IBA Compliance Connection

Your go to source for compliance!

For our UTMA accounts, we always disclosed that the accounts would convert to ordinary savings accounts when the beneficiary reaches the age of majority, with “applicable charges” applying after the conversion. However, our original account disclosures for the UTMA accounts do not specify what charges will apply after the conversion to a savings account. Should we send new disclosures to the UTMA account beneficiaries after converting their accounts to savings accounts?

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Yes, we recommend treating the conversion to a savings account as a new account opening, requiring new disclosures and a new account agreement.

Regulation DD requires savings account disclosures to include “the amount of any fee that may be imposed . . . and the conditions under which the fee may be imposed.” Simply stating that “applicable charges” would apply upon converting the account does not meet these disclosure requirements, particularly if the fees for an UTMA account differ from the fees for a savings account.

Additionally, the UTMA account’s terms likely will differ from the savings account terms; for example, an UTMA account may be subject to a court order or other limitations that would be inapplicable to the subsequent savings account. Consequently, we recommend entering into a new account agreement when UTMA beneficiaries reach the age of majority, disclosing and binding the UTMA beneficiaries to the terms and fees applicable to their savings accounts.

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.”)
  • Truth in Savings Act, Regulation DD, 12 CFR 1030.4(b)(4) (“Content of account disclosures. . . . The amount of any fee that may be imposed in connection with the account (or an explanation of how the fee will be determined) and the conditions under which the fee may be imposed.”)