[Federal Register Volume 74, Number 18 (Thursday, January 29, 2009)]
[Rules and Regulations]
[Pages 5584-5594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-31183]


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FEDERAL RESERVE SYSTEM

12 CFR Part 230

[Regulation DD; Docket No. R-1315]


Truth in Savings

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule; official staff commentary.

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SUMMARY: The Federal Reserve Board (Board) is amending Regulation DD, 
which implements the Truth in Savings Act, and the official staff 
commentary to the regulation to require all depository institutions to 
disclose aggregate overdraft fees on periodic statements, and not 
solely institutions that promote the payment of overdrafts. The final 
rule also addresses balance disclosures provided to consumers through 
automated systems. In addition, the Board is separately issuing a 
proposed rulemaking, published in today's Federal Register, to 
incorporate the notice requirements into Regulation E that were 
previously proposed under Regulation DD.

Dates: Effective Date: The rule is effective January 1, 2010.

FOR FURTHER INFORMATION CONTACT: Dana E. Miller, Attorney, or Ky Tran-
Trong, Counsel, Division of Consumer and Community Affairs, Board of 
Governors of the Federal Reserve System, Washington, DC 20551, at (202) 
452-3667. For users of Telecommunications Device for the Deaf (TDD) 
only, contact (202) 263-4869.

SUPPLEMENTARY INFORMATION: 

I. The Truth in Savings Act

    The Truth in Savings Act (TISA), 12 U.S.C. 4301 et seq., is 
implemented by the Board's Regulation DD (12 CFR part 230). The purpose 
of the act and regulation is to assist consumers in comparing deposit 
accounts offered by depository institutions, principally through the 
disclosure of fees, the annual percentage yield, the interest rate, and 
other account terms. An official staff commentary interprets the 
requirements of Regulation DD (12 CFR part 230 (Supp. I)). Credit 
unions are governed by a substantially similar regulation issued by the 
National Credit Union Administration (NCUA).
    The Board's authority under section 269(a) of TISA provides that 
its regulations may contain such classifications, differentiations, or 
other provisions, and may provide for such adjustments and exceptions 
for any class of accounts as, in the judgment of the Board, are 
necessary or proper to carry out the purposes of TISA, to prevent 
circumvention or evasion of the requirements of TISA, or to facilitate 
compliance with the requirements of TISA. 12 U.S.C. 4308. It is the 
purpose of TISA to require the clear and uniform disclosure of the fees 
that are assessable against deposit accounts, so that consumers can 
make a meaningful comparison between the competing claims of depository 
institutions with regard to deposit accounts. 12 U.S.C. 4301.
    In addition, under TISA and Regulation DD, account disclosures must 
be provided upon a consumer's request and before an account is opened. 
Institutions are not required to provide periodic statements; but if 
they do, the act requires that fees, yields, and other information be 
provided on the statements.
    TISA and Regulation DD contain rules for advertising deposit 
accounts. TISA and Regulation DD prohibit inaccurate or misleading 
advertisements, announcements, or solicitations, or those that 
misrepresent the deposit contract. TISA and Regulation DD also prohibit 
institutions from advertising an

[[Page 5585]]

account as free (or using words of similar meaning) if a regular 
service or transaction fee is imposed, if a minimum balance must be 
maintained, or if a fee is imposed when a customer exceeds a specified 
number of transactions.

