Do you read the fine print?
A disclosure details all material facts relevant to a transaction. Federal or state laws require financial institutions to provide disclosures containing information on terms to their customers. It can sometimes be difficult to decipher the information you are given. However, disclosure statements contain the critical information you need to make an informed decision about which financial institution, and its products and services are right for you.
Disclosure statements are legal documents. You should read the disclosures you receive when you open an account at your credit union. To understand your legal rights and responsibilities as well as the rights and responsibilities of the credit union, read the documents you receive from the financial institution. Read the entire disclosure document. Don’t be shy about asking for explanations, clarifications, and answers to your questions before you open an account or take out a loan. You should understand the disclosure statements prior to signing any documents.
Use the checklist below as you read through your disclosures:
Opening an Account
The key sections in a disclosure document at account opening are:
- Membership or account agreement
- Par value for one share (credit union)
- Fee schedule
- Electronic funds transfer (EFT) policy
- Funds availability policy
- Overdraft protection policy and your right to opt-in/out
- Pledge of deposits in share accounts for any obligations owed the bank or credit union
- Explanation of dividends, including frequency, minimum balance requirements, etc. (credit union)
- Information on accounts with joint owners
- Certificate of Deposits (CDs) or Share Certificates disclosure, including early withdrawal penalties
The key sections in a disclosure document when taking out a loan are:
- Annual Percentage Rate (APR), including if it can change, how it is calculated and the use of an index on variable-rate or adjustable-rate loans
- Grace period, if any
- Fees and costs associated with the loan, including late payment fee, application fee, origination fee, credit report cost, late fees, reoccurring monthly fees, appraisal cost, etc.
- Cross-collateralization clause
- Property insurance requirements and collateral protection insurance if adequate insurance is not maintained (home and property loans)
- Co-signor notice
Note: Federal consumer financial protection laws apply to credit unions. These laws included the Equal Credit Opportunity Act, which requires credit be made available to members without regard to sex, marital status, race, national origin, age or any other prohibited basis.
Disclosure statements provide you with the facts you need to make an informed decision. By reading through them and making sure to understand them, you’ll better protect yourself from making a bad decision. Keep and compare your documents from your credit union. This will help you make the best use of your rights under federal law and avoid liability.