[Federal Register Volume 59, Number 55 (Tuesday, March 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-6644]


[[Page Unknown]]

[Federal Register: March 22, 1994]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 707

 

Truth in Savings

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule; corrections and correcting amendments.

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SUMMARY: The National Credit Union Administration is amending part 707 
of the NCUA Rules and Regulations (``part 707''), which implements the 
Truth in Savings Act for credit unions. The effective date for part 707 
is January 1, 1995. This document extends the compliance date for 
nonautomated credit unions that have assets of $1 million or less as of 
December 31, 1993. The extensions give the smaller nonautomated credit 
unions time needed to come into compliance with part 707. The 
extensions also give NCUA additional time to assist the smaller 
nonautomated credit unions with compliance issues. This document also 
contains clarifications, technical amendments and revisions to part 
707.

DATES: Effective Date: This document is effective January 1, 1995. 
Sections 707.3--707.9 contain information collection requirements that 
are not effective until approved by the Office of Management and 
Budget. When approval is received, NCUA will publish a document 
announcing the effective date.
    Compliance Dates: The compliance date of part 707 is extended to 
March 31, 1995, for credit unions of an asset size between $500,000 and 
$1 million as of December 31, 1993, that are not automated. The 
compliance date of part 707 is extended to June 30, 1995, for credit 
unions of an asset size of less than $500,000 as of December 31, 1993, 
that are not automated. The compliance date for all other credit unions 
remains January 1, 1995.

FOR FURTHER INFORMATION CONTACT: Martin S. Conrey, Staff Attorney, 
Office of General Counsel, National Credit Union Administration, 1775 
Duke Street, Alexandria, VA 22314-3428, or telephone (703) 518-6540.

SUPPLEMENTARY INFORMATION:

Background

    NCUA's final part 707, published September 27, 1993 (58 FR 50394), 
which is the subject of these revisions, implements the Truth in 
Savings Act (12 U.S.C. 4301 et seq.). The final regulation and the 
Truth in Savings Act require credit unions to disclose fees, dividend 
and interest rates and other terms concerning share and deposit 
accounts, and limit the methods by which credit unions determine the 
balance on which dividends are calculated.

Need for Technical Amendments

    As published, the Supplementary Information to the final rule, the 
final rule, and appendix B to the final rule contained several drafting 
and technical errors that are confusing or erroneous, and need to be 
clarified.

Need for Extensions of Compliance Date

    Since the Truth in Savings Act was enacted in 1991, NCUA has been 
studying the effects it might have upon small credit unions. NCUA has 
determined that there are at least 1,299 credit unions under $1 million 
in assets that have no computers or in-house data processing 
capability. Of these credit unions, approximately 977 have less than 
$500,000 in assets and approximately 322 have between $500,000 and $1 
million in assets. The NCUA Board has determined that these small, 
nonautomated credit unions will need more time to comply with the Truth 
in Savings rule than other credit unions. An extended compliance date 
for these credit unions will enable NCUA and other interested parties 
to complete the extensive training and preparation that will be 
necessary to ensure that these credit unions comply with part 707 by 
the extended compliance dates. This action is being taken to preserve, 
educate, and possibly automate (by providing access to minimal cost 
computer hardware, software and services) many of these small credit 
unions; ensure compliance with Truth in Savings at the earliest 
possible date; assist administrative convenience; reduce the risk of 
potential losses to the National Credit Union Share Insurance Fund; 
enable credit union data processing vendors to assist larger credit 
unions in Truth in Savings compliance, thus avoiding a potential 
shortage of credit union data processors if many of the small credit 
unions automate; and to allow time for coordination in this effort 
among NCUA, affected credit unions, data processors and other 
interested parties.
    NCUA intends to use the December 31, 1993, NCUA Form 5300 report to 
determine the requisite nonautomation status and asset size for those 
credit unions filing Form 5300 reports that are eligible for the 
extensions in required compliance. Credit unions which do not file Form 
5300 reports will be permitted to prove nonautomation status and asset 
size by other means. NCUA will consider verified self-certifications, 
certifications by appropriate state supervisory authorities, and other 
equivalent forms of proof as sufficient for eligibility for the 
extensions by these non-federally insured credit unions.

Need for Final Extensions and Amendments; Voluntary Compliance

    The extensions and amendments made to this part are not subject to 
the notice and comment provisions of the Administrative Procedure Act 
(the ``APA''), 5 U.S.C. 551 et seq. The extensions relate to a few 
credit unions that need more assistance in complying with part 707. The 
amendments relate merely to technical amendments, clarifications and 
revisions designed to eliminate confusion. No major changes are 
contemplated, or made, by these revisions. Also, even though the 
mandatory effective date for most credit unions is January 1, 1995, 
many credit unions are proceeding with plans for early voluntary 
compliance with part 707. Any notice and comment proceedings on these 
minor changes would hinder these credit unions from these plans. Early 
compliance will benefit members of those credit unions. Therefore, the 
NCUA Board has determined that, in this case, the APA notice and 
comment procedures for these extensions and amendments are 
impracticable, unnecessary, and contrary to the public interest. 5 
U.S.C. 553(b)(3)(B).