II. Background on Overdraft Services and Regulatory Action to Date

    Historically, if a consumer attempted to engage in a transaction 
that would overdraw his or her deposit account, the consumer's 
depository institution used its discretion on an ad hoc basis to 
determine whether to pay the overdraft. If an overdraft was paid, the 
institution usually imposed a fee on the consumer's account.\1\ In 
recent years, many institutions have largely automated the overdraft 
payment process. Automation is used to set specific criteria for 
determining whether to honor overdrafts and set limits on the amount of 
the coverage provided.
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    \1\ The Board recognized this longstanding practice when it 
initially adopted Regulation Z in 1969 to implement the Truth in 
Lending Act (TILA). The regulation provided that these transactions 
are generally not covered under Regulation Z where there is no 
written agreement between the consumer and institution to pay an 
overdraft and impose a fee. See 12 CFR 226.4(c)(3). The treatment of 
overdrafts in Regulation Z was designed to facilitate depository 
institutions' ability to accommodate consumer's transactions on any 
ad hoc basis.
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    Overdraft services vary among institutions but often share certain 
common characteristics. In general, consumers who meet the 
institution's criteria are automatically enrolled in overdraft 
services.\2\ While institutions generally do not initially underwrite 
on an individual account basis when enrolling a consumer in the 
service, most institutions will review individual accounts periodically 
to determine whether the consumer continues to qualify for the service, 
and the amounts that may be covered. Most institutions disclose to 
consumers that the payment of overdrafts is discretionary, and that the 
institution has no legal obligation to pay any overdraft.
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    \2\ These criteria may include whether the account has been open 
a certain number of days, whether the account is in ``good 
standing,'' and whether deposits are regularly made to the account.
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    In the past, institutions generally provided overdraft coverage 
only for check transactions.\3\ In recent years, however, the service 
has been extended to cover overdrafts resulting from non-check 
transactions, including withdrawals at automated teller machines 
(ATMs), automated clearinghouse transactions, debit card transactions 
at point-of-sale, pre-authorized automatic debits from a consumer's 
account, telephone-initiated funds transfers, and online banking 
transactions.\4\
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    \3\ According to the FDIC's Study of Bank Overdraft Programs, 
nearly 70 percent of banks surveyed implemented their automated 
overdraft program after 2001. In addition, 81 percent of banks 
surveyed that operate automated programs allow overdrafts to be paid 
at ATMs and POS debit card terminals. See FDIC Study of Bank 
Overdraft Programs 8, 10 (November 2008) (available at:  http://www.fdic.gov/bank/analytical/overdraft/FDIC138_Report_FinalTOC.pdf) (FDIC Study). See also Overdraft Protection: Fair 
Practices for Consumers: Hearing before the House Subcomm. on 
Financial Institutions and Consumer Credit, House Comm. on Financial 
Services 110th Cong., at 72 (2007) (hereinafter, Overdraft 
Protection Hearing) (available at http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr0705072.shtml) (stating that as 
recently as 2004, 80 percent of banks still declined ATM and debit 
card transactions without charging a fee when account holders did 
not have sufficient funds in their account).
    \4\ See Interagency Guidance on Overdraft Protection Programs, 
70 FR 9127, Feb. 24, 2005, and OTS Guidance on Overdraft Protection 
Programs, 70 FR 8428, Feb. 18, 2005.
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    A flat fee is charged each time an overdraft is paid, regardless of 
the amount of the overdraft. Institutions commonly charge the same 
amount for paying the overdraft as they would if they returned the item 
unpaid. A daily fee also may apply for each day the account remains 
overdrawn.
    The Board, Federal Deposit Insurance Corporation (FDIC), NCUA and 
Office of the Comptroller of the Currency published guidance on 
overdraft protection programs in February 2005 (Joint Guidance) in 
response to concerns about aspects of the growing marketing, 
disclosure, and implementation of overdraft services. The Joint 
Guidance addressed three primary areas--safety and soundness 
considerations, legal risks, and best practices. The Office of Thrift 
Supervision (OTS) published similar guidance which focused on safety 
and soundness considerations and best practices (OTS Guidance). The 
best practices described in the Joint Guidance and the OTS Guidance 
focused on the marketing of overdraft services and the disclosure and 
operation of program features, including distinguishing actual 
available account balances from account balances that include overdraft 
protection amounts.
    In May 2005, the Board separately published revisions to Regulation 
DD and the official staff commentary to address concerns about the 
uniformity and adequacy of institutions' disclosure of overdraft fees 
generally, and the advertisement of overdraft services in particular. 
70 FR 29582, May 24, 2005.\5\ Under the May 2005 final rule, which 
became effective July 1, 2006, all depository institutions were 
required to specify in their account disclosures the categories of 
transactions for which an overdraft fee may be imposed. Depository 
institutions that promote the payment of overdrafts in an advertisement 
were required to include in such advertisements certain information 
about the costs associated with the service and the circumstances under 
which the institution would not pay an overdraft. These institutions 
were also required to disclose separately on their periodic statements 
the total amount of fees or charges imposed on the account for paying 
overdrafts and the total amount of fees charged for returning items 
unpaid. These disclosures were required to be provided for the 
statement period and for the calendar year-to-date.
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    \5\ A substantively similar rule applying to credit unions was 
issued separately by the NCUA. 71 FR 24568, Apr. 26, 2006.
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III. The Board's Proposed Revisions to Regulation DD

    In May 2008, the Board issued two proposals relating to overdraft 
services. These proposals were intended to address concerns that 
consumers may not adequately understand the costs of overdraft services 
or how overdraft services operate generally. The Board, along with the 
OTS and the NCUA, proposed to adopt substantive protections using their 
authority under the Federal Trade Commission Act (FTC Act).\6\ The 
Board also separately proposed to add a new Subpart D on overdraft 
services to the Board's Regulation AA, Unfair or Deceptive Acts or 
Practices (FTC Act Proposal) (12 CFR part 227). Among other provisions, 
the proposed rules would require institutions to provide consumers the 
right to opt out of their institutions' payment of overdrafts.
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    \6\ 73 FR 28904, May 19, 2008. For simplicity, this notice will 
refer only to the Board's proposal.
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    Pursuant to its authority under sections 263, 264, 268 and 269(a) 
of TISA,\7\ the Board also proposed new disclosure requirements under 
Regulation DD to facilitate consumers' ability to make informed 
judgments about the use of their accounts.\8\ The proposed revisions to 
Regulation DD addressed three types of overdraft disclosures. First, 
the Board proposed to revise Sec.  230.10 to establish format, content, 
and timing requirements for the notices given to consumers by their 
depository institution informing them about their right to opt out of 
their

[[Page 5586]]

institution's overdraft service. The proposal included a model opt-out 
form. Second, the Board proposed to extend to all institutions the 
requirement to disclose on periodic statements the aggregate dollar 
amounts charged for overdraft fees and for returned-item fees (for the 
statement period and the year-to-date). Currently, Regulation DD 
requires that only institutions that promote or advertise the payment 
of overdrafts must disclose aggregate amounts. Third, the Board 
proposed to require institutions that provide account balance 
information through an automated system to disclose the amount of funds 
available for the consumer's immediate use or withdrawal, without 
including additional funds the institution may provide to cover 
overdrafts. Under the proposal, institutions would be permitted to 
disclose a second account balance that includes funds available for 
paying overdrafts, provided the institution prominently discloses at 
the same time that this balance includes additional funds provided by 
the institution to cover overdrafts.
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    \7\ 12 U.S.C. 4302(e), 4303(b) & (d), 4307, 4308(a). While the 
NCUA did not separately propose amendments to its 12 CFR part 707 in 
May 2008, TISA requires the NCUA to promulgate regulations 
substantially similar to Regulation DD. Accordingly, the NCUA 
anticipates issuing proposed amendments to part 707 shortly after 
the Board's adoption of final rules under Regulation DD.
    \8\ 73 FR 28739, May 19, 2008.
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Overview of Public Comments

