Does the FDIC cover identity theft?

September 20, 2018 — 6:00 AM EDT

No, it doesn't. When a third party gains access to your bank account and conducts transactions without your consent, the FDIC does not have jurisdiction to protect consumers against this type of criminal activity, which is outside of its role of ensuring confidence in the U.S. banking system.

What the FDIC Covers

The Federal Deposit Insurance Corporation (FDIC) only provides coverage for deposits in eligible FDIC Insured Accounts in the unlikely event of the financial failure of that bank or savings institution. Eligible accounts for insurance coverage are checking accounts, savings accounts, money market deposit accounts, certificates of deposit (CDs), cashier's checks, money orders and other official items issued by an FDIC-covered bank.

Each one of your eligible accounts per insured bank is covered for a total of up to $250,000. If you have a checking account with a $300,000 balance at an FDIC-covered bank, $50,000 of your funds in that account is not insured by the FDIC and should be transferred to another insured bank for FDIC coverage. The same rules hold true for business accounts but do not extend to mutual funds, which are not covered.

What to Do in Case of Identity Theft

When you notice suspicious activity on your bank account, report your loss to your financial institution and local law enforcement authorities right away. The FDIC also recommends notifying your local, state or federal consumer protection agency. Use this directory to find the contact information for your state's consumer protection office.

By acting quickly, you increase your chances of recovering your lost funds and help local authorities protect other members in your community. Some best practices to catch identity theft early are to check your monthly bank statement every month for any suspicious activity. If you receive paper copies, contact your bank right away if you do not receive one by its usual arrival date. Identity thieves may try to intercept or divert account statements to get access to your funds.