Agencies Issue Guidance on Youth Savings Program
On February 24, 2015, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Financial Crimes Enforcement Network issued guidance to help financial institutions develop and implement youth savings programs that are intended to expand the financial capability among America’s youth and increase their opportunities to save.
The guidance is presented in a Q&A format and is available online. 
The following is a condensed version.
Banking Activity
- 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 of the account?
Federal law does not prohibit a minor from opening a savings account. This matter is governed by state law. Minors are generally deemed as lacking the legal capacity to enter into a contract, which would include opening an account at a financial institution. However, some states specifically allow a minor to open a savings account. Legal counsel should be consulted when determining whether it is legally permissible for a financial institution to open an account for a minor without requiring a responsible adult to be the custodian or co-owner. - Can a minor with a custodial account be issued an automated teller machine (ATM) card or debit card?
The Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) 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 the 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. - 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 the Children’s Online Privacy Protection Act (Children’s Online Privacy Protection Rule), the Electronic Fund Transfer Act (Regulation E), the Expedited Funds Availability Act (Regulation CC), the Truth in Savings Act (Regulation DD), and prohibitions against unfair or deceptive acts or practices. - Can banks and savings associations receive consideration under the Community Reinvestment Act (CRA) for developing and implementing youth savings programs?
Yes, if the youth savings and financial education programs are targeted primarily to low- and moderate-income students. 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. 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. - Is a financial institution required to file a branch application when it partners with a school to offer a youth savings program?
Applicable requirements 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 if the program is not designed for the purpose of profit-making. Detailed information regarding agency-specific requirements is provided in the guidance.
Customer Identification Program (CIP)
- 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 party 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. - 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?
The USA PATRIOT Act requires each financial institution to establish, maintain, and implement a written CIP appropriate for its size and type of business. If a financial institution opens an account for a minor, the CIP must include risk-based procedures for: (1) verifying the identity of a customer seeking to open an account, to the extent reasonable and practicable; (2) maintaining records of the information used to verify the customer’s identity; (3) determining whether the customer appears on any government-issued list of suspected terrorists or terrorist organizations; and (4) providing customers with adequate notice that the financial institution is requesting information to verify their identities. - Based on the CIP rule, what information must a financial institution collect from a customer when opening an account, including for a minor?
A financial institution must obtain, at a minimum, the following information from the customer before opening an account:- name
- date of birth
- address
- identification number
- How can a financial institution verify the identity of a minor to satisfy the CIP rule when the minor is the customer?
Since verification procedures are risk-based, institutions may use reasonable documentary or nondocumentary methods to verify a minor’s identity. The procedures must describe when the financial institution will use documents, nondocumentary 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. Additional information regarding the use of documentary and nondocumentary methods is provided in the guidance.
Third-Party Deposit Relationships
- 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, nonprofit 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 in which a party may create a master savings account with subaccounts for various minors to save for a restricted purpose (such as higher education). Under the CIP rule, the customer is generally the “person” who opens a new account for another individual who lacks legal capacity, such as a minor. In these situations, 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 account holder. Instead, the financial institution will only be required to verify the identity of the named account holder by obtaining, at a minimum, the account holder’s name, address, and identification number.