|
For those credit unions that allow members to overdraw their share or checking accounts, up to a certain dollar limitation for a fee, without tapping into a line of credit, the disclosure and advertising requirements of Truth in Savings have changed. Credit unions frequently refer to this service as “courtesy pay” or “bounce protection.”
The mandatory compliance date has been moved back to October 1, 2006, in large part to all of our credit union and league comment letters. The extension will help ensure the credit union has sufficient time to coordinate with its data processor and forms company to update the data processing system and the Truth in Savings disclosure given to new members. The following changes are required:
Disclosure of Overdraft Fees on Periodic Statements
Credit unions that provide members with courtesy pay protection, but do not promote the product in advertisements, must still disclose the courtesy pay fees debited from the account on the member periodic statement. If the fee for paying the items is imposed more than once in a statement period, the fees may be itemized separately or grouped with all other fees, and the total disclosed.
In contrast, credit unions that promote courtesy pay in advertisements are now required to separately disclose the total fees charged to the account for utilizing the courtesy pay protection, which consists of fees associated with NSFs and returned items. The fees are to be totaled and separately disclosed for the statement period and the year to date.
Advertising Rules
If your credit union promotes courtesy pay in advertisements, the advertisement must also include the following disclosures:
- The applicable fees and charges;
- The categories of transactions covered, which will be the same as the TIS disclosure addressed previously;
- The time period members have to bring the account back to a positive balance; and
- Any occasion in which the credit union would not pay an overdraft.
Stating the amount that the credit union would allow a member to overdraw an account, or stating an available courtesy pay balance on a periodic statement, would also trigger the above requirements.
Truth in Savings Account-Opening Disclosure
The disclosure that your credit union presently provides to new members is to be updated to include each type of transaction that could trigger courtesy pay protection. For example, if applicable, the disclosure could state: “A fee is imposed for overdrafts created by checks, in-person withdrawals, ATM withdrawals, or by any other electronic means.”
The above requirements are significant and should be addressed immediately so as to give the credit union’s data processing company adequate time to implement the changes. In addition, the required changes to the Truth in Savings disclosure can be executed by placing a sticker with the changes on the disclosure or including an addendum, until it is time to order the next batch of disclosures. For additional information, please contact Niall Twomey in the ICUL Office of General Counsel.
|
