IBA Compliance Connection

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We recently converted to a new statement rendering system that differentiates between consumer and non-consumer accounts. We have revocable trusts where the beneficiary, trustee, and settlor are all the same person. Some of these trusts are opened using the individual’s tax identification number (TIN), and some are opened using an Employer Identification Number (EIN). The new system does not consider the EIN trust accounts to be consumer accounts. Is a trust considered a “consumer” under Regulation DD? I know that trusts (including land trusts) are considered to be “consumers” under Regulation Z for disclosure and rescission purposes.

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A trust is not subject to the requirements of Regulation DD, provided that the account was opened by a trustee pursuant to a formal written trust agreement.

Under Regulation DD, “consumer” means “a natural person who holds an account primarily for personal, family, or household purposes, or to whom such an account is offered.” The term “natural person” is not defined in the regulation. However, the regulation’s official interpretations expressly provide that “trust accounts opened by a trustee pursuant to a formal written trust agreement ([but] not merely declarations of trust on a signature card such as a ‘Totten trust,’ or an IRA and SEP account)” are not subject to Regulation DD.

Because trusts are excluded from coverage under Regulation DD, we do not believe they should be considered “consumer” accounts for any purpose related to Regulation DD. To that end, you may wish to consider identifying your trust accounts as “non-consumer” accounts in their names or on their signature cards, regardless of whether they are opened using a TIN or and an EIN, in order to avoid any misunderstandings with your examiners.

Also, as you correctly point out, trusts (including land trusts) are considered “natural persons” and therefore “consumers” under Regulation Z.  Accordingly, trusts are subject to Regulation Z’s requirements (when applicable), but not to the requirements of Regulation DD.

For resources related to our guidance, please see:

  • Regulation DD, 12 CFR 1030.2(h) (“Consumer means a natural person who holds an account primarily for personal, family, or household purposes, or to whom such an account is offered. The term does not include a natural person who holds an account for another in a professional capacity.”)
  • Official Interpretations, Regulation DD, 12 CFR 1030, Paragraph 2(a), Comment 2(iii) (“Examples of accounts not subject to the regulation are: . . . Trust accounts opened by a trustee pursuant to a formal written trust agreement (not merely declarations of trust on a signature card such as a ‘Totten trust,’ or an IRA and SEP account).”)
  • Regulation Z, 12 CFR 1026.2(a)(11) (“Consumer means a cardholder or natural person to whom consumer credit is offered or extended.”)
  • Regulation Z, 12 CFR 1026.2(a)(22) (“Person means a natural person or an organization, including a . . . trust . . .”)
  • Regulation Z, Official Interpretations, 12 CFR 1026, Paragraph 2(a)(11), Comment 3 (“Credit extended to land trusts, as described in the commentary to § 1026.3(a), is considered to be extended to a natural person for purposes of the definition of consumer.”)