    The Board received over 600 comments on the Regulation DD proposal. 
Additionally, a number of comments submitted in connection with the FTC 
Act Proposal contained comments on the Regulation DD proposal. 
Commenters included individual consumers, consumer advocates, federal 
and state regulators and officials, large financial institutions, 
credit unions, community banks, industry trade associations, members of 
Congress, core systems providers, and vendors of overdraft services.
    Most commenters focused on the proposed model opt-out form.\9\ 
Consumer groups supported the proposed model form for notifying 
consumers of their right to opt out of overdraft services, but urged 
the Board to enhance the model form in various ways, including making 
the opt-out right more prominent. Most industry commenters stated that 
the proposed model form was unduly biased towards encouraging consumers 
to opt out and did not sufficiently explain that payment of overdrafts 
is discretionary. These commenters maintained that the model form could 
mislead consumers into believing that overdrafts will be paid in all 
cases.
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    \9\ Comments that addressed the merits of the substantive opt-
out right were provided in response to the May 2008 FTC Act 
Proposal. Many industry commenters argued that the substantive opt-
out right should be addressed under Regulation E. These commenters 
argued that consumers prefer to have their checks paid and an 
overdraft fee assessed rather than face possible negative 
consequences resulting from a bounced check.
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    Consumers and consumer groups supported extending the aggregate 
overdraft fee disclosures on periodic statements to all financial 
institutions. These commenters maintained that streamlined disclosures 
will ensure that consumers fully understand the consequences of 
overdrawing their account. However, most industry commenters objected 
to extending the aggregate fee disclosures to all institutions, stating 
the burden would outweigh the limited benefits of the disclosure.
    Consumer groups also supported the proposed requirement that 
institutions disclose account balance information without including any 
overdraft funds provided by the institution. Consumer groups urged the 
Board to apply the same requirement to balance information provided in 
person, by telephone or e-mail, or in Internet ``chats'' with bank 
personnel. Some consumer groups argued that institutions also should be 
prohibited from disclosing a second balance that includes these 
overdraft funds because it could mislead consumers. Industry response 
to the balance disclosure proposal was mixed; of those commenters that 
supported the proposal, some argued that it should only apply to 
proprietary ATMs. Other industry commenters requested the rule be 
revised to clarify what funds must be excluded from the balance (and 
from any second balance that might be disclosed).
    Subsequent to the issuance of the Regulation DD proposal, the Board 
used a testing consultant, Macro International, Inc. (Macro), to 
conduct qualitative consumer testing to assess consumer understanding 
of the model form. Macro also conducted qualitative consumer testing of 
various model opt-out language and aggregate fee tables. Except where 
relevant to this final rule, the testing results are discussed in the 
final FTC Act rule and the Board's Regulation E proposal, where 
appropriate. These rulemakings are published elsewhere in today's 
Federal Register.

IV. Summary of the Final Rule

    The following is a summary of the significant revisions to the 
regulation and the official staff commentary. The revisions are 
discussed in more detail below in the section-by-section analysis.
    The Board is adopting final revisions to Regulation DD and the 
official staff commentary to expand the requirement to disclose 
overdraft fees on periodic statements to apply to all institutions, and 
not solely to institutions that promote the payment of overdrafts. The 
final rule adds format requirements to help make the aggregate fee 
disclosures more effective and noticeable to consumers.
    In addition, the final rule requires an account balance disclosed 
to a consumer through any automated system (including, but not limited 
to, an ATM, Internet Web site, or telephone response system) to exclude 
additional amounts that the institution may provide or that may be 
transferred from another account of the consumer to cover an item where 
there are insufficient or unavailable funds in the consumer's account. 
The rule is designed to ensure that consumers are not confused or 
misled about the available amount of funds in their account when they 
request their account balance. The final rule permits the institution 
to disclose an additional balance that includes funds provided pursuant 
to a discretionary overdraft service or a line of credit, or funds that 
could be transferred from a consumer's linked individual or joint 
account, so long as the institution prominently states that the balance 
includes these additional amounts.
    Based on the Board's review of comments received and consumer 
testing results, the Board believes it is appropriate to place opt-out 
requirements under the Board's authority under the Electronic Fund 
Transfer Act and Regulation E.\10\ Thus, a revised substantive opt-out 
is set forth in a proposal under Regulation E. The Regulation E 
proposal also proposes, in the alternative, to require institutions to 
provide customers an opt-in to payment of overdrafts for ATM and debit 
transactions, and includes a proposed model opt-in notice. The 
Regulation E proposal would also incorporate the content and timing 
requirements for consumer opt-out (and opt-in) notices. The new 
proposed model forms have been modified to conform to the revised 
substantive opt-out right, and reflect consumer testing results and 
commenter suggestions.
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    \10\ These comments and the testing results are more fully 
discussed in the final FTC Act rule and the Board's Regulation E 
proposal published elsewhere in today's Federal Register, where 
appropriate.

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[[Page 5587]]

