[Federal Register Volume 59, Number 25 (Monday, February 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2505]


[[Page Unknown]]

[Federal Register: February 7, 1994]


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FEDERAL RESERVE SYSTEM

12 CFR Part 230

[Regulation DD; Docket No. R-0824]

 

Truth in Savings

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed official staff interpretation.

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SUMMARY: The Board is publishing for comment a proposed official staff 
commentary to Regulation DD (Truth in Savings). The commentary applies 
and interprets the requirements of Regulation DD and is a substitute 
for individual staff interpretations. The proposed commentary 
incorporates much of the guidance provided when the regulation was 
adopted, and addresses additional questions that have been raised about 
the application of its requirements.

DATES: Comments must be received on or before April 1, 1994.

ADDRESSES: Comments should refer to Docket No. R-0824, and may be 
mailed to William W. Wiles, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue, NW., 
Washington, DC 20551. Comments also may be delivered to room B-2222 of 
the Eccles Building between 8:45 a.m. and 5:15 p.m. weekdays, or to the 
guard station in the Eccles Building courtyard on 20th Street, NW. 
(between Constitution Avenue and C Street) at any time. Comments may be 
inspected in Room MP-500 of the Martin Building between 9 a.m. and 5 
p.m. weekdays, except as provided in 12 CFR 261.8 of the Board's rules 
regarding the availability of information.

FOR FURTHER INFORMATION CONTACT: Jane Ahrens, Kyung Cho, Kurt 
Schumacher or Mary Jane Seebach, Staff Attorneys, Division of Consumer 
and Community Affairs, Board of Governors of the Federal Reserve 
System, at (202) 452-3667 or 452-2412; for the hearing impaired only, 
Dorothea Thompson, Telecommunications Device for the Deaf, at (202) 
452-3544.

SUPPLEMENTARY INFORMATION:

(1) Background

    The purpose of the Truth in Savings Act (12 U.S.C. 4301 et seq.) is 
to assist consumers in comparing deposit accounts offered by depository 
institutions. The act requires institutions to disclose fees, the 
interest rate, the annual percentage yield, and other account terms 
whenever a consumer requests the information and before an account is 
opened. Fees and other information also must be provided on any 
periodic statement the institution sends to the consumer. Rules are set 
forth for deposit account advertisements and advance notices to account 
holders of adverse changes in terms. The act restricts how institutions 
must determine the account balance on which interest is calculated. The 
act is implemented by the Board's Regulation DD (12 CFR part 230), 
which became effective on June 21, 1993. The regulation authorizes the 
issuance of official staff interpretations of the regulation. (See 
Appendix D to Regulation DD.)
    The Board is publishing a proposed commentary to Regulation DD. The 
proposal is designed to provide guidance to depository institutions in 
applying the regulation to specific transactions and is a substitute 
for individual staff interpretations. The Board contemplates updating 
the commentary periodically to address significant questions that 
arise. It is expected that this commentary will be adopted in final 
form in June 1994 with a six-month time period for optional compliance 
until the effective date, estimated in December 1994.

(2) Proposed Commentary

    The Federal Register documents containing the regulation that 
implemented the act and documents for subsequent amendments set forth a 
large amount of supplementary material interpreting the new regulation. 
(See final rule published on September 21, 1992 (57 FR 43337), 
correction notice published on October 5, 1992 (57 FR 46480), and 
amendments published on March 19, 1993 (58 FR 15077).) In large 
measure, the proposed commentary incorporates the supplementary 
material from those rulemakings, and reflects the views expressed 
therein without substantive change. A number of issues that have arisen 
since the publication of the regulation have also been addressed. 
Proposed interpretations of new issues are noted below.
    On December 6, 1993, the Board published a proposal to amend the 
regulation's rules for calculating the annual percentage yield for 
accounts that pay interest prior to maturity (58 FR 64190). (See also 
the notice extending the comment period published on January 13, 1994, 
59 FR 1921.) The Board has deferred proposing commentary on provisions 
of the regulation affected by the proposal, pending final action by the 
Board.
    The scope of the discussion that follows is limited so that, for 
instance, examples listed in the commentary are not repeated below.

Section 230.1--Authority, Purpose, Coverage, and Effect on State Laws

(c) Coverage
    Comment 1(c)-1 clarifies that the scope of the regulation is all 
depository institutions (except credit unions) that offer accounts to 
residents of a ``state,'' such as accounts held in the United States, 
even though funds may be transferred periodically into an account held 
at a location outside the United States. An account located outside the 
United States is not covered, even if the funds are held by a U.S. 
resident.

Section 230.2--Definitions

(a) Account
    Comment 2(a)-1 provides examples of accounts subject to the 
regulation, including the example of a deposit account required as a 
condition of obtaining a credit card account (often referred to as a 
``secured'' credit card account). The Board believes it is important 
for consumers to receive disclosures about the terms, monthly fees, or 
other charges that may apply to such accounts, since such information 
may not appear on disclosures given to card holders under the Truth in 
Lending Act and its implementing Regulation Z (12 CFR part 226).
    The proposed comment also includes examples of accounts not subject 
to the regulation. The Board's proposed comment narrows the scope of 
trust accounts covered by the regulation, a difference from guidance 
provided in supplementary material to the September 1992 rulemaking. 
The comment provides that trust accounts are not subject to the 
regulation with the exception of individual retirement accounts (IRAs) 
and simplified employee pension (SEP) accounts. (See proposed 
commentary to paragraph 2(h) of this section.) The ``trust'' for which 
the account is established is not a natural person, even though the 
trustee and beneficiary might be. In addition, the law of trusts 
imposes duties and responsibilities upon all trustees that the Board 
believes distinguish trust accounts from other accounts held by one 
individual for another solely for personal, family or household 
purposes. Finally, the Board believes that requiring an institution to 
identify both the purpose of the trust and whether the account has been 
established by someone in a professional capacity would present an 
undue compliance burden, with minimal benefits. The Board requests 
comment on whether any accounts established for trusts (other than IRAs 
and SEP accounts) should be subject to the regulation, particularly 
when both the beneficiary and the trustee are natural persons.
(b) Advertisement
    Comment 2(b)-1 provides examples of commercial messages considered 
to be advertisements, such as messages on computer screens in bank 
lobbies and accompanying printouts. The Board believes these messages 
are similar to messages in traditional advertising media such as 
televisions and newspapers.
    The comment also provides examples of messages not considered to be 
advertisements, including direct oral discussions conducted in person--
but not telephone conversations--regarding the negotiation of a 
specific account. The Board believes that the purpose of advertising 
disclosures--ensuring that prospective customers of consumer accounts 
know basic terms about the account--is adequately served by face-to-
face discussions between employees of the institution and consumers 
seeking information about accounts. Also, this interpretation is 
similar to the approach taken in the Official Staff Commentary to the 
Board's Regulation Z (12 CFR part 226, Supp. I, 2(a)(2)-1).
(f) Bonus
    Comment 2(f)-1 provides examples of bonuses. The comment also 
provides an example of an item that is not considered a bonus for 
purposes of the regulation--discount coupons offered by institutions 
for use at restaurants and stores.
    Comment 2(f)-2 clarifies the application of the de minimis rule 
($10 value or less) by defining the calendar year as the time frame for 
determining whether the bonus requirements are triggered, to ease 
compliance. The comment also provides that institutions must aggregate 
per account the value of items contemplated to be given during the 
calendar year, even though an item's individual value is less than $10. 
Thus, if an institution offers in January to give a consumer an item 
valued at $7.00 each calendar quarter during the year if account 
balances in a NOW account exceed $10,000 for each calendar quarter, the 
bonus rules would be triggered. On the other hand, if the items are 
given for opening separate accounts--such as a $7.00 item for renewing 
a time account and another for opening a savings account--the value 
given for each account remains within the de minimis exception, and the 
bonus rules would not be triggered.
    Comment 2(f)-3 clarifies that the waiver or reduction of a fee or 
absorption of expenses is not a bonus. The Board solicits comment on 
this approach.
(h) Consumer
    Comment 2(h)-3 clarifies coverage issues for retirement plans. For 
example, the proposed comment states that SEP accounts and IRAs are 
considered consumer accounts for purposes of the regulation. The Board 
believes that although institutions are named as trustees, SEP accounts 
and IRAs are equivalent to other accounts opened for consumer purposes. 
On the other hand, the proposed comment would exclude from coverage 
accounts held in a Keogh plan, which is established by a self-employed 
individual. The Board believes Keogh accounts are similar to accounts 
held by a sole proprietor, which Congress intended not to cover.
    Comment 2(h)-4 provides factors to consider in determining whether 
an account is held by an unincorporated nonbusiness association of 
natural persons. Associations with paid staff are likely to be more 
sophisticated in their investment decisions and are not as likely to 
need disclosures. The Board solicits comment on whether the use of 
factors is appropriate for providing guidance in this area. In 
addition, the Board solicits comment on the proposed factors and on 
what additional factors might indicate an account is held by or offered 
to an unincorporated association of natural persons.
(p) Passbook Savings Account
    Comment 2(p)-1 clarifies that institutions may consider accounts as 
``passbook savings,'' even if direct deposits such as social security 
payments are made to the account without the use of the passbook. The 
proposed comment is consistent with the requirements of Regulation E 
(12 CFR 205.9). Accounts that permit other electronic fund transfers--
whether or not called ``passbook''--and thus trigger Regulation E's 
requirement to send statements at least quarterly are not passbook 
savings accounts, and institutions must comply with the periodic 
statement disclosures in Sec. 230.6 of this part.
(t) Tiered-rate Account
    Comment 2(t)-1 clarifies that time accounts that pay different 
rates based solely on the amount of the initial deposit are not 
considered tiered-rate accounts. In this case, advertisements and 
account disclosures would not reflect tiered-rate disclosures for the 
account.

