[Federal Register Volume 72, Number 217 (Friday, November 9, 2007)]
[Rules and Regulations]
[Pages 63477-63484]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-21701]


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FEDERAL RESERVE SYSTEM

12 CFR Part 230

[Regulation DD; Docket No. R-1285]


Truth in Savings

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule; official staff interpretation.

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SUMMARY: The Board is amending Regulation DD, which implements the 
Truth in Savings Act, and the official staff commentary to the 
regulation, to withdraw portions of the interim final rules for the 
electronic delivery of disclosures issued March 30, 2001. The interim 
final rules addressed the timing and delivery of electronic 
disclosures, consistent with the requirements of the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act). Because 
compliance with the 2001 interim final rules has not been mandatory, 
withdrawal of these provisions from the Code of Federal Regulations 
reduces confusion about the status of the provisions and simplifies the 
regulation.
    In addition, the Board is adopting final amendments to Regulation 
DD to provide guidance on the electronic delivery of disclosures. For 
example, the final rules provide that when a deposit account 
advertisement is accessed by a consumer in electronic form, disclosures 
may be provided to the consumer in electronic form in the advertisement 
without regard to the consumer consent and other provisions of the E-
Sign Act. Similar final rules are being adopted under other consumer 
fair lending and financial services regulations administered by the 
Board.

DATES: The final rule is effective December 10, 2007. The mandatory 
compliance date is October 1, 2008.

FOR FURTHER INFORMATION CONTACT: John C. Wood, Counsel, Division of 
Consumer and Community Affairs, at (202) 452-2412 or (202) 452-3667. 
For users of Telecommunications Device for the Deaf (TDD) only, contact 
(202) 263-4869.

SUPPLEMENTARY INFORMATION: 

I. Statutory Background

    The purpose of the Truth in Savings Act (TISA), 12 U.S.C. 4301 et 
seq., is to enable consumers to make informed decisions about accounts 
at depository institutions. The act requires depository institutions to 
disclose yields, fees, and other terms concerning deposit accounts to 
consumers 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. TISA and Regulation DD require a number of disclosures 
to be provided in writing.
    The Electronic Signatures in Global and National Commerce Act (the 
E-Sign Act), 15 U.S.C. 7001 et seq., was enacted in 2000. The E-Sign 
Act provides that electronic documents and electronic signatures have 
the same validity as paper documents and handwritten signatures. The E-
Sign Act contains special rules for the use of electronic disclosures 
in consumer transactions. Under the E-Sign Act, consumer disclosures 
required by other laws or regulations to be provided or made available 
in writing may be provided or made available, as applicable, in 
electronic form if the consumer affirmatively consents after receiving 
a notice that contains certain information specified in the statute, 
and if certain other conditions are met.
    The E-Sign Act, including the special consumer notice and consent 
provisions, became effective October 1, 2000, and did not require 
implementing regulations. Thus, depository institutions are currently 
permitted to provide in electronic form any disclosures that are 
required to be provided or made available to the consumer in writing 
under Regulation DD if the consumer affirmatively consents to receipt 
of electronic disclosures in the manner required by section 101(c) of 
the E-Sign Act.

II. Board Proposals and Interim Rules Regarding Electronic Disclosures

    On April 4, 2001, the Board published for comment interim final 
rules to establish uniform standards for the electronic delivery of 
disclosures required under Regulation DD (66 FR 17,795). Similar 
interim final rules for Regulations B, E, M, and Z, (implementing the 
Equal Credit Opportunity Act, the Electronic Fund Transfer Act, the 
Consumer Leasing Act, and the Truth in Lending Act, respectively) were 
published on March 30, 2001 (66 FR 17,322 and 66 FR 17,329) 
(Regulations M and Z, respectively) and April 4, 2001 (66 FR 17,779 and 
66 FR 17,786) (Regulations B and E, respectively). Each of the interim 
final rules incorporated, but did not interpret, the requirements of 
the E-Sign Act. Depository institutions, creditors, and other persons, 
as applicable, generally were required to obtain consumers' affirmative 
consent to provide disclosures electronically, consistent with the 
requirements of the E-Sign Act. The interim final rules also 
incorporated many of the provisions that were part of earlier 
regulatory proposals issued by the Board regarding electronic 
disclosures.\1\
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    \1\ On May 2, 1996, the Board proposed to amend Regulation E to 
permit financial institutions to provide disclosures by sending them 
electronically (61 FR 19696). Based on comments received, in 1998 
the Board published an interim rule permitting the electronic 
delivery of disclosures under Regulation E (63 FR 14,528, March 25, 
1998) and similar proposals under Regulations B, M, Z, and DD (63 FR 
14,552, 14,538, 14,548, and 14,533, respectively, March 25, 1998). 
Based on comments received on the 1998 proposals, in 1999 the Board 
published revised proposals under Regulations B, E, M, Z, and DD (64 
FR 49688, 49699, 49713, 49722 and 49740, respectively, September 14, 
1999).
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    Under the 2001 interim final rules, disclosures could be sent to an 
e-mail address designated by the consumer, or could be made available 
at another location, such as an Internet Web site. If the disclosures 
were not sent by e-mail, institutions would have to provide a notice to 
consumers (typically by e-mail) alerting them to the availability of 
the disclosures. Disclosures posted on a Web site would have to be 
available for at least 90 days to allow consumers adequate time to 
access and retain the information. Institutions also would be required 
to make a good faith attempt to redeliver electronic disclosures that 
were returned undelivered, using the address information available in 
their files.
    Commenters on the interim final rules identified significant 
operational and information security concerns with respect to the 
requirement to send the disclosure or an alert notice to an e-mail 
address designated by the consumer. For example, commenters stated that 
some consumers who choose to receive electronic disclosures do not have 
e-mail addresses or may not want personal financial information sent to 
them by e-mail. Commenters also noted that e-mail is not a secure 
medium for delivering confidential information and that consumers' e-
mail addresses frequently change. The commenters also opposed the 
requirement for redelivery in the event a disclosure was returned 
undelivered. In addition, many commenters asserted that making the 
disclosures available for at least 90 days, as required by the interim 
final rule,