V. Section-by-Section Analysis

Section 230.11 Additional Disclosure Requirements Regarding Overdraft 
Services

11(a) Disclosure of Total Fees on Periodic Statements
Applicability of Aggregate Fee Disclosures
    Although periodic statements are not required under TISA, 
institutions that provide such statements are required to disclose fees 
or charges imposed on the account during the statement period. See 12 
U.S.C. 4307(3) and 12 CFR 230.6(a)(3). Further, Sec.  230.11(a) of 
Regulation DD requires institutions that promote the payment of 
overdrafts in an advertisement to provide on periodic statements the 
aggregate dollar amount totals for overdraft fees and for returned item 
fees, both for the statement period as well as for the calendar year-
to-date. Pursuant to its authority under Sections 268 and 269 of TISA, 
the Board proposed to expand Sec.  230.11(a) to require all 
institutions, regardless of whether they promote the payment of 
overdrafts, to disclose the aggregate fee information. The revision was 
intended to provide all consumers that use discretionary overdraft 
services, consistent with the purposes of TISA, with additional 
information about fees to help them better understand the costs 
associated with their accounts. The proposed rule also added format 
requirements to help make the aggregate fee disclosures more effective 
and noticeable to consumers. The final rule generally adopts the 
proposal, with certain clarifications to reflect the expanded scope of 
the rule. The final rule deletes as unnecessary certain of the examples 
in existing Sec.  230.11(a)(2) of communications that would not trigger 
the aggregate fee disclosure requirement. As under the current rule, 
institutions must provide these totals for both the statement period 
and the calendar year-to-date. See Sec.  230.11(a)(2). In addition, the 
Board is adopting, generally as proposed, commentary clarifying that 
the aggregate fee total does not include fees for transferring funds 
from another account of the consumer to avoid an overdraft, or fees 
charged under a service subject to the Board's Regulation Z (12 CFR 
part 226). See comment 11(a)(1)-2.
    Consumers and consumer groups supported extending the aggregate 
overdraft fee disclosures on periodic statements to all financial 
institutions because, in their view, most institutions systematically 
cover overdrafts whether they promote the service or not.
These commenters asserted that consistent disclosures will ensure that 
consumers fully understand the consequences of overdrawing their 
account. These commenters stated that the aggregate fee disclosures 
would help consumers to better manage their bank accounts and to 
understand the total costs they have incurred over time. In addition, 
these commenters believed that the aggregate disclosures may encourage 
consumers to explore other potentially lower-cost alternatives that may 
be available to them.
    In contrast, most industry commenters objected to extending the 
aggregate fee disclosures to all institutions. These commenters stated 
that revisions to periodic statements would be costly and would require 
extensive and time-consuming programming changes. Industry commenters 
also argued that the burden would outweigh the limited benefits of the 
disclosure; some argued that aggregate fee information would benefit 
only a limited number of consumers who incur substantial fees.
    The final rule is intended to provide all consumers who use 
discretionary overdraft services with additional information to help 
them better understand the overdraft and NSF (returned item) costs 
associated with their accounts. The aggregate fee disclosures will 
benefit those consumers who overdraw their accounts with some frequency 
but who do not currently receive aggregate fee disclosures because 
their institution does not promote its overdraft service.
    In addition, the Board believes the final rule will promote greater 
transparency about the terms and costs of overdraft services for all 
institutions. Under the current rule, institutions that do not promote 
their overdraft service may be reluctant to provide information about 
the service out of concern that such disclosures might trigger the 
aggregate fee disclosure requirements. The Board also believes the rule 
will create consistency in disclosures and will eliminate compliance 
challenges inherent in a regulatory scheme based on a ``promoting'' or 
``marketing'' distinction.
    Several industry commenters argued that overdraft fees are already 
disclosed in the deposit agreement or fee schedule, and questioned why 
these types of fees deserve special attention on the statement compared 
to other types of account fees. Others argued that consumers already 
receive itemized fees on their periodic statements. Some industry 
commenters argued that the emphasis on overdraft and returned item fees 
would detract from other account charges.
    The Board believes this requirement is appropriate because 
overdraft and returned item fees are not as predictable as many other 
types of account fees. Consumers cannot always know when settlement on 
any one item will occur (particularly relative to other transactions, 
where an institution processes items using different methods). Also, 
balance inquiries may not always contain real-time balance information; 
therefore, consumers may not realize that one overdrawn item could 
trigger overdrafts on other transactions, and thus may not be able to 
predict the total fees that will be charged for any one overdraft 
occurrence. When there are multiple overdrafts, fee amounts may be 
significant, even though each item may represent a relatively small 
dollar amount.\11\ In addition, a small segment of consumers incur the 
majority of overdraft fees.\12\ The aggregate fee disclosures will 
benefit these consumers by showing them the total expenditures on 
overdraft fees for the statement period and year, which may encourage 
them to explore alternatives that might be less costly.
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    \11\ Eric Halperin, Lisa James & Peter Smith, Debit Card Danger, 
Ctr. For Responsible Lending at 25 (consumers pay $1.94 in fees for 
every one dollar borrowed to cover a debit card POS overdraft). The 
FDIC's Study of Bank Overdraft Programs found that the median 
overdraft amount for debit card overdrafts was $20, and the median 
overdraft amount for ATM transactions was $60. FDIC Study of Bank 
Overdraft Programs 79 (Nov. 2008), available at: http://www.fdic.gov/bank/analytical/overdraft/FDIC138_Report_FinalTOC.pdf. Overdraft fees have increased significantly over the 
last decade. See Federal Reserve Bulletin, Retail Fees of Depository 
Institutions, 1997-2001, 405, 409, available at: http://www.federalreserve.gov/pubs/bulletin/2002/0902lead.pdf (average 
overdraft fee in 1997: $16.51); Bankrate, 2007 Courtesy Overdraft 
Study, available at: http://www.bankrate.com/brm/news/chk/20071219_overdraft_survey_main_a1.asp (average overdraft fee in 2007: 
$29). See also Bank Fees: Federal Banking Regulators Could Better 
Ensure that Consumers Have Required Disclosure Documents Prior to 
Opening Checking or Savings Accounts, GAO Report 08-281 (January 
2008) (11% increase from 2000 to 2007, according to one estimate).
    \12\ See, e.g., Jacqueline Duby, Eric Halperin & Lisa James, 
High Cost and Hidden From View: The $10 Billion Overdraft Loan 
Market, Ctr. For Responsible Lending (May 26, 2005).
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    A few industry commenters requested that, in lieu of a year-to-date 
fee total, the Board permit a rolling twelve-statement-cycle total, 
because the latter would be more useful for consumers. However, 
consumer testing on both credit card and overdraft disclosures 
indicated that consumers noticed year-to-date cost figures, and that 
they would find the numbers helpful in making financial decisions. The 
Board further