Section 230.3--General Disclosure Requirements

(b) General
    Comment 3(b)-1 provides guidance on the specificity required for 
the disclosures of the compounding and crediting frequencies. The Board 
believes slight variations in cycles are consistent with the notion of 
``monthly'' cycles, which are often not based on an actual calendar 
month.
(c) Relation to Regulation E
    Comment 3(c)-1 provides examples of disclosures under Regulation E 
that also comply with this regulation.
    The comment clarifies that an institution may rely on Regulation 
E's disclosure rules regarding fees imposed at ATMs and limitations on 
the frequency and amount of electronic fund transfers, including 
security-related exceptions. But any fees assessed for--or any 
limitations placed on the number or amount of--``intra-institutional 
transfers'' from other accounts at the institution must be disclosed 
under this regulation, even though those transactions are exempt from 
Regulation E. (See Sec. 230.4(b) of this part.)

Section 230.4--Account Disclosures

(a) Delivery of Account Disclosures
(a)(1) Account Opening
    The regulation requires institutions to provide account disclosures 
before an account is opened. Comment 4(a)(1)-1 provides examples of 
events that do and do not trigger the delivery of new account 
disclosures. Comment 4(a)(1)-1 provides guidance to institutions that 
deem an account to be closed, then receive a deposit from the consumer. 
The circumstances under which an institution may deem an account closed 
is governed by state or other law. However, the Board believes that if 
an institution accepts a deposit from a consumer on an account the 
institution has deemed to be ``closed'' (such as with a balance of $0) 
opening account disclosures are required.
    The proposed comment also provides that an account acquired in a 
merger or acquisition is not a new account. Comment is solicited on 
whether the rules for acquisitions involving the Resolution Trust 
Corporation and the Federal Deposit Insurance Corporation should be 
distinguished from the rules for other acquisitions, since they may 
involve the acquisition of deposits, not accounts.
(a)(2) Requests
Paragraph (a)(2)(i)
    Comment 4(a)(2)(i)-3 clarifies that ten business days (a period 
consistent with other timing rules for providing disclosure to 
consumers that open accounts by telephone, for example) is a reasonable 
time for responding to requests for disclosures.
(b) Content of Account Disclosures
Paragraph (b)(1) Rate Information
Paragraph (b)(1)(i) Annual Percentage Yield and Interest Rate
    Comment 4(b)(1)(i)-1 provides that no rate or yield other than the 
interest rate and annual percentage yield may be stated in account 
disclosures, with the exception of a periodic rate corresponding to the 
interest rate (since it is easily understood by consumers).
(b)(2) Compounding and Crediting
(b)(2)(i) Frequency
    Interpretation of this paragraph is deferred pending the Board's 
final action on proposed amendments to Regulation DD.
(b)(2)(ii) Effect of Closing an Account
    Proposed comment 4(b)(2)(ii)-1 explains that institutions may 
include in their contract specific consumer actions that will be 
considered by the institution to be a request to close the account, and 
that may result in the nonpayment of accrued but uncredited interest. 
(See Sec. 230.7(b) of this part.) The Board solicits comment on this 
approach.
(b)(4) Fees
    Comments 4(b)(4)-1 through -3 provide guidance for disclosing the 
amount of fees that may be assessed in connection with the account and 
the conditions under which they may be imposed. The Board believes that 
attempting to list in the commentary all fees imposed by institutions 
would produce a list that would become both lengthy and outdated.
(b)(5) Transaction Limitations
    Comment 4(b)(5)-1 clarifies that institutions need not disclose 
their right to require seven-day advance notice for withdrawals from an 
account. (See 12 CFR part 204.)
(b)(6) Features of Time Accounts
(b)(6)(i) Time Requirements
    Comment 4(b)(6)(i)-1 provides that institutions offering 
``callable'' time accounts must state the date or the circumstances 
under which the account may be redeemed, in addition to the maturity 
date. The Board believes the disclosure is a component of the maturity 
date--informing the consumer when the funds in the account may become 
available for reinvestment.
(b)(6)(ii) Early Withdrawal Penalties
    Comment 4(b)(6)(ii)-2 provides examples of early withdrawal 
penalties, and clarifies that early withdrawal penalties include 
bonuses that may be reclaimed if funds are withdrawn prior to maturity.
    Comment 4(b)(6)(ii)-3 clarifies that institutions are not required 
to disclose as early withdrawal penalties potential income taxation 
consequences for consumers who withdraw funds held in IRAs or similar 
plans.

Section 230.5--Subsequent Disclosures

(a) Change in Terms
Paragraph (a)(1) Advance Notice Required
    Comment 5(a)(1)-3 provides guidance on an institution's 
responsibilities to provide change in terms notices when account 
disclosures reflect that a term may change upon the occurrence of an 
event, such as a fee waiver for employees during their employment.
    However, the Board believes that a change in terms notice does not 
extend to changes in the type of account held. (See proposed commentary 
to Sec. 230.4(a)(1) of this part, which clarifies that transferring 
funds held in an MMDA to open a NOW account must be treated as the 
opening of a new account.)
Paragraph (a)(2)(ii) Check Printing Fees
    The regulation's exception to providing a change in terms notice 
for increases to check printing charges is based on the consumer's 
control over the style and quantity of checks ordered. The Board 
solicits comment on other products, if any, that should be similarly 
treated.
(b) Notice Before Maturity for Time Accounts Longer Than One Month That 
Renew Automatically
    Comments 5(b)-1 through -5 address questions about notices that 
must be sent for automatically renewing time accounts. Comment 5(b)-1 
provides guidance regarding a time account that may, in fact, have a 
term longer than the stated maturity date because the maturity date 
falls on a weekend or holiday. The Board has received questions asking 
whether this delay on a one-year time deposit would make the term 
longer than one year (thus requiring the full account disclosures under 
paragraph 5(b)(1) of this section prior to renewal rather than the 
abbreviated disclosures permitted by paragraph 5(b)(2)). The same issue 
arises for time accounts with a stated term of one month that may be 
extended beyond 31 days. The Board believes these short extensions due 
to the maturity date's falling on a weekend or holiday do not affect 
the classification of the account for purposes of the type of 
disclosures institutions are required to provide.
    Comment 5(b)-2 clarifies that when disclosing the date when the 
interest rate and annual percentage yield can be determined, 
institutions may use general disclosures of that date if the date is 
easily discerned.
    The Board has received many questions about ``club accounts.'' 
Comment 5(b)-4 makes clear that club accounts that otherwise meet the 
definition of a time account (Sec. 230.2(u)) must follow the 
requirements of this section, even if the consumer withdraws funds at 
maturity rather than ``rolling over'' the principal amount for another 
term. The proposed comment also clarifies that if the consumer has 
previously agreed to make payments into the account for the next club 
cycle (for example, by direct deposit or by transfers from another 
account), the club account should be treated as an automatically 
renewable time account.
    Comment 5(b)-5 clarifies disclosure requirements for a changed term 
for the subsequent renewal of a rollover time account. If the notice 
required by this paragraph has been provided to the consumer about the 
renewing time account, institutions may provide new account disclosures 
or a disclosure that reflects the consumer's request and the new term. 
The regulation states that if disclosures have previously been given 
and the terms remain the same, institutions need not provide the 
disclosures a second time. (See Sec. 230.4(a) of this part.) Since 
consumers receive disclosures about their renewing time account, this 
approach provides consumers with essential information and eases 
compliance for institutions. The Board requests comment on this 
approach.
Paragraph (b)(1) Maturities of Longer Than One Year
    Comment 5(b)(1)-1 clarifies that institutions need not highlight 
the new terms reflected in the disclosures.
(c) Notice for Time Accounts One Month or Less That Renew Automatically
    Institutions have limited disclosure responsibilities for rollover 
time accounts with maturities of one month or less. If a term 
previously disclosed (other than the interest rate and annual 
percentage yield) is changed at renewal, institutions must send a brief 
notice describing the change ``within a reasonable time'' after the 
renewal of the account. Comment 5(c)-1 provides that 10 calendar days 
after the renewal is a reasonable time except for accounts shorter than 
10 days, which should receive disclosures before any subsequent 
renewal.
(d) Notice Before Maturity for Time Accounts Longer Than One Year That 
Do Not Renew Automatically
    Comment 5(d)-1 clarifies that institutions need not provide new 
account disclosures when funds are subsequently transferred following 
the maturity of a nonrollover time account, unless a new account is 
established. The Board solicits comments on how institutions treat 
funds held in a nonrollover time account following maturity, and 
whether new account disclosures are appropriate in cases where funds 
remain with institutions. For example, is a check sent to the consumer 
automatically, or within a certain number of days of maturity? Are 
funds transferred to an account, and if so, how long are the funds 
typically held in that account?

Section 230.6--Periodic Statement Disclosures

(a) General Rule
    Comment 6(a)-2 provides guidance to institutions when quarterly 
periodic statements are normally sent for the account but a consumer's 
electronic fund transfer triggers the institution's duty under 
Regulation E to send a statement that month. Institutions need not 
treat interim monthly statements as periodic statements subject to the 
requirements of this regulation; if they choose not to do so, they must 
provide the disclosures (such as the interest earned and annual 
percentage yield earned) on subsequent quarterly statements.
    Comment 6(a)-3 clarifies that institutions may include limited 
account information for one account (an MMDA, for example) on the 
periodic statement of another account. However, disclosing interest or 
rate information would trigger the duty to state the annual percentage 
yield and other disclosure requirements on that statement.
    Comment 6(a)-4 provides guidance on additional information that may 
appear on periodic statements.
Paragraph (a)(3) Fees Imposed
    Comment 6(a)(3)-2 provides examples of similar types of fees that 
can be grouped together if they are disclosed with the same name or 
description. It also makes clear that all other account fees, including 
those related to electronic services that are not fund transfers, must 
be disclosed in accordance with Sec. 230.6 of this part.
    Comment 6(a)(3)-4 clarifies that institutions may comply with the 
requirements of Regulation E for disclosing electronic funds transfer 
fees on periodic statements.
Paragraph (a)(4) Length of Period
    Comment 6(a)(4)-2 provides that if a consumer opens or closes an 
account during a period, the annual percentage yield earned and the 
other disclosures for the consumer's account must reflect only those 
days the account was open, such as when a consumer changes from an 
interest-bearing account to a noninterest-bearing account in the middle 
of a period.
(b) Special Rule for Average Daily Balance Method
    When an institution uses the average daily balance method for 
monthly periods and provides a quarterly statement, the literal 
language of the regulation suggests that institutions should provide 
three interest figures with three corresponding annual percentage yield 
earned figures. Comment 6(b)-3 would permit institutions to show either 
separate figures for each month or a figure for the whole quarter. The 
Board believes consumers may receive more useful information if 
institutions provide one interest figure and one corresponding annual 
percentage yield earned figure for the period.