List of Subjects in 12 CFR Part 707

    Advertising, Credit unions, Consumer protection, Interest, Interest 
rates, Truth in savings.

    For the reasons set forth above the following changes are made to 
12 CFR part 708 as indicated below:

PART 707--TRUTH IN SAVINGS

Preamble Corrections

    The final rule published in the Federal Register of September 27, 
1993 (58 FR 50394) is corrected as follows:
    1. On page 50404, in the first column, under the heading Paragraph 
(q)--Member, in the third full paragraph, the seventh sentence is 
corrected to read as follows: ``The Board adopts this approach, and 
finds that it would not cover persons holding trust, estate and court-
ordered accounts, and other accounts held in a professional capacity.''
    2. On page 50421, in the third column, under the heading Timing and 
format requirements, in the first paragraph, in the third sentence, the 
date ``July 15'' is corrected to read ``January 15.''
    3. On page 50424, in the first column, under the heading 
Alternative timing rule, in the first paragraph, in the second 
sentence, the term ``time accounts'' is corrected to read ``term share 
accounts.''
    4. On page 50431, in the second column, the heading Tiered rate 
accounts is corrected by adding a hyphen between ``tiered'' and 
``rate'' to read ``Tiered-rate accounts.''
    5. On page 50435, in the first column, under the heading 
Advertising `Free' Accounts, in the first paragraph, the fourth, fifth, 
sixth and seventh sentences are corrected to read as follows: ``To be 
consistent with the FRB, which limited the prohibition to ``regular'' 
transaction or service fees, the final rule limits the scope of a 
maintenance or activity fee to such charges as, for example, periodic 
service charges and fees imposed to deposit, withdraw or transfer funds 
(including per share draft or check charges and fees to use the credit 
union's ATMs). A maintenance fee also includes fees imposed if a 
minimum balance requirement is not met or if a transaction limit is 
exceeded. A maintenance or activity fee does not include fees imposed 
by a third party to print share drafts or checks for an account; stop 
payment fees; fees for copies of share drafts or checks; fees for 
checks returned for insufficient funds; or fees unrelated to the 
account such as a fee for purchasing a cashier's check or traveler's 
checks.''
    6. On page 50436, in the third column, under the heading Paragraph 
(c)(5)--Effect of fees, the first paragraph is corrected by adding a 
new fourth sentence (after the third sentence) to read as follows: ``In 
order to be consistent with the FRB, the Board has decided to limit the 
scope of the disclosure to the imposition of maintenance and activity 
fees alone.''

Correcting Amendments

    1. The authority citation for part 707 continues to read as 
follows:

    Authority: 12 U.S.C. 4311.


Sec. 707.2  [Corrected]

    2. In Sec. 707.2, paragraph (r) is amended by adding a hyphen 
between ``non'' and ``dividend'' in the term ``nondividend.''
    3. In Sec. 707.8, paragraph (c)(5), is revised to read as follows:


Sec. 707.8  Advertising.

* * * * *
    (c) * * *
    (5) A statement that fees could reduce the earnings on the account.
* * * * *
    4. In Sec. 707.9, paragraph (b) is revised to read as follows:


Sec. 707.9  Enforcement and record retention.

* * * * *
    (b) Section 271 of TISA (12 U.S.C. 4310) contains the provisions 
relating to civil liability for failure to comply with the requirements 
of TISA and this regulation.
* * * * *

Appendix B [Corrected]

