TIS Obligations and Restitution

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Question:

I need a quick summary of our obligations regarding interest recalculation and possible restitution if we discover that we are not paying interest on deposit accounts as disclosed in the Truth in Savings disclosure.

Answer:

The TISA lacks a restitution feature of the type found in TILA. Consequently, no automatic sanctions apply to the bank or its regulator when the bank overstates an APY by more than the 5 basis point tolerance. Nevertheless, regulators are free to enforce the TISA and Regulation DD in any manner they wish, including depositor restitution.

Depositors may also seek to recover underpaid interest through private lawsuits. Claims would most likely involve breach of contract and would seek recovery of damage (the underpaid interest).

Given these risks, depository institutions may wish to implement quality control testing and voluntarily adjust interest payments to conform with inadvertently overstated APYs.

First published on BankersOnline.com 1/15/01