[[Page 63478]]

would increase costs and would not be necessary for consumer 
protection.
    In August 2001, in response to comments received, the Board lifted 
the previously established October 1, 2001 mandatory compliance date 
for all of the interim final rules. (66 FR 41439, August 8, 2001.) 
Thus, institutions are not required to comply with the interim final 
rules. Since that time, the Board had not taken further action with 
respect to the interim final rules on electronic disclosures in order 
to allow electronic commerce, including electronic disclosure 
practices, to continue to develop without regulatory intervention and 
to allow the Board to gather further information about such practices.
    In April 2007, the Board proposed to amend Regulation DD and the 
official staff commentary by (1) withdrawing portions of the 2001 
interim final rule that restate or cross-reference provisions of the E-
Sign Act and accordingly are unnecessary; (2) withdrawing other 
portions of the interim final rule that the Board now believes may 
impose undue burdens on electronic banking and commerce and may be 
unnecessary for consumer protection; and (3) retaining the substance of 
certain provisions of the interim final rule that provide regulatory 
relief or guidance regarding electronic disclosures. (72 FR 21155, 
April 30, 2007.) Similar amendments were also proposed by the Board 
under Regulations B, E, M, and Z (72 FR 21125, 72 FR 21131, 72 FR 
21135, and 72 FR 21141, respectively).

III. Summary of the Final Rule

    The Board received about 20 comments on the April 2007 proposal, 
primarily from depository institutions and their representatives. Most 
of the financial industry commenters generally supported the proposal, 
although some provided suggestions for clarifications or changes to 
particular elements of the proposal. A comment letter was also 
submitted on behalf of four consumer groups. The consumer group 
commenters suggested a number of changes to strengthen consumer 
protections. The comments are discussed in more detail in the Section-
by-Section Analysis below.
    For the reasons discussed below, the Board is now adopting 
amendments to Regulation DD in final form, largely as proposed in April 
2007. As stated in the proposal, because compliance with the 2001 
interim final rules has not been mandatory, the final rule will reduce 
confusion about the status of the electronic disclosure provisions and 
simplify the regulation. The Board is also adopting certain provisions 
that are identical or similar to provisions in the 2001 interim rules 
in order to enhance the ability of consumers to shop for deposit 
account products online, minimize the information-gathering burdens on 
consumers, and provide guidance or eliminate a substantial burden on 
the use of electronic disclosures, as discussed further below.
    Since 2001, industry and consumers have gained considerable 
experience with electronic disclosures. During that period, the Board 
has received no indication that consumers have been harmed by the fact 
that compliance with the interim final rules is not mandatory. The 
Board also has reconsidered certain aspects of the interim final rules, 
such as sending disclosures by e-mail, in light of concerns about data 
security, identity theft, and ``phishing'' (i.e., prompting consumers 
to reveal confidential personal or financial information through 
fraudulent e-mail requests that appear to originate from a depository 
institution, government agency, or other trusted entity) that have 
become more pronounced since 2001. Finally, the Board is eliminating 
certain aspects of the 2001 interim final rule, such as provisions 
regarding the availability and retention of electronic disclosures, as 
unnecessary in light of current industry practices.
    The 2001 interim final rule allowed depository institutions to 
provide certain disclosures to consumers electronically without regard 
to the consumer consent or other provisions of the E-Sign Act. These 
included disclosures in connection with advertisements and disclosures 
about deposit accounts that are provided upon a consumer's request. The 
Board reasoned that these disclosures, which would be available to the 
general public while shopping for deposit products, did not ``relate to 
a transaction,'' which is a prerequisite for triggering the E-Sign 
consumer consent provisions, and thus were not subject to the consent 
provisions. Some commenters on the interim final rules agreed with the 
result but did not agree with the Board's rationale.
    In the April 2007 proposal, the Board stated that, upon further 
consideration, it did not believe it was necessary to determine whether 
or not these disclosures are related to a transaction. Instead, 
pursuant to the Board's authority under section 269 of TISA, as well as 
under section 104(d) of the E-Sign Act,\2\ the Board proposed to 
specify the circumstances under which certain disclosures may be 
provided to a consumer in electronic form, rather than in writing as 
generally required by Regulation DD, without obtaining the consumer's 
consent under section 101(c) of the E-Sign Act.
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    \2\ Section 269 of TISA provides that regulations prescribed by 
the Board under TISA ``may provide for such adjustments and 
exceptions * * * as, in the judgment of the Board, are necessary or 
proper to carry out the purposes of [TISA], * * * or to facilitate 
compliance with the requirements of [TISA].'' Section 104(d) of the 
E-Sign Act authorizes federal agencies to adopt exemptions for 
specified categories of disclosures from the E-Sign notice and 
consent requirements, ``if such exemption is necessary to eliminate 
a substantial burden on electronic commerce and will not increase 
the material risk of harm to consumers.'' For the reasons stated in 
this Federal Register notice, the Board believes that these criteria 
are met in the case of the advertising disclosures and the 
disclosures provided to a consumer upon request. In addition, the 
Board believes TISA section 269 authorizes the Board to permit 
institutions to provide disclosures electronically, rather than in 
paper form, independent of the E-Sign Act.
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    Commenters supported the Board's approach with regard to this 
issue. This final rule adopts the approach in the April 2007 proposal. 
The Board continues to believe that depository institutions should not 
be required to obtain the consumer's consent in order to provide 
advertising disclosures to the consumer in electronic form if the 
consumer accesses an advertisement containing those disclosures in 
electronic form, such as at an Internet Web site. Similarly, the Board 
continues to believe that institutions should not be required to follow 
the E-Sign consent requirements in order to respond to a consumer's 
request for account disclosures (although under the final rule, the 
institution could provide the disclosures in electronic form only if 
the consumer agrees).
    The Board believes that when viewing online deposit product 
advertising, consumers would not be harmed if the E-Sign consent 
procedures do not apply and would obtain significant benefits by having 
timely access to advertising disclosures in electronic form. The Board 
also believes that consumers' ability to shop for deposit accounts 
online and compare the terms of various offers could be substantially 
diminished if consumers had to consent in accordance with the E-Sign 
Act in order to access advertisements that must be accompanied by 
disclosures, or in order to obtain account disclosures upon request. 
Applying the consumer consent provisions of the E-Sign Act to these 
disclosures could impose substantial burdens on electronic commerce and 
make it more difficult for consumers to gather information and shop for 
deposit accounts.
    At the same time, the Board recognizes that consumers who shop or 
apply for deposit accounts online may