    5. In section B-1, paragraph (a)(iv), in the model clause entitled 
3. Other Dividend-bearing Accounts, Tiering Method A, in paragraph 
``1*'', the second sentence is amended by removing the phrase ``on your 
account'' at the end of the sentence.
    6. In section B-1, paragraph (a)(iv), in the model clause entitled 
3. Other Dividend-bearing Accounts; Tiering Method A, in paragraph 
``2*'', the second sentence is amended by removing the phrase ``on your 
account'' at the end of the sentence.
    7. In section B-1, paragraph (a)(iv), in the model clause entitled 
3. Other Dividend-bearing accounts; Tiering Method A, in paragraph 
``3*'', the first and second sentences are revised to read as follows:
    ``[As of the last dividend declaration date/ (date)], if your 
[daily balance/average daily balance] was $______ or less, the dividend 
rate paid on the entire balance in your account will be ______% with an 
annual percentage yield (APY) of ______%. /or If your [daily balance/
average daily balance] is $______ or less, the prospective dividend 
rate of ______% will be paid on the entire balance in your account with 
a prospective annual percentage yield (APY) of ______% for this 
dividend period.''
    8. In section B-1, paragraph (a)(iv), in the model clause entitled 
3. Other Dividend-bearing Accounts; Tiering Method B, in paragraph 
``3*'', the second sentence is revised to read as follows:
    ``/or If your [daily balance/average daily balance] was $______ or 
less, the prospective dividend rate paid on the entire balance in your 
account will be ______% with a prospective annual percentage yield 
(APY) of ______% for this dividend period.''
    9. In section B-1, the heading for paragraph (f), is amended by 
adding a parenthesis before the citation Sec. 704.4(b)(3)(iii).
    10. In section B-6, under the heading Regular Share Account 
Disclosures, in the first paragraph entitled 1. Rate information, the 
second sentence is amended by removing the phrase ``on your share 
account'' at the end of the sentence.
    11. In section B-6, under the heading Regular Share Account 
Disclosures, the first paragraph entitled 1. Rate information, is 
amended by adding a third sentence (after the second sentence) to read 
as follows:
    ``The dividend rate and annual percentage yield may change every 
quarter as determined by the credit union board of directors.''
    12. In section B-6, under the heading Regular Share Account 
Disclosures, in the sixth paragraph entitled 6. Fees and charges, item 
(e) is revised to read as follows:
    ``Minimum balance service fee--$5.00 per quarter.''
    13. In section B-8, under the heading Money Market Share Account 
Disclosures, in the sixth paragraph entitled 6. Fees and charges, items 
(e), (h) and (i) are revised to read as follows:
    ``(e) Minimum balance service fee--$5.00 per (time period).
* * * * *
    (h) Certified checks--$5.00 per check.
    (i) Stop Payment Order--$5.00 per order''.
    14. In section B-9, under the heading Term Share (Certificate) 
Account Disclosures, in the first paragraph entitled 1. Rate 
information, the first sentence is revised to read as follows:
    ``[Repeat rates disclosed on face of term share certificate, see 
Sec. B-5, Sample Form (Term Share (Certificate) Account)].''
    15. In section B-9, under the heading Term Share (Certificate) 
Account Disclosures, the twelfth paragraph entitled 12. Nature of 
dividends, is removed and reserved.
    16. In section B-11, under the heading Rate and Fee Schedule, under 
the subheading Regular Share, the entry ``Dividend Rate as of Last 
______% Dividend Declaration Date.'' is revised to read as follows:
    ``Dividend Rate as of Last Dividend Declaration Date ______%.''
    17. In section B-11, under the heading Rate and Fee Schedule, under 
the subheading Regular Share, the entry ``Annual Percentage Yield as of 
______% Last Dividend Declaration Date.'' is revised to read as 
follows:
    ``Annual Percentage Yield as of Last Dividend Declaration Date 
______%.''
    18. In section B-11, under the heading Rate and Fee Schedule, under 
the subheading Regular Share, the entry ``Prospective Annual Percentage 
______% Yield.'' is revised to read as follows:
    ``Prospective Annual Percentage Yield ______%.''
    19. In section B-11, under the heading Rate and Fee Schedule, under 
the subheading Share Draft, the entry ``Dividend Rate as of Last 
______% Dividend Declaration Date.'' is revised to read as follows:
    ``Dividend Rate as of Last Dividend Declaration Date ______%.''
    20. In section B-11, under the heading Rate and Fee Schedule, under 
the subheading Share Draft, the entry ``Annual Percentage Yield as of 
______% Last Dividend Declaration Date.'' is revised to read as 
follows:
    ``Annual Percentage Yield as of Last Dividend Declaration Date 
______%.''
    21. In section B-11, under the heading Rate and Fee Schedule, under 
the subheading Share Draft, the entry ``Prospective Annual Percentage 
______% Yield.'' is revised to read as follows:
    ``Prospective Annual Percentage Yield ______%.''
    22. In section B-11, under the heading Rate and Fee Schedule, under 
the subheading Money Market, the entry ``Dividend Rate as of Last 
______% Dividend Declaration Date.'' is revised to read as follows:
    ``Dividend Rate as of Last Dividend Declaration Date ______%.''
    23. In section B-11, under the heading Rate and Fee Schedule, under 
the subheading Money Market, the entry ``Annual Percentage Yield as of 
______% Last Dividend Declaration Date.'' is revised read as follows:
    ``Annual Percentage Yield as of Last Dividend Declaration Date 
______%.''
    24. In section B-11, under the heading Rate and Fee Schedule, under 
the subheading Money Market, the entry ``Prospective Annual Percentage 
______% Yield.'' is revised to read as follows:
    ``Prospective Annual Percentage Yield ______%.''
    25. In section B-11, under the heading Rate and Fee Schedule, under 
the subheading Fees Applicable to All Accounts, the entry ``Minimum 
balance violation fee'' is revised to read as follows:
    ``Minimum balance service fee.''

    By the National Credit Union Administration Board on February 
28, 1994.
Becky Baker,
Secretary of the Board.
[FR Doc. 94-6644 Filed 3-21-94; 8:45 am]
BILLING CODE 7535-01-M