[Federal Register Volume 59, Number 89 (Tuesday, May 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11152]


[[Page Unknown]]

[Federal Register: May 10, 1994]


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FEDERAL RESERVE SYSTEM

12 CFR Part 230

[Regulation DD; Docket No. R-0818]

 

Truth in Savings; Final Preemption Determination (Wisconsin)

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.

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SUMMARY: The Board is publishing a final determination that Wisconsin's 
Truth in Savings law is not inconsistent with the federal Truth in 
Savings Act and Regulation DD, and therefore is not preempted.

EFFECTIVE DATE: May 11, 1994.

FOR FURTHER INFORMATION CONTACT: Kurt Schumacher, Staff Attorney, 
Division of Consumer and Community Affairs, at (202) 452-2412 or (202) 
452-3667; for the hearing impaired only contact Dorothea Thompson, 
Telecommunications Device for the Deaf, at (202) 452-3544.

SUPPLEMENTARY INFORMATION:

(1) General

    Section 273 of the Truth in Savings Act (12 U.S.C. 4312) states 
that the act does not supersede provisions of the law of any State 
relating to the disclosure of yields payable or account terms, except 
to the extent that those laws are inconsistent with the provisions of 
the federal statute, and then only to the extent of the inconsistency. 
The act also grants the Board the authority to determine whether any 
inconsistencies exist between federal and state law.
    Regulation DD (12 CFR part 230), which implements the act, provides 
the standards for preemption determinations in appendix C. State 
requirements are inconsistent with, and therefore preempted by, the 
federal provisions if the state law requires a depository institution 
to make disclosures or take actions that contradict the requirements of 
the federal law. A state law is also inconsistent if it requires the 
use of the same term to represent a different amount or a different 
meaning than the federal law, requires the use of a term different from 
that required in the federal law to describe the same item, or permits 
a method of calculating interest on an account different from that 
required in the federal law.
    Preemption determinations for the act are issued under authority 
delegated to the Director of the Division of Consumer and Community 
Affairs, as set forth in the Board's Rules Regarding Delegation of 
Authority (12 CFR 265.9(c)(5), as amended December 15, 1993, 58 FR 
65539).

(2) Discussion of Specific Request and Final Determination

    The Board was asked to determine whether specific provisions of 
Wisconsin Statutes section 224.08 regarding disclosures for deposit 
accounts at banks are inconsistent with the act and Regulation DD and 
are therefore preempted. The Board published a proposed determination 
on December 14, 1993 (58 FR 65293), stating that the provisions of the 
Wisconsin law found in Wisconsin Statutes section 224.08 are not 
inconsistent with the federal Truth in Savings law, and therefore are 
not preempted by the federal law.
    The act and Regulation DD require depository institutions to give 
consumers disclosures before opening a deposit account and upon a 
request made by a consumer. The act also sets out requirements for the 
payment of interest on accounts, provides rules for account 
advertisements and change in terms notices, and mandates certain 
information to be provided on periodic statements for accounts that 
receive such statements. In addition, the act and Regulation DD provide 
for an ``annual percentage yield'' to aid consumers in making 
comparisons between the rates paid on different accounts.
    Section 224.08 of the Wisconsin Statutes requires disclosure 
statements to be given for each account offered by a bank, setting 
forth the following information: a description of the account, the 
conditions (if any) on which the account is offered, the terms of 
interest offered for the account, and all fees charged for the account. 
The disclosure statement under state law may include a separate 
interest rate table or fee schedule, or both. Banks must provide this 
information at the time of the depositor's initial deposit into the 
account, upon any change in any of the information applicable to a 
depositor's account (other than a change in the interest rate of a 
variable interest rate account if the variability of the interest rate 
was disclosed at the time of the initial deposit), and upon request. 
Finally, the state law requires that the disclosure statement for an 
account be accompanied by a brief description of all other accounts 
offered by the bank and a statement that more detailed information is 
available on request.
    The Board received three comment letters on its proposal, all 
opposing the Board's proposed determination and requesting that the 
Board preempt the Wisconsin law based on inconsistencies with the 
federal provisions. After careful review, the Board has made a final 
determination not to preempt the Wisconsin law for the reasons 
discussed below.

Coverage of Institutions

    The requesting party suggested that state law is inconsistent with 
the act and Regulation DD because the state law covers only state-
chartered banks, whereas the federal law covers all depository 
institutions, including savings associations and national banks. The 
Board has determined that a state law providing for more limited 
coverage than federal law is not inconsistent with the act, and 
therefore is not preempted.