[[Page 63479]]

not want to receive other disclosures electronically. Therefore, with 
respect to account-opening disclosures, periodic statements, and 
change-in-terms notices, depository institutions are required to obtain 
the consumer's consent, in accordance with the E-Sign Act, to provide 
such disclosures in electronic form, or else provide written 
disclosures.
    Finally, as proposed, certain provisions that restate or cross-
reference the E-Sign Act's general rules regarding electronic 
disclosures (including the consumer consent provisions) are being 
deleted as unnecessary, because the E-Sign Act is a self-effectuating 
statute. The revisions to Regulation DD and the official staff 
commentary are described more fully below in the Section-by-Section 
Analysis.

IV. Section-by-Section Analysis

12 CFR Part 230 (Regulation DD)

Section 230.3 General Disclosure Requirements

    Section 230.3(a) prescribes the form of disclosures required for 
deposit accounts, and generally requires depository institutions to 
provide the disclosures in writing and in a form that the consumer may 
keep. As proposed, the Board is revising Sec.  230.3(a) to clarify that 
institutions may provide disclosures to consumers in electronic form, 
subject to compliance with the consumer consent and other applicable 
provisions of the E-Sign Act. Some institutions may provide disclosures 
to consumers both in paper and electronic form and rely on the paper 
form of the disclosures to satisfy their compliance obligations. For 
those institutions, the duplicate electronic form of the disclosures 
may be provided to consumers without regard to the consumer consent or 
other provisions of the E-Sign Act because the electronic form of the 
disclosure is not used to satisfy the regulation's disclosure 
requirements.
    Section 230.3(a) is also revised, as proposed, to provide that the 
disclosures required by Sec. Sec.  230.4(a)(2) (disclosures provided 
upon request) and 230.8 (advertising) may be provided to the consumer 
in electronic form, under the circumstances set forth in those 
sections, without regard to the consumer consent or other provisions of 
the E-Sign Act. Commenters supported this aspect of the proposal.
    Section 230.8 requires that if certain information is stated in a 
deposit account advertisement, or if an advertisement promotes the 
payment of overdrafts, the advertisement must also include specified 
disclosures. The Board believes that, for a deposit account 
advertisement accessed by the consumer in electronic form, permitting 
institutions to provide the required disclosures in electronic form 
without regard to the consumer consent and other provisions of the E-
Sign Act will eliminate a potential significant burden on electronic 
commerce without increasing the risk of harm to consumers. This 
approach will facilitate shopping for deposit products by enabling 
consumers to receive important disclosures at the same time they access 
an advertisement without first having to provide consent in accordance 
with the requirements of the E-Sign Act. Requiring consumers to follow 
the consent procedures set forth in the E-Sign Act in order to access 
an online advertisement is potentially burdensome and could discourage 
consumers from shopping for deposit products online. Moreover, because 
these consumers are viewing the advertisement online, there appears to 
be little, if any, risk that the consumer will be unable to view the 
disclosures online as well.
    Similarly, Sec.  230.4(a)(2) requires that depository institutions 
provide disclosures, setting forth account terms and conditions, to 
consumers upon request. If a consumer is not present at the depository 
institution and requests the account disclosures, it would appear 
unnecessary and burdensome to require the consumer to go through the E-
Sign consent procedures before the request could be satisfied, as long 
as the consumer agrees that the disclosures can be provided 
electronically. Applying the E-Sign consent procedures in this context 
could discourage consumers from requesting account disclosures.
    Section 230.3(g) in the 2001 interim final rule refers to Sec.  
230.10, the section of the interim final rule setting forth general 
rules for electronic disclosures. Because the Board is deleting Sec.  
230.10, as discussed further below, Sec.  230.3(g) is also deleted, as 
proposed.

