DEFINITION of Truth in Savings Act
The Truth in Savings Act (also known as TISA) is a federal law passed by Congress on December 19, 1991, as part of the Federal Deposit Insurance Corporation (FDIC) Improvement Act of 1991. The act was implemented under Federal Regulation DD. The Truth in Savings Act was designed to help promote competition between depository institutions and make it easier for consumers to compare interest rates, fees, and terms associated with savings institutions' deposit accounts. The Truth in Savings Act established uniform guidelines for how banks and other financial institutions disclose information about deposit accounts to individuals.
BREAKING DOWN Truth in Savings Act
The Truth in Savings Act applies to individuals opening accounts for personal or household use. It does not apply to business accounts opening a corporate account or organizations (such as nonprofits) opening a business deposit account.
Why the Truth in Savings Act Was Established
The intent of the law was to provide consumers with protection and information on the terms of new savings and certificate of deposit accounts they wish to open. Under the law, the financial institution must disclose whether there are fees such as for wire transfers, penalties for early withdrawals or returned checks, or stop payment orders. Rates of interest must also be disclosed as well as minimum balance requirements.
After an account has been opened, the bank must also continue to provide clarity to read communications to its customers. This includes providing customers with regular updates on the amount of interest their accounts should be accruing. Furthermore, bank advertising falls under the jurisdiction of the act. This is to ensure that the marketing and ads banks present to the public are not misleading. The annual percentage yield must also be disclosed if a bank mentions interest rates in its advertising, including billboards, in print publications, online, and other media.
The passage of the law came in the wake of the Savings and Loan Crisis, which occurred from the 1980s through the 1990s. The failure of the multitude of savings and loan associations, along with the related losses across the economy led to the introduction of a host of federal regulations and new laws including the Truth in Savings Act. The purpose of introducing the new statues was to grant more authority and power to the FDIC in response to the crisis. The various legislation, including the Truth in Savings Act, was meant to create more transparency for consumers and hold financial institutions accountable with standards of practice that might deter a repeat of the circumstances that led to the crisis.