Department News COMPLIANCE
CD Notice Requirements By Gina Jolly, Vice President of Compliance Services
notice that is required by regulation — the “approaching maturity” notice. Te MBA Compliance Services team oſten sees banks that are sending multiple notices or incomplete approaching maturity notices. Specifically, many banks do not include all the required information for CD terms of longer than one year that automatically renew.
Timing CD “approaching maturity” notices must be provided at least 30 calendar days before maturity or 20 days before the end of the CD’s grace period, if a grace period of at least five calendar days is provided. Most banks will have a 10-day grace period. If that is the case, the notice should be provided at least 10 days before maturity.
CD Terms of One Year or Less but Greater Than One Month That Automatically Renew If the CD term is one year or less but longer than one month, the bank may either provide a full Truth-in-Savings Initial Disclosure or: 1. provide the date the existing account will mature and the new maturity date
2. the interest rate and annual percentage yield for the new account (if known), or that those rates have not yet been determined, the date when they will be determined and a telephone number the consumer may call to obtain the interest rate and the APY that will be paid for the new account; and
3. any differences in the new CD as compared to the terms of the existing CD
CD Terms of Longer Than One Year That Automatically Renew It is important to remember that because this CD has been open for more than one year, the bank will have to remind the customer of everything they agreed to when the CD was initially opened, along with the new maturity date. Tis means the bank must provide new account disclosures as required by § 1030.4(b) along with the date the account matures. Tis could be accomplished by providing a new Truth-in-Savings disclosure or by ensuring all the required information from the disclosure is included in your approaching renewal notice. If the interest rate and APY for the renewing account are unknown when disclosures are provided, the bank can state that the rate and APY have not yet been determined, include the date when they will be determined and a telephone number consumers may call to obtain the interest rate and the APY that will be paid for the new account.
CD Terms of Longer Than One Year That Do Not Automatically Renew For CDs with a maturity longer than one year that do not renew automatically at maturity, banks must disclose the maturity date and whether interest will be paid aſter maturity. Te disclosures shall be mailed or delivered at least 10 calendar days before maturity of the existing account.
Banks may find it useful to review their “approaching maturity” notices to ensure all required information is disclosed properly, especially as consumers may be more likely to make changes in this fluctuating rate environment.
This article is for information purposes and does not contain or convey legal advice. The information should not be used or relied upon in regard to any particular situation without consultation with your bank attorney. MBA Compliance Services and its Compliance Force program offer various programs to aid banks with compliance needs. For more information, call 573-636-8151.
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