Compliance Blog

The Fear of Change: Is Your Credit Union Required to Provide a Change-in-terms Notice? (Part 1)

Written by Alma Calcano, Regulatory Compliance Specialist, NAFCU

NAFCU’s compliance team often receives questions related to regulatory requirements for providing change-in-terms disclosures for different credit union products. This is the first in a series of three blogs to help you understand and navigate the numerous regulations governing change-in-term requirements. In this blog, I will cover several key regulations governing change-in-terms notices for checking and savings accounts. In general, these laws and regulations require a credit union to provide its members with change-in-terms notices before most changes in account terms.

Checking and Savings Accounts

Regulation

Citation

Notice Requirement

Form of the Notice

Exceptions

Model Language, Forms & Disclosure Requirements

Truth in Savings Act
12 CFR  §707.5(a).

30 calendar days advanced notice for changes in particular terms that are required to be disclosed prior to account opening when those changes would be adverse to the member. Notice must include the effective date of the change.

Listed in section 707.4(b), these terms include:

  • The annual percentage yield (APY) and dividend rate;
  • Any fee that may be imposed in connection with the account;
  • The frequency for compounding and crediting dividends; and
  • Any minimum balance requirements to open the account or avoid fees.
Written notice required.

Changes in the dividend rate and corresponding changes in the APY for variable-rate accounts;

  • Changes in fees for check printing; and
  • Changes in any term for term share accounts with maturities of one month or less. See,  12 CFR § 707.5(a)(2).
  • Disclosures required by and provided in accordance with the Electronic Fund Transfer Act and its implementing Regulation (Reg. E), may be substituted for the disclosures required by section 707.3. See, 12 CFR §707.3(c).

Appendix B to Part 707 provides a model clause for change-in-terms notices required under the rule and recommends the use of as simple language as possible to convey the change-in-terms.

Regulation CC
12 CFR § 229.18(e).

At least 30 days before implementing a change to credit union funds availability policies.

For changes that result in faster availability for a member than what Regulation CC requires, notice is required no later than 30 days after implementation.

In any form as long as it is clear and conspicuous. According to the Commentary in Appendix E, if all new disclosures are provided, the credit union must direct the customer to the changed terms by highlighting the change or using a cover letter or insert.
Electronic Fund Transfers Act
12 CFR § 1005.8(a)(1).

At least 21 days before the effective date of any change in a term or condition that would result in:

  • Increased fees to the member;
  • Increased liability for the member;
  • Fewer types of available electronic fund transfers; or
  • Stricter limitations on the frequency of dollar amount of transfers.

Terms or conditions required to be disclosed can be found in §1005.7(b) and include:

  • Liability of consumer;
  • Telephone number and address for reporting unauthorized electronic funds transfers;
  • The credit union's business days;
  • Types of transfers and limitations;
  • Fees;
  • Documentation;
  • A summary of the consumer's right to stop payment;
  • A summary of the credit union's liability to the consumer for failure to make or to stop certain transfers;
  • Error resolution; and
  • ATM fees.
Written notice.
  • If an immediate change in terms is necessary to maintain or restore the security of an account or an electronic fund transfer system.
  • When closing some of the credit union's ATMs or cancelling an "access device," such as a debit or ATM card.
  • When a credit union changes the telephone number or address used for reporting unauthorized transactions, a change-in-terms notice is required only if the credit union plans to impose liability on the member for unauthorized transfers.

 

 

According to the Official Staff Interpretation to Regulation E, no specific form or wording is required for the change-in-terms notice.

The notice can appear on a periodic statement or may be given by sending a copy of a revised disclosure statement if the change is highlighted.

The Fear of Change Trilogy 

Part 2: The Fear of Change: Is Your Credit Union Required to Provide a Change-in-terms Notice? (Open-end Credit)

Part 3: The Fear of Change: Is Your Credit Union Required to Provide a Change-in-terms Notice? (Closed-end Credit)

Compilation: Download the full Fear of Change blog series PDF

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About the Author

Alma Calcano, NCCO, Regulatory Compliance Specialist, NAFCU

Alma joined NAFCU in February 2019.  As part of the Regulatory Compliance Team, she provides daily compliance assistance to member credit unions on a variety of topics. 
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