Deposit Insurance

When considering where to deposit your hard-earned money, consumers have traditionally opened deposit accounts directly with banks (whether in-person, online, or through the bank’s mobile app). However, technology has continued to transform the business of banking in recent years and, increasingly, consumers are choosing to open bank deposit accounts through non-bank technology companies that provide financial services (often referred to as “fintech” companies). It is crucial for consumers to understand how a bank and a fintech interact as this information is key to whether or not your deposit is protected by deposit insurance.

If you open an individual deposit account directly with an FDIC-insured bank, your deposit is insured up to $250,000 by the FDIC in the unlikely event that the bank fails, and FDIC insurance is backed by the full faith and credit of the United States government. This is the traditional way that most consumers have opened their bank deposit accounts.

When you open a deposit account through a non-bank fintech (like Raisin), the FDIC provides that your deposits may be eligible for what is referred to as “pass-through” FDIC deposit insurance coverage. For your funds to be covered by pass-through FDIC-deposit insurance, banks and non-bank fintechs like Raisin must take certain additional actions, as non-bank fintechs are not themselves FDIC-insured.

From its founding in 1933, the FDIC has always provided so-called “pass-through insurance,” which allows a person or entity to hold funds in a deposit account for the benefit of others. “Pass-through” deposit insurance refers to FDIC-insured deposits held at an FDIC-insured bank through a third party. Pass-through references arrangements through which deposit accounts are established by a third party for the benefit of one or more other parties, also known as principals. For purposes of pass-through insurance, the concept is that the third party deposits funds at an FDIC-insured bank on behalf of the actual owner of the funds (the principal). On Raisin’s platform, the third party holding your funds in the bank of your choice is called “the Custodial Bank” and you are “the principal” who actually owns the funds.

In order for pass-through FDIC deposit insurance to apply to your funds which are deposited in FDIC-insured banks through a non-bank fintech (like Raisin), the FDIC requires the following criteria to be met: 

1. The records at the bank where the deposit account is established must indicate the existence of the custodian’s relationship with you, typically in the name of the account. For example, the account name may be XYZ Custodian For The Benefit Of ABC Principals. In the Custodial Agreement between you and the Custodial Banks on the Raisin platform, the Custodial Banks agree that the accounts they establish at product banks are titled in such a way as to make it clear that the custodial banks are holding funds in a custodial capacity for the benefit of customers participating in the Raisin service. You can find out more about how the accounts held for Raisin customers are titled in Section 3(c) of your Custodial Agreement with the Custodial Banks.
   
2. The funds in the deposit account must, in fact, be owned by the consumers and not the party that established the deposit account, and the interest rate that you receive is the interest rate paid by the bank on that deposit account, as set forth in the offer terms. The FDIC will look to the agreement between the parties and applicable state law to establish the ownership of the funds. On the Raisin platform, the Custodial Agreement between you and the Custodial Banks provides that you remain the owner of the funds which the Custodial Bank holds on your behalf in the deposit account. The Custodial Agreement also provides that the interest that you receive on your funds deposited in each deposit account will be at the rate paid by the respective product bank. You can find out more about how the ownership of your funds and the interest rate you receive in Sections 2(a) and Section 3(a)(i) of the Custodial Agreement.
   
3. Finally, the details of the relationship and your interest in the deposit account must be ascertainable either from the deposit account records of the bank or from records maintained, in good faith and in the regular course of business, by the custodian or by some person or entity that has undertaken to maintain such records for the custodian. On the Raisin platform, the Custodial Banks keep records of the portion of funds in each deposit account that is being held on deposit for you and the portion that is being held for each other customer participating in the Raisin service. Additionally, Raisin keeps records of your beneficial ownership of funds in each deposit account. In the unlikely event that Raisin or a Custodial Bank cease to exist, the detailed account information is safeguarded by two parties, rather than only one. You can learn more about who is responsible for record keeping for your deposits held at banks through the Raisin platform in Section 3(c) of the Custodial Agreement and Section 3 of Raisin’s Terms of Service.

In the unlikely event of a bank failure, the FDIC will review the arrangement to determine whether these criteria have been met and, if they have, pass-through insurance will apply. This means that FDIC insurance will apply to your funds held in the deposit account established by the custodian at the bank as if you had opened a deposit account directly with the bank.

It is important to make sure you read all agreements and disclosures carefully to understand if an account may be eligible for FDIC pass-through insurance.

As noted above, FDIC deposit insurance does not protect you against the failure or bankruptcy of a non-bank company like Raisin. However, Raisin never receives, holds or deposits any customer funds. Your funds are always held in federally-regulated banks and credit unions by custodial banks which are also federally regulated.

