Adopting a Master Signature Card?
Issue/Question
The Bank would like to pursue streamlining the process for having customers sign signature cards. Currently, a new paper based signature card is generated and signed by the customer whenever a new account is opened or a signer is changed. What options does the Bank have to make this process easier when a customer opens a second or third account, or an account online? Does a new signature card need to be generated every time a customer opens another account?
RESPONSE SUMMARY
A signature card is a contract between the Bank and its customer which establishes certain contractual requirements of the account. There is no legal or regulatory requirement to obtain a signature card for each deposit account opened by a customer or for the signature card to be in electronic form. The Bank’s procedures, however, will have to address authenticating the opening of accounts and the need to obtain additional signature cards when new accounts are opened for parties not on the original signature card or for products not covered by the original terms and conditions.
Response Detail
Uniform Commercial Code
The Uniform Commercial Code does not have specific requirements for a signature card, though some are implied by its other requirements. For example, no person is liable on an instrument unless his signature appears therein. A signature is made by the use of any name upon an instrument, including any trade or assumed name, or by any word or mark used in lieu of a written signature [NYS UCC, Article 3-401].
It will be necessary, therefore, to establish the signature of a person in some way. This does not preclude, however, having one signature card for all accounts of the person. The Uniform Commercial Code provides that the liability of the bank and its customer on an account can be varied by agreement, except that the bank cannot disclaim liability for its lack of good faith or failure to exercise ordinary care, and that the parties may establish the standards by which such responsibility is to be measured, provided such standards are not unreasonable [NYS UCC, Article 4-103(1)]. This would include using a single agreement to cover the opening of all accounts of the person.
While a single signature card can used for the opening of subsequent accounts, there should be a method for authenticating the opening of those accounts, perhaps one analogous to the use of an authenticating device in electronic funds transfers, such as a personal identification number. It might also include caveats to the customer concerning security for the authenticating device and controls for its use, similar to those for the use of a facsimile signature under the Uniform Commercial Code. Otherwise, the Bank would face liability if an account was opened for the ostensible accountholder without his knowledge or permission. While the Uniform Commercial Code addresses unauthorized transactions, the accountholder is required to scrutinize account statements to identify such transactions, something that may not be possible if account statements are not provided to the ostensible owner.
FDIC Interpretation
The FDIC has issued an Advisory Opinion concerning the opening of joint accounts under a “master” signature card. It found that if a master signature card clearly indicates there are several accounts that are jointly owned by the same combination of individuals and each of those individuals has personally signed the signature card, the accounts will be treated as joint accounts and insured in accordance with our joint account regulation [12 C.F.R. § 330.7] even if some of those joint accounts were subsequently opened by only one of the co-owners on an existing master signature card and the co-owners did not re-sign the signature card at the time the secondary accounts were opened. In this particular case, the method used to indicate that a new account had been opened under the signature card was to add the account number to the card and then have the account owners initial the signature card [FDIC-91-51].
Payable-on-Death Accounts
Under FDIC regulations, in order for a “payable-on-death” or “POD” account to qualify for special insurance coverage, the owner’s intention that the account belong to the beneficiary upon the owner’s death must be manifested in the title of the account using commonly accepted terms, such as “in trust for,” “as trustee for,” “payable-on-death-to,” and the beneficiaries of the account must be specifically named in the deposit account records of the insured depository institution [12 CFR §330.8]. This means that if there is a subsequent change regarding the status of the account as a POD account, the Bank must amend its records to reflect that designation, if they were not part of the original signature card.
CIP Rule
The Customer Identification Program (“CIP”) Rule of the USA PATRIOT Act applies to a “customer,” who is generally “a person that opens a new account” [31 CFR §103.121(a)(3)(i)]. An “account” is a formal banking relationship to provide or engage in services [31 CFR §103.121(a)(1)(i)]. Each time, then, that a customer opened a new account under a signature card, another formal banking relationship will have been established. However, the CIP Rule provides that the term “customer” does not include a person who has an existing account with the Bank, provided that the Bank has a reasonable belief that it knows the true identity of the person [31 CFR §103.121(a)(3)(ii)(C)]. This would tie in with the method established by the Bank to authenticate the opening of a new account under an existing signature card.
Regulations DD and E
Regulation DD, which implements the Truth-in-Savings Act, and Regulation E, implementing the Electronic Funds Transfer Act, provide that their required disclosures for consumer accounts may be made electronically, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act [12 CFR §§1030.3(a); 1005.4(a)(1)].
E-Sign Act
The Electronic Signatures in Global and National Commerce Act (“E-Sign Act”), 15 USC 7001 et seq. covers all consumer transactions affecting interstate or foreign commerce and provides that a signature, contract, or other recording relating to such a transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form. The term “electronic signature” means an electronic sound, symbol, or process attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record [15 USC 7001.101(a); 106(5)].
For that reason, a signature card could be in an electronic format. However, the formal requirements of the E-Sign Act would have to be complied with, including:
- The right to have paper records
- The hardware and software requirements for receiving electronic records
- Obtaining the consent of the customer electronically in such a way as demonstrates that the customer can access information in electronic form
- The right of the customer to withdraw consent
Further, the electronic consent of the customer would have to correspond to the “signature” on checks or such other access to the account.
Other Considerations
As a practical matter, the signature card must authorize the particular action taken. If the signature card authorized accounts to be opened for a single person, and that person wanted to open a joint account with another person, a new signature card should be obtained. This is a different situation than when the names of more than one person are already on the signature card and the account is being opened for those persons or for one of the persons on the account.
Similarly, if the person wishes to open a new account product not covered by the original signature card, a new signature card should be obtained.
If the signature card acknowledges that the person has received and agrees to the terms set forth in the Truth-in-Savings and Regulation E disclosures, the rate and fee schedule, then the Bank should obtain a separate acknowledgment for subsequent disclosures, if further accounts are opened.