[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2075 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 2075

 To require truth in disclosures for financial intermediaries, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 11, 1993

Mr. Slattery introduced the following bill; which was referred jointly 
to the Committees on Energy and Commerce and Banking, Finance and Urban 
                                Affairs

_______________________________________________________________________

                                 A BILL


 
 To require truth in disclosures for financial intermediaries, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Truth in Disclosure Act''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress hereby finds that economic stability 
would be enhanced, competition between financial intermediaries would 
be improved, and the ability of the consumer to make informed decisions 
regarding investment accounts, and to verify accounts, would be 
strengthened if there was uniformity in the disclosure of terms and 
conditions on which earnings are paid and fees are assessed in 
connection with such accounts.
    (b) Purpose.--It is the purpose of this Act to require the clear 
and uniform disclosure of--
            (1) the rates of earnings which are payable on investment 
        accounts by financial intermediaries; and
            (2) the fees that are assessable against investment 
        accounts, so that consumers can make a meaningful comparison 
        between the competing claims of financial intermediaries with 
        regard to investment accounts.

SEC. 3. DISCLOSURE OF EARNINGS AND TERMS OF ACCOUNTS.

    (a) In General.--Except as provided in subsection (b), each 
advertisement, announcement, or solicitation initiated by any financial 
intermediary relating to any investment account offered which includes 
any reference to a specific rate payable on amounts invested in such 
account, or to a specific yield or rate of earnings on amounts so 
invested, shall state the following information, to the extent 
applicable, in a clear and conspicuous manner:
            (1) The annual percentage yield based on earnings for the 
        latest 7-day period.
            (2) The period during which such annual percentage yield is 
        in effect.
            (3) All minimum account balance and time requirements which 
        must be met in order to earn the advertised yield (and, in the 
        case of accounts for which more than 1 yield is stated, each 
        annual percentage yield and the account minimum balance 
        requirement associated with each such yield shall be in close 
        proximity and have equal prominence).
            (4) The minimum amount of the initial deposit which is 
        required to open the account in order to obtain the yield 
        advertised, if such minimum amount is greater than the minimum 
        balance necessary to earn the advertised yield.
            (5) A statement that regular fees or other conditions could 
        reduce the yield.
            (6) A statement if a penalty is required for early 
        withdrawal or redemption.
    (b) Broadcast and Electronic Media and Outdoor Advertising 
Exception.--The appropriate Federal agency may, by regulation, exempt 
advertisements, announcements, or solicitations made by any broadcast 
or electronic medium or outdoor advertising display not on the premises 
of the financial intermediary from any disclosure requirements 
described in paragraph (4) or (5) of subsection (a) if the agency finds 
that any such disclosure would be unnecessarily burdensome.
    (c) Misleading Descriptions.--
            (1) No advertisement, announcement, or solicitation made by 
        any financial intermediary may refer to or describe an account 
        as a free or no-cost account (or words of similar meaning) if--
                    (A) in order to avoid fees or service charges for 
                any period--
                            (i) a minimum balance must be maintained in 
                        the account during such period;
                            (ii) the number of transactions during such 
                        period may not exceed a maximum number; or
                            (iii) a dollar amount limitation is imposed 
                        on any type of withdrawal; or
                    (B) any regular service or transaction fee is 
                imposed.
            (2) Financial intermediaries shall state in a clear and 
        conspicuous manner in any advertisement, announcement, or 
        solicitation relating to an investment account that such 
        investment is not insured by the Federal Government.
            (3) Financial intermediaries shall state in a large, bold, 
        and conspicuous manner in any advertisement, announcement, or 
        solicitation relating to an investment account mentioning 
        historical returns the following: ``These returns are not to be 
        expected on your investment.''.
    (d) Misleading or Inaccurate Advertisements, Etc., Prohibited.--No 
financial intermediaries shall make any advertisement, announcement, or 
solicitation relating to an investment account that is inaccurate or 
misleading or that misrepresents its terms and conditions contract.

SEC. 4. ACCOUNT DISCLOSURE.

