Guidance to Encourage Financial Institutions’ Youth Savings Programs and Address Related Frequently Asked Questions

Board of Governors of the Federal Reserve System Federal Deposit Insurance Corporation Financial Crimes Enforcement Network National Credit Union Administration Office of the Comptroller of the Currency February 24, 2015 Citations updated as of November 9, 2017 Guidance to Encourage Financial Institutions’ Youth Savings Programs and Address Related Frequently Asked Questions The Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC), as members of the Financial Literacy and Education Commission (FLEC), together with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury, are issuing guidance regarding youth savings programs. The issuance of this document is also supported by the agencies that serve as the FLEC Chair (the U.S. Department of the Treasury) and Vice Chair (the Consumer Financial Protection Bureau). The purpose of the guidance is to encourage financial institutions1 to develop and implement programs to expand the financial capability of youth and build opportunities for financial inclusion for more families. The guidance also addresses frequently asked questions that may arise as financial institutions collaborate with schools, local and state governments, non-profits, or corporate entities to facilitate youth savings and financial education programs. Such efforts are consistent with the FLEC’s National Strategy for Financial Literacy to advance the expansion of financial capability among America’s youth and to increase their opportunities to save. 2 Background Throughout the country, various financial institutions collaborate with elementary, middle, and high school administrators, and, in some cases, with government, non-profit, or private entity partners to administer youth savings and financial education programs. The youth savings programs are often structured as in-school credit union or bank programs that offer students basic savings accounts. They also may include more complex asset-building accounts and school district-wide programs that offer universal savings accounts to large numbers of children or non￾school based models administered by state and local governments and non-profit agencies. Research indicates that youth savings programs may be effective in helping improve long-term financial and educational outcomes, such as completing college. 1 This guidance uses the term “financial institution” or “institution” to refer to all federally insured depository institutions. 2 “Promoting Financial Success in the United States: National Strategy for Financial Literacy 2011,” available at http://www.treasury.gov/resource-center/financial-education/Documents/NationalStrategyBook_12310%20(2).pdf.

Youth savings programs are generally linked to a diverse array of financial education efforts, including personal financial management, banking operations, or both. They are intended to help students understand the value of saving for the future by opening and managing savings accounts. These savings accounts generally have very low minimum balance requirements and low or no monthly maintenance fees. Material account terms and conditions are also explained in an age-appropriate manner. Financial institutions and others involved with youth savings programs indicate that there is some uncertainty about several legal and regulatory considerations relating to these programs and that this uncertainty may cause some institutions to be reluctant to develop youth savings initiatives. This guidance provides answers to common questions received regarding youth savings programs. This document does not create new regulatory agency policy or industry expectations. Banking Activity Questions

1. Are there restrictions on minors opening savings accounts? How old must a person be to
   open a savings account without a parent or guardian serving as the custodian or co￾owner on the account? No federal law prohibits minors from opening savings accounts. Rather, a deposit account relationship is based on a contract governed by state law. In general, minors are deemed to not have the legal capacity to enter into a contract, including opening an account at a financial institution, meaning that a contract with a minor is potentially “voidable.” However, some states specifically allow a minor to open a savings account. For example, the State of Washington permits a minor to enter into a valid and enforceable contract for a deposit account with a financial institution.3 States also have different legal definitions of “minor.” Whether it is legally permissible for an institution to open an account for a minor without requiring a responsible adult to be the custodian or co-owner is a determination that a financial institution should make in consultation with legal counsel.

2. Can a minor with a custodial account be issued an automated teller machine (ATM) or
   debit card?
   The Uniform Transfers to Minors Act or Uniform Gifts to Minors Act of each state governs custodial accounts for minors. As a general matter for custodial accounts, a custodian manages the funds in the account on behalf of a minor, meaning the minor would not be able to withdraw funds without the custodian’s approval. Therefore, a minor with a custodial account should not be provided with an ATM or debit card that permits withdrawals. 3 See Rev. Code of Wash. 30.22.070.