Section 230.7--Payment of Interest

(a) Permissible Methods
    Comment 7(a)-5 clarifies that the regulation does not require 
institutions to pay interest after a time account matures and provides 
examples to illustrate the rule.
    Comment 7(a)-6 addresses ``dormant'' accounts. The Board solicits 
comment on whether an institution should or should not be permitted to 
withhold the payment of interest for dormant accounts. (See comment 
7(b)-4, regarding the forfeiture of accrued but uncredited interest for 
dormant accounts.) The Board also solicits comment on whether providing 
further guidance on the definition of a dormant account would be 
preferable to reliance on state or other law. And, if a uniform time 
period were to be adopted, what period of time would be appropriate to 
consider an account dormant?
Paragraph (a)(2) Determination of Minimum Balance to Earn Interest
    Comment 7(a)(2)-5 clarifies that when a consumer's account has a 
negative balance, institutions must use zero, and not a negative 
number, to determine the balance on which the institution pays interest 
and whether any minimum balance requirement has been met. The Board 
believes that the regulation prohibits institutions from using negative 
balance amounts for these purposes, regardless of whether a daily 
balance or an average daily balance requirement method is used. (See 
commentary to Appendix A, Part II, which prohibits the use of negative 
balances for calculating the interest figure for the annual percentage 
yield earned.)
    Comment 7(a)(2)-6 clarifies that for club accounts, such as 
``holiday'' and ``vacation'' clubs, institutions cannot impose a 
minimum balance that could result in the nonpayment of interest for the 
entire club period. The Board believes a minimum balance that requires 
consumers to make the total number of payments or dollar amounts 
required under the club plan at the maturity of the account is 
tantamount to the ending balance method of calculating interest--a 
balance calculation method not permitted under the regulation.
(b) Compounding and Crediting Policies
    Comment 7(b)-3 clarifies that institutions may, by agreement with 
the consumer, specify circumstances in which the institution deems an 
account to be closed by the consumer. If an account is closed by the 
consumer, Regulation DD does not require an institution to pay accrued 
but uncredited interest, as long as this fact is disclosed. (See 
Sec. 230.4(b)(2)(ii).) For example, institutions may provide in a 
checking account agreement that by writing a check which reduces the 
account balance to $0, a consumer is deemed to have closed an account, 
or that the account will be deemed closed if no activity occurs within 
60 days of that transaction. (See proposed comment 230.4(a)(1)-1, which 
requires institutions to treat the acceptance of a deposit subsequently 
made by the consumer to that account as the opening of a new account.)

Section 230.8--Advertising

(a) Misleading or Inaccurate Advertisements
    In response to concerns expressed about the potential for 
misleading or inaccurate advertising on indoor signs, comment 8(a)-2 
provides guidance regarding time accounts and tiered-rate accounts. The 
Board solicits comment on the approach taken.
    The regulation prohibits institutions from using the terms ``free'' 
or ``no cost'' (or terms of similar meaning) to advertise accounts or 
account services if ``maintenance and activity fees'' can be imposed. 
The Board has received many questions about which fees trigger the 
prohibition. The Board believes that it is not possible to identify by 
name all fees that trigger this limitation. (See discussion for 
proposed comment 4(b)(4)-1.) Instead, comments 8(a)-3 through -7 
provide general principles institutions may use, regardless of what a 
fee may be named. The Board solicits comment on the proposed approach 
to provide guidance in this area.
    In defining the scope of ``maintenance and activity'' fees, comment 
8(a)-3 addresses advertisements for ``free'' accounts with optional 
electronic services such as home banking. The Board believes many 
consumers consider electronic services such as ATM access to be an 
integral part of their accounts. Therefore, in its September 1992 
rulemaking, the Board stated that institutions could not advertise an 
account as ``free'' if a fee is imposed for transactions at ATMs owned 
by the institution. Some institutions have questioned this approach 
arguing that ATM access is provided only upon a consumer's request and 
that consumers will receive information--including the cost of ATM 
access--before obtaining the service. The Board solicits comment on 
this approach.
    The Board believes consumers are not mislead by advertisements for 
``free'' accounts, if certain electronic services, such as home banking 
services, are available for a fee. The Board believes that (unlike ATM 
access) consumers do not have a reasonable expectation that services 
such as home banking would be included as part of an account advertised 
as free. Of course, if optional features that impose fees are 
advertised with a free account, the advertisement must make clear that 
charges are assessed for the optional feature. The Board solicits 
comment on this approach, and requests comment on whether ATM services 
should be distinguished from other optional electronic services, and 
whether consumers would be mislead by an advertisement for an account 
that is described as ``free'' even though the institution may charge 
for ATM activity at ATMs owned by the institution.
    Comment 8(a)-4 specifies that the term ``fees waived'' is similar 
to the terms ``free'' or ``no cost'' for the purposes of this section.
(b) Permissible Rates
    The Board has received many questions about advertising accounts 
for which institutions offer a number of versions (certificates of 
deposits, for example). Comment 8(b)-3 clarifies that institutions may 
state an annual percentage yield for each version of an account. 
Alternatively, the proposed comment would permit institutions to state 
a representative example as long as the advertisement makes clear that, 
for instance, the advertised yield is for a time account with a 30-day 
maturity and does not apply to all time accounts. Similarly, the 
comment illustrates that institutions could advertise selected versions 
of time accounts. The Board solicits comment on this approach, which 
the Board believes would effectively minimize compliance burdens for 
institutions while still providing meaningful information to consumers.
(c) When Additional Disclosures are Required
    The regulation requires institutions to disclose additional 
information when the annual percentage yield is advertised. Comment 
8(c)-1 provides examples of information that does and does not trigger 
the additional disclosures. In response to questions about the effect 
of advertising a ``bonus'' rate, the proposed comment illustrates that 
stating ``bonus rates are available'' does not trigger additional 
disclosures. However, stating a ``bonus rate of 1%'' over an 
institution's current interest rate for one-year certificates of 
deposit is equivalent to stating an interest rate.
Paragraph (c)(2) Time Annual Percentage Yield Is Offered
    Comment 8(c)(2)-1 clarifies the regulation's disclosure 
requirements for advertisements that state an annual percentage yield 
as of a specified ``recent'' date. The proposed comment provides that 
when an advertisement is published, the specified ``recent date'' must 
be recent in relation to the publication frequency of the media used 
for the advertisement (taking into account established production 
deadlines for the media involved). For example, annual percentage 
yields as of the printing date of a brochure printed once for a deposit 
account promotion that will run for six months would be considered 
``recent,'' even though rates may be expected to change during the six-
month period. Annual percentage yields published in a daily newspaper 
or broadcast on television must be ``recent'' as of the daily 
publishing or broadcasting deadline date, even though the 
advertisements may appear less frequently (such as once a month). The 
Board solicits comment on this approach. 
Paragraph (c)(6) Features of Time Accounts 
Paragraph (c)(6)(i) Time Requirements 
    Comment 8(c)(6)(i)-1 addresses questions regarding ``club'' 
accounts in which there is a fixed maturity date but the term of the 
account may vary, depending on when the account is opened. The proposed 
comment provides that institutions adequately disclose the term of the 
account by stating the established maturity date and the fact that the 
actual term may vary. 
Appendix A--Annual Percentage Yield Calculation 
Part I. Annual Percentage Yield for Account Disclosures and Advertising 
Purposes 
    With one exception, the interpretation of Appendix A, Part 1 is 
deferred pending the Board's final action on proposed amendments to 
Regulation DD. Proposed comment app. A.I.-1 clarifies rounding rules 
which may be used in calculating interest and the annual percentage 
yield. The Board believes that rounding to five decimals results in a 
more precise figure and is in accordance with industry practices. The 
Board requests comment on whether further guidance on rounding 
principles would be appropriate. 
Part II. Annual Percentage Yield Earned for Periodic Statements 
    Comment app. A.II.A-1 clarifies when institutions should or should 
not include accrued but uncredited interest in the balances used to 
calculate the annual percentage yield earned. The Board believes that 
it would be misleading to include accrued interest in the balance 
figure when statements are sent less frequently than interest is 
credited.
    When periodic statements are issued more frequently than interest 
is credited, accrued interest would be included in the balance figure 
in succeeding statements. This is necessary so that the beginning 
balance can properly reflect the principal on which interest will 
accrue for the succeeding statement period. The Board solicits comment 
on these calculation principles.
    Comment app. A.II.A.-2 clarifies rounding rules for calculating 
interest earned and the annual percentage yield earned. The Board 
believes flexibility in rounding is appropriate when statements are 
sent more frequently than interest is compounded and credited, since 
the interest earned figure does not reflect the amount which will 
actually be paid by an institution.

