[Federal Register Volume 64, Number 177 (Tuesday, September 14, 1999)]
[Rules and Regulations]
[Pages 49846-49848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23136]
[[Page 49845]]
_______________________________________________________________________
Part II
Federal Reserve System
_______________________________________________________________________
12 CFR Part 230
Truth in Savings; Final Rule
Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 /
Rules and Regulations
[[Page 49846]]
FEDERAL RESERVE SYSTEM
12 CFR Part 230
[Regulation DD; Docket No. R-1003]
Truth in Savings
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Interim rule.
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SUMMARY: The Board is publishing an interim rule amending Regulation
DD, which implements the Truth in Savings Act. The interim rule allows
depository institutions to deliver Regulation DD disclosures on
periodic statements in electronic form if the consumer agrees. This
interim rule is adopted in response to comments received on a proposed
rule issued in March 1998, allowing depository institutions to provide
all disclosures under Regulation DD in electronic form. Elsewhere in
today's Federal Register, the Board is publishing, for further comment,
a modified proposal covering all Regulation DD disclosures.
EFFECTIVE DATE: September 1, 1999.
FOR FURTHER INFORMATION CONTACT: Jane Ahrens, Senior Counsel, or
Michael Hentrel, Staff Attorney, Division of Consumer and Community
Affairs, Board of Governors of the Federal Reserve System, Washington,
DC 20551, at (202) 452-3667 or 452-2412. Users of Telecommunications
Device for the Deaf (TDD) only, contact Diane Jenkins at (202) 452-
3544.
SUPPLEMENTARY INFORMATION:
I. Background
The Truth in Savings Act (TISA), 12 U.S.C. 4301 et seq., requires
depository institutions to disclose to consumers yields, fees, and
other terms concerning deposit accounts at account opening, upon
request, when changes in terms occur, and in periodic statements. It
also includes rules about advertising for deposit accounts. The Board's
Regulation DD (12 CFR part 230) implements the act. Credit unions are
governed by a substantially similar regulation issued by the National
Credit Union Administration.
The TISA and Regulation DD require a number of disclosures to be
provided in writing, presuming that institutions provide paper
documents. Under many laws that call for information to be in writing,
information in electronic form is considered to be ``written.''
Information produced, stored, or communicated by computer is also
generally considered to be a writing, where visual text is involved.
In May 1996, the Board proposed to amend Regulation E (Electronic
Fund Transfers) to permit disclosures to be provided electronically (61
FR 19696, May 2, 1996). Based on the comments received on that proposal
and further analysis, in March 1998 the Board proposed to amend four of
its other regulations to allow institutions to provide disclosures
electronically: Regulation DD (63 FR 14533, March 25, 1998), Regulation
B (Equal Credit Opportunity; 63 FR 14552), Regulation M (Consumer
Leasing; 63 FR 14538), and Regulation Z (Truth in Lending; 63 FR 14548)
(collectively, the ``March 1998 proposed rules''). In March 1998 the
Board also issued an interim rule under Regulation E so that financial
institutions could implement systems, such as home-banking programs, to
provide account information electronically (63 FR 14528, March 25,
1998).
The March 1998 proposed rules and the interim rule permitted
financial institutions to provide disclosures electronically if the
consumer agreed, with few other requirements. The rule was intended to
provide flexibility and did not specify any particular method for
obtaining a consumer's agreement. Whether the parties had an agreement
would be determined by state law. The proposals and the interim rule
did not preclude a financial institution and a consumer from entering
into an agreement electronically, nor did they prescribe a formal
mechanism for doing so.
The Board received approximately 200 written comments on the
interim rule and the March 1998 proposed rules. The majority of
comments were submitted by financial institutions and their trade
associations. Industry commenters generally supported the use of
electronic communication to deliver information required by the TISA
and Regulation DD. Nevertheless, many sought specific revisions and
additional guidance on how to comply with the disclosure requirements
in particular transactions and circumstances.
Industry commenters were especially concerned about the condition
that the consumer had to ``agree'' to receive information by electronic
communication, because the rule did not specify a method for
establishing that an ``agreement'' was reached. These commenters
believed that relying on state law created uncertainty about what
constitutes an agreement and, therefore, potential liability for
noncompliance. To avoid uncertainty over which state's laws apply, some
commenters urged the Board to adopt a federal minimum standard for
agreements or for informed consent to receive disclosures by electronic
communication. These commenters believed that such a standard would
avoid the compliance burden associated with tailoring legally binding
``agreements'' to the contract laws of all jurisdictions where
electronic communications may be sent.