3. Do consumer protection laws and regulations apply to accounts held by or for the benefit
   of minors?
   As with other deposit accounts, various federal and state consumer financial protection laws and regulations apply to youth savings accounts. Applicable federal consumer financial protection laws and regulations include, but are not limited to, the Children’s Online Privacy Protection Act (Children’s Online Privacy Protection Rule),4 the Electronic Fund Transfer Act (Regulation E),5 the Expedited Funds Availability Act (Regulation CC),6 the Truth in Savings Act (Regulation DD),7 and prohibitions against unfair or deceptive acts or practices.8

For example, the Truth in Savings Act (Regulation DD) requires financial institutions to comply with certain requirements when advertising deposit accounts, provide consumer account holders with particular written information about account terms, provide certain fee and other information in periodic statements sent to consumers, and use specific methods to determine the account balance upon which interest is calculated.
4. Can banks and savings associations receive consideration under the Community
Reinvestment Act (CRA) for developing and implementing youth savings programs? Banks and savings associations may receive CRA consideration if they provide youth savings and financial education programs targeted primarily to low- and moderate￾income students. The CRA’s definition of “community development” includes “community services targeted to low- or moderate-income individuals.”9 To the extent that a financial institution’s youth savings program has a primary purpose of community development, the program will receive CRA consideration as a community development service.10 In addition, the interagency CRA guidance provides examples of community development services that include establishing school savings programs or developing or teaching financial education or literacy curricula for low- or moderate-income individuals.11 Financial institutions are also reminded that the interagency CRA guidance provides examples illustrating how financial institutions can determine whether community services are provided to low- and moderate-income individuals. One such example is when a community service is provided to students or their families from a 4 Children's Online Privacy Protection Act of 1998, 15 U.S.C. 6501 et seq.; 16 CFR Part 312 (Children’s Online Privacy Protection Rule). 5 Electronic Fund Transfer Act, 15 U.S.C. 1693 et seq.; 12 CFR Part 1005 (Regulation E). 6 Expedited Funds Availability Act, 12 U.S.C. 4001 et seq.; 12 CFR Part 229 (Regulation CC). 7 Truth in Savings Act, 12 U.S.C. 4301 et seq.; 12 CFR Part 1030 (Regulation DD). 8 Federal Trade Commission Act, Section 5, 15 U.S.C. 45(a). 9 See 12 CFR 25.12(g)(2), 195.12(g)(2), 228.12(g)(2), 345.12(g)(2). 10 See Interagency Questions and Answers Regarding Community Reinvestment __.12(h) – 8, 81 Fed. Reg. 48506, 48530 (July 25, 2016), available at https://www.gpo.gov/fdsys/pkg/FR-2016-07-25/pdf/2016-16693.pdf (“interagency CRA guidance”). See also Interagency Questions and Answers Regarding Community Reinvestment, __.12(i) – 3, 81 Fed. Reg. at 48530-31. 11 See Interagency Questions and Answers Regarding Community Reinvestment __.12(i) – 3, 81 Fed. Reg. at 48530- 31.

school at which the majority of students qualify for free or reduced-price meals under the U.S. Department of Agriculture’s National School Lunch Program.12
5. Is a financial institution required to file a branch application when it partners with a
school to offer a youth savings program?
Requirements for financial institutions to file a branch application in connection with a youth savings program vary by regulatory agency. Generally, a branch application might not be required if the primary purpose of the youth savings program is financial education designed to teach students the principles of personal financial management, banking operations, and saving for the future, and the program is not designed for the purpose of profit-making. Agency-specific requirements are summarized below, and financial institutions participating in such programs should contact their respective regulators to determine whether such activity requires a branch application. FDIC-Supervised Institutions FDIC regulations permit a state nonmember bank to provide banking services (such as opening or maintaining savings accounts) in schools without filing a branch application or obtaining prior approval from the FDIC if:

• Such service or services are provided on school premises, or a facility used by the
  school;
• Such service or services are provided at the discretion of the school;
• The principal purpose of each program is financial education. For example, the
  principal purpose of a program would be considered to be financial education if the program is designed to teach students the principles of personal financial management, banking operations, or the benefits of saving for the future, and is not designed for the purpose of profit-making; and
• Each program is conducted in a manner that is consistent with safe and sound
  banking practices and complies with applicable law.13 Applicable state law and the appropriate state supervisory authority determine branch application requirements, if any, for state savings associations. FRB-Supervised Institutions The FRB has not issued branch application policies or regulations specifically applicable to youth savings programs. FRB branch application information is available on the FRB’s website. 14 12 See Interagency Questions and Answers Regarding Community Reinvestment __.12(g)(2) – 1, 81 Fed. Reg.

48526. 13 See 12 CFR 303.46 and 73 FR 35337 (June 23, 2008). 14 See https://www.federalreserve.gov/supervisionreg/afi/afi.htm. See also 12 CFR 208.6.

