Topic: Truth in Savings Act (TISA)
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We would like to offer a gift certificate to our customers who open a free checking account. Is the value of the gift certificate reportable on a 1099-INT form? Should we disclose that it may be tax reportable in our advertisements? Or, even if not required, would it be prudent to do so?
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We believe that you will have to report the value of the gift certificates on IRS 1099-INT forms. As the IRS explained in a ruling, all payments of interest over $10 in a calendar year must be reported on a 1099-INT form. IRS Rev. Proc. 2000-30 (December 31, 1999). The ruling states that non-cash premiums…
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We are changing several of our fees and plan to provide advance notice of our increased overdraft fees. Is there an advance notice requirement for cashier’s check fees and safe deposit box drilling fees?
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We agree that you should provide advance notice of an increase in overdraft fees, as Regulation DD requires you to provide advance notice of any change in terms that will adversely affect your customers at least thirty calendar days before the change takes effect. 12 CFR 1030.5(a)(1). We are not aware of any requirement for…
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We want to increase our early withdrawal penalties for our CDs that will be maturing in more than thirty days. The new early withdrawal penalty will be effective before any of the CDs mature. Can we send a mass mailing notifying our CD customers of the change?
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First, we believe it is possible to raise a certificate of deposit (CD) early withdrawal penalty before the CD matures, provided that you comply with Regulation DD’s notification requirements (described below). However, we recommend checking your CD agreements to ensure that the terms of each agreement permit your institution to raise the early withdrawal penalties…
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When a customer does a split deposit involving a large item, to both his checking and his savings account, what should the hold notice say regarding the hold amount? Should we give two hold notices, one notice for each account?
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While Regulation CC requires a written notice whenever you place a hold on funds deposited into a checking account, we are not aware of any similar regulatory requirements that would apply to placing a hold on funds deposited into a savings account. Regulation DD, which covers savings accounts, does not include any funds availability requirements.…
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Do we need to disclose the foreign (out-of-network) ATM fees that our institution charges on our Regulation E disclosures? Can we instead disclose the fees on a separate fee schedule?
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We believe that you must disclose the out-of-network ATM fees charged by your institution, but the fee disclosure can be included on a separate fee schedule that complies with Regulation E and Regulation DD’s disclosure requirements. The initial account disclosures required by Regulation E must include “any fees imposed by the financial institution for electronic…
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How should we distribute the CHARM Handbook and the HUD Settlement Cost Booklet to customers who access our loan applications online? Currently, our online system automatically prints the both documents, leading to customer complaints. We don’t accept applications online; customers can submit applications by faxing, mailing, or bringing the application to a branch.
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We do not believe that the Consumer Handbook on Adjustable Rate Mortgages (CHARM Handbook) or the Settlement Cost Booklet (referred to in the rules as the “special information booklet”) need to be automatically printed with loan applications that your customers access online. As explained below, the CHARM Handbook can be provided to an online loan…
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One of our customers is an LLC that is buying a residence. The LLC’s owner will live in the residence. Would Regulation Z or RESPA apply to this loan?
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From what you have told us, it is likely that RESPA will apply to this loan, and Regulation Z will not. Because Regulation Z applies only to natural persons, we believe that Regulation Z would not apply to a loan where the borrower is a limited liability company (LLC). However, RESPA would likely apply to…
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Is there still a $10 limit on premiums offered when someone opens a deposit account? When do I need to issue a Form 1099?
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We are not aware of any limits on the premiums paid to customers on account opening. There are references to bonuses of $10 or more in the Truth in Savings Act advertising requirements, the FDIC’s deposit insurance regulations, and the IRS Form 1099 requirements, but those provisions do not place any limitations on account opening…
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We are offering special features during the first term of our CDs, such as early withdrawal privileges, and these special features will not apply after the CD’s first automatic renewal. Do we need to send a change in terms when each CD renews, or will the initial notice suffice?
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If you draft the account opening disclosures correctly, a change in terms notice will not be necessary. Because the certificate of deposit (CD) account terms will automatically change when the CDs mature, you do not need to send an advanced notice of the changes that occur on maturity, provided that you clearly describe the conditions…
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Can we advertise a checking account as “free” if the account would impose a monthly paper statement fee on customers who do not opt-in to e-statements?
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No, we do not believe that you could advertise such an account as “free.” Before using electronic statements, your institution must obtain each customer’s opt-in, as required by the federal Electronic Signatures in Global and National Commerce (E-SIGN) Act, 15 USC 7001(c)(1), and the Illinois Financial Institutions Electronic Documents and Digital Signature Act, 205 ILCS 705/10(a). Without…