B. Special Formula for Use Where Periodic Statements Are Sent More 
Often Than the Period for Which Interest Is Compounded

    Comment app. A.II.B.-1 provides guidance to institutions that issue 
quarterly periodic statements but are required by Regulation E to send 
a monthly statement during the quarter. (See proposed comment 230.6(a)-
2, which discusses an institution's option to comply with the 
disclosure requirements for such monthly statements.) The comment 
clarifies that institutions complying with Sec. 230.6 for monthly 
statements triggered by Regulation E must use the special formula in 
part II.B. of this appendix. Institutions could use this formula for a 
quarterly statement whether or not a monthly statement is triggered by 
Regulation E during the quarter. The Board believes such a rule would 
significantly reduce compliance burdens for institutions. However, in 
some cases, the use of the special formula may result in an understated 
annual percentage yield earned. The Board solicits comment on whether 
the purposes of the act are best served by this approach.
    Comment app. A.II.B.-2 clarifies that the special formula requires 
institutions to use the actual number of days in the compounding period 
in calculating the annual percentage yield earned. In the supplementary 
material that accompanied the March 19, 1993 amendments to the 
regulation (58 FR 15077), the calculation used average numbers of days 
in the compounding period to calculate the annual percentage yield 
earned for a statement period. The Board believes that using actual 
days in a compounding period is more appropriate and corresponds to the 
annual percentage yield earned for a specific consumer's account. The 
Board solicits comment on the proposed comment.
(3) Form of Comment Letters
    Comment letters should refer to Docket No. R-0824, and, when 
possible, should use a standard typeface with a type size of 10 or 12 
characters per inch. This will enable the Board to convert the text 
into machine-readable form through electronic scanning, and will 
facilitate automated retrieval of comments for review. Comments may 
also be submitted on 3\1/2\ inch or 5\1/4\ inch computer diskettes in 
any IBM-compatible DOS-based format, if accompanied by an original 
document in paper form.

List of Subjects in 12 CFR Part 230

    Advertising, Banks, Banking, Consumer protection, Deposit accounts, 
Interest, Interest rates, Truth in savings.

    For the reasons set forth in the preamble, the Board proposes to 
amend 12 CFR part 230 as follows:

PART 230--TRUTH IN SAVINGS (REGULATION DD)

    1. The authority citation for part 230 would continue to read as 
follows:


    Authority: 12 U.S.C. 4301 et seq.

    2. Part 230 would be amended by adding a new Supplement I at the 
end of the appendixes to the Part to read as follows:

Supplement I to Part 230--Official Staff Interpretations

INTRODUCTION

    1. Official status. This commentary is the vehicle by which the 
staff of the Division of Consumer and Community Affairs of the 
Federal Reserve Board issues official staff interpretations of 
Regulation DD. Good faith compliance with this commentary affords 
protection from liability under section 271(f) of the Truth in 
Savings Act.

Section 230.1--Authority, Purpose, Coverage, and Effect on State Laws

(c) Coverage

    1. Foreign applicability. Regulation DD applies to all 
depository institutions, except credit unions, that offer deposit 
accounts to residents (including resident aliens) of any state as 
defined in Sec. 230.2(r).
    2. Persons who advertise accounts. Persons who advertise 
accounts are subject to the advertising rules. For example, if a 
deposit broker places an advertisement that offers consumers an 
interest in an account at a depository institution, the advertising 
rules apply to the advertisement, whether the account is held by the 
broker or directly by the consumer.

Section 230.2--Definitions

(a) Account

    1. Covered accounts. Examples of accounts subject to the 
regulation are:
     Interest-bearing and noninterest-bearing accounts
     Accounts opened as a condition of obtaining a credit 
card
    Examples of accounts not subject to the regulation are:
     Mortgage escrow accounts for collecting taxes and 
property insurance premiums
     Accounts established to make periodic disbursements on 
construction loans
     Trust accounts other than individual retirement 
accounts (IRAs) and simplified employee pension (SEP) accounts
     Accounts opened by an executor in the name of a 
decedent's estate
     Accounts of individuals operating businesses as sole 
proprietors
    2. Other investments. The term ``account'' does not apply to all 
products of a depository institution. Examples of products not 
covered are:
     Government securities
     Mutual funds
     Annuities
     Securities or obligations of a depository institution
     Contractual arrangements such as repurchase agreements, 
interest rate swaps, and bankers acceptances

(b) Advertisement

    1. Coverage. Advertisements include commercial messages in 
visual, oral, or print media that invite, offer, or otherwise 
announce generally to prospective customers the availability of 
consumer accounts such as:
     Telephone solicitations
     Messages on automated teller machine (ATM) screens
     Messages on a computer screen in an institution's lobby 
(including any printout)
     Messages in a newspaper, magazine, or promotional flyer 
or on radio
     Messages promoting an account that are provided along 
with information about the consumer's existing account at an 
institution
    Examples of messages that are not advertisements are:
     Rate sheets published in newspapers, periodicals, or 
trade journals provided the depository institution (or deposit 
broker that offers accounts at the institution) does not pay a fee 
to have the information included
     An in-person discussion with a consumer about the terms 
for a specific account
     Information provided to consumers about their existing 
accounts, such as on IRA disbursements or notices for automatically 
renewable time accounts sent before renewal

(f) Bonus

    1. Examples. Bonuses include items of value, other than 
interest, offered as incentives to consumers, such as an offer to 
pay the final installment deposit for a holiday club account.
    The following is an example of an item that is not a bonus:
     Discount coupons distributed by institutions for use at 
restaurants or stores
    2. De minimis rule. Items with a de minimis value of $10 or less 
are not bonuses. Institutions may rely on the valuation standard 
used by the Internal Revenue Service (IRS) to determine if the value 
of the item is de minimus. (See 26 CFR Sec. 1.6049-5(a)(2), which 
discusses the fair market value of property received.) Items 
required to be reported by the institution under IRS rules are 
bonuses under this regulation. Examples of items that are not 
bonuses are:
     Disability insurance premiums paid by the institution 
in an amount less than $10 per year
     Coffee mugs, T-shirts or other merchandise with a 
market value of less than $10 per year
    Institutions must aggregate per account per calendar year any 
items given to a consumer that are individually valued at less than 
$10 and must consider them to be a bonus if their aggregate value 
exceeds $10.
    3. Waiver or reduction of a fee or absorption of expenses. 
Bonuses do not include value received by consumers through the 
waiver or reduction of fees for banking-related services (even if 
the fees waived exceed $10), such as the following:
     Waiving a safe deposit box rental fee for one year for 
consumers who open a new account
     Waiving fees for travelers checks for account holders
     Discounts on interest rates charged for loans at the 
institution

(h) Consumer

    1. Professional capacity. Examples of accounts held by a natural 
person in a professional capacity for another are:
     Attorney-client trust accounts
     Landlord-tenant security accounts
    2. Nonprofessional capacity. Examples of accounts not held in a 
professional capacity are:
     Accounts held by parents for a child under the Uniform 
Gifts to Minors Act
     Accounts established by a tenant for apartment lease 
payments pending resolution of a landlord-tenant dispute
    3. Retirement plans. Individual retirement accounts (IRAs) and 
simplified employee pension (SEP) accounts are consumer accounts to 
the extent that funds are invested in accounts subject to the 
regulation. Keogh accounts, like sole proprietor accounts, are not 
subject to the regulation.
    4. Unincorporated associations. An account held by or offered to 
an unincorporated association of natural persons is a consumer 
account if the account is primarily for a nonbusiness purpose.
    The following factors may be considered:
     The institution may rely on the declaration of the 
person representing the association as to whether the account is 
held for a business or nonbusiness purpose.
     Whether the association has paid employees, which would 
indicate a business purpose for the account. For example, an account 
held by a religious organization that has payroll obligations is not 
covered by the regulation.

(j) Depository Institution and Institution

    1. Foreign institutions. Branches of foreign institutions 
located in the United States are subject to the regulation if they 
offer consumer accounts. Edge Act and Agreement corporations, and 
agencies of foreign institutions, are not depository institutions.

(k) Deposit Broker

    1. General. A deposit broker is any person in the business of 
placing or facilitating the placement of deposits in an institution, 
as defined by the Federal Deposit Insurance Act (12 U.S.C. 29(g)).

(n) Interest

    1. Relation to Regulation Q. While bonuses are not interest for 
purposes of this regulation, other regulations may require that 
bonuses be treated as the equivalent of interest. For example, 
Regulation Q identifies payments of cash or merchandise that violate 
the prohibition against paying interest on demand accounts. (See 12 
CFR Sec. 217.2(d).)

(p) Passbook Savings Account

    1. Relation to Regulation E. Passbook savings accounts include 
accounts accessed by preauthorized electronic fund transfers to the 
account (as defined in 12 CFR 205.2(j)), such as an account credited 
by direct deposit of social security payments. Accounts that permit 
access by other electronic means are not ``passbook saving 
accounts,'' and any statements that are sent four or more times a 
year must comply with the requirements of Sec. 230.6.

(q) Periodic Statement

    1. Examples. Periodic statements do not include:
     Additional statements provided solely upon request
     Information provided by computer through home banking 
services
     General service information such as a quarterly 
newsletter or other correspondence that describes available services 
and products

(r) State

    1. General. Territories and possessions include Guam, the 
Mariana Islands, and the Marshall Islands.

(t) Tiered-rate Account

    1. Time accounts. Time accounts that pay different rates based 
solely on the amount of the initial deposit are not tiered-rate 
accounts.

(u) Time Account

    1. Relation to Regulation D. Regulation D permits in limited 
circumstances the withdrawal of funds without penalty during the 
first six days after a ``time deposit'' is opened. (See 12 CFR 
Sec. 204.2(c)(1)(i).) Withdrawals without penalty from a time 
account made in accordance with Regulation D do not disqualify the 
account from being a time account for purposes of this regulation.

(v) Variable-rate Account

    1. General. A certificate of deposit that permits one or more 
rate adjustments prior to maturity at the consumer's option is a 
variable-rate account.

