Topic: Truth in Savings Act (TISA)
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We would like to target customers of a nearby bank that is closing by offering them a free order of checks when they open a checking account at our bank. We would require proof that the customers are coming from the other bank. Could this be viewed as a discrimination issue? Also, can we mention the closing bank’s name in advertisements?
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It is possible that your contemplated promotion could create fair lending concerns, but a full analysis would require additional facts comparing your bank’s customer base with the closing bank’s customer base. Although a customer base is not a protected class, a promotion offered only to customers of a particular bank conceivably could have a disparate…
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We understand that under the Revised Uniform Unclaimed Property Act effective January 1, 2018, a demand, savings, or time deposit account is presumed abandoned three years after maturity or no contact with us, instead of the current five years. Our current fee schedule states that an account becomes dormant after five years of inactivity, at which point it starts incurring a monthly fee. We do not charge any escheat fees. We will need to change our fee schedule to reflect the new three-year abandonment period. Are we required to notify our customers by sending out a revised fee schedule or disclosures?
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Yes, your bank should notify customers about this change at least thirty calendar days before it takes effect (i.e., by December 2, 2017, which is thirty days before the new law’s effective date of January 1, 2018). Under Regulation DD, a bank must provide at least thirty days advance notice when a change in account…
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When we issue a certificate of deposit (CD), we include the Truth in Savings Act (TISA) disclosures and the terms of the account agreement on the CD, which the customer signs. After a CD matures, some customers call to request a new CD with a longer or shorter term. In these cases, we mail the customer a new CD that contains the new disclosures and the new account terms, but we do not obtain their signature. Our auditors say a signature is required on the new CD. Is that correct?
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We are not aware of any requirement in the Truth in Savings Act or otherwise mandating that a customer sign a CD. However, we do recommend requiring the customer to sign a new account agreement when switching to a new CD account that has a different term. If your account agreement is included on your…
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We would like to revise the penalties on our certificates of deposit (CDs) that automatically renew. The increased penalty schedule will not take effect until after the CDs renew. Do we need to provide 30 days’ notice to our CD customers before implementing the increased penalties? As part of a promotion, we are also planning to offer a brand new type of CD that will have different penalties than our existing CDs. Do we need to provide any advance notice about that? The new CD product doesn’t have any customers yet.
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We believe you should include the increased penalty schedule in your prematurity notice, which generally must be sent at least 30 calendar days before the maturity of the existing CD accounts. However, we agree that you do not need to provide advance notice regarding the new type of CD accounts, because no customers have opened…
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Our forms provider recently updated the Terms and Conditions for our demand deposit and savings accounts. Should we also provide updated Terms and Conditions for our certificate of deposit (CD) and individual retirement account (IRA) customers?
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Whether you update the Terms and Conditions for your CD and IRA customers depends on whether your bank plans to provide those accounts under the same terms as your demand deposit and savings accounts. As a guiding principle, your Terms and Conditions should accurately reflect your practices for the affected accounts. It is possible to…
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We have an ad hoc overdraft program. In which order should we pay overdrawn checks: High-to-low or low-to-high?
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This question does not have an easy answer. Illinois law has long granted banks the freedom to post checks in any order they choose, without regard to the order in which they were received. However, as discussed below, the federal banking agencies have issued guidances that discourage the use of high-to-low posting orders (without explicitly…
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We are updating our consumer and business deposit account agreements. Do we have to mail our customers the entire new account agreements, or would it be permissible to announce the changes in our periodic statements and note that the new agreements are available on our website?
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You may provide notice of the new terms in your periodic statements, without including the entire new account agreement. When changing account terms, you must provide notice to customers of the new terms either by noting all of the changes or by providing an entire set of revised account disclosures with the changes highlighted. If…
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We have added a line to our monthly statements and transaction receipts advertising a Christmas Club account with a “3.5% APY.” If we remove the mention of the APY, would that eliminate the need to provide additional disclosures under Regulation DD?
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Yes, removing the mention of the annual percentage yield (APY) will eliminate the need to provide additional advertising disclosures related to the APY. Regulation DD requires additional disclosures to be provided with advertisements that include trigger terms such as “annual percentage yield” or “APY.” Without those trigger terms, the additional disclosures are not required. For…
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If a customer wants to change their account from one type of checking account to a similar account with fewer fees, leaving ownership the same, is it necessary to have the customer sign a new account agreement? Currently, we use a form on which the customer indicates the new account type and acknowledges receipt of the Truth in Savings (TIS) disclosures specific to the new account. We also provide the customer with a brochure listing the TIS disclosures for their new account. Is our current practice acceptable?
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We believe your practice is acceptable for compliance with the Truth in Savings Act, which requires you to provide account disclosures before opening a new account. However, we would recommend requiring the customer to sign a new account agreement when switching to a new account that involves different fees. The account agreement is the instrument…
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Our marketing department is working on a promotion for deposit accounts opened by teachers. We would like to provide an account opening bonus of $100, as well as a $100 gift card donated to the teacher’s classroom. Would the $100 gift card be treated as a donation? Should we donate it to the teacher or to the school? How would we disclose the bonuses to the customers and the schools?
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Whether the gift card is donated to the school or to the individual teacher is up to the bank. If donating to the school, it may be possible to designate that the gift card must be used in a particular teacher’s classroom, but that will depend on the school district’s policies. We recommend contacting the…