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# Legal Protection for your Deposit Accounts

Federal insurance coverage for bank deposits, which is provided by the Federal Deposit Insurance Corporation (FDIC), protects depositors to a maximum of $100,000 at any one institution. All nationally-chartered banks are required to be members of the FDIC; state-chartered banks are not mandated to belong, but most do maintain a membership. The $100,000 insurance protection applies to all funds deposited in any one bank under the name or Social Security number of a unique individual. In other words, a depositor with $40,000 in a money market account, $80,000 in one or more CDs, and $2,500 in a checking account would have a total of $122,500 on deposit in that bank, of which only $100,000 would be insured by the FDIC.

It is possible, however, for this $100,000 coverage to be extended in several ways. The depositor can open one or more accounts in a different bank (not just another branch of the same bank), or open a second set of accounts in the same bank under joint ownership with a spouse or child. The depositor could also open additional accounts in the name of a revocable trust. Each of these accounts, because they have different registrations, would have the full $100,000 protection. But any one person's coverage for his or her total deposits in all joint accounts in the same bank is still limited to $100,000.

Although the FDIC programs guarantee the safety of deposits, they do not guarantee that depositors will be able to withdraw their money on demand. The terms and conditions governing regular savings accounts specify that the bank may require the depositor to provide advance notice (typically 30 days) of his or her intention to make a withdrawal. This requisite, which is designed to protect the bank in situations of unusual cash outflow or other crises, has in actuality been invoked only very rarely, and then for periods of only a few days. By contrast, some state insurance programs have been depleted in recent years by the failure of a number of savings-and-loan institutions, causing depositors to experience uncertainties and delays in retrieving their money.

Consumers who take out bank loans have been protected for a number of years by the Truth-in-Lending Act (TILA). Similar regulatory protection for savings products was enacted in December 1991 with the passing of the federal Truth in Savings Act (TISA). This directive, which was part of the larger Federal Deposit Insurance Corporation Improvement Act of 1991, is implemented by Regulation DD. Its purpose is to establish clarity and uniformity in the disclosure of terms and conditions regarding the rates of interest (the annual percentage yield or APY) and fees associated with deposit accounts so that the consumer is equipped to make a meaningful comparison between potential banks and accounts. In addition, depositors should also compare other features which are not subject to regulation and are at the discretion of the individual bank, such as service charges on the account at various balance levels, minimum balances below which interest is not paid, the compounding and crediting of interest, and the penalties for early withdrawal of time deposits, to name a few. For more detailed information on consumer protection provided by the FDIC, please visit their website.

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