Consumer advocates generally opposed the March 1998 interim rule
and the proposed rules. Without additional safeguards, they believed,
consumers may not be provided with adequate information about
electronic communication before an ``agreement'' is reached. They also
believed that promises of lower costs could induce consumers to agree
to receive disclosures electronically without a full understanding of
the implications. To avoid such problems, they urged the Board, for
example, either to require institutions to disclose to consumers that
their account with the institution will not be adversely affected if
they do not agree to receive electronic disclosures, or to permit
financial institutions to offer electronic disclosures only to
consumers who initiate contact with the institution through electronic
communication. They also noted that some consumers will likely consent
to electronic disclosures believing that they have the technical
capability to retrieve information electronically, but might later
discover that they are unable to do so. They questioned consumers'
willingness and ability to access and retain disclosures posted on
Internet websites, and expressed their apprehension that the goals of
federally mandated disclosure laws will be lost.
After careful consideration of the comments and further analysis,
the Board is requesting comment on a modified rule under Regulation DD
as well as the other four regulations (including Regulation E). The
proposed amendments to Regulation DD and the other four regulations are
published elsewhere in today's Federal Register.
The Board is also issuing this interim rule under Regulation DD,
pursuant to its authority under section 269 of the TISA, permitting
depository institutions to deliver Regulation DD disclosures on
periodic statements in electronic form, as discussed below.
II. Regulatory Revisions
Some depository institutions are prepared to offer on-line banking
programs that would include the electronic delivery of periodic
statements and other material now provided in paper form. These
institutions have urged the Board to move forward with the electronic
communication rulemakings, to facilitate the development of electronic
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commerce and enable them to realize cost savings by reducing or
eliminating paper disclosures. Institutions have also requested that,
pending the issuance of final rules, the Board adopt interim rules.
Based on the comments received and further analysis, the Board is
issuing an interim rule allowing the issuance of periodic statements
under Regulation DD. The electronic delivery of periodic statements for
consumer asset accounts is already permissible under the Regulation E
interim rule issued in March 1998. Institutions commonly provide a
single periodic statement that complies with Regulation E and
Regulation DD; thus, the issuance of a comparable interim rule for
periodic statements under Regulation DD should allow institutions to
implement electronic delivery of deposit account statements with a
single set of procedures, and avoid the cost of printing and mailing
the information in paper form. In addition to reducing paperwork and
costs for institutions, the interim rule may benefit many consumers by
allowing them to receive their periodic account statements, including
required disclosures, more quickly and in a more convenient form. In
addition to reducing paperwork and costs for institutions, the interim
rule may benefit many consumers by allowing them to receive their
periodic account statements, including required disclosures, more
quickly and in a more convenient form. The Regulation DD interim rule
follows the approach of the Regulation E interim rule.
Electronic delivery of periodic statements for open-end consumer
credit accounts is currently permitted under the Board's Official Staff
Commentary to Regulation Z, comment 5(b)(2)(ii)-3. Thus, an institution
that issues combined periodic statements, covering deposit accounts
along with open-end credit accounts (such as for overdrafts), can use
electronic delivery for the combined statements and be in compliance
with Regulations E, DD, and Z.
The interim rule under Regulation DD is limited to the electronic
delivery of periodic statements. Other disclosures required by
Regulation DD, such as account-opening disclosures and change-in-terms
notices, are addressed in the modified proposals being published for
comment. Additional public comment would be useful before a rule is
issued permitting electronic delivery more generally. Institutions that
opt to deliver periodic statements electronically are encouraged to
test the approach outlined in the modified proposals; this may be
helpful in assessing how well the modified proposals will work in
practice.
The interim rule for Regulation DD incorporates various
requirements set forth in the March 1998 proposed rule and in the
Regulation E interim rule. For example, the periodic statement must be
provided in a form that can be displayed as visual text, and must be
clear and conspicuous and in a form that the consumer can retain. With
regard to the rule that the consumer must agree to electronic delivery,
the reference to state law is not intended to require a formal
contract. The Board believes, however, that consumers should be clearly
informed when they are consenting to the electronic delivery of
Regulation DD periodic statements.
Comment 2(q)-1(ii) in the Regulation DD Official Staff Commentary
states that a periodic statement does not include ``information
provided by computer through home banking services.'' Prior to the
adoption of this interim rule, if a depository institution provided
account information electronically that might be deemed to constitute a
periodic statement as defined in Regulation DD, the institution could
not comply with the regulation by including the disclosures required by
Sec. 230.6 in the information provided electronically; rather, it would
have to send paper periodic statements including the required
disclosures. The comment was intended to avoid this result. Because
electronic delivery of statements, including the required disclosures,
will now be permissible, the comment appears to be unnecessary. In the
modified proposal under Regulation DD, published elsewhere in today's
Federal Register, the Board proposes to delete the comment.
