Modified Payoff

DEFINITION of 'Modified Payoff'

The partial insurance reimbursement that is paid to depositors of failed banks. Customers who have lost money in excess of what is covered by FDIC insurance can expect to receive a modified payoff. Based on an FDIC estimate of what they could collect from liquidation, a dividend to uninsured depositors would be paid.

BREAKING DOWN 'Modified Payoff'

The FDIC instituted the modified payoff in the early 1980s. It was offered in response to a rash of bank failures that led to substantial customer losses.