Happy Fall, compliance friends! It seems like this year is quickly passing by. Soon it will be Halloween, next there will be snow on the ground (depending on where you are geographically), and then it will be the new year. But I don’t want to get ahead of myself, currently, I’m savoring the cool crisp mornings and all things pumpkin related. With that said, let’s get down to business on our compliance topic today. Recently, we have received quite a few questions on periodic statements. Many of these questions include how often to send a periodic statement or what needs to be included in the statement. So, let’s jump right in while I sip on my pumpkin spice latte and snack on some pumpkin bread.
There are two regulations that govern periodic statements for share accounts: NCUA’s Truth in Savings (TIS) and Regulation E.
If the credit union sends periodic statements pursuant to section 707.6 of TIS, then the following information is required to be disclosed:
(b) Statement disclosures. If a credit union mails or delivers a periodic statement, the statement shall include the following disclosures:
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- Annual percentage yield earned. The “annual percentage yield earned,” using that term as calculated according to the rules in appendix A of this part.
- Amount of dividends. The dollar amount of dividends earned (accrued or paid and credited) on the account. The dollar amount of any extraordinary dividends earned during the statement period shall be shown as a separate figure.
- Fees imposed. Fees required to be disclosed under 707.4(b)(4) of this part that were debited from the account during the statement period. The fees must be itemized by type and dollar amounts. Except as provided in § 707.11(a)(1) of this part, when fees of the same type are imposed more than once in a statement period, a credit union may itemize each fee separately or group the fees together and disclose a total dollar amount for all fees of that type.
- Length of period. The total number of days in the statement period, or the beginning and ending dates of the period.
- Aggregate fee disclosure. If applicable, the total overdraft and returned item fees required to be disclosed by 707.11(a).
For more information on what fees to include, section 707.4(b)(4) states “the amount of any fee that may be imposed in connection with the account (or an explanation of how the fee will be determined) and the conditions under which the fee may be imposed.”
Comment 1 in the commentary to this section discusses the types of fees that must be disclosed stating:
- Types of fees. Fees related to the routine use of an account must be disclosed. The following are types of fees that must be disclosed in connection with an account:
i. Maintenance fees, such as monthly service fees.
ii. Fees related to share deposits or withdrawals.
iii. Fees for special services, such as stop payment fees, fees for balance inquiries or verification of share and deposits, fees associated with checks returned unpaid, fees for regularly sending to members share drafts that otherwise would be held by the credit union, and overdraft line of credit access fees (if charged against the share account).
iv. Fees to open or to close an account.
v. Fees imposed upon dormant or inactive accounts.
Comment 2 in the commentary to this section discusses the types of fees that credit unions do not need to disclose stating:
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- Other fees. Credit unions need not disclose fees such as the following:
i. Fees for services offered to members and nonmembers alike, such as fees for certain travelers checks, for wire transfers and automated clearinghouse (ACH) transfers, to process credit card cash advances, or to handle U.S. Savings Bond Redemption (even if different amounts are charged to members and nonmembers).
ii. Incidental fees, such as fees associated with state escheat laws, garnishment or attorneys fees, to change names on an account, to generate a midcycle periodic statement, to wrap loose coins, for photocopying, for statements returned to the credit union because of a wrong address, and locator fees.
Further, if the account is one to which electronic fund transfers can be made to or from, then section 1005.9(b) of Regulation E would apply, and requires the following information (as applicable):
1. Transaction information. For each electronic fund transfer occurring during the cycle:
i. The amount of the transfer;
ii. The date the transfer was credited or debited to the consumer’s account;
iii. The type of transfer and type of account to or from which funds were transferred;
iv. For a transfer initiated by the consumer at an electronic terminal (except for a deposit of cash or a check, draft, or similar paper instrument), the terminal location described in paragraph (a)(5) of this section; and
v. The name of any third party to or from whom funds were transferred.
2. Account number. The number of the account.
3. Fees. The amount of any fees assessed against the account during the statement period for electronic fund transfers, the right to make transfers, or account maintenance.
4. Account balances. The balance in the account at the beginning and at the close of the statement period.
5. Address and telephone number for inquiries. The address and telephone number to be used for inquiries or notice of errors, preceded by “Direct inquiries to” or similar language. The address and telephone number provided on an error resolution notice under § 1005.8(b) given on or with the statement satisfies this requirement.
6. Telephone number for preauthorized transfers. A telephone number the consumer may call to ascertain whether preauthorized transfers to the consumer’s account have occurred, if the financial institution uses the telephone-notice option under § 1005.10(a)(1)(iii).
Now that you know what needs to be in a periodic statement, let’s go over when you need to send one. Ultimately, while section 707.6 of NCUA’s Truth in Savings regulation provides many of the disclosure requirements for periodic statements, it does not actually require credit unions to provide statements. Instead, section 1005.9(b) of Regulation E requires statements for each month in which an electronic fund transfer is made to or from the account or at least quarterly if no transfer has occurred. Neither the rule nor the commentary provide a specific timing requirement for when the statement must be sent after the close of the month. However, credit unions may want to review any applicable state law and account agreements to determine whether they impose any specific timing requirement. In the absence of any state law or contractual provision, it will be up to the credit union to determine when to provide the periodic statement. In making this determination, credit unions may also want to consider that the timeline for reporting errors does not begin until a periodic statement is sent.
As always, feel free to contact America’s Credit Unions’ Compliance Team at compliance@americascreditunions.org with questions.