    (a) In General.--Each financial intermediary shall maintain a 
schedule of fees, charges, interest rates, and terms and conditions 
applicable to all products offered by or through the financial 
intermediaries, in accordance with the requirements of this section and 
regulations which shall be prescribed. A Federal agency shall specify, 
in regulations, which fees, charges, penalties, terms, conditions, and 
account restrictions must be included in a disclosure required under 
this subsection. A financial intermediary need not include in such 
disclosure any information not specified in such regulation.
    (b) Information on Fees and Charges.--The disclosure required under 
subsection (a) with respect to any account shall contain the following 
information:
            (1) A description of all fees, periodic service charges, 
        and penalties which may be charged or assessed against the 
        account (or against the account holder in connection with such 
        account), the amount of any such fees, charge, or penalty (or 
        the method by which such amount will be calculated), and the 
        conditions under which any such amount will be assessed.
            (2) All minimum balance requirements that affect fees, 
        charges, and penalties, including a clear description of how 
        each such minimum balance is calculated.
            (3) Any minimum amount required with respect to the initial 
        investment in order to open the account.
    (c) Information on Earnings.--The disclosure required under 
subsection (a) with respect to any account shall include the following 
information:
            (1) The annual percentage yield for the opened account 
        based on earnings for the latest 7-day period.
            (2) The period during which any such annual percentage 
        yield will be in effect.
            (3) Any annual rate of simple interest.
            (4) The frequency with which earnings will be compounded 
        and credited.
            (5) A clear description of the method used to determine the 
        balance on which earnings are paid.
            (6) The information described in paragraphs (1) through (4) 
        with respect to any period after the end of the period referred 
        to in paragraph (2) (or the method for computing any 
        information described in any such paragraph), if applicable.
            (7) Any minimum balance which must be maintained to earn 
        the rates and obtain the yields disclosed pursuant to this 
        subsection and a clear description of how any such minimum 
        balance is calculated.
            (8) A clear description of any minimum time requirement 
        which must be met in order to obtain the yields disclosed 
        pursuant to this subsection and any information described in 
        paragraph (1), (2), (3), or (4) that will apply if any time 
        requirement is not met.
            (9) A statement, if applicable, that any earnings which 
        have accrued but has not been credited to an account at the 
        time of a withdrawal from the account will not be paid by the 
        financial intermediary or credited to the account by reason of 
        such withdrawal.
            (10) Any provision or requirement relating to nonpayment of 
        earnings, including any charge or penalty for early withdrawal, 
        and the conditions under which any such charge or penalty may 
        be assessed.
    (d) Other Information.--The disclosure required under subsection 
(a) shall include such other disclosures as the Federal agency may 
determine to be necessary to allow consumers to understand and compare 
accounts, including frequency of earnings adjustments, account 
restrictions, and renewal policies.
    (e) Style and Format.--Disclosures required under subsection (a) 
shall be written in clear and plain language and be presented in a 
format designed to allow consumers to readily understand the terms of 
the accounts offered.

SEC. 5. DISCLOSURE REQUIREMENTS FOR CERTAIN ACCOUNTS.

    The Federal agency shall require, in regulations, such modification 
in the disclosure requirements under this Act as may be necessary to 
carry out the purposes of this Act in the case of--
            (1) accounts with respect to which determination of annual 
        percentage yield is based on an annual rate of interest that is 
        guaranteed for a period of less than 1 year;
            (2) variable rate accounts;
            (3) accounts which, pursuant to law, do not guarantee 
        payment of a stated rate;
            (4) multiple rate accounts; and
            (5) accounts with respect to which determination of annual 
        percentage yield is based on an annual effective rate of 
        interest that is guaranteed for a stated term.

SEC. 6. DISTRIBUTION OF SCHEDULES.

    (a) In General.--A disclosure required account shall be--
            (1) made available to any person upon request;
            (2) provided to any potential customer before an account is 
        opened or a service is rendered; and
            (3) provided to the consumer, in the case of any time 
        account which is renewable at maturity without notice from the 
        consumer, at least 30 days before the date of maturity.
    (b) Distribution in Case of Certain Initial Investments.--If a 
consumer is not physically present at an office of a financial 
intermediary at the time an initial investment is accepted with respect 
to an account established by or for such person, the financial 
intermediary shall mail the disclosure to the customer at the address 
shown on the records of the financial intermediary for such account no 
later than 10 business days after the date of the initial investment.
    (c) Distribution of Notice of Certain Changes.--If--
            (1) any change is made in term or condition which is 
        required to be disclosed; and
            (2) the change may reduce the yield or adversely affect any 
        holder of the account,
all account holders who may be affected by such change shall be 
notified and provided with a description of the change by mail at least 
30 days before the change takes effect.
    (d) Distribution in Case of Accounts Established by More Than 1 
Individual or by a Group.--If an account is established by more than 1 
individual or for a person other than an individual, any distribution 
described in this section with respect to such account meets the 
requirements of this section if the distribution is made to 1 of the 
individuals who established the account or 1 individual representative 
of the person on whose behalf such account was established.
    (e) Notice to Investors as of the Effective Date of Regulations.--
For any account for which the financial intermediary delivers an 
account statement on a quarterly or more frequent basis, the financial 
intermediary shall include on the first of any regularly scheduled 
mailing posted or delivered after publication of regulations issued in 
final form, a statement that the investor has the right to request an 
account disclosure continuing the terms, charges, and interest rates of 
the account, and that the account holder may wish to request such an 
account disclosure.