Section 230.4 Account Disclosures

    Depository institutions generally must provide account-opening 
disclosures to consumers before an account is opened or a service is 
provided. Depository institutions may delay delivering the disclosures 
if the consumer is not present at the institution when the account is 
opened (or service is provided). Section 230.4(a)(1) provides that in 
such cases, account-opening disclosures must be mailed or delivered 
within ten business days. The rationale underlying the ten-day delay is 
that the institution cannot provide written disclosures when, for 
example, an account is opened by telephone. The 2001 interim final rule 
provided that depository institutions opening accounts by electronic 
communication (for example, on the Internet) may not delay providing 
disclosures under Sec.  230.4(a)(1). The difficulties in providing 
disclosures for accounts opened by mail or telephone do not exist for 
requests to open accounts received by electronic communication using 
visual text. Thus, the 2001 interim final rule required that 
disclosures must be provided before accounts are opened using 
electronic communication. New paragraph (ii) was added to Sec.  
230.4(a)(1) to effectuate this requirement. In the April 2007 proposal, 
the Board stated that it continued to believe that the rationale 
underlying Sec.  230.4(a)(1)(ii) was valid, and accordingly proposed to 
retain the new provision.
    Several commenters requested that the regulation allow delayed 
disclosures in a number of situations involving the use of electronic 
means to open an account. Commenters noted, for example, that small 
hand-held electronic devices, such as Internet-enabled cellphones or 
personal digital assistants, may not be well suited to displaying or 
retaining disclosures. Commenters argued, therefore, that institutions 
should be permitted to open an account electronically and mail paper 
disclosures to the consumer within ten business days, rather than 
providing electronic disclosures that the consumer might view using a 
small hand-held device. Some commenters suggested that the delayed 
disclosure provision should apply to other situations as well, such as 
``enhanced ATMs'' and computers not owned by the consumer (e.g., a 
computer in an employer's office or a public library). However, it does 
not appear that at present, use of such devices for financial 
transactions has advanced to the point where the relief suggested by 
the commenters is necessary to avoid burdens on electronic commerce. 
Therefore, Sec.  230.4(a)(1)(ii) is retained in the final rule with 
minor wording changes.
    As noted above, depository institutions must also provide account 
disclosures to a consumer upon request. Section 230.4(a)(2)(i) provides 
that if a consumer is not present at the institution when a request for 
account disclosures is made, the institution must mail or deliver the 
disclosures within a reasonable time after the institution receives the 
request; ten days is deemed to be a reasonable time. The 2001 interim 
final rule revised Sec.  230.4(a)(2)(i) to allow institutions to mail 
or deliver

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disclosures either in paper form or electronically to consumers who are 
not present at the institution when they make their request. Under the 
2001 interim final rule, to provide the requested disclosures 
electronically, the institution must send the disclosures to the 
consumer's e-mail address, or send a notice alerting the consumer to 
the location of the disclosures, such as on the institution's Internet 
Web site. The interim rule revised comment 4(a)(2)(i)-3 and added 
comment 4(a)(2)(i)-4 to provide guidance.
    In the April 2007 proposal, the Board proposed to retain the 
changes made to Sec.  230.4(a)(2)(i) and the accompanying commentary by 
the interim final rule, with some revisions for clarification and to 
provide greater flexibility for both institutions and consumers (in 
particular, by not requiring that e-mail be used to provide the 
disclosures electronically). The Board stated that it continued to 
believe that if the consumer is not present at the institution when 
requesting disclosures, it is appropriate to allow institutions to 
respond to requests by electronic means (without following the E-Sign 
consent provisions, as discussed above under Sec.  230.3) provided the 
consumer agrees.
    A few commenters suggested that the last sentence in proposed 
revised comment 4(a)(2)(i)-4, which states that the regulation ``does 
not require an institution to provide, nor a consumer to agree to 
receive, disclosures in electronic form,'' should be eliminated as 
unnecessary. The Board believes, however, that the sentence is 
appropriate because it clarifies that institutions are required to 
provide account disclosures in paper form if a consumer requests that 
they be provided in paper form. However, in the final rule language has 
been added to the sentence to make clear that the sentence applies only 
to disclosures provided upon request under Sec.  230.4(a)(2). An 
institution would not be prohibited from offering accounts online that 
use only electronic disclosures at account-opening and for periodic 
statements, provided the consumer consents in accordance with the E-
Sign Act. Accordingly, the revisions made to Sec.  230.4(a)(2)(i) and 
the accompanying commentary are adopted as proposed, with the minor 
wording changes noted.

Section 230.8 Advertising

    Section 230.8 contains requirements for advertisements for deposit 
accounts, including the requirement that if an advertisement includes 
certain ``trigger terms'' (such as a bonus or the annual percentage 
yield), the advertisement must also include certain disclosures. The 
Board proposed to add new comment 8(a)-11, to clarify that if a 
consumer accesses an advertisement for deposit accounts in electronic 
form, such as on a home computer, the disclosures required on or with 
the advertisement must be provided to the consumer in electronic form 
on or with the advertisement. The proposed comment also clarified that 
if a consumer receives a written advertisement in the mail, the 
required disclosures must be provided in paper form on or with the 
advertisement (and not, for example, by including a reference in the 
advertisement to the Web site where the disclosures are located). 
Commenters did not address this aspect of the proposal.
    In the final regulation, new comment 8(a)-11 is not being adopted. 
Section 230.8 requires that if an advertisement includes trigger terms, 
the advertisement itself must ``state'' the required disclosures 
``clearly and conspicuously.'' Therefore, under the existing 
regulation, providing paper disclosures for an advertisement in 
electronic form, or vice versa, would not comply because the 
disclosures would not be stated in the advertisement itself.
    Comment 8(a)-9, as added by the interim final rule, provides that 
in an electronic advertisement, the required disclosures need not be 
shown on each page where a ``trigger term'' appears, as long as each 
such page includes a cross-reference to the page where the required 
disclosures appear. For example, if a ``trigger term'' appears on a 
particular web page, the additional disclosures may appear on another 
web page if there is a clear reference to that page (which may be 
accomplished, for example, by including a link). In April 2007, the 
Board proposed to retain this comment. Commenters did not address this 
issue. The final rule retains the comment as proposed.
    In April the Board also proposed to add new comment 8(a)-12 to 
clarify that the rules regarding advertising disclosures provided in 
electronic form also apply to the disclosures described in Sec.  
230.11(b), which are incorporated by reference in Sec.  230.8(f). 
Commenters did not address this issue; the comment is adopted as 
proposed (and renumbered as comment 8(a)-11).
    Section 230.8(b) permits institutions to state an interest rate in 
addition to the APY, as long as the rate is stated in conjunction with, 
but not more conspicuously than, the APY. In the 2001 interim final 
rule, comment 8(b)-4 was added to state that in an advertisement using 
electronic communication, the consumer must be able to view both rates 
simultaneously, and that this requirement is not satisfied if the 
consumer can view the APY only by use of a link that takes the consumer 
to another web location. In the April 2007 proposal, the Board proposed 
to delete comment 8(b)-4 as unnecessary, because the requirement to 
state the simple annual rate or periodic rate in conjunction with, and 
not more conspicuously than, the APY, continues to apply to electronic 
advertisements no less than to advertisements in other media. In the 
supplementary information, the Board stated that requiring the consumer 
to scroll to another part of the page, or access a link, in order to 
view the APY would likely not satisfy this requirement.
    Some commenters were concerned by the foregoing discussion in the 
April 2007 proposal, and contended that in the case of small hand-held 
electronic devices that a consumer might use to view a deposit account 
advertisement, the small size of the screen might necessitate scrolling 
or the use of links for viewing the APY. Commenters also said the 
proposal was confusing in that comment 8(b)-4, stating that the use of 
links would not comply, was proposed to be deleted, yet the 
supplementary information appeared to impose the same restriction.
    Comment 8(b)-4 is being deleted as proposed. As stated in the 
proposal, the regulatory requirement is to state the interest rate in 
conjunction with, but not more conspicuously than, the APY, and this 
rule applies in the electronic context as well. However, the Board 
believes that the rule can be applied with some degree of flexibility, 
to account for variations in devices consumers may use to view 
electronic advertisements. Therefore, the use of scrolling or links 
would not necessarily fail to comply with the regulation in all cases; 
however, institutions should ensure that electronic advertisements 
comply with the equal conspicuousness requirement.
    Section 230.8(e) exempts from some disclosure requirements 
advertisements made through broadcast or electronic media, such as 
television and radio or outdoor billboards. The interim final rule 
added comment 8(e)(1)(i)-1 to provide that this exemption would not 
apply to advertisements using electronic communication, such as 
Internet advertisements, which do not have the same time and space 
constraints as radio or television advertisements. In April, the Board 
proposed to retain comment 8(e)(1)(i)-1 with minor wording changes. 
Commenters did not address this issue. The Board continues to believe 
that space constraints for advertisements on Internet Web sites are