Section 230.3--General Disclosure Requirements

(a) Form

    1. Design requirements. Disclosures must be presented in a 
format that allows consumers to readily understand the terms of 
their account. Disclosures may be made:
     In any order
     In combination with other disclosures or account terms
     On more than one page and on the front and reverse 
sides
     By using inserts to a document or filling in blanks
     On more than one document, as long as the documents are 
provided at the same time
    2. Multiple account disclosures. Institutions may prepare 
combined disclosures for all accounts offered, or prepare different 
documents for different types of accounts. If an institution 
provides one document for several types of accounts, consumers must 
be able to understand clearly which disclosures apply to their 
account.
    3. Consistent terminology. An institution must use the same 
terminology to describe terms or features that are required to be 
disclosed. For example, if an institution describes a monthly fee 
(regardless of account activity) as a ``monthly service fee'' in 
account-opening disclosures, the same terminology must be used in 
its periodic statements and change-in-term notices.

(b) General

    1. Specificity of legal obligation. An institution may use the 
term ``monthly'' to describe its compounding or crediting policy 
when interest is compounded or paid at the end of each calendar 
month or for twelve periods during the year even if the actual days 
in each period vary between 28 and 33 days.

(c) Relation to Regulation E

    1. General rule. Compliance with Regulation E (12 CFR part 205) 
is deemed to satisfy the disclosure requirements of this regulation, 
such as when:
     An institution changes a term that triggers a notice 
under Regulation E, and the timing and disclosure rules of 
Regulation E are used for sending change-in-term notices.
     A consumer adds an ATM access feature to an account, 
and the institution provides disclosures pursuant to Regulation E, 
including disclosure of fees before the consumer receives ATM 
access. (See 12 CFR Sec. 205.7.) If the institution complies with 
the timing rules of Regulation E, fees related to electronic 
services (such as balance inquiry fees imposed if the inquiry is 
made at an ATM) that are required to be disclosed by this regulation 
but not by Regulation E may also be provided at that time.
     An institution relies on Regulation E's disclosure 
rules regarding limitations on the frequency and amount of 
electronic fund transfers, including security-related exceptions. 
But any limitation on the number of ``intra-institutional 
transfers'' from other accounts at the institution during a given 
time period must be disclosed, even though those transfers are 
exempt from Regulation E.

(e) Oral Response to Inquiries

    1. Application of rule. Institutions need not provide rate 
information orally.
    2. Relation to advertising. An oral response to a question about 
rates is not covered by the advertising rules.

(f) Rounding and Accuracy Rules for Rates and Yields (f)(2) 
Accuracy

    1. Annual percentage yield and annual percentage yield earned. 
The tolerance for annual percentage yield and annual percentage 
yield earned calculations is designed to accommodate inadvertent 
errors. Institutions may not purposely incorporate the tolerance 
into their calculation of yields.
    2. Interest rate. There is no tolerance for an inaccuracy in the 
interest rate.

Section 230.4--Account Disclosures

(a) Delivery of Account Disclosures

(a)(1) Account Opening

    1. New accounts. New account disclosures must be provided when:
     A time account that does not automatically rollover is 
renewed by a consumer
     A consumer changes the term for a renewable time 
account (from a one-year time account to a six-month time account, 
for instance)
     Funds in an MMDA account are transferred by an 
institution to open a new account for the consumer, such as a NOW 
account, because the consumer exceeded transaction limitations on 
the MMDA account
      An institution accepts a deposit from a consumer to an 
account the institution previously deemed to be ``closed'' by the 
consumer
    New account disclosures are not required when an institution 
acquires an account through an acquisition of or merger with another 
institution (but see Sec. 230.5(a) regarding advance notice 
requirements if terms are changed).

(a)(2) Requests

(a)(2)(i)

    1. Inquiries versus requests. A response to an oral inquiry (by 
telephone or in person) about rates and yields or fees does not 
trigger the duty to provide account disclosures. However, when a 
consumer asks for written information about an account (whether by 
telephone, in person, or by other means), the institution must 
provide disclosures.
    2. General requests. When a consumer generally asks for 
information about a type of account (a NOW account, for example), an 
institution that offers several variations may provide disclosures 
for any one of them.
    3. Timing for response. Ten business days is a reasonable time 
for responding to a request for account information that a consumer 
does not make in person.

(a)(2)(ii)(B)

    1. Term. Describing the maturity of a time account as ``1 year'' 
or ``6 months,'' for example, illustrates a response stating the 
maturity of a time account as a term rather than a date (``January 
10, 1995'').

(b) Content of Account Disclosures

(b)(1) Rate information

(b)(1)(i) Annual Percentage Yield and Interest Rate

    1. Rate disclosures. In addition to the interest rate and annual 
percentage yield, a periodic rate corresponding to the interest rate 
may be disclosed. No other rate or yield (such as ``tax effective 
yield'') is permitted. If the annual percentage yield is the same as 
the interest rate, institutions may disclose a single figure but 
must use both terms.
    2. Fixed-rate accounts. To disclose the period of time the 
interest rate will be in effect, institutions may state the maturity 
date for fixed-rate time accounts that pay the opening rate until 
maturity. (See Appendix B, B-7--Sample Form.) For other fixed-rate 
accounts, institutions may disclose a date (such as ``This rate will 
be in effect through June 30, 1994'') or a period (such as ``This 
rate will be in effect for at least 30 days'').
    3. Tiered-rate accounts. Each interest rate, along with the 
corresponding annual percentage yield for each specified balance 
level (or range of annual percentage yields, if appropriate), must 
be disclosed for tiered-rate accounts. (See Appendix A, Part I, 
Paragraph D.)
    4. Stepped-rate accounts. A single annual percentage yield must 
be disclosed for stepped-rate accounts. (See Appendix A, Part I, 
Paragraph B.) However, the interest rates and the period of time 
each will be in effect also must be provided. When the initial rate 
offered on a variable-rate account is higher or lower than the rate 
that would otherwise be paid on the account, the calculation of the 
annual percentage yield must be made as if for a stepped-rate 
account. (See Appendix A, Part I, Paragraph C.)

(b)(1)(ii) Variable Rates

(b)(1)(ii)(B)

    1. Determining interest rates. To disclose how the interest rate 
is determined, institutions must:
     Identify the index and specific margin, if the interest 
rate is tied to an index
     State that rate changes are solely within the 
institution's discretion, if the institution does not tie changes to 
an index

(b)(1)(ii)(C)

    1. Frequency of rate changes. Institutions that reserve the 
right to change rates at any time must state that fact.

(b)(1)(ii)(D)

    1. Limitations. A floor or ceiling on rates or on the amount the 
rate may decrease or increase during any time period must be 
disclosed. Institutions need not disclose the absence of limitations 
on rate changes.

(b)(2) Compounding and Crediting

(b)(2)(ii) Effect of Closing an Account

    1. Deeming an account closed. Institutions may provide in their 
deposit contract the actions by consumers that the institution will 
treat as closing the account and that will result in the forfeiture 
of accrued but uncredited interest, such as when a consumer 
withdraws all funds from the account prior to the date interest is 
credited.

(b)(3) Balance Information

(b)(3)(ii) Balance Computation Method

    1. Methods and periods. Institutions may use different methods 
or periods to calculate minimum balances for purposes of imposing a 
fee (daily balance for a calendar month, for example) and accruing 
interest (average daily balance for a statement period, for 
example). Each method and period must be disclosed.

(b)(3)(iii) When Interest Begins to Accrue

    1. Additional information. Institutions may disclose additional 
information such as the time of day after which deposits are treated 
as having been received the following business day, and may use 
additional descriptive terms such as ``ledger'' or ``collected'' 
balances to disclose when interest begins to accrue.

(b)(4) Fees

    1. Types of fees. The following are types of fees that must be 
disclosed in connection with an account:
     Maintenance fees, such as monthly service fees
     Fees related to deposits or withdrawals, such as fees 
for use of the institution's ATMs
     Fees for special services, such as stop payment fees, 
fees for balance inquiries or verification of deposits, and fees 
associated with checks returned unpaid
     Fees to open or to close accounts Institutions need not 
disclose fees such as the following:
     Fees assessed for services offered to account and 
nonaccount holders alike, such as fees for travelers checks and wire 
transfers (even if different for nonaccount holders)
     Incidental fees, such as fees associated with state 
escheat laws, garnishment or attorneys fees, and fees for 
photocopying forms
    2. Amount of fees. Institutions must state the amount and 
conditions under which a fee may be imposed. Naming and describing 
the fee typically satisfies this requirement. Some examples are:
     ``$4.00 monthly service fee''
     ``$7.00 and up'' or ``fee depend on style of checks 
ordered'' for check printing fees
    3. Tied-accounts. Institutions must state if fees that may be 
assessed against an account are tied to other accounts at the 
institution. For example, if an institution ties the fees payable on 
a NOW account to balances held in the NOW account and in a savings 
account, the NOW account disclosures must state that fact and 
explain how the fee is determined.

(b)(5) Transaction Limitations

    1. General rule. Examples of limitations on the number or dollar 
amount of deposits or withdrawals that institutions must disclose 
are:
     Limits on the number of checks that may be written on 
an account for a given time period
     Limits on withdrawals or deposits during the term of a 
time account
     Limitations required by Regulation D, such as the 
number of withdrawals permitted from money market deposit accounts 
by check to third parties each month (but they need not disclose 
that the institution reserves the right to require a seven-day 
notice for a withdrawal from an account).

(b)(6) Features of Time Accounts

(b)(6)(i) Time Requirements

    1. ``Callable'' time accounts. In addition to the maturity date, 
institutions must state the date or the circumstances under which 
the institution may redeem a time account at the institution's 
option (a ``callable'' time account).

