Topic: Truth in Savings Act (TISA)
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Our bank has a deposit and loan rate sheet that is labeled “for internal use only” and is not to be given to customers. On occasion, a teller or the receptionist will give the sheet to a customer upon request. The sheet has the names of the products, the interest rate, and the APY/APR as applicable, but no disclosures. Would this qualify as advertising? If so, what other information would be required? Is there any chance we are covered because it indicates “for internal use only” and isn’t meant to be distributed to the public?
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In our view, an internal rate sheet does constitute an advertisement if it is provided to customers, even if it indicates that it is “for internal use only.” An advertisement is “a commercial message, appearing in any medium that directly or indirectly promotes” an account or credit transaction. Providing information to customers about your account…
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We recently converted to a new statement rendering system that differentiates between consumer and non-consumer accounts. We have revocable trusts where the beneficiary, trustee, and settlor are all the same person. Some of these trusts are opened using the individual’s tax identification number (TIN), and some are opened using an Employer Identification Number (EIN). The new system does not consider the EIN trust accounts to be consumer accounts. Is a trust considered a “consumer” under Regulation DD? I know that trusts (including land trusts) are considered to be “consumers” under Regulation Z for disclosure and rescission purposes.
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A trust is not subject to the requirements of Regulation DD, provided that the account was opened by a trustee pursuant to a formal written trust agreement. Under Regulation DD, “consumer” means “a natural person who holds an account primarily for personal, family, or household purposes, or to whom such an account is offered.” The term “natural person”…
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We offer Christmas Club accounts to our customers where they determine how much they wish to deposit each week over 50 weeks. When the account reaches maturity, we require that the customer deposited 50 times their weekly amount in order to receive their accrued interest. For example, if they wish to deposit $10 a week, they must deposit $500 over 50 weeks. If they fall short of this amount at the time of maturity, then we do not pay them the accrued interest on the account. Is that permissible? What about withholding accrued interest when they close the account before maturity? Is that an acceptable penalty?
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We are not aware of any law that would directly prohibit a bank from establishing holiday club savings accounts for which customers forfeit their accrued interest if they take early withdrawals or close the account before maturity, provided this forfeiture penalty is clearly disclosed in the account agreement. In fact, Regulation DD appears to allow…
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We are planning to close all of our Christmas Club accounts. The accounts do not have check writing or other transaction privileges — we simply issue checks for the account balances once per year, in October. Our account agreements state that we may close an account any time with “reasonable notice.” We plan to include notice of the closing, effective immediately, when we issue checks this October. Is that sufficient notice of closing?
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We recommend providing some advance notice before mailing the checks and closing the accounts in October. While nothing in Illinois or federal law appears to require advance notice of closing these accounts, your account agreements do require “reasonable notice.” In our view, reasonable notice should be provided in advance of the account closing. In addition,…
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We recently discovered an error in the interest calculations for some of our deposit accounts. In most cases, we underpaid interest by just a few cents. Does Regulation DD provide a certain tolerance threshold for such “de minimis” errors?
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No, there is no de minimis threshold for interest calculation errors for savings accounts in Regulation DD. The Truth in Savings Act formerly required restitution to customers for errors, but that provision was repealed in 2001. We do recommend providing restitution to the affected customers, since a failure to pay interest as promised, even to…
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Do we need to provide a funds availability disclosure for savings accounts?
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No, you are not required to provide a funds availability notice for a savings account, because Regulation CC does not apply to saving accounts. Unless your account agreement (or disclosures) provide that the bank will comply with Regulation CC, a Reg CC funds availability notice is not required. For resources related to our guidance, please…
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A customer had a two-year CD. At the end of the term, we provided a “prematurity notice” and a grace period for renewing. The customer then requested a renewal for a four-year term. Should we redisclose the account terms by providing new TISA disclosures? Currently, we provide a change in terms notice when a customer requests a change that highlights the original issue date and amount, the last renewal date, and the new interest rate, maturity date, term and amount.
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It is not necessary to provide a full set of new TISA disclosures, because your change in terms notice highlights the new maturity date. You are not required to provide a full set of new disclosures when a customer requests a change after you have provided a prematurity notice for the rollover CD, but you…
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We are one of two charters under the same holding company. We are printing statement stuffers advertising our overdraft services, which are identical. The envelope and periodic statements both include our bank’s name. We don’t want to pay to print up separate flyers for each charter, which would be identical but for the bank names. Can we print these without any bank name so that both banks can use the statement stuffers?
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Yes, we believe it is permissible to use statement stuffers that do not identify your bank’s name. We are not aware of any specific law or regulation that would require a bank to state its name in a statement stuffer when the bank’s identity can be inferred from other materials in the same mailing. However,…
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On our consumer money market accounts, we pay a higher interest rate and waive service charges when the balance reaches a certain threshold. We would like to add additional thresholds paying higher interest rates at higher dollar amounts. Do we need to provide advance notice of this change?
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No, we do not believe that advance notice is required. This change would not adversely affect your customers, who would continue to receive the same interest rates they receive today under your current practice, or higher rates than they receive today. We do recommend providing some form of notice to ensure that all of your…
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Our auditor told us to change our TISA disclosures on the compounding and crediting of interest. Our core processor told us that we compound and credit interest monthly for certain certificate of deposit accounts. However, the interest “accrues” daily. Our auditor told us that we should disclose interest as compounded daily. Is that right?
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From what you have told us, we believe that you should continue to disclose interest as compounding monthly, not daily. It is possible that your auditor and your core processor have different understandings of the definition of “compounding.” We recommend clarifying with both of them that while accounts may “accrue” interest daily (meaning that the…