[[Page 63481]]

not significantly different from those for a print advertisement (a 
newspaper, for example). Accordingly, comment 8(e)(1)(i)-1 is adopted 
as proposed.

Section 230.10 Electronic Communication

    Section 230.10 was added by the 2001 interim final rule to address 
the general requirements for electronic communications. In the April 
2007 proposal, the Board proposed to delete Sec.  230.10 from 
Regulation DD and the accompanying sections of the staff commentary. 
Depository institution commenters largely supported the proposed 
deletion, and Sec.  230.10 and the accompanying commentary are deleted 
in the final rule.
    In the interim rule, Sec.  230.10(a) defines the term ``electronic 
communication'' to mean a message transmitted electronically that can 
be displayed on equipment as visual text, such as a message displayed 
on a personal computer monitor screen. The deletion of Sec.  230.10(a) 
does not change applicable legal requirements under the E-Sign Act.
    Sections 230.10 (b) and (c) incorporate by reference provisions of 
the E-Sign Act, such as the provision allowing disclosures to be 
provided in electronic form and the requirement to obtain the 
consumer's affirmative consent before providing disclosures in 
electronic form. The deletion of these provisions has no impact on the 
general applicability of the E-Sign Act to Regulation DD disclosures. 
Section 230.10(f) was added in the interim final rule to clarify that 
persons, other than depository institutions, that are required to 
comply with Regulation DD may use electronic disclosures. This 
provision is unnecessary because the E-Sign Act is a self-effectuating 
statute and permits any person to use electronic records subject to the 
conditions set forth in the Act.
    Sections 230.10 (d) and (e) address specific timing and delivery 
requirements for electronic disclosures under Regulation DD, such as 
the requirement to send disclosures to a consumer's e-mail address (or 
post the disclosures on a Web site and send a notice alerting the 
consumer to the disclosures). The Board stated in the proposal that it 
no longer believed that these additional provisions were necessary or 
appropriate. The Board noted that electronic disclosures have evolved 
since 2001, as industry and consumers have gained experience with them, 
and also noted concerns about e-mail related to data security, identity 
theft, and phishing.
    The consumer group commenters urged the Board to require the use of 
e-mail to provide required disclosures in electronic form, arguing that 
e-mail is the only reliable way to ensure that consumers are able to 
actually access, receive, and retain disclosures. The consumer groups 
also disagreed with the statement that concerns relating to phishing, 
identity theft, and data security are a valid reason for not requiring 
the use of e-mail, noting that phishing involves gathering information 
from the consumer, while disclosures would be provided to the consumer, 
and need not include sensitive information.
    While the consumer's receipt of an e-mail message that is actually 
from the consumer's depository institution would not in general pose a 
security risk, consumers might ignore or delete e-mails from depository 
institutions (real or purported), in order to avoid falling victim to 
fraud schemes. Thus, disclosures sent by consumers' depository 
institutions may not receive the attention they should. Consequently, 
some depository institutions may be reluctant to communicate by e-mail. 
To the extent consumers are instructed not to ignore electronic mail 
messages from their depository institutions, the risk of consumers 
being victimized by fraudulent e-mail might be increased. In any event, 
the Board believes it is preferable not to mandate the use of any 
particular means of electronic delivery of disclosures, but instead to 
allow flexibility for institutions to use whatever method may be best 
suited to particular types of disclosure (for example, account-opening, 
periodic statements, or change in terms).
    With regard to the requirement to attempt to redeliver returned 
electronic disclosures, institutions would be required to search their 
files for an additional e-mail address to use, and might be required to 
use a postal mail address for redelivery if no additional e-mail 
address was available. As stated in the April 2007 proposal, the Board 
continues to believe that both requirements would likely be unduly 
burdensome.
    Under the April 2007 proposed rule, the requirement in the 2001 
interim final rule for institutions to maintain disclosures posted on a 
Web site for at least 90 days would be deleted. Depository institution 
commenters supported the proposed deletion; consumer group commenters 
expressed concern about its impact on consumers. As stated in the 
proposal, based on a review of industry practices, it appears that many 
institutions maintain disclosures posted on an Internet Web site for 
several months, and, in a number of cases, for more than a year. For 
example, it appears that institutions that offer online periodic 
statements to consumers typically make those statements available 
without charge for six months or longer in electronic form. This 
practice has developed even though Regulation DD does not currently 
require institutions to maintain disclosures for any specific period of 
time. In addition, the Board continues to believe that an appropriate 
time period consumers may want electronic disclosures to be available 
may vary depending upon the type of disclosure, and is reluctant to 
establish specific time periods that would vary depending on the 
disclosures, which would increase the compliance burden. Therefore, the 
90-day retention provision is deleted as proposed.
    Nevertheless, while the Board is not requiring disclosures to be 
maintained on an Internet Web site for any specific time period, the 
general requirements of Regulation DD continue to apply to electronic 
disclosures, such as the requirement to provide disclosures to 
consumers at certain specified times and in a form that the consumer 
may keep. The Board expects institutions to maintain disclosures on Web 
sites for a reasonable period of time (which may vary depending upon 
the particular disclosure) so that consumers have an opportunity to 
access, view, and retain the disclosures. As stated in the April 2007 
proposal, the Board will monitor institutions' electronic disclosure 
practices with regard to the ability of consumers to retain Regulation 
DD disclosures and would consider further revisions to the regulation 
to address this issue if necessary.