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notes that some consumers are already receiving year-to-date totals 
from institutions currently subject to the rule; thus, requiring year-
to-date disclosures for all institutions will promote consistency of 
disclosure across institutions. The Board is also adopting, elsewhere 
in today's Federal Register, requirements to disclose year-to-date 
interest charges and fees under Regulation Z. Consistency among the 
various consumer disclosure regulations should facilitate consumer 
understanding of disclosures. Thus, the final rule requires totals for 
both the statement period and the calendar year-to-date. See Sec.  
230.11(a)(2).
    Several industry commenters asked whether an institution must 
provide an aggregate fee disclosure if the consumer has not been 
charged an overdraft or returned item fee for the year-to-date. Section 
230.11(a)(1) states that a depository institution must separately make 
the fee disclosures on each periodic statement, as applicable (emphasis 
added). Thus, if a consumer has not incurred fees since the beginning 
of the year (or statement period), the institution is not required to 
provide a ``$0'' aggregate total for the year-to-date (or statement 
period). However, institutions may, at their option, provide aggregate 
fee disclosures even if a consumer has not been charged fees since the 
beginning of the year or for a particular statement period.
    Because the final rule expands the applicability of the aggregate 
fee disclosures to all financial institutions, certain existing staff 
comments addressing institutions that promote overdraft services 
require modification or are no longer applicable. Thus, comment 
11(a)(3)-1 has been revised, and comment 11(a)(5)-1 has been deleted.
Format of Aggregate Fee Disclosures
    Pursuant to the Board's authority under TISA Section 269, the final 
rule also adds proximity and format requirements which are intended to 
enhance the effectiveness of the disclosures and to make them more 
noticeable to consumers. Board staff reviewed current periodic 
statement disclosures for institutions that promote overdraft services. 
This review indicated that the aggregate fee totals are often disclosed 
in a manner that may not be effective in informing consumers of the 
totals.\13\ Accordingly, proposed Sec.  230.11(a)(3) stated that 
aggregate fee disclosures must be provided in close proximity to the 
fees identified under Sec.  230.6(a)(3). For example, the aggregate fee 
totals could appear immediately after the transaction history on the 
periodic statement reflecting the fees that have been imposed on the 
account during the statement period. The proposed rule also provided 
that the information must be presented in a tabular format similar to 
the proposed interest charge and total fees disclosures under the 
Board's June 2007 proposal under Regulation Z. See 72 FR at 32996, 
33052. The proposal requested comment on two alternatives of Sample 
Form B-11, which illustrates how institutions should provide the 
aggregate cost information on their periodic statements.
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    \13\ For example, several statements contained inconsistent 
formatting, or fee totals were included at the end of the statement 
and not highlighted in a manner noticeable to consumers.
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    Consumer groups supported the proposed proximity and formatting 
requirements. These commenters maintained that the requirement to place 
the aggregate fee disclosures in close proximity to the transaction 
history would better enable consumers to understand how their current 
account activity may have contributed to a history of overdrafts. They 
also supported the proposed tabular format.
    Industry commenters, however, objected to the proximity and fee 
table requirement. They argued that it would require extensive, costly 
systems changes to provide a fee table in close proximity to the 
transaction history. Some industry commenters also argued that a 
proximity requirement is subjective and subject to litigation risk.
    As described above, Board staff's review of current periodic 
statement disclosures for institutions that promote overdraft services 
showed that in some cases, fee tables were not placed in a location 
noticeable to consumers. Thus, the Board believes that uniform 
proximity requirements are necessary to enable consumers to easily find 
fee information so that, consistent with the purposes of TISA, they 
better understand the costs of using the service. The proposed 
proximity and format requirements were informed by the Board's consumer 
testing undertaken in the context of credit card disclosure 
requirements under Regulation Z. In that testing, consumers reviewing 
transactions identified on their periodic statements consistently 
noticed totals for fees and interest charges when they were grouped 
together with transactions. See 72 FR at 32996. Additional consumer 
testing was conducted subsequent to the May 2008 proposal on overdraft 
fee disclosures and confirmed that aggregate cost disclosures for 
overdraft and returned item fees were more noticeable to consumers when 
grouped together with the itemized fees.\14\ Further, the testing 
indicated that consumers tend to notice fee disclosures when expressed 
in tabular form. Consumer testing on the two proposed tabular format 
alternatives demonstrated that the first alternative, a clear graphic 
disclosure, was the preferred alternative. Consumers found it easiest 
to identify and digest the relevant fees in a column and row format. 
Thus, the Board is adopting the first proposed alternative, renumbered 
as Sample Form B-10, to illustrate how an institution should provide 
the aggregate cost data. Aggregate fee disclosures must be provided 
using a format substantially similar to Sample Form B-10. See Sec.  
230(11)(a)(3).
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    \14\ See Review and Testing of Overdraft Notices, Macro 
International, December 8, 2008.
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    Despite their general support of the aggregate fee disclosures, 
consumer groups nonetheless urged the Board to find that overdraft 
services are credit under Regulation Z so that consumers would be 
provided disclosures containing an effective APR figure. The Board 
believes that requiring an effective APR is not necessary to alert 
consumers to the costs of the service. Moreover, the Board believes the 
proposed aggregate fee table will be of more value than an effective 
APR in the overdraft context. Consumer testing in the credit card 
context showed that consumers preferred seeing costs reflected as 
amount totals rather than expressed as an effective APR.\15\
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    \15\ For this reason, the Board is revising Regulation Z to 
replace the disclosure of the effective APR with a tabular 
disclosure of the proposed interest charge and total fees.
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    Several industry commenters requested that the Board permit some 
flexibility in the language used in the aggregate fee table for the 
total returned item fees, because their customers are more familiar 
with language such as ``NSF fee'' rather than ``returned item fee.'' 
The Board has revised comment 11(a)(1)-3 to clarify that institutions 
may use terminology such as ``returned item fee'' or ``NSF fee'' to 
describe the fees for returning items unpaid.
    Several industry commenters also requested clarification on how to 
display fees that have been refunded. Comment 11(a)(1)-6, which has 
been redesignated as comment 11(a)(1)-4 in the final rule, addresses 
this issue where an institution provides a statement for the current 
period reflecting that fees imposed during a previous period were 
waived and credited to the account. This comment provides that, in 
these circumstances, institutions may, but are not required to, reflect 
the adjustment in the total for the calendar year-to-date

