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Warning: TAG to expire soon

By Marcie Geffner · Bankrate.com
Tuesday, November 20, 2012
Posted: 6 am ET

The Federal Deposit Insurance Corp., or FDIC, has asked banks to notify their customers that the Transaction Account Guarantee program, known as TAG, is set to expire Dec. 31.

The program, which provides temporary unlimited deposit insurance for noninterest-bearing transaction accounts, was put in place in October 2008 as part of the Dodd-Frank financial reform law. TAG was intended to reassure depositors that their money was safe, among other objectives.

Dodd-Frank doesn't include a specific TAG-is-ending notice requirement, but in a Nov. 5 financial institutions letter, the FDIC characterized such a reminder as "a matter of prudent commercial practice."

Banks can attach written notices to account statements, send email to depositors or use other communication methods to provide adequate notice so depositors can consider the impact in managing their transaction accounts, the FDIC said. The agency's letter also advised banks to remove posted notices about the expanded insurance from their main offices, branches and websites and review and modify account agreements and disclosure statements as needed.

Many small businesses, municipalities, hospitals and other entities use noninterest-bearing transaction accounts to meet payroll and operational expenses. Approximately $1.4 trillion is deposited in these accounts, according to the Independent Community Bankers of America, a banking industry group in Washington, D.C.

After TAG expires, noninterest-bearing transaction accounts will be FDIC-insured up to $250,000 per depositor.

Meanwhile, the American Bankers Association, or ABA, and other banking groups continue to lobby Congress to extend the program.

The ABA will be looking for a bill to  to attach the extension to during the congressional lame-duck session that starts Nov. 13, according to the association's Dodd-Frank tracker website.

Follow me on Twitter: @marciegeff.

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