[SVaught0816]

Friday my institution received the following bulletin from our vendor:

“This compliance alert is related to OnBoard Deposits. The presenting issue is associated with tiered rate accounts involving the last tier. In these transactions, the TISA discloses the word “above” instead of “equal to or greater than” the amount in the last tier.

Does this change in wording require us to redisclose TIS? If so, what kind of timeline should we follow?

[rcooper]

I’m assumuing that we’re talking about the highest tier (highest balance level) and it has the highest associated rate/APY. Based on those assumptions, if you are providing the highest rate on amounts at or above that amount, that is beneficial to the customer as you are giving them more opportunity to earn that higher rate. However, as you’ve stated, it means the disclosure is inaccurate and it could even be deemed misleading if you’ve told the customer they must have a higher balance than they actually need to obtain the highest rate. Therefore, I think you would need to provide a revised disclosure so the customer fully understands how they can obtain the rate associated with each tier.

It does not sound like there will be any change to your system as it seems it has been accurately set to provide the correct rate at the amount “equal to or greater than” the required dollar amount. Based on that assumption, you will not have an actual change to anything but the disclosures, is that correct? If so, I don’t believe you could actually provide the disclosure before the change since there wont’ be one. To build on that, the change to the disclosure isn’t reducing the APY and wont’ have an adverse affect on the consumer (it is only providing them with more accurate information).

12 CFR 1030.5:
a) Change in terms. (1) Advance notice required. A depository institution shall give advance notice to affected consumers of any change in a term required to be disclosed under Sec. 1030.4(b) of this part if the change may reduce the annual percentage yield or adversely affect the consumer. The notice shall include the effective date of the change. The notice shall be mailed or delivered at least 30 calendar days before the effective date of the change.

If I have misunderstood any of this please let me know as it could affect my answer.

[SVaught0816]

You are correct in all of your assumptions. Basically instead of telling the client that they will, for example, earn 1% on anything equal to or greater than $100,000, the disclosure makes it seem as if 1% is only earned above $100,000.

Right, I looked at this section of the Regulation and since the situation didn’t seem to fit, I wasn’t sure what sort of timeline I needed to follow. Our vendor stated that a TISA update was released on 10/1/2020, however you have to be on a certain version of their product before you complete the download. As a general rule, we stay 2 builds behind because of issues that have presented in the past. We also always put the new build into our test environment before releasing it. Without the update, our system will continue to generate the incorrect disclosure for anyone opening these tiered account. Does 30 days from the time we received the notice from our vendor (to give us time to update and test the latest version) seem like an unreasonable timeframe to notify the clients that require re-disclosure?

[rcooper]

I think a reasonable timeframe would be as promptly as you can do what needs to be done to get them out. If 30 days is as quickly as you do can do it and you can make your case I think that is reasonable. If you can do ir faster (e.g. 10, 15 days, etc.), I wouldn’t rely on 30 days as reasonable.

Reg DD says that subsequent notices can be provided on a periodic statement. I think you could use that method to communicate the correct information to the consumer. Regardless of the form be sure to document when and how you notified customers.
1. Form of notice. Institutions may provide a change-in-term notice on or with a periodic statement or in another mailing. If an institution provides notice through revised account disclosures, the changed term must be highlighted in some manner. For example, institutions may note that a particular fee has been changed (also specifying the new amount) or use an accompanying letter that refers to the changed term.

I’d also confirm there hasn’t been any issues with providing the correct rate for amount equal to the threshold amount and document that for your file.

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