Hello All,
I started at a new institution a few months ago, and I have some concerns about their online account opening process. They do not provide all required disclosures to the consumer during the online account application process, sending them after the fact by email and postal mail. They believe this is not an issue because "they do not consider the account open until 5 business days after they receive the online application".

Within 24 hours of online application, most new accounts are setup on our system and have been funded. Since the funding is typically by EFT and EFT transactions are exempt from Reg CC's new account exception hold rules, the fact that they are freezing the account for 5 days is concerning. Is there any guidance out there about when an account is considered open? I have a hard time buying the idea that an account that is on our core system with an opening date and has been funded would not be considered "open" by the "reasonable person" standard.

Any feedback appreciated!

A couple of observations.

1. You need to tell us specifically which disclosures you are referring too that you have a concern about. What constitutes account opening may or may not be the same for every regulation.

2. "E-Mailing" disclosures is never acceptable unless it is accomplished through an E-Sign compliant system. E-mailing a disclosure outside of an E-Sign compliant system means it never happened, unless there is a carve out for electronic delivery in the specific regulation, but those carves outs do not usually involve e-mail.

i have a hard time buying an account on the core system which has been funded would not be considered open.

If the account is funded, it is open. Try to tell the consumer that it isn't and see what happens.

I suspect that if the online account opening platform being used has the ability to let the customer fund the account, that it also has the ability to provide disclosures to comply with E-Sign. It sounds like the institution may not have bothered to set it up.

From Regulation DD:

1030.4 Account disclosures.
(a) Delivery of account disclosures. (1) Account opening. (i) General. A depository institution shall provide account disclosures to a consumer before an account is opened or a service is provided, whichever is earlier. An institution is deemed to have provided a service when a fee required to be disclosed is assessed. Except as provided in paragraph (a)(1)(ii) of this section, if the consumer is not present at the institution when the account is opened or the service is provided and has not already received the disclosures, the institution shall mail or deliver the disclosures no later than 10 business days after the account is opened or the service is provided, whichever is earlier.

(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.

If the institution is "holding" (freezing) the customers funds deposited by EFT, then you also have a Reg CC issue.

Both of these could be considered systemic violations, so I would definitely find out what is going on. Perhaps there is a new product/service process and you can review the documentation or sign off from the person previously responsible for compliance.

You said you just joined the bank. Sounds like you have your work cut out for you!