Our Christmas Clubs and Vacation Clubs have variable rates. We've gotten away from the coupon booklets and have gone to just using deposit tickets as with any other savings account. When the maturity date rolls around and the payout occurs, the account closes, however, our system will reopen it if the customer makes a deposit. My question is, when we send the payout, do we need to treat it like we do our variable rate CDs and include a statement and phone number where they can call to find out the current rate on the account should they choose to basically renew it for the following year or is this statement not required on club accounts even though they have some CD features?

Any help with this would be greatly appreciated! I have marketing breathing down my back! Thanks!

It depends on your contract. If the account is extinguished at maturity, then you have a new account (regardless if you internally use the same account number). If it is a new account, you would trigger all new disclosure and since the account was closed, if that was the only account that the person had, they would no longer be an existing customer and would require CIP procedures.

If it is not extinguished and you have previously disclosed that it is a variable rate account, then no new disclosures would be required. If you have not previously disclosed that it is a variable account, you would have to provide them prior notice to change the interest rate.

rlcarey, when you say if the account is closed (extinguished) are you saying new disclosure are necessary because of the Reg DD commentary for 230.4(a)(1)-(1)(iv) (forfeited interest) or something else? If we pay out the account to zero and then allow new deposits a week/month later do you think that this is a new account requiring new disclosures?

I'm not Randy, but what I have seen was accounts closed when the disbursement was made. New accounts had to be established for the next year's program, if desired. That means new disclosures.

Some banks now open regular savings accounts and add the club account parameters to it. This way, a disbursement is simply an automatic withdrawal and the account doesn't terminate on a zero balance. You may add a condition here that the zero balance can't exist for more than XX days, so that you don't end up with a bunch of zero balance accounts for the next year.

Thanks Andy, that's how we've decided to proceed.