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FDIC-insured Accounts at Failed Banks


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► FDIC-insured accounts at closed banks  The Federal Deposit Insurance Corporation (FDIC), created by the Banking Act of 1933, administers insurance funds to protect depositors from losing money when banks fail. Participating banks pay premiums to the Deposit Insurance Fund (DIF). When a bank is closed, the FDIC pays depositors directly, or transfers insured funds to a successor bank.

There has been nearly 500 bank closures since the start of the Great Recession in 2008;  including the largest ever, Washington Mutual, with $182 billion in deposits.

When a bank is closed by government regulators, the FDIC is appointed receiver roughly the equivalent of a bankruptcy trustee - with responsibility for the payout of insured deposits and liquidation of the institution's assets, which are distributed to creditors.

► Unclaimed accounts at banks in FDIC receivership  FDIC has taken custody of billions of dollars worth of insured accounts over the years. Its important to be aware there are negative consequences for those who fail to promptly claim insured funds.

Accounts transferred to successor institutions may have lower interest rates and can lose insurance coverage after a period of time, generally six months.


If an individual already has accounts at the successor institution, perhaps unknowingly in the case of brokered deposits, the insurance limit may be exceeded and funds could be lost in a subsequent receivership. In a worst case scenario, claims on accounts which are inactive for an extended period may be time-barred, and safe deposit boxes can be drilled and the contents sold at auction.


Abandoned Funds and Unclaimed Property Search

Click on binoculars to search for a lost account or safe deposit box at a bank that has closed

► FDIC deposit insurance amounts  The Emergency Economic Stabilization Act of 2008 temporarily increased FDIC deposit insurance from $100,000 to $250,000, effective 3 October 2008 through 31 December 2009. The change was made permanent and retroactive by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Note the $250,000 deposit insurance limit now also applies to banks that failed between 1 January 2008 and 3 October 2008. Former depositors at the following failed banks, which failed prior to the Act of 2010, may be entitled to receive additional compensation:

Washington Mutual (WaMu) | Hume Bank | ANB Financial | IndyMac Bank | First Priority Bank | The Columbian Bank &  Trust Company | Silver State Bank

► FDIC deposit insurance claims  The length of time for claiming insured deposits at failed banks depends on when the receivership was established, and whether an entity other than FDIC has assumed responsibility for paying deposits after closing.

Depositors have until closure or termination of receivership to claim insured funds at banks that failed prior to 1/1/89; up to 18-months after the closure of a failed institution or termination of a receiverships established between 1/1/89 and 6/28/93; and up to ten years and 18-months after closure or termination of a receivership established after 6/28/93, if a state took temporary custody of the funds.

After a bank is closed, the FDIC provides written notice within 30 days to insured depositors advising they must claim their deposit from the FDIC, or if the deposit has been transferred to another institution, establish contact with that institution. A second notice is mailed 15 months after the first.


► Bank name changes  Be aware you may have an account at a failed institution and not know it, either because you were a depositor at a bank acquired by an institution that subsequently failed, or if you are the beneficial owner of a brokered or trust account. For assistance with bank name changes go to: failedbankreporter.com

Also be aware that if you have uninsured funds at a failed bank i.e. excess deposits over the insurance limit - you may be entitled to receive a portion of its liquidated assets. In many instances these funds go unclaimed because dividend checks sent depositors, perhaps years after closure, went undelivered or were never cashed.

Finally note that not every depositor with funds in a failed bank will receive notification from the FDIC. Beneficial owners of fiduciary accounts, including Uniform Transfers to Minors (UTMA) Accounts, escrow accounts, Interest On Lawyer Trust Accounts (IOLTA), and deposit accounts obtained through a broker (Brokered Accounts) will not be contacted by the FDIC.

These accounts are on the failed bank's records in the name of the fiduciary, not the individual owner. The FDIC does not have access to ownership information, and therefore will not contact individual depositors. It is the responsibility of the broker or other fiduciary to initiate a claim.


 
2015 NUPA - NATIONAL UNCLAIMED PROPERTY ASSOCIATES