Articles & E-Books


Opening deposit accounts when the lobby is closed

Jun 16, 2020

Due to the coronavirus and the need to limit in-person interactions, for financial institutions that do not offer online account opening, requests to open deposit accounts through the mail and over the telephone are becoming more common.

Email is one method being used for the delivery of documents in connection with these requests to open a deposit account or change the terms of an existing certificate of deposit (CD). 

Before emailing disclosures, a financial institution must determine whether the regulation triggering the document has a requirement to comply with the Electronic Signatures in Global and National Commerce (ESIGN) Act. Regulation E, Regulation CC and Regulation DD require that certain disclosures provided to consumers be in writing and in a form they may keep. These disclosures may be provided in electronic form, subject to compliance with the ESIGN Act. 

Covered documents include the Electronic Funds Transfer (EFT) disclosure required by Section 1005.7, the funds availability disclosure required by Section 229.17 and the Truth in Savings disclosure required by Section 1030.4 when provided in connection with opening an account.

If these disclosures are provided both in paper by mail and in electronic form, a financial institution may rely on the mailed paper form to satisfy its compliance obligations and would not have to comply with ESIGN to satisfy the regulations’ disclosure requirements.

When a financial institution is relying on emailed disclosures to comply with a regulation’s disclosure requirements, prior to delivering them the consumer must receive a notification that includes:

  • A description of the extent of the consent granted (for example, an explanation of whether the consent applies to a particular transaction or a description of the categories of disclosures that are included).
  • An explanation of the consumer’s right, if any, to obtain a document in paper form, whether a fee will be assessed and procedures for how to request the paper document.
  • An explanation of the consumer’s right to withdraw consent for receiving electronic documents and the consequences of withdrawing consent, along with instructions for how to withdraw consent.
  • The process for updating contact information, such as the consumer’s email address.
  • A description of the hardware and software requirements necessary to access and retain the electronic documents.

After providing the notification, the consumer must both affirmatively consent to receive electronic disclosures and demonstrate that they are able to access the disclosures in the format (HTML, PDF, etc.) they will be provided in.

This verification step is sometimes referred to as an electronic “consent handshake” or “demonstrable consent” because it must be accomplished electronically to demonstrate the consumer has the capability to access the information in the form it will be provided in.

For example, one way to accomplish the electronic handshake for documents that will be delivered in PDF format is to email a PDF document to the consumer with a passcode and have the consumer email the passcode back to the financial institution. This demonstrates the consumer can open and read a PDF document prior to using this format to send documents.

To comply with the timing requirements of Regulation E, a financial institution must make the disclosures required by Section 1005.7 at the time a consumer contracts for an electronic funds transfer service or before the first electronic funds transfer involving the consumer's account is made. If a consumer opens a new account permitting EFTs at a financial institution where the consumer already has received an EFT disclosure for another account, the institution need only disclose terms and conditions that differ from those previously given.

Under Regulation DD, a financial institution is to provide account disclosures to a consumer before an account is opened or a service is provided, whichever is earlier. An institution is deemed to have provided a service when a fee required to be disclosed is assessed. If a consumer requests an account be opened via mail or telephone, the institution can mail — or email in compliance with ESIGN — the disclosures no later than 10 business days after the account is opened or the service is provided, whichever is earlier.

Under Section 229.17 of Regulation CC, an institution must provide its funds availability policy to all potential customers prior to opening an account. The requirement of a notice prior to opening an account is that the disclosure be provided prior to accepting a deposit to open the account. However, if the request to open an account is received by mail from a person asking that an account be opened, and the request includes an initial deposit, the institution may open the account with the deposit, provided it mails, or emails in compliance with ESIGN, the required disclosures to the customer not later than the business day following the banking day on which the deposit was received.

Similarly, if the institution receives a telephone request from a customer asking that an account be opened with a transfer from a separate account of the customer's, the disclosure may be mailed, or emailed in compliance with ESIGN, no later than the business day following the banking day of the request.

Remember, if disclosures are provided on a timely basis by mail, in addition to email, a financial institution does not have to comply with ESIGN.

Given the various timing and delivery requirements within the different regulations, if a financial institution allows consumers to open deposit accounts over the telephone or through the mail, management should ensure its process complies with the requirements for delivering disclosures via email or mail.

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