Institutions and Accounts to Which TISA Applies

Institutions

The Truth-in-Savings Act (TISA) applies to what it calls “depository institutions.” This term includes insured banks, insured mutual savings banks, insured savings banks, insured savings associations, and insured credit unions. The term also includes any of these sorts of entities that are not insured—if the entity is eligible to apply for insurance. [12 USC 4313(6)] As we mentioned earlier, however, corporate credit unions and small, nonautomated credit unions are exempt from coverage. See the Introduction to this chapter for more details.

The advertising restrictions of TISA also apply to deposit brokers. [12 USC 4302(a)]

Accounts

Regulation DD and Part 707 apply to any account held by or offered to a “natural person” for personal, family, or household purposes. [12 CFR 1030.2(a)] Regulation DD refers to these as “consumers.” Part 707 refers to them as “members” and “potential members.” These terms apply to the Truth in Savings section.

The crucial factors in deciding whether TISA applies are the type of entity and the purposes for which that entity owns (or will own) the account. The type of account (e.g., checking, savings, share, share draft, or time deposit) is irrelevant.

Accounts held by corporations or partnerships are not subject to TISA because these entities are not natural persons. TISA also does not apply to an account held by an individual for business purposes, such as a sole proprietorship account. Similarly, TISA does not apply to an account held by a natural person in a professional capacity on behalf of someone else. [Commentary, 12 CFR 1030.2(a)-2; Commentary, 12 CFR 707.2(a)-2] For example, the trustee of a trust may invest trust funds in a deposit account. Even though the trustee may be a natural person, he/she will not be under the protection of TISA because the trustee holds the account on behalf of the beneficiaries in a professional capacity. However, TISA does apply to individual retirement accounts (IRAs) even though an IRA is technically held by the depository institution as trustee or custodian. [Commentary, 12 CFR 1030.2(a)-1; Commentary, 12 CFR 707.2(a)-1] The FRB and NCUA felt IRAs, though technically trust or custodial accounts, are in essence more like individually held deposit accounts. Simplified Employee Pension (SEP) plans are also subject to TISA.)

A number of account-like investments that people may obtain from or through depository institutions are not “accounts” for purposes of TISA. For example, government securities or annuities are not accounts—even if a person purchases them from or through an institution subject to TISA. Securities or obligations of the institution itself are not accounts. Nor are repurchase agreements, interest rate swaps, or banker’s acceptances. An investment in a mutual fund, even if made through a depository institution or its affiliate or subsidiary, is not an account. [Commentary, 12 CFR 1030.2(a)-3; Commentary, 12 CFR 707.2(a)-3] Finally, a certificate of indebtedness account that is offered by a credit union is not subject to TISA. [Commentary, 12 CFR 707.2(a)-2]

To summarize, TISA, Regulation DD, and Part 707 apply to “depository institutions,” which are insured and uninsured banks, savings associations, and most credit unions. The TISA and regulatory requirements will apply to “accounts” at those depository institutions, and “accounts” includes most forms of deposit accounts that are held by or offered to a natural person for personal, family, or household purposes.