Account Disclosure Statements

Are institutions required to make the following statement or something similar, on certain account disclosure statements:

"The Bank may perform a periodic transfer of funds in this account between two types of sub-accounts. These transfers will not affect your bank statement, balance, interest, FDIC insurance or any other features of your account."

Does any ones statements or disclosures indicate this or something similar? If so, would you mind sharing your statement?

There is no requirement to have this statement on an account statement, but the bank that does has established savings sub-accounts for thier transaction account base in order to reduce their reserve expenses. Hope that made sense.

I haven't heard anything about a statement notice. What you're referring to is the reclassification of unused or idle funds in a customer's transaction account, for the purpose of reducing reserve requirements. The money shifts behind-the-scenes from a transaction subaccount to a non-transaction subaccount...that which is in the non-transaction subaccount isn't subject to reserves.

Most importantly, all of this is transparent to the customer - they never see any evidence of it.

We're in the process of moving from a bank that doesn't do this to one that does. We were advised to modify our deposit contract (which required 30 days in advance notice); and modify our TISA disclosure. We aren't planning to notify on periodic statements.

We also use sub-accounts and when we began this process we were advised by our regulator to provide 30-day notice to existing customers and to include this disclosure in our account terms and conditions information for new accounts.

Thanks for the replys, cwilliams, are you using a similar statement? If so, are you willing to share it with me?

Do you possible use Bankers Systems forms? They have a form "SUB-ACCT" that can be delivered at account opening.

This is the verbiage we have in our new account terms & conditions. We don't use a separate from - it is incorporated into all the other fine print!

"Your account may, at the bank's option, be divided into two sub-accounts in order to allow the bank to modify its reserve requirements as defined by Regulation D. Such division is strictly for internal bank purposes and will not affect the operations of your account in any way."

Hope that helps!

There were other discussions on this subject in past "threads" you may want to review. We did the statement stuffer using what FED recommended as language and placed the language in our account opening disclosures. Our bank is in the Third FED District and they have an excellent packet on this issue.

We revised our Customer Deposit Agreement to disclose the Master Account arrangement; however, we have not modified our TISA disclosures. Was the recommendation to modify your TISA approached as a good idea or actual requirement? And who made the recommendation? We have no more room on our TISA, I certainly hope it is not a requirement. Thanks, Bart!

We are working on this issue also and currently have someone at the Fed researching this disclosure requirement. We have been trying to say that it is only confusing for the customer and technically doesn't affect their account, only our bank accounting of their account and therefore it isn't necessary to notify the customer.

For those of you that have already done this, how have customers reacted to this disclosure? I am afraid that this is going to be a nightmare if we do have to make the disclosure, maybe someone can tell me that it is not going to be so bad...... (PLEASE!)

Jennifer, in our case it was almost a non-event. We get very few comments or questions about it. Our new account terms & conditions also contains the TIS disclosure (this is where we placed the notice) so perhaps the customers are on information overload and don't really notice what it is saying.

Jennifer,

It was a non-event at our bank too. Actually I had it approved with a statement stuffer...compliance required language on one side and a marketing advertisement on the other. No customer actually called on this change.

It was almost a non-event here as well. We had just a very few to call. The best I can remember, we included it with some other mailing as well.

We were clued-in to this approach by our mainframe vendor (Kirchman). They sent around a package in mid-2000 with benefits, testimonials, and a set of proposed communication pieces that included: a) a change in terms notice; b) language for the contracts going forward; c) the TISA recommended verbiage; and d) a draft letter to the regulator.

We decided to pull the trigger this spring, and are currently in the notification phase (via statement stuffer). Like the other recent posters, a non-event so far in terms of customer service.

The TISA piece came at the recommendation of the Kirchman attorneys, and it was verbally supported by our consumer affairs contact at the FRB. I think her comment was "that's a good idea". A regulatory citation wasn't requested by us or offered by her - we just took it at face value & did it, as the TISA change cost us exactly zero.

It has been a non-event from a customer standpoint at all the banks I have seen it implemented. In response to Jennifer, it does have to be disclosed and it is more than an accounting issue. I would also warn cwilliams, based on the language you posted, you may want to re-analyze your approach. The key to this whole process is to get the subaccounts that you are creating into the "savings" category to avoid paying reserves on those subaccounts. If you don't reserve the right to 7 days advance notice of withdrawal, you have not created a "savings" subaccount. If you haven't disclosed this properly, you could be subject to back reserves. It's an easy concept, but don't let it be too easy and don't let the marketing people talk you out of the necessary appropriate disclosures in order to legally qualify these accounts for proper reserve consideration.

Thanks for the warning. But, we do have the 7 day notice included in the disclosure. As I mentioned previously, the sub account disclosure does appear in the TIS portion of the new account terms and conditions information where the 7 day notice is covered.