Content and Format of Disclosures

    The requesting party asked the Board to determine that the content 
of the state law disclosures is inconsistent with the federal law. The 
state law permits disclosures to be more general than the federal law 
allows--for example, by mandating only a statement of the ``terms of 
interest offered for the account,'' and not requiring an ``annual 
percentage yield'' to be given, using that term. However, state law 
does not prohibit institutions from being more specific in fulfilling 
their state disclosure requirements. Therefore, the Board believes 
institutions can comply with the state provisions while still complying 
with the more detailed federal requirements.
    Similarly, the requesting party suggested that preemption of the 
state law is warranted, based on the format of the required state 
disclosures because Wisconsin law requires that each account disclosure 
include a ``brief description'' of all other accounts offered by the 
bank along with a statement that more detailed information is available 
upon request. The federal law contains no similar requirement, and in 
fact permits an institution to combine disclosures for all of its 
accounts, as long as it is clear which disclosures are applicable to 
the consumer's account (12 CFR 230.3(a)). However, Regulation DD 
provides a very narrow preemption standard: preemption is appropriate 
only where a state law requires a depository institution to make 
disclosures or take actions that contradict the requirements of the 
federal law. The Board believes that banks are able to comply with 
Wisconsin law without contradicting the requirements of the federal 
law. Thus, preemption of the state requirement to provide information 
about other available accounts is not warranted.
    Moreover, the Wisconsin Commissioner of Banking, the state 
enforcement agency for Wisconsin-chartered banks, has provided an 
interpretation to the Board stating that banks would comply with this 
provision of the Wisconsin law by providing disclosures in keeping with 
the federal law. The agency has stated that the ``brief description'' 
of other accounts was intended as an accommodation to banks to provide 
something less than full disclosures for each available account; thus, 
banks would not violate state law if they provide full account 
disclosures for all accounts offered by the institution, as federal law 
allows. Finally, agency officials confirmed that they would not require 
the statement that more detailed information is available upon request 
if full account disclosures are provided for all accounts in compliance 
with the requirements of Regulation DD.

Change in Terms Notice

    The requesting party asked that the Board find the provision of the 
Wisconsin law requiring a change in terms notice to be inconsistent 
with the federal law and therefore preempted for three reasons. First, 
the state law requires redisclosure of all state law disclosures when 
any term is changed. In contrast, federal law requires notice to 
consumer account-holders only of the specific term being changed. 
Second, state law requires a change in terms notice to be sent upon any 
change to a depositor's account that was initially required to be 
disclosed (except a change in the interest rate for a variable rate 
account). Federal law requires such a notice only for a change that 
reduces the annual percentage yield or adversely affects the consumer. 
See Sec. 230.5(a). Third, state law redisclosure is required upon any 
change in the account. Federal law generally requires a change in terms 
notice at least 30 days prior to the effective date of the change.
    As stated above, the Board believes the state Truth in Savings law 
is not inconsistent simply because the state law requires more 
information than federal law requires, or because the state law 
requires disclosures in cases where the federal law is silent. A 
Wisconsin-chartered bank can comply with the advance change in terms 
notice required under federal law while providing the more detailed 
disclosures required by the state law. The Board notes that Regulation 
DD allows institutions to comply with change in terms requirements by 
sending new account disclosures if the changed terms are specifically 
brought to the consumer's attention (for example, by highlighting them 
in some way). Although state and federal laws have different 
requirements in this regard, the Board believes that they are not 
inconsistent, given that a bank can comply with both requirements 
without violating either.
    Finally, the Board has determined that the state law requirement 
that a bank redisclose all applicable information ``upon'' any change 
in a term that was initially disclosed is not inconsistent with the 
federal provision requiring at least 30 days advance notice of the 
effective date of the change. As stated in the Board's proposed 
determination, State officials have indicated to the Board that 
institutions providing the disclosures required under state law at 
least 30 days in advance of the effective date of the change, as the 
federal provisions require, would comply with the state law. As 
Wisconsin banks are therefore able to comply with both the federal and 
state laws, the Board has determined that this provision is not 
preempted by the federal law.

(3) Regulatory Flexibility Analysis and Paperwork Reduction Act

    The determination that State law is not preempted is not likely to 
have a significant impact on institutions' costs, including those of 
small institutions.

List of Subjects in 12 CFR Part 230

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

    By order of the Board of Governors of the Federal Reserve 
System, May 4, 1994.
William W. Wiles,
Secretary of the Board.
[FR Doc. 94-11152 Filed 5-9-94; 8:45 am]
BILLING CODE 6210-01-P