[[Page 5589]]

and in the applicable statement period. For example, if an institution 
assesses a fee in January and refunds the fee in February, the 
institution could disclose a year-to-date total reflecting the amount 
credited, but it should not affect the total disclosed for the February 
statement period, because the fee was not assessed in the February 
statement period. However, because some institutions may assess and 
then waive and credit a fee within the same statement cycle, the 
comment has been revised to clarify that, in such a case, the 
institution may reflect the adjustment in the total disclosed for fees 
imposed during the current statement period and for the total for the 
calendar year-to-date. In this case, if the institution assesses and 
waives the fee in February, the February fee total could reflect a 
total net of the waived fee.
11(b) Advertising Disclosures for Overdraft Services
    Section 230.11(b)(2) lists the types of communications about the 
payment of overdrafts that are not subject to additional advertising 
disclosures under Sec.  230.11(b)(1). The final rule expands the list 
in Sec.  230.11(b)(2) to include an opt-out or opt-in notice regarding 
the institution's payment of overdrafts or provision of discretionary 
overdraft services. See Sec.  230.11(b)(2)(xii).
11(c) Disclosure of Account Balances
    Section 230.11(b)(1) currently requires institutions that promote 
the payment of overdrafts to include certain disclosures in their 
advertisements about the service to avoid confusion between overdraft 
services and traditional lines of credit. The May 2005 final rule 
provided examples of institutions promoting the payment of overdrafts 
in the staff commentary.\16\ In particular, the commentary stated that 
an institution must include the additional advertising disclosures if 
it ``discloses an overdraft limit or includes the dollar amount of an 
overdraft limit in a balance disclosed on an automated system, such as 
a telephone response machine, ATM screen or the institution's Internet 
site.'' \17\ To facilitate responsible use of overdraft services and 
ensure that consumers receive accurate information about their account 
balances, the May 2008 Regulation DD Proposal would have prohibited 
institutions from including funds the institution may provide to cover 
an overdraft item in a consumer's account balance disclosed through any 
automated system in response to a balance inquiry. The proposal would 
have permitted an institution to disclose a second balance that 
includes these additional funds, if the institution prominently 
indicates these funds are included. The rule as adopted has been 
revised to clarify that the balance disclosed may not include any funds 
the institution may provide to cover an overdraft, funds that will be 
paid by the institution under a service subject to the Board's 
Regulation Z (12 CFR part 226), or funds transferred from another 
account of the consumer. The final rule permits an institution to 
disclose another balance that includes these additional funds, so long 
as the institution prominently states that the balance includes such 
funds.
---------------------------------------------------------------------------

    \16\ See comment 11(b)-1.
    \17\ Comment 11(b)-1.iii.
---------------------------------------------------------------------------

    Industry response to the proposal was mixed. Some supported the 
rule as proposed; for example, one national community bank trade 
association stated that a common consumer complaint has been 
misunderstanding whether an account has sufficient funds to cover a 
transaction. This commenter believed that requiring the bank to 
disclose the available balance would help avoid customer confusion. 
Others argued for limiting the scope of coverage to balances provided 
at proprietary ATMs; some opposed the rule altogether as too 
burdensome. Some commenters requested that the rule be revised to 
clarify what funds must be excluded from the balance.
    Consumer groups supported the proposed rule as a significant 
protection for consumers. These commenters argued that disclosing a 
balance without overdraft funds provided by the institution would equip 
consumers with the knowledge necessary to make informed financial 
decisions. However, these commenters urged the Board to apply the same 
requirement to balance information provided during communications with 
bank personnel. Some consumer groups also urged the Board to prohibit 
financial institutions from disclosing a second account balance.
    The Board is adopting a revised rule, pursuant to its authority in 
TISA section 263(e) to prohibit misleading or inaccurate 
advertisements, announcements, or solicitations relating to a deposit 
account. Under Sec.  230.11(c) of the final rule, if an institution 
discloses balance information through an automated system, it must 
disclose an account balance that excludes funds that the institution 
may provide to cover an overdraft in its discretion, funds that will be 
paid by the institution under a service subject to the Board's 
Regulation Z (12 CFR part 226), or funds transferred from another 
account of the consumer. For example, although an institution may add a 
$500 cushion to the consumer's account balance when determining whether 
to pay an overdrawn item, under the final rule, the additional $500 
could not be included in the balance provided to the consumer through 
an automated system.
    The proposed rule covered account balances disclosed in response to 
a consumer's inquiry. However, balances may also be disclosed to the 
consumer even if the consumer has not specifically requested a balance. 
For example, if a consumer withdraws funds at an ATM from his or her 
checking account, the receipt for that transaction may also include the 
consumer's account balance. Or, a consumer may receive an account 
balance when requesting a transaction history online. The Board 
believes the requirement to provide a balance not supplemented by 
overdraft funds should apply equally in these circumstances to ensure 
consumers are given an accurate account balance. Thus, the final rule 
deletes the reference to the consumer's inquiry.
Funds Included In and Excluded From Balance
    Several industry commenters argued that the reference in proposed 
Sec.  230.11(c) to ``funds that are available for the consumer's 
immediate use or withdrawal'' is superfluous and adds unnecessary 
complexity to the rule. They contended that this language could lead to 
litigation over what is actually ``available.'' Some commenters 
suggested that, to provide greater certainty, the rule should focus on 
the funds that must be excluded from the balance, rather than on the 
funds that should be included. The proposed language was intended to 
provide clarity that institutions should not provide a balance 
including overdraft funds, so that a consumer receives an accurate 
disclosure of his or her balance to help the consumer better manage his 
or her account. The rule was not intended to define what funds are 
available pursuant to Regulation CC. Accordingly, to avoid any 
ambiguity, Sec.  230.11(c) has been revised to delete the language 
``funds that are available for the consumer's immediate use or 
withdrawal.'' As discussed below, the final rule does not require 
disclosures of real-time balances nor otherwise affect what funds an 
institution considers to be available.
    Several other industry commenters requested clarification as to 
whether institutions may include in the balance disclosure amounts 
available under a consumer's overdraft line of credit with

