IBA Compliance Connection

Your go to source for compliance!

Are there any Illinois laws that address what must be included on the form we use for customer name changes when the name change is due to certain life events such as marriage, divorce, or adoption? Also, do we need to issue new account agreements reflecting a customer’s updated name?

—

by

admin

We are not aware of any Illinois laws or regulations that dictate what must be included on banking forms used to document customers’ name changes due to marriage, divorce, or adoption.                             

The federal Customer Identification Program (CIP) regulations require only that your CIP “include risk-based procedures for verifying the identity of each customer to the extent reasonable and practicable,” without imposing specific procedures for name changes. We recommend verifying your customer’s new name through documentation (such as a driver’s license) and by requesting the legal document that changed the customer’s name, such as a marriage license, divorce decree, or court order. Obtaining documentation verifying the name change will also ensure that the bank is reporting interest and other information to the IRS using the customer’s correct name.

Additionally, while you likely will be able to enforce existing agreements after a customer’s name change, we believe it would be a best practice to require customers to sign new signature cards and other agreements signed with their old name, including account signature cards.

Importantly, loans affected by a customer’s name change may require further action. For example, if a loan is secured by a “blanket” financing statement (UCC-1), you may need to amend the financing statement within four months of the name change to ensure that the financing statement remains effective for property acquired after the borrower’s name change, under the Uniform Commercial Code (UCC).

For resources related to our guidance, please see:

  • 31 CFR 1020.220(a)(2) (“The CIP must include risk-based procedures for verifying the identity of each customer to the extent reasonable and practicable. The procedures must enable the bank to form a reasonable belief that it knows the true identity of each customer.. . .”)
  • Chi. Exhibitors Corp. v. Jeepers! of Ill., Inc., 376 Ill.App.3d 599, 608 (“The court applied Illinois law and held that because the economic relationship between the parties had not changed, the incorporation and name change did not materially alter the contract and did not discharge the loan.”)
  • UCC, 810 ILCS 5/9-507(c) (“If the name that a filed financing statement provides for a debtor becomes insufficient as the name of the debtor under Section 9-503(a) so that the financing statement becomes seriously misleading under Section 9-506 . . . (2) the financing statement is not effective to perfect a security interest in collateral acquired by the debtor more than four months after the filed financing statement becomes seriously misleading, unless an amendment to the financing statement which renders the financing statement not seriously misleading is filed within four months after the filed financing statement becomes seriously misleading.”)