V. Other Issues Raised by Commenters

Clear and Conspicuous Disclosures

    An issue raised in the comments on the April 2007 proposal related 
to small hand-held electronic devices through which consumers may 
conduct financial transactions using the Internet or other electronic 
means (for example, personal digital assistants, Internet-enabled 
cellphones, and similar devices). One commenter requested clarification 
on whether institutions would be deemed to comply with the requirement 
to provide disclosures in a clear and conspicuous form, even when the 
consumer views them on a small screen of a hand-held electronic device. 
The commenter noted that the institution has no control over what 
devices consumers choose to use, for example, to view disclosures on a 
Web page. The Board believes that disclosures comply with the ``clear 
and conspicuous'' requirement as long as they are provided in a manner 
such that they

[[Page 63482]]

would be clear and conspicuous when viewed on a typical home personal 
computer monitor.

Retainable Form

    Several industry commenters requested guidance on how institutions 
can be sure of meeting the requirement to provide disclosures in a form 
that the consumer can keep. Commenters noted that some of the 
disclosures that are exempted from the E-Sign requirements regarding 
notice and consent are nevertheless required to be given in retainable 
form (for example, account disclosures provided upon request under 
Sec.  230.4(a)(2)). Commenters pointed out that the E-Sign Act 
requires, with regard to consumer disclosures generally, that an 
institution disclose ``the hardware and software requirements for 
access to and retention of the electronic records'' and that the 
consumer consent to electronic disclosures ``in a manner that 
reasonably demonstrates that the consumer can access'' the disclosures 
electronically. A commenter noted that if the E-Sign procedures are 
followed, an institution has some degree of comfort that the 
retainability requirement has been met; however, with regard to 
disclosures that are exempted from the E-Sign notice and consent 
provisions (such as those under Sec.  230.4(a)(2)), it is not clear how 
the institution can demonstrate compliance with the retainability 
requirement.
    The consumer group commenters were concerned about retainability of 
disclosures in light of the deletion of the requirement to maintain 
disclosures on a Web site for at least 90 days. They urged that the 
final regulations require that disclosures be delivered in a format 
that is both downloadable and printable.
    The Board believes that institutions satisfy the requirement for 
providing electronic disclosures in a form the consumer can retain if 
they are provided in a standard electronic format that can be 
downloaded and saved or printed on a typical home personal computer. 
Typically, any document that can be downloaded by the consumer can also 
be printed. The Board will, however, monitor institutions' practices to 
evaluate whether further guidance is needed on this issue. In a 
situation where the consumer is provided electronic disclosures through 
equipment under the institution's control--such as a terminal or kiosk 
in the institution's offices--the institution could, for example, 
provide a printer that automatically prints the disclosures.

Expansion of Exception From E-Sign Notice and Consent Requirements

    One commenter suggested that the Board adopt additional exemptions 
from the E-Sign notice and consent requirements. For example, if a 
consumer opened a deposit account online, the commenter suggested that 
the institution should be able to provide the account-opening 
disclosures online under Sec.  230.4(a)(1) (in addition to the 
advertising-related disclosures, and disclosures provided upon request, 
already permitted under this final rule) without notice and consent 
under the E-Sign Act. The commenter argued that, since Internet 
commerce has expanded greatly over the past few years, when consumers 
choose to conduct financial transactions online, they presume that they 
will receive any related disclosures online as well. The Board believes 
that, at this time, there is insufficient evidence that the consent 
requirements are a burden on electronic commerce in this situation; and 
that consumers who shop for deposit products online may not necessarily 
want to receive account-opening disclosures online.

VI. Use of ``Plain Language''

    Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the 
Board to use ``plain language'' in all proposed and final rules 
published after January 1, 2000. In the proposal, the Board invited 
comments on whether the proposed rules are clearly stated and 
effectively organized, and how the Board might make the proposed text 
easier to understand. No comments were received on ``plain language'' 
issues involving Regulation DD.