[[Page 5590]]

the institution, and how to treat funds from a linked account (such as 
a savings account). As described above, the rule was intended to give 
consumers an accurate idea of their balance. The Board is concerned 
that permitting a balance to include funds available under a consumer's 
overdraft line of credit or through a transfer from a consumer's 
savings or other linked account would cause consumer confusion--
comparable to the inclusion of an overdraft cushion--as to the amount a 
consumer may withdraw or spend without incurring an overdraft. Thus, 
Sec.  230.11(c) has been revised to clarify that an institution must 
disclose a balance that does not include additional amounts that the 
institution may provide in its discretion to cover an overdraft, funds 
that will be paid by the institution under a service subject to the 
Board's Regulation Z (12 CFR part 226), or funds transferred from 
another account of the consumer.
    Proposed comment 11(c)-1 clarified that the institution may, but 
need not, include in the balance funds that are deposited in the 
consumer's account, such as from a check, but that are not yet made 
available for withdrawal in accordance with the funds availability 
rules under the Board's Regulation CC (12 CFR part 229). Similarly, the 
comment stated that the balance may, but need not, include any funds 
that are held by the bank to satisfy a prior obligation of the consumer 
(for example, to cover a hold for an ATM or debit card transaction that 
has been authorized but for which the bank has not settled). The 
comment is generally adopted as proposed.
    Some consumer groups argued that the disclosed account balance 
should not be permitted to reflect deposits not yet available under the 
institution's funds availability policy, or debit card holds. They 
argued that inclusion of such funds misstates the balance and can cause 
consumers to incur overdraft fees. In contrast, industry commenters 
supported proposed comment 11(c)-1 based on operational concerns. These 
commenters agreed that the methods used by depository institutions for 
determining the balances that are available for the consumer's use or 
withdrawal may vary significantly by institution. Industry commenters 
also agreed that the disclosed balance should be able to include funds 
that have deposited but not yet cleared.
    Proposed comment 11(c)-1 reflected the Board's intent not to 
require institutions to reconfigure their internal systems to provide 
``real-time'' balance disclosures in order to comply with the balance 
disclosure provision. For example, some institutions may only be able 
to provide a balance to the ATM network that reflects the ledger 
balance for the consumer's account at the end of the previous day after 
the institution has completed its processing activities. Section 
230.11(c) does not require institutions to provide a ``real-time'' 
balance, but only prohibits institutions from including additional 
overdraft funds such as a discretionary overdraft cushion in the 
disclosed balance.
Additional Balances
    The February 2005 Joint Guidance stated that if more than one 
balance is provided, the institution should ``separately (and 
prominently) identify the balance without the inclusion of overdraft 
protection.'' 70 FR at 9132. Proposed Sec.  205.11(c) incorporated this 
portion of the Joint Guidance by providing that the institution may, at 
its option, disclose a second account balance that includes the 
additional overdraft funds, if the institution prominently indicates 
that this balance includes funds provided by the institution to cover 
overdrafts.\18\
---------------------------------------------------------------------------

    \18\ The FDIC Study found that of the 374 study population banks 
that extended their overdraft service to ATM withdrawals, most 
excluded the overdraft limit from ATM balances. Of the remaining 
banks, 16.1% displayed the overdraft limit separately from the 
account balance at proprietary ATMs (7.0% at non-proprietary ATMs), 
and 7.1% combined the overdraft limit with the account balance in 
the only balance displayed to customers at proprietary ATMs (5.6% at 
non-proprietary ATMs). See FDIC Study at 38-39.
---------------------------------------------------------------------------

