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#2221276 - 09/10/19 02:48 PM Opening a CD online
Tesla Offline
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Hi!

We are initiating a process where a customer could open a CD online. They first go through CIP and E-SIGN, so that is covered. Where I am getting hung up is on providing the TISA disclosure. I tried looking at how other banks are doing it, but I need to open a CD (and I don't have the cash (LOL!)).

The reg has a section on providing a TISA upon request that is sort of generic. Is that what everyone does and then sends the real TISA (with the specific terms of the account) when we receive the funds to open the account (such as by ACH, Wire or mail) or is the generic TISA sufficient? Is it that simple? I am thinking I am missing something because they aren't getting the real TISA until after they fund the account. Am I over thinking this??
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#2221294 - 09/10/19 04:33 PM Re: Opening a CD online [Re: Tesla]
rlcarey Offline
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If they are not funding the CD until sometime later, how is this on-line account opening? ACH or mail - really? Has someone really thought this through? Normally CDs opened on-line require an existing account at the bank from which collected funds can be transferred.
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#2221321 - 09/10/19 06:08 PM Re: Opening a CD online [Re: Tesla]
Tesla Offline
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Well, I don't know. I thought you could fund any account with ACH or by mail. Is there a rule that says you can't or is just this crazy disclosure conundrum I am trying to work through? Is the reason other banks only allow you to open a CD if you have an existing account so you can move money from an existing account at that bank to the CD? I am clearly missing something here, but I admit deposits is not my wheelhouse.
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#2221324 - 09/10/19 06:22 PM Re: Opening a CD online [Re: Tesla]
rlcarey Offline
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How are you going to verify that the person has legitimate access to the account from which the ACH is coming from? How are you going to match a check randomly received in the mail to a pending CD account opening.

These are all more logistical and security issues than compliance.

As to your disclosure timing question:

1030.4(a)(ii) Timing of electronic disclosures. If a consumer who is not present at the institution uses electronic means (for example, an Internet Web site) to open an account or request a service, the disclosures required under paragraph (a)(1) of this section must be provided before the account is opened or the service is provided.

So the disclosure would have to be provided before you accepted the deposit.
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#2221330 - 09/10/19 06:50 PM Re: Opening a CD online [Re: Tesla]
Tesla Offline
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/i/How are you going to verify that the person has legitimate access to the account from which the ACH is coming from? How are you going to match a check randomly received in the mail to a pending CD account opening./I/

How do you verify that information if the customer is face to face? We are still CIPing them. (I am not trying to be argumentative, just trying to walk through this.:))

I am still struggling with timing of the specific TISA for the CD. When is "account opening"? I was thinking it was when they funded the account which would be when we receive the funds (via ACH, mail, wire, etc.). At that time, we would provide them with a specific TISA stating the maturity date and CD #. If "account opening" is when they enter all their information into the website to "open" an account, then we can't give them a specific TISA. So how do other banks handle this or what am I missing?

Other banks I have looked at have online Deposit Agreements that include the Reg E, Reg CC and Reg DD disclosures - thought the Reg DD one is general which is permitted under the reg. Once the customer enters their information into their website, is the system they use sophisticated enough to generate a specific TISA (amount, rate, APY, maturity date) for the CD the customer is opening even though the funding hasn't been finalized or how does this work?
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#2221338 - 09/10/19 07:40 PM Re: Opening a CD online [Re: Tesla]
rlcarey Offline
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I am not sure what the receipt of an ACH deposit from a sight unseen person to open an account or some employee opening the mail and having a check in their hand with no idea what is for, compares to opening an account in person.

I have hacked someone's account and open a CD on-line using their account information for the ACH transfer. I open a $50,000 CD. Two weeks later I show up at the branch and cash in the CD early and pay the early withdrawal penalty. A week later the ACH debit to the account that was used to open the account is returned as unauthorized. The Bank loses $50,000.

As far as timing of the disclosure, you need to make a business decision as to when the account is considered opened. Is it opened on-line with a zero balance and then you allow a customer to make deposits to the CD account. Do you allow one - do you allow multiple deposits? This would all have to be outlined in your deposit's agreement.

Or, do you considered the account opened when the deposit is made.

In either case you have to get them the required TISA disclosures prior to the account being opened, if you are doing this electronically based on the previous regulation citation I provided.
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#2221352 - 09/10/19 09:50 PM Re: Opening a CD online [Re: Tesla]
Tesla Offline
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Thanks for all your input Randy. I'm still not seeing where there is more risky than opening a deposit account online or any account opening (other than your standard risk when opening accounts online.)

Is anyone actually opening CDs online at their institution? Would you be willing to discuss with me?
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#2221355 - 09/10/19 11:21 PM Re: Opening a CD online [Re: Tesla]
Richard Insley Offline
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Richard Insley
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Originally Posted by Tesla
When is "account opening"?
This is clearly the key to getting your answer. It's a shame they didn't define that term in the regulation.

When there's uncertainty about the meaning of a reg, sometimes the answer lies in the findings and purpose of the reg and the law it implements. In the case of Reg DD, the most fundamental rule is found in Section 1030.1(b):
The purpose of this part is to enable consumers to make informed decisions about accounts at depository institutions. This part requires depository institutions to provide disclosures so that consumers can make meaningful comparisons among depository institutions.

In order to make a meaningful comparison between the CD terms available at First National Bank and Peoples State Bank, the consumer must have control of the money. Once a binding agreement occurs between the consumer and FNB, the consumer can no longer decide to accept PSB's offer--because the consumer no longer has control of the money. FNB may not yet have the dollars, but the consumer's opportunity to shop and compare has ended. For this regulation to have the effect intended by Congress, the account is "opened" no later than the moment the consumer signed (or e-signed) FNB's time deposit agreement.
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#2223700 - 10/15/19 02:29 PM Re: Opening a CD online [Re: Tesla]
BJ Blazko Offline
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My institution allows CD opening online and we supply the TISA at the point they hit "submit" along with all the other disclosures.

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#2223716 - 10/15/19 04:31 PM Re: Opening a CD online [Re: Tesla]
Monster Offline
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You can also try to build in the account disclosures after the ESIGN consent is captured. This could be covered by generic TIS disclosure combined with a rate sheet that shows the rates for each product.

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#2223853 - 10/16/19 09:21 PM Re: Opening a CD online [Re: Tesla]
Andy_Z Offline
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BJ - is E-SIGN in place or is the bank simply making all the disclosures in e-form without regard to that? Is paper going out?
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