[Federal Register Volume 65, Number 99 (Monday, May 22, 2000)]
[Rules and Regulations]
[Pages 32010-32011]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-55509]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 707


Truth in Savings

CFR Correction

    In Title 12 of the Code of Federal Regulations, parts 600 to End, 
revised as of January 1, 2000, page 404, Part 707, Appendix C is 
corrected by adding Appendices A and B to the end to read as follows:

APPENDIX C TO PART 707--OFFICIAL STAFF INTERPRETATIONS

* * * * *

Appendix A to Part 707--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 dividends and the annual 
percentage yield:
    i. The daily rate applied to a balance carried to five or more 
decimals. For example; .008219178%, 3.00% for a 365 day year, would 
be rounded to no less than .00822%.
    ii. The daily dividends or interest earned carried to five or 
more decimals. For example; $.08219178082, daily dividends on $1,000 
at 3% for a 365 day year, would be rounded to no less than $.08219.
    2. Exponents in a leap year. The annual percentage yield 
formula's exponent numerator will remain 365 in leap years. The 
``days in term'' figure used in the denominator should be consistent 
with the length of term used in the dividends calculation.
    3. First tier of a tiered-rate account. When credit unions use a 
rate table, the first tier of a tiered rate account is to be 
disclosed and advertised; ``Up to but not exceeding * * * '', ``$.01 
to * * * '', or similar language.
    4. Term Share Accounts Opened in Midterm. For club accounts that 
meet the definition of a term share account, the annual percentage 
yield is based on the maximum number of days in the term not to 
exceed 365 days (or 366 days in a leap year).

Part II. Annual Percentage Yield Earned for Periodic Statements

    1. Balance method. The dividend or 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. 
Regardless of the dividend calculation method, the balance used in 
the annual percentage yield earned formula is the average daily 
balance. The average daily balance calculation is the sum of the 
balances for each day in the period divided by the number of days in 
the period. The balance for each day is based on a point in time; 
i.e. beginning of day balance, end of day balance, closing of day 
balance, etc. Each day's balance, for dividend accrual and payment 
purposes, must be based on the same point in time and cannot be 
based on the day's low balance.
    2. Negative balances prohibited. Credit unions 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. 707.7(a)(2).)

A. General Formula

    1. Accrued but uncredited dividends. To calculate the annual 
percentage yield earned, accrued but uncredited dividends:
    i. May 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

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example, if monthly statements are sent for an account that 
compounds dividends daily and credits dividends monthly, the balance 
may not be increased each day to reflect the effect of daily 
compounding. Assume a credit union will pay $13.70 in dividends on 
$100,000 for the first day, $6.85 in dividends on $50,013.70 for the 
second day, and $3.43 in dividends on $25,020.55 for the third day. 
The sum of each days balance is $175,000 (does not include accrued, 
but uncredited, dividends amounts $13.70, $6.85, and $3.43), thereby 
resulting in an average daily balance for the three days of 
$58,333.33.
    ii. Must be included in the balance for succeeding statements if 
a statement is issued more frequently than compounded dividends is 
credited on an account. For example, if monthly statements are sent 
for an account that compounds dividends daily and credits dividends 
quarterly, the balance for the second monthly statement would 
include dividends that had accrued for the prior month. Assume a 
credit union will pay $411.78 in dividends on 30 days of $100,000, 
$427.28 in dividends on 31 days of $100,411.78, and $415.23 in 
dividends on 30 days of $100,839.06. The balance (average daily 
balance in the account for the period) for the second 31 days is 
$100,411.78.
    2. Rounding. The dividends 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 dividends 
earned for a statement period is $20.074 and the credit union pays 
the member $20.07, the credit union must use $20.07 (not $20.074) to 
calculate the annual percentage yield earned. For accounts that pay 
dividends based on the daily balance method, compound and credit 
dividends or interest quarterly, and send monthly statements, the 
credit union may, but need not, round accrued dividends to two 
decimals for calculating the ``projected'' or ``anticipated'' annual 
percentage yield earned on the first two monthly statements issued 
during the quarter. However, on the quarterly statement the 
dividends earned figure must reflect the amount actually paid.
    3. Compounding frequency using the average daily balance method. 
Any compounding frequency, including daily compounding, can be used 
when calculating dividends using the average daily balance method. 
(See comment 707.7(b), which does not require credit unions to 
compound or credit dividends at any particular frequency).

B. Special Formula for Use Where Periodic Statement is Sent More 
Often Than the Period for Which Dividends are Compounded

    1. Statements triggered by Regulation E. Credit unions 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 dividends 
quarterly and that receive monthly statements, triggered by 
Regulation E, which comply with the provisions of Sec. 707.6.
    2. Days in compounding period. Credit unions using the special 
annual percentage yield earned formula must use the actual number of 
days in the compounding period.

Appendix B to Part 707--Model Clauses and Sample Forms

    1. Modifications. Credit unions that modify the model clauses 
will be deemed in compliance as long as they do not delete 
information required by TISA or regulation or rearrange the format 
so as to affect the substance or clarity of the disclosures.
    2. Format. Credit unions may use inserts to a document (see 
Sample Form B-11) or fill-in blanks (see Sample Forms B-4 and B-5, 
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 member when an account is 
opened, as required by Sec. 707.4(a)(1). (See Sec. 707.4(a)(2), 
which states the requirements for disclosing the annual percentage 
yield, the dividend rate, and the maturity of a term share account 
in responding to a member's request.)
    4. Compliance with Regulation E. Credit unions may satisfy 
certain requirements under Part 707 with disclosures that meet the 
requirements of Regulation E. (See Sec. 707.3(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). Credit unions 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), credit unions 
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 a credit union should insert 
in the space provided (for example, a credit union might insert 
``March 25, 1995'' in the blank for ``(date)'' disclosure). Brackets 
and diagonals (``/'') indicate a credit union 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-11) 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.

[FR Doc. 00-55509 Filed 5-19-00; 8:45 am]
BILLING CODE 1505-01-D