For more information on how pass-through insurance coverage works, please visit the FDIC website found here: https://www.fdic.gov/resources/deposit-insurance. 

When considering where to deposit your hard-earned money, consumers have traditionally opened deposit accounts directly with credit unions (whether in-person, online, or through the credit union’s mobile app). Technology has continued to transform the business of banking in recent years and, increasingly, consumers are choosing to open credit union accounts through non-bank technology companies that provide financial services (often referred to as “fintech” companies). It is crucial for consumers to understand how a credit union and a fintech interact as this information is key to whether or not your account is protected by share insurance.

If you open an individual account directly with an NCUA-insured credit union, your account is insured up to $250,000 by the NCUA in the unlikely event that the credit union fails, and NCUA insurance is backed by the full faith and credit of the United States government. This is the traditional way that most credit union members have opened their credit union share accounts.

When you open a credit union share account through a non-bank fintech (like Raisin), the NCUA provides that your account may be eligible for what is referred to as “pass-through” NCUA-share insurance coverage. For your funds to be covered by pass-through NCUA share insurance, credit unions and non-bank fintechs like Raisin must take certain additional actions, as non-bank fintechs are not themselves NCUA-insured.

“Pass-through” insurance refers to NCUA-insured shares, share certificates and share drafts held at an NCUA-insured credit union through a third party. Pass-through references arrangements through which deposit accounts are established by a third party for the benefit of one or more other parties, also known as principals. For purposes of pass-through insurance, the concept is that the third party deposits funds at an NCUA-insured credit union on behalf of the actual owner of the funds (the principal). On Raisin’s platform, the third party holding your funds in the credit union of your choice is called “the Custodial Bank” and you are “the principal” who actually owns the funds.

In order for pass-through NCUA share insurance to apply to your funds which are deposited in NCUA-insured credit unions through a non-bank fintech (like Raisin), the NCUA requires the following criteria to be met:

1. The beneficial owner of the account must be a member of the credit union or otherwise eligible to maintain an insured account at the credit union.
2. The records at the credit union where the account is established must indicate the existence of the custodian’s relationship with you, typically in the name of the account. For example, the account name may be XYZ Custodian For The Benefit Of ABC Principals. In the Custodial Agreement between you and the Custodial Banks on the Raisin platform, the Custodial Banks agree that the accounts they establish at credit unions are titled in such a way as to make it clear that the custodial banks are holding funds in a custodial capacity for the benefit of customers participating in the Raisin service. You can find out more about how the accounts held for Raisin customers are titled in Section 3(c) of your Custodial Agreement with the Custodial Banks.
3. The funds in the account must, in fact, be owned by the member and not the party that established the account, and the interest rate that you receive is the interest rate paid by the credit union on that account, as set forth in the offer terms. The NCUA will look to the agreement between the parties and applicable state law to establish the ownership of the funds. On the Raisin platform, the Custodial Agreement between you and the Custodial Banks provides that you remain the owner of the funds which the Custodial Bank holds on your behalf in the account. The Custodial Agreement also provides that the interest that you receive on your funds deposited in each account will be at the rate paid by the respective credit union. You can find out more about how the ownership of your funds and the interest rate you receive in Sections 2(a) and Section 3(a)(i) of the Custodial Agreement.
4. Finally, the details of the relationship and your interest in the account must be ascertainable either from the account records of the credit union or from records maintained, in good faith and in the regular course of business, by the member or by some person or entity that has undertaken to maintain such records for the member. On the Raisin platform, the Custodial Banks keep records of the portion of funds in each account that is being held on deposit for you and the portion that is being held for each other customer participating in the Raisin service. Additionally, Raisin keeps records of your beneficial ownership of funds in each account. In the unlikely event that Raisin or a Custodial Bank cease to exist, the detailed account information is safeguarded by two parties, rather than only one. You can learn more about who is responsible for record keeping for your deposits held at credit unions through the Raisin platform in Section 3(c) of the Custodial Agreement and Section 3 of Raisin’s Terms of Service.

In the unlikely event of a credit union failure, the NCUA will review the arrangement to determine whether these criteria have been met and, if they have, pass-through insurance will apply. This means that NCUA share insurance will apply to your funds held in the account established by the custodian at the credit union as if you had opened an account directly with the credit union.

It is important to make sure you read all agreements and disclosures carefully to understand if an account may be eligible for NCUA pass-through insurance.

As noted above, NCUA share insurance does not protect you against the failure or bankruptcy of a non-bank company like Raisin. However, Raisin never receives, holds or deposits any customer funds. Your funds are always held in federally-regulated banks and credit unions by custodial banks which are also federally regulated. 

For more information on how pass-through insurance coverage works, please visit the NCUA website found here: https://ncua.gov/consumers/share-insurance-coverage.