(b)(6)(ii) Early Withdrawal Penalties

    1. General. The term ``penalty'' need not be used to describe 
the loss that may be incurred by consumers for early withdrawal of 
funds from time accounts.
    2. Examples. Examples of early withdrawal penalties are:
     Monetary penalties, such as ``$10.00'' or ``seven days' 
interest plus accrued but uncredited interest''
     Adverse changes to terms such as the interest rate, 
annual percentage yield, or compounding frequency for funds 
remaining on deposit
     Reclamation of bonuses
    3. Relation to rules for IRAs or similar plans. Penalties 
imposed by the Internal Revenue Code for certain withdrawals from 
IRAs or similar pension or savings plans are not early withdrawal 
penalties.

(b)(6)(iv) Renewal Policies

    1. Rollover time accounts. Institutions offering a grace period 
on rollover time accounts that automatically renew need not state 
whether interest will be paid if the funds are withdrawn during the 
grace period.
    2. Nonrollover time accounts. Institutions that pay interest on 
funds following the maturity of time accounts that do not renew 
automatically need not state the rate (or annual percentage yield) 
that may be paid.

Section 230.5--Subsequent Disclosures

(a) Change in Terms

(a)(1) Advance Notice Required

    1. Form of notice. Institutions may provide a change-in-term 
notice on or with a regular periodic statement or in another 
mailing. If an institution provides notice through revised account 
disclosures, the changed term must be highlighted in some manner. 
For example, institutions may state that a particular fee has been 
changed (also specifying the new amount) or use an accompanying 
letter that refers to the changed term.
    2. Effective date. An example of a disclosure that complies is:
     ``As of May 11, 1994''
    3. Terms that change upon the occurrence of an event. 
Institutions that offer terms such as a fee waiver for employee 
account holders during their employment or for students enrolled at 
a local university need not send advance notice of a change 
resulting from termination of employment or enrollment if:
     The account-opening disclosures given (to the employee, 
for example) describe the term and the event that would cause the 
term to change (such as the consumer's leaving the institution's 
employment), and
     Notices are sent when the term is changed for other 
account holders, even though the term remains unchanged for the 
consumer while employment or enrollment continues.

(a)(2) No Notice Required

(a)(2)(ii) Check Printing Fees

    1. Increase in fees. A notice is not required even if an 
increase in check printing fees includes an amount added by the 
institution to the price charged by a vendor.

(b) Notice Before Maturity for Time Accounts Longer Than One Month 
That Renew Automatically

    1. Maturity dates on nonbusiness days. For determining the term, 
institutions may ignore the fact that the disclosed maturity falls 
on a nonbusiness day and the term is extended beyond the disclosed 
number of days. For example, a holiday or weekend may cause a ``one-
year'' time account to extend beyond 365 days (or 366, in a leap 
year), or a ``one-month'' time account to extend beyond 31 days.
    2. Disclosing when rates will be determined. Disclosures that 
illustrate when the annual percentage yield will be available 
include:
     A specific date, such as ``October 28''
     A date that is easily discernable, such as ``the 
Tuesday prior to the maturity date stated on the notice'' or ``as of 
the maturity date stated on this notice''
    Institutions must indicate when the rate will be available if 
the date falls on a nonbusiness day.
    3. Alternative timing rule. To illustrate the alternative timing 
rule: An institution that offers a 10-day grace period must provide 
the disclosures at least 10 days prior to the scheduled maturity 
date.
    4. Club accounts. Club accounts that are time accounts are 
covered by this paragraph, even though funds may be withdrawn at the 
end of the current club period. For example, if the consumer has 
agreed to the transfer of payments from another account to the time 
account for the next club period, the institution must comply with 
the requirements for automatically renewable time accounts.
    5. Renewal of a time account. The following applies to a change 
in a term that becomes effective if a rollover time account is 
subsequently renewed:
     If the change is initiated by the institution, the 
disclosure requirements of this paragraph. (Paragraph 5(a) applies 
if the change becomes effective prior to the maturity of the 
existing time account.)
     If initiated by the consumer, the account-opening 
disclosure requirements of Sec. 230.4(b). (If the notice required by 
this paragraph has been provided, institutions may give new account 
disclosures or disclosures that reflect the new term.)
    For example, if a consumer who receives a prematurity notice on 
a one-year time account requests a rollover to a six-month account, 
the institution must provide either account-opening disclosures that 
reflect the new maturity date or, if all other terms previously 
disclosed in the prematurity notice remain the same, only the new 
maturity date.

(b)(1) Maturities of Longer Than One Year

    1. Highlighting changed terms. Institutions need not highlight 
terms that have changed since the last account disclosures were 
provided.

(c) Notice for Time Accounts One Month or Less That Renew 
Automatically

    1. Providing disclosures within a reasonable time. Generally, 10 
calendar days after an account renews is a reasonable time for 
providing disclosures. For time accounts shorter than 10 days, 
disclosures should be given prior to the next-scheduled renewal 
date.
(d) Notice Before Maturity for Time Accounts Longer Than One Year That 
Do Not Renew Automatically
    1. Subsequent account. When funds are transferred following 
maturity of a nonrollover time account, institutions need not 
provide account disclosures unless a new account is established.

Section 230.6--Periodic Statement Disclosures

(a) General Rule

    1. General. Institutions are not required to provide periodic 
statements. If they provide periodic statements, disclosures need 
only be furnished to the extent applicable. For example, if no 
interest is earned for a statement period, institutions need not 
disclose ``$0'' interest earned and ``0%'' annual percentage yield 
earned.
    2. Regulation E interim statements. When an institution provides 
regular quarterly statements, and in addition provides a monthly 
interim statement to comply with Regulation E, the interim statement 
need not comply with this section unless it states interest or rate 
information. (See 12 CFR 205.9.)
    3. Combined statements. Institutions may provide certain 
information about an account (such as an MMDA) on the periodic 
statement for another account (such as a NOW account) without 
triggering the disclosures required by this section, as long as:
     The information is limited to the account number, the 
type of account, or balance information, and
     The institution also provides consumers a periodic 
statement that complies with this section for the account (the MMDA, 
in the example).
    4. Other information. Institutions may include additional 
information on or with a periodic statement, such as:
     Interest rates and periodic rates corresponding to the 
interest rate applied to balances during the statement period
     The dollar amount of interest earned year-to-date
     Bonuses paid (or any de minimis consideration of $10 or 
less)
     Fees for other products, such as safe deposit boxes

(a)(1) Annual Percentage Yield Earned

    1. Ledger and collected balances. Institutions that accrue 
interest using the collected balance method may use either the 
ledger or the collected balance in determining the annual percentage 
yield earned.

(a)(2) Amount of Interest

    1. Accrued interest. Institutions must state the amount of 
interest that accrued during the statement period, even if it was 
not credited. For interest not credited, institutions may disclose 
when funds will become available for the consumer's use.
    2. Terminology. In disclosing interest earned for the period, 
institutions must use the term ``interest'' or terminology such as:
     ``Interest paid,'' to describe interest that has been 
credited
     ``Interest accrued'' or ``interest earned,'' to 
indicate that interest is not yet credited
    3. Closed accounts. If a consumer closes an account between 
crediting periods and forfeits accrued interest, the institution may 
not show any figures for ``interest earned'' or annual percentage 
yield earned for the period.

(a)(3) Fees Imposed

    1. General. Periodic statements must state fees debited to the 
account during the statement period even if assessed for an earlier 
period.
    2. Itemizing fees by type. In itemizing fees by type, 
institutions may group together fees of the same type that are 
imposed more than once in the period. If fees are grouped, the 
description must make clear that the dollar figure represents more 
than a single fee, for example, ``total fees for checks written this 
period.'' Examples of fees that may not be grouped together are:
     Monthly maintenance and excess activity fees
     ``Transfer'' fees, if different dollar amounts are 
imposed--such as $.50 for deposits and $1.00 for withdrawals
     Fees for electronic fund transfers and fees for other 
services, such as balance inquiry or maintenance fees
    3. Identifying fees. Statement details must enable the consumer 
to identify the specific fee. For example:
     Institutions may use a code to identify a particular 
fee if the code is explained on the periodic statement or in 
documents accompanying the statement.
     Institutions using debit slips may disclose the date 
the fee was debited on the periodic statement and show the amount 
and type of fee on the dated debit slip.
    4. Relation to Regulation E. Compliance with Regulation E 
complies with this section for the disclosure of fees related to 
electronic fund transfers on periodic statements (for example, 
totaling all electronic funds transfer fees in a single figure).

(a)(4) Length of Period

    1. General. Institutions that provide the beginning and ending 
dates of the period must make clear whether both dates are included 
in the period.
    2. Opening or closing an account mid-cycle. If an account is 
opened or closed during the period for which a statement is sent, 
institutions must calculate the annual percentage yield earned based 
on account balances for each day the account was open.

(b) Special Rule for Average Daily Balance Method

    1. General. To illustrate, this rule applies when an institution 
calculates interest on a quarterly average daily balance and sends 
monthly statements. The first two monthly statements may not state 
annual percentage yield earned and interest earned figures; the 
third ``monthly'' statement will reflect the interest earned and the 
annual percentage yield earned for the entire quarter.
    2. Length of the period. Institutions must disclose the length 
of both the interest calculation period and the statement period. 
For example, a statement could disclose a statement period of April 
16 through May 15 and further state that ``the interest earned and 
the annual percentage yield earned are based on your average daily 
balance for the period April 1 through April 30.''
    3. Quarterly statements and monthly compounding. Institutions 
that use the average daily balance method to calculate interest on a 
monthly basis, but send statements on a quarterly basis, may 
disclose a single interest (and annual percentage yield earned) 
figure. Alternatively, an institution may disclose three interest 
earned and three annual percentage earned figures, one for each 
month in the quarter, as long as the institution states the number 
of days (or beginning and ending date) in the interest period if it 
is different from the statement period.