VII. Final Regulatory Flexibility Analysis

    The Board prepared an initial regulatory flexibility analysis as 
required by the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
in connection with the April 2007 proposal. The Board received no 
comments on its initial regulatory flexibility analysis.
    The RFA generally requires an agency to perform an assessment of 
the impact a rule is expected to have on small entities. However, under 
section 605(b) of the RFA, 5 U.S.C. 605(b), the regulatory flexibility 
analysis otherwise required under section 604 of the RFA is not 
required if an agency certifies, along with a statement providing the 
factual basis for such certification, that the rule will not have a 
significant economic impact on a substantial number of small entities. 
Based on its analysis and for the reasons stated below, the Board 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities.
    1. Statement of the need for, and objectives of, the final rule. 
The Board is adopting revisions to Regulation DD to withdraw the 2001 
interim final rule on electronic communication and to allow depository 
institutions to provide certain disclosures to consumers in electronic 
form on or with an advertisement that is accessed by the consumer in 
electronic form, or if the consumer requests the disclosure, without 
regard to the consumer consent and other provisions of the E-Sign Act. 
The Board is also clarifying that other Regulation DD disclosures may 
be provided to consumers in electronic form in accordance with the 
consumer consent and other applicable provisions of the E-Sign Act.
    TISA was enacted to enhance economic stabilization, improve 
competition between depository institutions, and strengthen the ability 
of consumers to make informed decisions regarding deposit accounts. 12 
U.S.C. 4301. It is the purpose of TISA to require the clear and uniform 
disclosure of rates of interest payable on deposit accounts and the 
fees that are assessable against deposit accounts, so that consumers 
can make a meaningful comparison between the competing claims of 
institutions. TISA authorizes the Board to prescribe regulations to 
carry out the purposes of the statute. 12 U.S.C. 4308. The Act 
expressly states that the Board's regulations may contain ``such 
classifications, differentiations, or other provisions, * * * , as in 
the judgment of the Board, are necessary or proper to carry out the 
purposes of [the Act], to prevent circumvention or evasion of [the 
Act], or to facilitate compliance with [the Act].'' 12 U.S.C. 4308(a). 
The Board believes that the revisions to Regulation DD discussed above 
are within Congress's broad grant of authority to the Board to adopt 
provisions that carry out the purposes of the statute. These revisions 
facilitate informed decisions about deposit accounts by consumers in 
circumstances where a consumer accesses a deposit account 
advertisement, or requests deposit account disclosures, in electronic 
form.
    2. Issues raised by comments in response to the initial regulatory 
flexibility analysis. In accordance with section 603(a) of the RFA, the 
Board conducted an initial regulatory flexibility analysis in 
connection with the proposed rule. The Board did not receive any 
comments on its initial regulatory flexibility analysis.

[[Page 63483]]

    3. Small entities affected by the final rule. The ability to 
provide advertising disclosures in electronic form on or with an 
advertisement that is accessed by the consumer in electronic form, or 
to provide disclosures in electronic form if requested to do so by the 
consumer, applies to all depository institutions, regardless of their 
size. Accordingly, the final rule would reduce burden and compliance 
costs for small entities by providing relief, to the extent the E-Sign 
Act applies in these circumstances. The number of small entities 
affected by this final rule is unknown.
    4. Other federal rules. The Board believes no federal rules 
duplicate, overlap, or conflict with the final revisions to Regulation 
DD.
    5. Significant alternatives to the proposed revisions. The Board 
solicited comment on any significant alternatives that could provide 
additional ways to reduce regulatory burden associated with the 
proposed rule. Commenters did not suggest any significant alternatives 
to the proposed rule.

VIII. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (PRA) (44 
U.S.C. 3506; 5 CFR Part 1320 Appendix A.1), the Board reviewed the rule 
under the authority delegated to the Board by the Office of Management 
and Budget (OMB). The collection of information that is subject to the 
PRA by this final rulemaking is found in 12 CFR Part 230. 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 control number. The OMB control number is 7100-
0271.
    Section 269 of the Truth in Savings Act (TISA) (12 U.S.C. 4308) 
authorizes the Board to issue regulations to carry out the provisions 
of TISA. TISA and Regulation DD require depository institutions to 
disclose yields, fees, and other terms concerning deposit accounts to 
consumers at account opening, upon request, and when changes in terms 
occur. Depository institutions that provide periodic statements are 
required to include information about fees imposed, interest earned, 
and the annual percentage yield earned during those statement periods. 
The act and regulation mandate the methods by which institutions 
determine the account balance on which interest is calculated. They 
also contain rules about advertising deposit accounts. To ease the 
compliance cost (particularly for small entities), model clauses and 
sample forms are appended to the regulation. Depository institutions 
are required to retain evidence of compliance for twenty-four months, 
but the regulation does not specify types of records that must be 
retained. This information collection is mandatory. Since the Federal 
Reserve does not collect any information, no issue of confidentiality 
arises.
    Regulation DD applies to all depository institutions except credit 
unions. Credit unions are covered by a substantially similar rule 
issued by the National Credit Union Administration. The Federal Reserve 
accounts for the paperwork burden associated with Regulation DD only 
for Federal Reserve-supervised institutions. Federal Reserve supervised 
institutions are defined by Regulation DD as: State member banks, 
branches and agencies of foreign banks (other than federal branches, 
federal agencies, and insured state branches of foreign banks), 
commercial lending companies owned or controlled by foreign banks, and 
organizations operating under section 25 or 25A of the Federal Reserve 
Act. Other federal agencies account for the paperwork burden imposed on 
the depository institutions for which they have administrative 
enforcement authority.
    The annual burden is estimated to be 232,443 hours for 1,172 
Federal Reserve-supervised institutions that are deemed respondents for 
purposes of the PRA. As mentioned in the Preamble, on April 30, 2007, a 
notice of proposed rulemaking was published in the Federal Register (72 
FR 21155). No comments specifically addressing the burden estimate were 
received.
    The Federal Reserve has a continuing interest in the public's 
opinions of our collections of information. At 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: Secretary, Board of Governors of the Federal Reserve System, 
20th and C Streets, NW., Washington, DC 20551; and to the Office of 
Management and Budget, Paperwork Reduction Project (7100-0199), 
Washington, DC 20503.