NCUA-Supervised Institutions
Applicable state law and the appropriate state supervisory authority determine branch application requirements, if any, for state-chartered credit unions. The Federal Credit Union Act and NCUA regulations do not establish any branch application requirements for federal credit unions. The Federal Credit Union Act does provide that federal credit unions were organized for, among other things, promoting thrift among members.15 This provision is the basis for these credit unions’ youth savings programs. In addition, since 2009, NCUA’s 5300 Call Report has collected information about credit unions’ financial literacy programs, including in-school branches promoting youth financial literacy. OCC-Supervised Institutions National banks that seek to set up school-based youth savings programs in nonbank branch settings must comply with 12 CFR 7.1021. National banks that have school￾based youth savings programs that do not meet the conditions in 12 CFR 7.1021 must submit branch applications to the OCC. National banks may participate in financial literacy programs, such as school-based youth savings programs, on the premises of, or at a facility used by, a school. 16 A branch application is not required and the school premises or facility would not be considered a branch when:

• The bank does not establish and operate the school premises or facility on which
  the financial literacy program is conducted.

• Bank employees work at the site only to participate in the program.

• No services are provided to the general public.

• The principal purpose of the financial literacy program is educational. For
  example, a program is educational if it is designed to teach students the principles of personal economics or the benefits of saving for the future and is not designed for the purpose of profit-making.17 Similar rules are applicable to federal savings associations. 18 Generally, a branch application is not required and a federal savings association’s school-based financial education program would not be considered a branch of the savings association as long as the program meets the following criteria:

• The program is conducted on school premises and is not open to the general
  public.
  15 See 12 U.S.C. 1752(1). 16 See OCC Interpretive Letter No. 839, November 1998, available at http://www.occ.gov/static/interpretations-and￾precedents/nov98/int839.pdf; OCC Advisory Letter 2001-1, “Financial Literacy” (January 16, 2001), available at http://www.occ.gov/static/news-issuances/memos-advisory-letters/2001/advisory-letter-2001-1.pdf; and 12 CFR
  7.1021 [66 Fed. Reg. 34791 (July 2001)]. 17 See “School-Based Bank Savings Programs: Bringing Financial Education to Students,” OCC Community
  Developments Insights report (April 2009), available at http://www.occ.gov/topics/community￾affairs/publications/insights/insights-school-based-bank-savings-programs.pdf. 18 See Office of Thrift Supervision Opinion Letter, Proposal to Create a School Partnership Program (November 20, 1992), available at http://www.occ.gov/topics/community-affairs/resource-directories/financial-literacy/opinion￾letter.pdf.

• Association employees would not be on the school’s premises once the program is
  commenced.

• The association does not establish an office that is owned, leased, or operated by
  the association in connection with the program.

• The services provided on the school’s premises are limited.

• Student accounts would not be established until applications and funds are
  received and accepted at a home or branch office of the association.

• The association would not be liable for any theft, loss, or embezzlement until
  funds are deposited and accepted at a home or branch office of the association. Customer Identification Program (CIP) Questions

6. Does the CIP rule prohibit a minor from opening an account?
   No. If a minor opens a savings account, the minor is the financial institution’s customer. For example, where a financial institution sends its employees to a school so that students may open savings accounts by themselves without the involvement of a parent or guardian as part of a program to promote financial education, the student opening an account is the financial institution’s customer. However, if a parent, guardian, or third party19 opens an account on behalf of a minor, the financial institution’s customer is the parent, guardian, or third party. The CIP rule states that the financial institution’s “customer” is the person who opens the account for a person who lacks legal capacity, such as a minor. See 31 CFR 1020.100(c)(1)(i-ii)20 and Interagency Interpretive Guidance on Customer Identification Program Requirements under Section 326 of the USA PATRIOT Act, 2005 FAQs: Final CIP Rule, Definition of “customer,” FAQ #6. 21
7. What requirements of the CIP rule apply to a financial institution that opens an account
   on behalf of a customer, including a minor, such as through a youth savings program?
   Section 326 of the USA PATRIOT Act requires each financial institution to establish,
   maintain, and implement a written CIP appropriate for its size and type of business. As with other accounts, if a financial institution opens an account for a minor, the CIP must include risk-based procedures for: (1) verifying the identity of any customer seeking to open an account, to the extent reasonable and practicable; (2) maintaining records of the 19 See Question 10. 20 In March 2010, FinCEN transferred its regulations from 31 CFR Part 103 to 31 CFR Chapter X. References to FinCEN regulations in this guidance are cited in their current format, while regulations referenced in the CIP FAQs use the format in existence at the time the FAQs were first published. FinCEN’s website has a tool for the purpose of converting the old citation format to the new one, and vice versa. 21 See https://www.fincen.gov/sites/default/files/shared/faqsfinalciprule.pdf.

