What is the Impact of Disclosure with Deposit Reclassification?


Most financial institutions’ terms and conditions require notification to current customers about any changes to their account, including the reclassifying of funds into savings and checking sub-accounts, also known as Deposit Reclassification.

Due to incidents such as Wells Fargo’s ongoing fake accounts scandal, where employees opened more than 1.5 million unauthorized deposit accounts under fake PIN numbers and email addresses, as well as the opening of 565,443 credit card accounts without the customer’s knowledge and consent, customers are more cautious about any changes happening to their accounts today. Even though more than 5,300 employees were fired for the incident, Wells Fargo, and unfortunately all financial institutions, are still dealing with the fallout and mistrust caused by this scandal.

The impact of disclosure on customers is a concern for most financial institution’s looking to implement a Deposit Reclassification solution. However, banks or credit unions shouldn’t be intimidated by the impact of disclosure, and speaking from experience, the impact is smaller than one might think.

I work with banks and credit unions on a daily basis to help them select Deposit Reclassification, and despite “disclosure,” being a common term in the financial services industry, it is often a main concern with my clients for two main reasons:

1. Disclosure language is often complex and confusing

No matter the business or industry, I think everyone can agree that disclosure language can often leave a customer scratching their head, but that doesn’t have to be the case. In my experience, a bank or credit union’s terms and conditions generally require disclosure 30 days prior to any account changes to existing customers. It is also best to provide an option to opt-out of Deposit Reclassification, if a customer requests their account not be changed. Financial institutions must also update their terms and conditions to include the reclassified account structure for new customers.

Disclosure doesn’t have to be difficult. To ensure disclosure has the least impact during implementation your selected vendor should provide guidance on language and methodology; after all, they are the experts. For example, logicpath always provides recommended disclosure language and templates to help make the process of disclosure efficient and simple.  The language in the disclosure needs to be easily digestible, and the document should be provided to all checking account holders. Following the above recommendations often alleviates most questions that customers have about Deposit Reclassification, and ultimately decreases the overall impact on the institution and its customers.

2. Negative impact on customer relationships

The relationship a financial institution has with their customers is important, and any changes need to be transparent and clear to avoid any potential negative impact it could have on the relationship.

In the case of Deposit Reclassification, or any changes that involve disclosure to your customers, I recommend creating a list of questions you foresee customers asking, and then have a training session with your customer service team about the information disclosed to the customers. The customer service team is going to be the first point of contact for customers, so you need to make sure they have the knowledge and resources available to help them answer customer questions within a timely manner. My next recommendation is to ensure customers have a quick and easy way to ask any questions. This could be in the form of an online chat or phone line. In my experience, institutions that follow these guidelines and proper disclosure rarely see any impact on customer relationships.

I’ve helped hundreds of banks and credit unions select Deposit Reclassification, and with the right disclosure protocols in place, institutions on average receive less than seven questions regarding the changes being made to customer’s accounts.

If you’re shopping for a Deposit Reclassification solution, look for companies that are familiar with disclosure, and if you have any questions regarding disclosure and Deposit Reclassification, feel free to reach out to me.