When is a Change in Terms Notice Required under the Truth in Savings Act?

Frequently, the Compliance Team here at America’s Credit Unions receives questions regarding change in terms notices under the Truth in Savings Act (TISA),  12 CFR Part 707 . This blog explains when a credit union is required to provide a change in terms notice and also provides a practical example of when such a notice would not be required. 

Specifically, NCUA’s  section 707.5(a)(1)  outlines when a change in terms notice (advance notice) is required: 

“(a) Change in terms —

(1) Advance notice required. A credit union shall give advance notice to affected members of any change in a term required to be disclosed under  § 707.4(b) , if the change may reduce the annual percentage yield or adversely affect the member. The notice shall include the effective date of the change. The notice shall be mailed or delivered at least 30 calendar days before the effective date of the change.”

In short, section 707.5(a)(1) generally requires 30 days advance notice of any change in a term required to be disclosed at account opening “if the change may reduce the annual percentage yield or adversely affect the member.” As such, it’s important to review section 707.4(b) to determine what is required to be disclosed at account opening. It includes fees, transaction limitations, bonuses, and other key account terms (review section 707.4(b) for a full list). 

The regulation also provides instances where no notice would be required. Per  section 707.5(a)(2) , no notice is required for the following:

“(2) No notice required. No notice under this section is required for:

(i) Variable-rate changes. Changes in the dividend rate and corresponding changes in the annual percentage yield in variable-rate accounts.

(ii) Share draft and check printing fees. Changes in fees for check printing.

(iii) Short-term term share accounts. Changes in any term for term share accounts with maturities of one month or less.”

Now, aside from the above exceptions, let’s look at a common operational scenario where a change in terms notice is also not required. Let’s say a credit union wants to start charging a bad address fee for processing returned mail. Must that credit union send its members a change in terms notice?

Well, the first step in determining whether a change in terms notice is required is to figure out if the fee is one that must be disclosed at account opening under section 707.4(b) and its related staff commentary. Under  section 707.4(b)(4) , fees that may be imposed in connection with the account must be disclosed. 

Now, let’s look to the commentary, as it is always a great place to look for more information. Per the  commentary to section 707.4(b)(4):

“2. 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.” (Emphasis added). 

As emphasized in the commentary above, a fee for statements returned to the credit union for a wrong address are incidental fees and are not required to be disclosed at account opening under section 707.4(b). Since disclosure of the fee is not required at account opening, section 707.5(a)(1) does not require a change in terms notice. However, the credit union’s account agreements may have contractual notice provisions regarding certain kinds of account changes, so it’s important to review your account agreements to see if notice is contractually required. Also, even if there is no regulatory or contractual obligation to provide notice, some credit unions opt to provide notice as a courtesy to members. 

Question? Our Compliance Team can be reached at  [email protected] .