[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]]

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Part II





Federal Reserve System





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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

[[Page 49847]]

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

[[Page 49848]]

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