List of Subjects in 12 CFR Part 230

    Advertising, Banks, banking, Consumer protection, Federal Reserve 
System, Reporting and record keeping requirements, Truth in Savings.


0
For the reasons set forth in the preamble, the Board amends 12 CFR part 
230 as set forth below:

PART 230--TRUTH IN SAVINGS (REGULATION DD)

0
1. The authority citation for part 230 continues to read as follows:

    Authority: 12 U.S.C. 4301 et seq.

0
2. Section 230.3 is amended by revising paragraph (a), to read as 
follows, and removing paragraph (g):


Sec.  230.3  General disclosure requirements.

    (a) Form. Depository institutions shall make the disclosures 
required by Sec. Sec.  230.4 through 230.6 of this part, as applicable, 
clearly and conspicuously, in writing, and in a form the consumer may 
keep. The disclosures required by this part may be provided to the 
consumer in electronic form, subject to compliance with the consumer 
consent and other applicable provisions of the Electronic Signatures in 
Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.). 
The disclosures required by Sec. Sec.  230.4(a)(2) and 230.8 may be 
provided to the consumer in electronic form without regard to the 
consumer consent or other provisions of the E-Sign Act in the 
circumstances set forth in those sections. Disclosures for each account 
offered by an institution may be presented separately or combined with 
disclosures for the institution's other accounts, as long as it is 
clear which disclosures are applicable to the consumer's account.
* * * * *

0
3. Section 230.4 is amended by republishing paragraph (a)(1)(i) and 
revising paragraphs (a)(1)(ii) and (a)(2)(i), to read as follows:


Sec.  230.4  Account disclosures.

    (a) Delivery of account disclosures--(1) Account opening. (i) 
General. A depository institution shall provide account disclosures to 
a consumer before an account is opened or a service is provided, 
whichever is earlier. An institution is deemed to have provided a 
service when a fee required to be disclosed is assessed. Except as 
provided in paragraph (a)(1)(ii) of this section, if the consumer is 
not present at the institution when the account is opened or the 
service is provided and has not already received the disclosures, the 
institution shall mail or deliver the disclosures no later than 10 
business days after the account is opened or the service is provided, 
whichever is earlier.
    (ii) Timing of electronic disclosures. If a consumer who is not 
present at the institution uses electronic means (for example, an 
Internet Web site) to open an account or request a service, the 
disclosures required under paragraph (a)(1) of this section must be 
provided before the account is opened or the service is provided.
    (2) Requests. (i) A depository institution shall provide account 
disclosures to a consumer upon request. If a consumer who is not 
present at the

[[Page 63484]]

institution makes a request, the institution shall mail or deliver the 
disclosures within a reasonable time after it receives the request and 
may provide the disclosures in paper form, or electronically if the 
consumer agrees.
* * * * *


Sec.  230.10  [Removed]

0
4. Section 230.10 is removed and reserved.

0
5. In Supplement I to Part 230, the following amendments are made:
0
a. In Section 230.4--Account disclosures, under (a)(2)(i), paragraphs 
3. and 4. are revised.
0
b. In Section 230.8--Advertising, under (a) Misleading or inaccurate 
advertisements, paragraph 9. is revised and new paragraph 11. is added.
0
c. In Section 230.8--Advertising, under (b) Permissible rates, 
paragraph 4. is removed.
0
d. In Section 230.8--Advertising, under (e)(1)(i), paragraph 1. is 
revised.
0
e. Section 230.10--Electronic Communication is removed and reserved.
    The amendments read as follows:

Supplement I to Part 230--Official Staff Interpretations

* * * * *

Section 230.4--Account Disclosures

(a) Delivery of Account Disclosures

* * * * *
    (a)(2) Requests
    (a)(2)(i)
* * * * *
    3. Timing for response. Ten business days is a reasonable time 
for responding to requests for account information that consumers do 
not make in person, including requests made by electronic means 
(such as by electronic mail).
    4. Use of electronic means. If a consumer who is not present at 
the institution makes a request for account disclosures, including a 
request made by telephone, e-mail, or via the institution's Web 
site, the institution may send the disclosures in paper form or, if 
the consumer agrees, may provide the disclosures electronically, 
such as to an e-mail address that the consumer provides for that 
purpose, or on the institution's Web site, without regard to the 
consumer consent or other provisions of the E-Sign Act. The 
regulation does not require an institution to provide, nor a 
consumer to agree to receive, the disclosures required by Sec.  
230.4(a)(2) in electronic form.
* * * * *

Section 230.8--Advertising

(a) Misleading or Inaccurate Advertisements

* * * * *
    9. Electronic advertising. If an electronic advertisement (such 
as an advertisement appearing on an Internet Web site) displays a 
triggering term (such as a bonus or annual percentage yield) the 
advertisement must clearly refer the consumer to the location where 
the additional required information begins. For example, an 
advertisement that includes a bonus or annual percentage yield may 
be accompanied by a link that directly takes the consumer to the 
additional information.
* * * * *
    11. Additional disclosures in connection with the payment of 
overdrafts. The rule in Sec.  230.3(a), providing that disclosures 
required by Sec.  230.8 may be provided to the consumer in 
electronic form without regard to E-Sign Act requirements, applies 
to the disclosures described in Sec.  230.11(b), which are 
incorporated by reference in Sec.  230.8(f).
* * * * *
    (e) Exemption for certain advertisements
    (e)(1) Certain media
    (e)(1)(i)
    1. Internet advertisements. The exemption for advertisements 
made through broadcast or electronic media does not extend to 
advertisements posted on the Internet or sent by e-mail.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, October 31, 2007.
Jennifer J. Johnson,
Secretary of the Board.
 [FR Doc. E7-21701 Filed 11-8-07; 8:45 am]
BILLING CODE 6210-01-P