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Under the Truth in Savings Act, does our bank have to notify an account holder when an account becomes classified as “dormant”? We disclose dormancy fees in our account opening disclosures, and we send out a pre-dormancy notice thirty days before the account is classified as “dormant.” – IBA Compliance Connection

IBA Compliance Connection

Your go to source for compliance!

Under the Truth in Savings Act, does our bank have to notify an account holder when an account becomes classified as “dormant”? We disclose dormancy fees in our account opening disclosures, and we send out a pre-dormancy notice thirty days before the account is classified as “dormant.”

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No, we do not believe that your bank must provide notice to a customer when their account becomes classified as “dormant,” provided that your account agreement and disclosures do not impose this requirement.

However, under the Illinois Revised Uniform Unclaimed Property Act (Illinois RUUPA), your bank must communicate with customers about accounts that are presumed abandoned after a statutorily prescribed period of dormancy as part of a due diligence process. Additionally, the Illinois RUUPA requires dormancy fees to be authorized by a valid contract that specifies then amount of time after which a dormancy fee will be imposed. Moreover, it limits dormancy (and escheat) fees to an “amount that is not unconscionable considering all relevant factors, including the marginal transactional costs incurred by the holder in maintaining the apparent owner’s property and any services received by the apparent owner.”

For resources related to our guidance, please see:

  • Illinois RUUPA, 765 ILCS 1026/15-501 (“[T]he holder of property presumed abandoned shall send to the apparent owner notice by first-class United States mail that complies with Section 15-502 in a format acceptable to the administrator not more than one year nor less than 60 days before filing the report under Section 15-401 . . . .”)
  • Illinois RUUPA, 765 ILCS 1026/15-602(a) (“A holder may deduct a dormancy charge or an escheat fee from property required to be paid or delivered to the administrator if: (1) a valid contract between the holder and the apparent owner authorizes imposition of the charge for the apparent owner’s failure to claim the property within a specified time; and (2) the holder regularly imposes the charge and regularly does not reverse or otherwise cancel the charge.”)
  • Illinois RUUPA, 765 ILCS 1026/15-602(b) (“The amount of the deduction under subsection (a) is limited to an amount that is not unconscionable considering all relevant factors, including the marginal transactional costs incurred by the holder in maintaining the apparent owner’s property and any services received by the apparent owner.”)