IBA Compliance Connection

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If a customer wants to change their account from one type of checking account to a similar account with fewer fees, leaving ownership the same, is it necessary to have the customer sign a new account agreement? Currently, we use a form on which the customer indicates the new account type and acknowledges receipt of the Truth in Savings (TIS) disclosures specific to the new account. We also provide the customer with a brochure listing the TIS disclosures for their new account. Is our current practice acceptable?

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We believe your practice is acceptable for compliance with the Truth in Savings Act, which requires you to provide account disclosures before opening a new account. However, we would recommend requiring the customer to sign a new account agreement when switching to a new account that involves different fees.

The account agreement is the instrument by which customers bind themselves to the terms of a specific account. If the fees are different between the accounts, then the terms of the agreements also will be different. In our view, providing an account change form on which a customer simply identifies their new account type risks insufficiently binding the customer to all of the terms of that new account.

We recommend using a new account agreement for the new account, or consulting with your bank counsel on how to draft an account change form that fully binds the customer to the terms of the new account.

For resources related to our guidance, please see:

  • Truth in Savings Act, Regulation DD, 12 CFR 1030.4(a)(1)(i) (“A depository institution shall provide account disclosures to a consumer before an account is opened or a service is provided, whichever is earlier.”)