SEC. 7. PAYMENT OF INTEREST.

    (a) Calculated on Full Amount of Principal.--Earnings on an 
interest-earning account at any financial intermediary shall be 
calculated on the full amount of principal in the account for each day 
of the stated calculation period at the rate or rates of interest 
disclosed pursuant to this Act.
    (b) No Particular Method of Compounding Interest Required.--
Subsection (a) shall not be construed as prohibiting or requiring the 
use of any particular method of compounding or crediting of interest.
    (c) Date by Which Interest Must Accrue.--Interest on accounts that 
are subject to this Act shall begin to accrue not later than the 
business day provisional credit is received.

SEC. 8. PERIODIC STATEMENTS.

    Each financial intermediary shall include on or with each period 
statement provided to each investor a clear and conspicuous disclosure 
of the following information with respect to such account:
            (1) The annual percentage yield earned.
            (2) The amount of earnings.
            (3) The amount of any fees or charges imposed.
            (4) The number of days in the reporting period.

SEC. 9. REGULATIONS.

    (a) In General.--
            (1) Regulations required.--Before the end of the 9-month 
        period beginning on the date of the enactment of this Act, the 
        Federal agency shall prescribe regulations to carry out the 
        purpose and provisions of this Act.
            (2) Effective date of regulations.--The regulation 
        prescribed under paragraph (1) shall take effect not later than 
        6 months after publication in final form.
            (3) Contents of regulations.--The regulations prescribed 
        under paragraph (1) may contain such classifications, 
        differentiations, or other provisions, and may provide for such 
        adjustments and exceptions for any class of accounts as, in the 
        judgment of the Federal agency are necessary or proper to carry 
        out the purposes of this Act, to prevent circumvention or 
        evasion of the requirements of this Act, or to facilitate 
        compliance with the requirements of this Act.
    (b) Model Forms and Clauses.--
            (1) In general.--The Federal agency shall publish model 
        forms and clauses for common disclosures to facilitate 
        compliance with this Act. In devising such forms, the agency 
        shall consider the use by financial intermediaries of data 
        processing or similar automated machines.
            (2) Use of forms and clauses deemed in compliance.--Nothing 
        in this Act may be construed to require a financial 
        intermediary to use any such model form or clause prescribed by 
        the agency under this subsection. A financial intermediary 
        shall be deemed to be in compliance with the disclosure 
        provisions of this Act if the financial intermediary--
                    (A) uses any appropriate model form or clause as 
                published by the agency; or
                    (B) uses any such model form or clause and changes 
                it by--
                            (i) deleting any information which is not 
                        required by this Act; or
                            (ii) rearranging the format, if in making 
                        such deletion or rearranging the format, the 
                        financial intermediary does not affect the 
                        substance, clarity, or meaningful sequence of 
                        the disclosure.

SEC. 10. ADMINISTRATIVE ENFORCEMENT.

    (a) In General.--Compliance with the requirements imposed under 
this Act shall be enforced under [identify agencies].
    (b) Regulations by Other Agencies.--The authority of the Federal 
agency to issue regulations under this Act does not impair the 
authority of any other Federal agency referred to, to make rules 
regarding its own procedures in enforcing compliance with the 
requirements imposed under this Act.

SEC. 11. LIABILITY.

