The Truth in Savings Act requires banks to disclose fees and provide annual percentage returns to customers. It aims to provide transparency and prevent banks from taking advantage of customers. However, it only applies to natural persons and has resulted in increased paperwork when opening an account.
The Truth in Savings Act is a government decision that provides more transparency for consumers working with banks. Specifically, the act requires banks to disclose fees, provide annual percentage returns and other information. This act is a direct result of an extensive federal restructuring in 1991. The act is also limited to only certain bank customers and has come with some unforeseen paperwork drawbacks.
The roots of the Truth in Savings Act come from the Federal Deposit Insurance Corporation (FDIC) Improvement Act of 1991. In an effort to strengthen the FDIC, this act primarily allowed it to borrow from the US Department of the Treasury. Along with this major change, the government passed several other pieces of legislation aimed at improving the stability of the country’s savings and loans.
One such piece of legislation was the Truth in Savings Act, which required banks and lenders to follow four basic rules. The first is that lenders need to tell customers the annual percentage return on savings accounts so they can better understand how much interest will be earned in a year. Second, banks must honor an entire deposit, rather than a portion. The third requires lenders to list fees for bounced checks, wire transfers and other services. Finally, the law states that banks cannot advertise free checking accounts if there are, in fact, fees associated with the account.
The purpose of the law is to provide bank customers with enough data to make a sound savings decision. With this additional information, people are able to gather information from different banks and compare rates to find the best fit. Another effect is to prevent banks from taking advantage of customers by forcing lenders to be completely transparent.
This act, however, does not apply to everyone. The Savings Truth Act applies only to a natural person, i.e. a single customer. Businesses and organizations are not subject to these rules. Another unexpected result of this act is the increase in paperwork when opening an account. Due to the fact that lenders are required to provide this depth of information, there are often large piles of paperwork that need to be signed or initialed when opening an account. These documents indicate that the client has received the documents that the bank is required by law to provide.
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