Changing from Free Checking to Classic Checking

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Question:

We currently have free checking at our bank. The signature card lists the type of the account as "First Free Checking". The account currently has no fees, except overdraft fees. Management intends to change the "First Free Checking" account to our "Classic Checking Account", which requires the account holder to keep a minimum balance of $300.00 in order to avoid a monthly charge of $3.50, effective January 1, 2011. The current signature cards are titled "First Free Checking". Management will send a letter addressed to the account holders affected by this change giving sufficient notice for the change in terms. I have been researching the Regs, but could not find a reference to this type of situation. I am concerned about this change from a compliance standpoint. Do we need to mail new appropriate disclosures and privacy notices with the letter? Also, what about the signature card? Do we need a new signature card reflecting the change inthe account status? Are there any other compliance issues we should be concerned with before going ahead with this change?

Answer:

Your notification letter should include appropriate change in terms notification such that a new disclosure would not be required. Make sure the notice is sent no later than December 2 (thirty days before the change is to be effective).There is also no need for a new privacy notice, because you have not suggested that there is to be any change in your privacy practices as a result of the account change, nor do you need new signature cards.

First published on BankersOnline.com 11/15/10