    (a) Liability.--Except as otherwise provided in this section, any 
financial intermediaries which fails to comply with any requirement 
imposed under this Act or any regulation prescribed under this Act with 
respect to any person who is an investor is liable to such person in an 
amount equal to the sum of--
            (1) any actual damage sustained by such person as a result 
        of the failure;
            (2)(A) in the case of an individual action, such additional 
        amount as the court may allow, except that the liability under 
        this subparagraph shall not be less than $1,000; or
            (B) in the case of a class action, such amount as the court 
        may allow, except that--
                    (i) as to each member of the class, no minimum 
                recovery shall be applicable; and
                    (ii) the total recovery under this subparagraph in 
                any class action or series of class actions arising out 
                of the same failure to comply by the same financial 
                intermediary shall not be less than $500,000; and
            (3) in the case of any successful action to enforce any 
        liability under paragraph (1) or (2), the costs of the action, 
        together with a reasonable attorney's fee as determined by the 
        court.
    (b) Class Action Awards.--In determining the amount of any award in 
any class action, the court shall consider, among other relevant 
factors--
            (1) the amount of any actual damages awarded;
            (2) the frequency and persistence of failures of 
        compliance;
            (3) the resources of the financial intermediary;
            (4) the number of persons adversely affected; and
            (5) the extent to which the failure of compliance was 
        intentional.
    (c) Bona Fide Errors.--
            (1) General rule.--A financial intermediary may not be held 
        liable in any action brought under this section for a violation 
        of this Act if the financial intermediary demonstrates by a 
        preponderance of the evidence that the violation was not 
        intentional and resulted from a bona fide error notwithstanding 
        the maintenance of procedures reasonably adapted to avoid any 
        such error.
            (2) Examples.--Examples of a bona fide error include 
        clerical, calculation, computer malfunction and programming, 
        and printing errors, except that an error of legal judgment 
        with respect to a financial intermediary's obligation under 
        this Act is not a bond fide error.
    (d) No Liability for Overpayment.--A financial intermediary may not 
be held liable in any action under this section for a violation of this 
Act if the violation has resulted in--
            (1) earnings paid to the investor in an amount greater than 
        the amount determined under any disclosure applicable with 
        respect to such payment; or
            (2) a charge to the investor in an amount less than the 
        amount determined under the disclosed charge or fee schedule 
        applicable with respect to such charge.
    (e) Jurisdiction.--Any action under this section may be brought in 
any United States district court, or in any other court of competent 
jurisdiction, within 1 year after the date of the occurrence of the 
violation involved.
    (f) Reliance on Federal Agency Rulings.--No provision of this 
section imposing any liability shall apply to any act done or omitted 
in good faith in conformity with any regulation or order, or any 
interpretation of any regulation or order, of the agency, or in 
conformity with any interpretation or approval by an official or 
employee of the agency duly authorized by the agency to issue such 
interpretation or approval under procedures prescribed by the agency, 
notwithstanding, the fact that after such act or omission has occurred, 
such regulation, order, interpretation, or approval is amended, 
rescinded, or determined by judicial or other authority to be invalid 
for any reason.
    (g) Notification of and Adjustment for Errors.--A financial 
intermediary shall not be liable under this section for any failure to 
comply with any requirement imposed under this Act with respect to any 
account if--
            (1) before--
                    (A) the end of the 60-day period beginning on the 
                date on which the financial intermediary discovered the 
                failure to comply;
                    (B) any action is instituted against the financial 
                intermediary by the investor under this section with 
                respect to such failure to comply; and
                    (C) any written notice of such failure to comply is 
                received by the financial intermediary from the 
                investor, the financial intermediary notifies the 
                investor of the failure of such financial intermediary 
                to comply with such requirement; and
            (2) the financial intermediary makes such adjustments as 
        may be necessary with respect to such account to ensure that--
                    (A) the investor will not be liable for any amount 
                in excess of the amount actually disclosed with respect 
                to any fee or charge;
                    (B) the investor will not be liable for any fee or 
                charge imposed under any condition not actually 
                disclosed; and
                    (C) earnings on amounts in such account will accrue 
                at the annual percentage yield, and under the 
                conditions, actually disclosed (and credit will be 
                provided for earnings already accrued at a different 
                annual percentage yield and under different conditions 
                than the yield or conditions disclosed).
    (h) Multiple Interests in 1 Account.--If more than 1 person holds 
an interest in any account--
            (1) the minimum and maximum amounts of liability under 
        subsection (a)(2)(A) for any failure to comply with the 
        requirements of this Act shall apply with respect to such 
        account; and
            (2) the court shall determine the manner in which the 
        amount of any such liability with respect to such account shall 
        be distributed among such persons.
    (i) Continuing Failure To Disclose.--
            (1) Certain continuing failures treated as 1 violation.--
        Except as provided in paragraph (2), the continuing failure of 
        any financial intermediary to disclose any particular term 
        required to be disclosed under this Act with respect to a 
        particular account shall be treated as a single violation for 
        purposes of determining the amount of any liability under 
        subsection (a) for such failure to disclose.
            (2) Subsequent failure to disclose.--The continuing failure 
        of any depository institution to disclose any particular term 
        required to be disclosed under this Act with respect to a 
        particular term required to be disclosed under this Act with 
        respect to a particular account after judgment has been 
        rendered in favor of the investor in connection with a prior 
        failure to disclose such term with respect to such account 
        shall be treated as a subsequent violation for purposes of 
        determining liability under subsection (a).

SEC. 12. DEFINITIONS.

    For purposes of this Act:
            (1) Account.--The term ``account'' means any account 
        offered to any person.
            (2) Investor.--The term ``investor'' means any person.
            (3) Financial intermediary.--The term ``financial 
        intermediary'' excludes those identified in clauses (i) through 
        (vi) of section 19(b)(1)(A) of the Federal Reserve Act.
            (4) Federal agency.--[To be supplied.]

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HR 2075 IH----2