What is the Truth in Savings Act (TISA)?
The Truth in Savings Act, also known as TISA, is a federal law which was enacted in 1991 as part of the Federal Deposit Insurance Corporation Improvement Act. It protects consumers by requiring clear and uniform disclosure of terms of interest and fees when you open a new savings account or CD. The Truth in Savings Act was intended by Congress to help consumers to make informed decisions regarding the interest rates of accounts among competing institutions and promote economic stability.
What is Under the Truth in Savings Act?
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Under the Truth in Savings Act, banks are required to disclose the annual percentage yield, or APY, and any fees that are associated with the account when you open a savings account or certificate of deposit. For example, if you were to open a certificate of deposit account, the bank you are dealing with must provide information about ladder rates on various CDs, as well as any penalty fees that might be charged for early withdrawal. It also requires that the bank credit the interest rate toward the entire amount of the deposit, rather than crediting a portion of the deposit or using a “low balance per month” as the basis for accounting. If there are any fees for bounced checks, stop payment orders, wire transfers, certified checks, or any other fees, the bank must disclose those as well.
Who Does the Truth In Savings Act Protect?
The Truth in Savings Act also protects consumers by prohibiting institutions from advertising an account as “free” (for example, “free checking”) if there are any hidden requirements, such as maintaining a minimum balance in order to qualify for such an account. With fully disclosed fees, under the Truth in Savings Act, you will be able to make an informed decision among the best interest rates at different financial institutions. However, be aware that TISA only applies to accounts held by “natural persons,” such as an individual, household or family account. Corporate accounts, business accounts, or organizational accounts such as those held by a church or association, are not subject to regulation under the Truth in Savings Act.
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