information used to verify the customer's identity; (3) determining whether the customer appears on any lists of known or suspected terrorists or terrorist organizations issued by any government agency; and (4) providing customers with adequate notice that the financial institution is requesting information to verify their identities. 22
8. Based on the CIP rule, what information must a financial institution collect from a
customer when opening an account, including for a minor?
Under the CIP rule, a financial institution must obtain, at a minimum, the following information from the customer prior to opening an account:
23

• name;
• date of birth;
• address; and
• identification number.
  An address for an individual can be a residential or business street address or, if the individual does not have such an address, an Army Post Office (APO) or Fleet Post Office (FPO) box number or the residential or business street address of next of kin or of another contact individual. 24 The CIP rule provides that the identification number for a U.S. person shall be a taxpayer identification number. For a non-U.S. person, the identification number shall be one or more of the following: a taxpayer identification number; passport number and country of issuance; alien identification card number; or number and country of issuance of any other unexpired government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard.25

9. How can a financial institution verify the identity of a minor in order to satisfy the CIP
   rule when the minor is the customer?
   Since verification procedures are risk-based, institutions may use reasonable documentary or non-documentary methods to verify a minor’s identity. The procedures must describe when the financial institution will use documents, non-documentary methods, or a combination of both. The financial institution’s CIP must contain procedures for verifying the identity of the minor within a reasonable time after the account is opened. For a financial institution relying on documents to verify a minor’s identity, the CIP must include procedures that set forth the documents that the financial institution will use. For 22 See 31 CFR 1020.220(a). 23 See 31 CFR 1020.220(a)(2)(i). 24 See 31 CFR 1020.220(a)(2)(i)(A)(3)(i)-(ii). 25 See 31 CFR 1020.220(a)(2)(i)(A)(4).

example, the financial institution might verify a minor’s identity using a student identification card. For a financial institution relying on non-documentary methods, the CIP must contain procedures that describe the non-documentary methods that the financial institution will use to verify a minor’s identity. These methods may include contacting a customer or independently verifying the minor’s identity through the comparison of information provided by the minor with information obtained from a consumer reporting agency, public database, or other source. For example, the financial institution might verify a minor’s identity in an in-school program by having a teacher confirm the minor’s identity. See 31 CFR 1020.220(a)(2)(ii)(A)-(B) and Interagency Interpretive Guidance on Customer Identification Program Requirements under Section 326 of the USA PATRIOT Act, 2005 FAQs: Final CIP Rule, Definition of “customer,” FAQ #6. Third-Party Deposit Relationships
10. What are the CIP requirements for customer verification for a financial institution when
a third-party (such as a school district or other governmental unit, educational institution, non-profit organization, or corporate sponsor) opens a trust, custodial, or other administrative account at a financial institution to maintain and administer assets for multiple minors? There are circumstances where a party may create a master savings account with sub￾accounts for various minors to save for a restricted purpose (such as higher education). For purposes of the CIP rule, generally, the customer is the “person” (individual, corporation, partnership, or trust) who opens a new account for another individual who lacks legal capacity, such as a minor. 26 In these settings, the “customer” is the trust, regardless of whether the financial institution is the trustee for the trust. A financial institution will not be required to look through trust, escrow, or similar accounts to verify the identities of beneficiaries of the accountholder. Instead, the financial institution will only be required to verify the identity of the named accountholder by obtaining, at a minimum, the accountholder’s name, address, 27 and identification number (see response to Question 8 above). Moreover, the CIP rule also provides that, based on the financial institution’s risk assessment of a new account opened by a customer that is not an individual, the institution may need to obtain information about individuals with authority or control over such an account, including signatories, in order to verify the customer’s identity. 26 See 31 CFR 1020.100(c)(1). 27 An address for a person other than an individual is defined as a principal place of business, local office, or other physical location. See 31 CFR 1020.220(a)(2)(i)(A)(3)(iii).