Section 230.7--Payment of Interest

(a) Permissible Methods

    1. Prohibited calculation methods. Calculation methods that do 
not comply with the requirement to pay interest on the full amount 
of principal in the account each day include:
     The ``ending balance'' method, where institutions pay 
interest on the balance in the account at the end of the period
     The ``investable balance'' method, where institutions 
pay interest on a percentage of the balance, excluding an amount 
institutions set aside for reserve requirements
    2. Use of 365-day basis. Institutions may apply a daily periodic 
rate that is greater than \1/365\ of the interest rate--such as \1/
360\ of the interest rate--as long as it is applied 365 days a year.
    3. Periodic interest payments. An institution can pay interest 
each day on the account and still make uniform interest payments. 
For example, for a one-year certificate of deposit an institution 
could make monthly interest payments that are equal to \1/12\ of the 
amount of interest that will be earned for a 365-day period, or 11 
uniform monthly payments and a final payment that accounts for the 
total interest earned for the period.
    4. Leap year. Institutions may apply a daily rate of \1/366\ or 
\1/365\ of the interest rate for 366 days in a leap year, if the 
account will earn interest for February 29.
    5. Maturity of time accounts. Institutions are not required to 
pay interest after time accounts mature, such as:
     During any grace period offered by an institution for 
an automatically renewable time account, if the consumer decides 
during that period not to renew the account
     Following the maturity of nonrollover time accounts
     When the maturity date falls on a holiday, and the 
consumer must wait until the next business day to obtain the funds 
(See 12 CFR part 217, the Board's Regulation Q, for limitations on 
duration of interest payments.)
    6. Dormant accounts. Institutions may contract with a consumer 
not to pay interest if the account becomes ``dormant,'' as defined 
by applicable state or other law.

(a)(2) Determination of Minimum Balance To Earn Interest

    1. Daily balance accounts. Institutions that use the daily 
balance method to calculate interest and require a minimum balance 
to earn interest may choose not to pay interest for days when the 
balance drops below the required daily minimum balance.
    2. Average daily balance accounts. Institutions that use the 
average daily balance method to calculate interest and require a 
minimum balance to earn interest may choose not to pay interest for 
the period in which the average daily balance does not meet the 
required minimum.
    3. Beneficial method. Institutions may not require consumers to 
maintain both a minimum daily balance and a minimum average daily 
balance to earn interest, such as by requiring the consumer to 
maintain a $500 daily balance and an average daily balance that is 
higher or lower. But an institution could determine the minimum 
balance to earn interest by using a method that is ``unequivocally 
beneficial'' to the consumer such as the following: An institution 
using the daily balance method to calculate interest and requiring a 
$500 minimum daily balance could choose to pay interest on the 
account (for those days the minimum balance is not met) as long as 
the consumer maintained an average daily balance throughout the 
month of $400.
    4. Paying on full balance. Institutions must pay interest on the 
full balance in the account once a consumer has met the required 
minimum balance. For example, if an institution sets $300 as its 
minimum daily balance requirement to earn interest, and a consumer 
deposits $500, the institution must pay the stated interest rate on 
the full $500 and not just on $200.
    5. Negative balances prohibited. Institutions must treat a 
negative account balance as zero to determine:
     The daily or average daily balance on which interest 
will be paid
     Whether any minimum balance to earn interest is met 
(See commentary to Appendix A, Part II, which prohibits institutions 
from using negative balances in calculating the interest figure for 
the annual percentage yield earned.)
    6. Club accounts. Institutions offering club accounts (such as a 
``holiday'' or ``vacation'' club) cannot impose a minimum balance 
that is based on the total number or dollar amount of payments 
required under the club plan. For example, if a plan calls for $10 
weekly payments for 50 weeks, the institution cannot set a $500 
minimum balance and then pay only if the consumer makes all 50 
payments.
    7. Minimum balances not affecting interest. Institutions may use 
the daily balance, average daily balance, or other computation 
method to calculate minimum balance requirements not involving the 
payment of interest--such as to compute minimum balances for 
assessing fees.

(b) Compounding and Crediting Policies

    1. General. Institutions that choose to compound interest may 
compound or credit interest annually, semi-annually, quarterly, 
monthly, daily, continuously, or on any other basis.
    2. Withdrawals prior to crediting date. If consumers withdraw 
funds, without closing the account, prior to a scheduled crediting 
date, institutions may delay paying the accrued interest on the 
withdrawn amount until the scheduled crediting date, but may not 
avoid paying interest.
    3. Closed accounts. If consumers close accounts prior to the 
date accrued interest is credited, institutions may choose not to 
pay accrued interest as long as they have disclosed that fact to the 
consumer. Whether (and the conditions under which) institutions are 
permitted to deem an account closed by a consumer is determined by 
state or other law, if any.
    4. Dormant accounts. Subject to state or other law defining when 
an account becomes dormant, an institution may contract with a 
consumer not to pay accrued but uncredited interest if the account 
becomes dormant prior to the regular interest crediting date.

(c) Date Interest Begins To Accrue

    1. Relation to Regulation CC. Institutions may rely on the 
Expedited Funds Availability Act (EFAA) and Regulation CC (12 CFR 
part 229) to determine, for example, when a deposit is considered 
made for purposes of interest accrual, or when interest need not be 
paid on funds because a deposited check is later returned unpaid.
    2. Ledger and collected balances. Institutions may calculate 
interest by using a ``ledger'' balance or ``collected'' balance 
method, as long as the crediting requirements of the EFAA are met.
    3. Withdrawal of principal. Institutions must accrue interest on 
funds until the funds are withdrawn from the account. For example, 
if a check is debited to an account on a Tuesday, the institution 
must accrue interest on those funds through Monday.

Section 230.8--Advertising

(a) Misleading or Inaccurate Advertisements

    1. General. All advertisements must comply with the rule against 
misleading or inaccurate advertisements, even though the disclosures 
applicable to various media differ.
    2. Indoor signs. An indoor sign advertising an annual percentage 
yield is not misleading or inaccurate if:
     For a tiered-rate account, it also provides the upper 
and lower dollar amounts of the advertised tier corresponding to the 
annual percentage yield
     For a time account, it also provides the term required 
to obtain the advertised yield
    3. ``Free'' or ``no cost'' accounts. For purposes of determining 
whether an account can be advertised as ``free'' or ``no cost,'' 
maintenance and activity fees include:
     Any fee imposed if a minimum balance requirement is not 
met, or if the consumer exceeds a specified number of transactions
     Transaction and service fees that consumers reasonably 
expect to be regularly imposed on an account
    Examples of maintenance and activity fees include:
     A flat fee, such as a monthly service fee
     Fees imposed to deposit, withdraw or transfer funds, 
including per-check or per-transaction charges (for example, $.25 
for each withdrawal, whether by check, in person or at an ATM owned 
by the institution)
    Examples of fees that are not maintenance or activity fees 
include:
     Fees that are not required to be disclosed under 
Sec. 230.4(b)(4)
     Check printing fees of any type
     Fees for obtaining copies of checks, whether the 
original checks have been truncated or returned to the consumer 
periodically
     Balance inquiry fees
     Fees assessed against a dormant account
     Fees for using an ATM not owned by the account-issuing 
institution
     Fees for electronic transfer services that are not 
required to obtain an account, such as preauthorized transfers or 
home banking services
    4. Similar terms. An advertisement may not use a term such as 
``fees waived'' if a maintenance or activity fee may be imposed 
because it is similar to the terms ``free'' or ``no cost.''
    5. Specific account services. Institutions may advertise a 
specific account service or feature as free as long as no fee is 
imposed for that service or feature. For example, institutions that 
provide free access to their ATMs could advertise that fact.
    6. Free for limited time. If an account or a specific account 
service is free only for a limited period of time--for example, for 
one year following the account opening--the account or service may 
be advertised as free as long as the time period is stated.
    7. Conditions not related to deposit accounts. Institutions may 
advertise accounts as ``free'' for consumers that meet conditions 
not related to deposit accounts such as age. For example, 
institutions may advertise a NOW account as ``free for persons over 
65 years old,'' even though a maintenance or activity fee may be 
assessed on accounts held by consumers that are 65 or younger.

(b) Permissible Rates

    1. Tiered-rate accounts. An advertisement for a tiered-rate 
account that states an annual percentage yield must also state the 
annual percentage yield for each tier, along with corresponding 
minimum balance requirements. Any interest rates stated must appear 
in conjunction with the annual percentage yields for the applicable 
tier.
    2. Stepped-rate accounts. An advertisement that states an 
interest rate for a stepped-rate account must state each interest 
rate and the time period each rate is in effect.
    3. Representative examples. An advertisement that states an 
annual percentage yield for a type of account (such as a time 
account) need not state the annual percentage yield applicable to 
every variation offered by the institution. For example, if rates 
vary depending on the amount of the initial deposit and term of a 
time account, institutions need not list each balance level and term 
offered. Instead, the advertisement may:
     Provide a representative example of the annual 
percentage yields offered, clearly described as such. For example, 
if an institution offers a $25 bonus on all time accounts and the 
annual percentage yield will vary depending on the term selected, 
the institution may provide a disclosure of the annual percentage 
yield as follows: ``For example, our 6-month certificate of deposit 
currently pays a 3.15% annual percentage yield.''
     Indicate that various rates are available, such as by 
stating short-term and longer-term maturities along with the 
applicable annual percentage yields: ``We offer certificates of 
deposit with annual percentage yields that depend on the maturity 
you choose. For example, our one-month CD earns a 2.75% APY. Or, 
earn a 5.25% APY for a three-year CD.''