III. Regulatory Flexibility Analysis
In accordance with section 3(a) of the Regulatory Flexibility Act,
the Board has reviewed the interim rule to Regulation DD. Overall, the
amendments are not expected to have any significant impact on small
entities. A depository institution's use of electronic communication to
provide disclosures required by the regulation is optional. The rule
will relieve compliance burden by giving depository institutions
flexibility in providing disclosures.
IV. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3506; 5 CFR 1320 Appendix A.1), the Board reviewed the interim rule
under the authority delegated to the Board by the Office of Management
and Budget (OMB). The Federal Reserve may not conduct or sponsor, and
an organization is not required to respond to, this information
collection unless it displays a currently valid OMB number. The OMB
control number for this interim rule is 7100-0271.
The collection of information requirements that are relevant to
this interim rule are found in 12 CFR part 230. This information is
mandatory (15 U.S.C. 4301 et seq.) to ensure adequate disclosure of
basic terms, costs, and rights relating to services affecting consumers
holding deposit accounts and receiving certain disclosures by
electronic communication. (12 CFR 230.6). Institutions are also
required to retain records for 24 months. The respondents/recordkeepers
are for-profit depository institutions, including small businesses.
This regulation applies to all types of depository institutions, not
just state member banks; however, under Paperwork Reduction Act
regulations, the Federal Reserve accounts for the burden of the
paperwork associated with the regulation only for state member banks.
Other agencies account for the paperwork burden on their respective
constituencies imposed by this regulation.
Since the interim amendments provide an alternative method for
delivering periodic statements, it is anticipated that the requirements
will not be burdensome. The use of electronic communication will likely
reduce the paperwork burden of depository institutions. Institutions
will be able to use electronic communication to provide periodic
statements rather than having to print and mail the information in
paper form. There is estimated to be no additional annual cost burden
and no capital or start-up cost.
With respect to the existing requirements of Regulation DD as they
apply to state member banks, it is estimated that there are 988
respondents/recordkeepers and an average frequency of about 87,100
responses per respondent each year, and the current amount of annual
burden is estimated to be roughly 1,464,000 hours.
Because the information is not provided to the Federal Reserve, no
issue of confidentiality under the Freedom of Information Act arises;
however, the information may be protected from disclosure under
exemptions (b)(4), (6), and (8) of the Freedom of Information Act (5
U.S.C. 522(b)(4), (6), and (8)). The disclosures are confidential
between institutions and the customer.
The Board has a continuing interest in the public's opinions of the
Federal Reserve's collections of information. At
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any time, comments regarding the burden estimate, or any other aspect
of this collection of information, including suggestions for reducing
the burden, may be sent to the Office of Management and Budget,
Paperwork Reduction Project (7100-0271), Washington, DC 20503, with
copies of such comments sent to Mary M. West, Federal Reserve Board
Clearance Officer, Division of Research and Statistics, Mail Stop 97,
Board of Governors of the Federal Reserve System, Washington, DC 20551.
List of Subjects in 12 CFR Part 230
Advertising, Banks, banking, Consumer protection, Federal Reserve
System, Reporting and recordkeeping requirements, Truth in savings.
Text of Revisions
For the reasons set forth in the preamble, the Board amends
Regulation DD, 12 CFR part 230, as set forth below:
PART 230--TRUTH IN SAVINGS (REGULATION DD)
1. The authority citation for part 230 continues to read as
follows:
Authority: 12 U.S.C. 4301 et seq.
2. Under Sec. 230.6, a new paragraph (c) is added to read as
follows:
Sec. 230.6 Periodic statement disclosures.
* * * * *
(c) Electronic communication. (1) Definition. The term electronic
communication means a message transmitted electronically between a
consumer and a depository institution in a format that allows visual
text to be displayed on equipment such as a personal computer monitor.
(2) Electronic communication between depository institution and
consumer. A depository institution and a consumer may agree that the
institution will send by electronic communication periodic-statement
disclosures required by Sec. 230.6. Periodic-statement disclosures sent
by electronic communication to a consumer must comply with Sec. 230.3
and any applicable timing requirements contained in this part.
By order of the Board of Governors of the Federal Reserve
System, August 31, 1999.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 99-23136 Filed 9-13-99; 8:45 am]
BILLING CODE 6210-01-P