This verification method applies only when the institution cannot verify the customer's true identity using documentary and non-documentary verification methods. 28 See 31 CFR 1020.220(a)(2)(ii) and Interagency Interpretive Guidance on Customer Identification Program Requirements under Section 326 of the USA PATRIOT Act, 2005 FAQs: Final CIP Rule, Definition of “customer,” FAQ #9. In addition, in circumstances involving accounts for minors established by a custodian, financial institutions should be aware of the requirements for the individual deposits to be eligible for deposit insurance coverage by the FDIC29 or NCUA. 30 28 See 31 CFR 1020.220(a)(2)(ii)(C). 29 12 CFR 330.5. 30 12 CFR 745.

Other Relevant Resources

• Consumer Financial Protection Bureau (CFPB):
  o Help children build money skills—information for parents and caregivers of children pre-kindergarten through young adulthood:
  http://www.consumerfinance.gov/parents/ o Pay for college—consumers can get help to make informed financial decisions about how to pay for college:
  http://www.consumerfinance.gov/paying-for-college/

• FinCEN:
  o Interagency Guidance on CIP Requirements 2005 FAQs: Final CIP Rule:
  https://www.fincen.gov/resources/statutes-regulations/guidance/interagency￾interpretive-guidance-customer-identification o General FinCEN Regulation Guidance:
  https://www.fincen.gov/resources/statutes-regulations o Questions on the CIP rules can also be directed to the FinCEN Resource Center at (800) 767-2825.

• Federal Financial Institutions Examination Council (FFIEC):
  o Interagency Questions and Answers Regarding Community Reinvestment:
  http://www.ffiec.gov/cra/qnadoc.htm

• FLEC:
  o https://www.mymoney.gov is a resource to identify other financial education resources from more than 20 federal agencies. o National Strategy for Financial Literacy (2011), available at http://www.treasury.gov/resource-center/financial￾education/Documents/NationalStrategyBook_12310%20(2).pdf.

• FDIC:
  o Youth Financial Education Letter, FIL-80-2010, November 17, 2010:
  https://www.fdic.gov/news/news/financial/2010/fil10080.html o Youth Banking Resource Center:
  https://www.fdic.gov/youthsavings o Teacher Online Resource Center:
  https://www.fdic.gov/teachers o Money Smart Financial Education program:
  https://www.fdic.gov/moneysmart

• FRB:
  o Financial Literacy Resources:
  http://www.federalreserveeducation.org/ o Branch Application Information (12 CFR 208.6):
  https://www.ecfr.gov/cgi-bin/text-idx?SID=a8fbfbc9595e05e626b7e571 f282f21c&mc=true&node=se12.2.208_16&rgn=div8

• NCUA:
  o Financial Literacy and Resources for credit unions and the consumers they serve:
  https://www.ncua.gov/consumers/Pages/financial-literacy-resources.aspx o NCUA Webinar—Financial Literacy: Putting Your Mission Into Action:
  https://www.youtube.com/watch?v=BLMI7iZ6wGk o MyCreditUnion.gov—Credit Unions in Schools:
  https://www.mycreditunion.gov/Pages/credit-unions-in-schools.aspx o An Early Investment in Personal Finance Education Pays A Lifetime of Dividends:
  http://www.ncuareport.org/ncuareport/april_2014?pg=11#pg11

• OCC:
  o “School-Based Bank Savings Programs: Bringing Financial Education to Students,” OCC’s Community Development Insights report:
  http://www.occ.gov/topics/community-affairs/publications/insights/insights￾school-based-bank-savings-programs.pdf o OCC Interpretive Letter No. 839, November 1998:
  http://www.occ.gov/static/interpretations-and-precedents/nov98/int839.pdf o OCC Advisory Letter 2001-1, “Financial Literacy” (January 16, 2001):
  http://www.occ.gov/static/news-issuances/memos-advisory-letters/2001/advisory￾letter-2001-1.pdf o 12 CFR 7.1021 [66 FR 34791 (July 2001)]: http://www.ecfr.gov/cgi-bin/text￾idx?SID=70966f64398a9aa52c0695f8deef7de2&node=12:1.0.1.1.7.1.25.20&rgn= div8] o Office of Thrift Supervision Opinion Letter, Proposal to Create a School Partnership Program (November 20, 1992):
  http://www.occ.gov/topics/community-affairs/resource-directories/financial￾literacy/opinion-letter.pdf o Other resources can be found on the OCC’s Financial Literacy Resource Directory:
  http://www.occ.gov/topics/community-affairs/resource-directories/financial￾literacy/index-financial-literacy.html

• Treasury:
  o Financial Education and Account Access Among Elementary Students: Assessing Financial Capability Outcomes Pilot. Both the full report and research brief are available through http://www.treasury.gov/resource-center/financial￾education/Pages/default.aspx.