(c) When Additional Disclosures Are Required

    1. Trigger terms. Disclosures are triggered by statements such 
as ``We will pay a bonus of 1% over our current rate for one-year 
certificates of deposit opened before April 15, 1995.'' The 
following are examples of information stated in advertisements that 
are not ``trigger'' terms:
     ``One, three, and five year CDs available''
     ``Bonus rates available''

(c)(2) Time Annual Percentage Yield Is Offered

    1. Specified recent date. If an advertisement discloses an 
annual percentage yield as of a specified date, that date must be 
recent in relation to the publication or broadcast frequency of the 
media used. For example, the printing date of a brochure printed 
once for a deposit account promotion that will be in effect for six 
months would be considered ``recent,'' even though rates change 
during the six-month period. Rates published in a daily newspaper or 
on television must be a rate offered shortly before (or on) the date 
the rates are published or broadcast.

(c)(5) Effect of Fees

    1. Scope. This requirement applies only to maintenance or 
activity fees as described in paragraph 8(a).

(c)(6) Features of Time Accounts

(c)(6)(i) Time Requirements

    1. Club accounts. If the maturity date of a club account is set 
but the term may vary depending on when the account is opened, 
institutions may use a phrase such as: ``The term of the account 
varies depending on when the account is opened. However, the 
maturity date is November 15.''

(c)(6)(ii) Early Withdrawal Penalties

    1. Discretionary penalties. Institutions that impose early 
withdrawal penalties on a case-by-case basis may disclose that they 
``may'' (rather than ``will'') impose a penalty if that accurately 
describes the account terms.

(d) Bonuses

    1. General reference to ``bonus.'' General statements such as 
``bonus checking'' or ``get a bonus when you open a checking 
account'' do not trigger the bonus disclosures.

(e) Exemption for Certain Advertisements

(e)(1) Certain Media

(e)(1)(iii)

    1. Tiered-rate accounts. Solicitations for tiered-rate accounts 
made through telephone response machines must provide all annual 
percentage yields and the balance requirements applicable to each 
tier.

(e)(2) Indoor Signs

(e)(2)(i)

    1. General. Indoor signs include advertisements displayed on 
computer screens, banners, preprinted posters, and chalk or peg 
boards. Any advertisement inside the premises that can be retained 
by a consumer (such as a brochure or a printout from a computer) is 
not an indoor sign.
    2. Consumers outside the premises. Advertisements may be 
``indoor signs'' even though they may be viewed by consumers from 
outside. An example is a banner in an institution's glass-enclosed 
branch office, that is located behind a teller facing customers but 
also may be seen by passersby.

Section 230.9--Enforcement and Record Retention

(c) Record Retention

    1. Evidence of required actions. Institutions comply with the 
regulation by demonstrating they have done the following:
     Established and maintained procedures for paying 
interest and providing timely disclosures as required by the 
regulation, and
     Retained sample disclosures for each type account 
offered to consumers, such as account-opening disclosures, copies of 
advertisements, and change-in-term notices; and information 
regarding the interest rates and annual percentage yields offered.
    2. Methods of retaining evidence. Institutions must retain 
information needed to reconstruct the required disclosures or other 
actions. They need not keep disclosures or other business records in 
hard copy. Records evidencing compliance may be retained on 
microfilm, microfiche, or by other methods that reproduce records 
accurately (including computer files).
    3. Payment of interest. Sufficient rate and balance information 
must be retained to permit the verification of interest paid on an 
account, including the payment of interest on the full principal 
balance.

Appendix A to Part 230--Annual Percentage Yield Calculation

Part I. Annual Percentage Yield for Account Disclosures and 
Advertising Purposes

    1. Rounding for calculations. The following are examples of 
permissible rounding rules for calculating interest and the annual 
percentage yield:
     The daily rate applied to a balance rounded to five or 
more decimals
     The daily interest earned rounded to five or more 
decimals
Part II. Annual Percentage Yield Earned for Periodic Statements
    1. Balance method. The interest figure used in the calculation 
of the annual percentage yield earned may be derived from the daily 
balance method or the average daily balance method. The balance used 
in the annual percentage yield earned formula is the sum of the 
balances for each day in the period divided by the number of days in 
the period.
    2. Negative balances prohibited. Institutions must treat a 
negative account balance as zero to determine the balance on which 
the annual percentage yield earned is calculated. (See commentary to 
Sec. 230.7(a)(2).)

A. General Formula

    1. Accrued but uncredited interest. To calculate the annual 
percentage yield earned, accrued but uncredited interest:
     Shall not be included in the balance for statements 
that are issued at the same time or less frequently than the 
account's compounding and crediting frequency. For example, if 
monthly statements are sent for an account that compounds interest 
daily and credits interest monthly, the balance may not be increased 
each day to reflect the effect of daily compounding.
     Shall be included in the balance for succeeding 
statements if a statement is issued more frequently than compounded 
interest is credited on an account. For example, if monthly 
statements are sent for an account that compounds interest daily and 
credits interest quarterly, the balance for the second monthly 
statement would include interest that had accrued for the prior 
month.
    2. Rounding. The interest earned figure used to calculate the 
annual percentage yield earned must be rounded to two decimals to 
reflect the amount actually paid. For example, if the interest 
earned for a statement period is $20.074 and the institution pays 
the consumer $20.07, the institution must use $20.07 (not $20.074) 
to calculate the annual percentage yield earned. For accounts that 
pay interest based on the daily balance method, compound and credit 
interest quarterly, and send monthly statements, the institution 
may, but need not, round accrued interest to two decimals for 
calculating the annual percentage yield earned on the first two 
monthly statements issued during the quarter. However, on the 
quarterly statement the interest earned figure must reflect the 
amount actually paid.

B. Special Formula for Use Where Periodic Statement Is Sent More 
Often Than the Period for Which Interest Is Compounded

    1. Statements triggered by Regulation E. Institutions may, but 
need not, use this formula to calculate the annual percentage yield 
earned for accounts that receive quarterly statements and that are 
subject to Regulation E's rule calling for monthly statements when 
an electronic fund transfer has occurred. They may do so even though 
no monthly statement was issued during a specific quarter. This 
formula must be used for accounts that compound and credit interest 
quarterly and that receive monthly statements, triggered by 
Regulation E, which comply with the provisions of Sec. 230.6.
    2. Days in compounding period. Institutions using the special 
annual percentage yield earned formula must use the actual number of 
days in the compounding period.

Appendix B to Part 230--Model Clauses and Sample Forms

    1. Modifications. Institutions that modify the model clauses 
will be deemed in compliance as long as they do not delete 
information required by the act or regulation or rearrange the 
format so as to affect the substance or clarity of the disclosures.
    2. Format. Institutions may use inserts to a document (see 
Sample Form B-4) or fill-in blanks (see Sample Forms B-5, B-6 and B-
7, which use double underlining to indicate terms that have been 
filled in) to show current rates, fees or other terms.
    3. Disclosures for opening accounts. The sample forms illustrate 
the information that must be provided to a consumer when an account 
is opened, as required by Sec. 230.4(a)(1). (See Sec. 230.4(a)(2), 
which states the requirements for disclosing the annual percentage 
yield, the interest rate, and the maturity of a time account in 
responding to a consumer's request.)
    4. Compliance with Regulation E. Institutions may satisfy 
certain requirements under Regulation DD with disclosures that meet 
the requirements of Regulation E. (See Sec. 230.3(c).) The model 
clauses and sample forms do not give examples of disclosures that 
would be covered by both this regulation and Regulation E (such as 
disclosing the amount of a fee for ATM usage). Institutions should 
consult appendix A to Regulation E for appropriate model clauses.
    5. Duplicate disclosures. If a requirement such as a minimum 
balance applies to more than one account term (to obtain a bonus and 
determine the annual percentage yield, for example), institutions 
need not repeat the requirement for each term, as long as it is 
clear which terms the requirement applies to.
    6. Guide to model clauses. In the model clauses, italicized 
words indicate the type of disclosure an institution should insert 
in the space provided (for example, an institution might insert 
``March 25, 1993'' in the blank for ``(date)'' disclosure). Brackets 
and diagonals (``/'') indicate an institution must choose the 
alternative that describes its practice (for example, [daily 
balance/average daily balance]).
    7. Sample forms. The sample forms (B-4 through B-8) serve a 
purpose different from the model clauses. They illustrate various 
ways of adapting the model clauses to specific accounts. The clauses 
shown relate only to the specific transactions described.

B-1 Model Clauses for Account Disclosures

B-1(h) Disclosures Relating to Time Accounts

    1. Maturity. The disclosure in Clause (h)(i) stating a specific 
date may be used in all cases. The statement describing a time 
period is appropriate only when providing disclosures in response to 
a consumer's request.

B-2 Model Clauses for Change in Terms

    1. General. The second clause, describing a future decrease in 
the interest rate and annual percentage yield, applies to fixed-rate 
accounts only.

B-4 Sample Form (Multiple Accounts)

    1. Format. The sample form has been marked with an ``X'' to 
indicate it is for a NOW account and provides for both a fee 
schedule insert and a rate sheet insert.
    2. Rate sheet insert. In the rate sheet insert, the calculations 
of the annual percentage yield for the three-month and six-month 
certificates are based on 92 days and 181 days respectively.

B-6 Sample Form (Tiered-Rate Money Market Account)

    1. General. Sample Form B-6 uses Tiering Method A (discussed in 
Appendix A and Clause (a)(iv)) to calculate interest. It gives a 
narrative description of a tiered-rate account; institutions may use 
a different format (for example, a chart similar to the one in 
Sample Form B-4), as long as all required information for each tier 
is clearly presented. The form does not contain a separate 
disclosure of the minimum balance required to obtain the annual 
percentage yield; the tiered-rate disclosure provides that 
information.

B-9 Sample Form (Money Market Account Advertisement)

    1. General. The advertisement is for a tiered-rate money market 
account that uses Tiering Method A.

    By order of the Board of Governors of the Federal Reserve 
System, January 28, 1994.
William W. Wiles,
Secretary of the Board.
[FR Doc. 94-2505 Filed 2-4-94; 8:45 am]
BILLING CODE 6210-01-P