    Some consumer groups urged the Board to prohibit financial 
institutions from disclosing this second account balance. These 
commenters argued that disclosure of a second balance could be 
confusing to consumers, who may not realize they will incur fees by 
accessing the overdraft funds. One bank trade association also 
questioned whether permitting disclosure of a second balance would be 
particularly useful, although it supported including the option for 
banks to provide that information.
    The final rule permits, but does not require, disclosure of an 
additional balance that includes these additional overdraft funds, 
which may be useful to some consumers. For example, consumers may wish 
to receive a balance disclosure that indicates how much overdraft 
coverage they have available, so that they can make an informed 
decision as to whether or not to go forward with a transaction. The 
final rule thus permits an additional balance to be disclosed, so long 
as the institution prominently states that the balance contains 
additional overdraft funds. To address commenter concerns that 
consumers will be confused if multiple balances are disclosed to them 
on an automated system, new comment 11(c)-2 has been added to provide 
guidance on how institutions can appropriately identify that an 
additional balance includes overdraft funds. (Proposed comment 11(c)-2, 
described below, has been renumbered as comment 11(c)-3.) New comment 
11(c)-2 explains that the institution may not simply state, for 
instance, that the second balance is the consumer's ``available 
balance,'' or contains ``available funds.'' Rather, the institution 
should provide enough information to convey that the second balance 
includes these overdraft amounts. For example, the institution may 
state that the balance includes ``overdraft funds.''
    Further, the Board notes that Sec.  230.11(c) does not affect the 
existing application of the advertising disclosure rules of Sec.  
230.11(b). Thus, to the extent an institution includes the dollar 
amount of a discretionary overdraft limit in a disclosed balance on an 
automated system, the disclosure will continue to be considered an 
advertisement promoting the payment of overdrafts. See comment 11(b)-
1.iii. Therefore, the disclosures required by Sec.  230.11(b)(1) 
(including the amount of overdraft fees) must be provided. The existing 
exemption in Sec.  230.11(b)(2) from these disclosures for ATM receipts 
also continues to apply. However, under the final rule, any receipt 
containing a second balance including overdraft funds must prominently 
state that those funds are included and may not simply label the second 
balance as the consumer's ``available balance'' or ``available funds.'' 
See comment 11(c)(2).
    Many institutions currently provide consumers the ability to opt 
out of or opt into their overdraft service. Where a consumer has opted 
out of the institution's overdraft service (or, where an institution 
offers an opt-in and the consumer has not opted in), comment 11(c)-2 
also clarifies that any additional balance disclosed may not include 
funds provided under their institution's service (because presumably 
the consumer would not have access to those funds). For example, if a 
consumer has $200 in his or her account, and has opted out of the 
institution's overdraft service, a second balance may not reflect the 
additional $100 that the institution might otherwise have provided 
under the service. (However, if the consumer is not enrolled in the 
institution's overdraft service but has a line of credit or other 
overdraft alternative, the

[[Page 5591]]

additional balance may continue to include funds available pursuant to 
that other alternative.)
    Similarly, some institutions may provide consumers the ability to 
opt out of overdraft services for ATM and debit card transactions. In 
this instance, the institution would continue to offer the overdraft 
service for other transactions, such as check transactions. Because the 
institution's overdraft service would be available for some, but not 
all transactions, comment 11(c)-2 states that if an institution 
discloses an additional balance where a consumer has opted out of some, 
but not all of the institution's overdraft services, the institution 
may choose whether or not to include the overdraft funds in the 
balance. However, if the institution chooses to include the overdraft 
funds in the additional balance, it must indicate that the additional 
overdraft funds are not available for all transactions.
Automated Systems
    Proposed comment 11(c)-2 explained that the balance disclosure 
requirement applies to any automated system through which the consumer 
requests a balance, including, but not limited to, a telephone response 
machine (such as an interactive voice response system), at an ATM (both 
on the ATM screen and on receipts), or on an institution's Internet 
site (other than live chats with an account representative). Proposed 
comment 11(c)-2 also clarified that the reference to ATMs applies 
equally to ATMs owned or operated by a consumer's account-holding 
institution, as well as to ``foreign'' ATMs, including those operated 
by non-depository institutions. Some industry commenters supported the 
proposed comment, stating that it reflected the current practice at 
some institutions. However, other industry commenters argued that the 
account balance disclosure requirement should only apply to disclosures 
at proprietary ATMs. They stated that if the institution makes two 
balances available to the ATM network, one for balances and one for 
authorizations, it would have no control over what balances are 
displayed by a foreign ATM.
    The comment, renumbered as comment 11(c)-3, is adopted with minor 
adjustments. The balance disclosure requirements apply to account 
balances an institution discloses through any ATM. Because account-
holding institutions have discretion with respect to the balances they 
provide to an ATM network, they ultimately determine what additional 
funds (whether from the institution's discretionary overdraft service, 
an overdraft line of credit, or a linked account) are included in those 
balances (i.e., the institution has the discretion to provide to the 
network only balances that exclude overdraft funds). Thus, the Board 
believes that it is appropriate to include the information that 
account-holding institutions disclose through foreign ATMs within the 
scope of the rule.
    Several industry commenters requested clarification that the rule 
applies only where a financial institution chooses to provide balance 
information, or when an ATM or other electronic terminal has the 
capability to provide a balance. The final rule applies only to the 
extent balance information is offered on an automated system; it does 
not require financial institutions or other automated systems owners to 
provide balance information on automated systems available to 
consumers.
    Consumer groups commented that the Board should apply the balance 
disclosure requirement to information provided during discussions with 
bank personnel, whether in person, by telephone or e-mail, or over the 
Internet. They argued that many consumers obtain account balances 
directly from bank personnel, and that banks should be required to 
instruct employees to provide consumers with an account balance that 
does not include additional funds. Nonetheless, the Board continues to 
believe that the compliance burden and enforcement challenges 
associated with monitoring individual conversations and responses would 
outweigh the benefits provided by such a rule. Therefore, the final 
rule applies only to balance information disclosed through an automated 
system.

VI. Regulatory Flexibility Analysis

    The Board has prepared a final regulatory flexibility analysis as 
required by the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) 
(RFA). The RFA 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 proposed rule. 
TISA was enacted, in part, for the purpose of requiring clear and 
uniform disclosures regarding deposit account terms and fees assessable 
against these accounts. Such disclosures allow consumers to make 
meaningful comparisons between different accounts and also allow 
consumers to make informed judgments about the use of their accounts. 
12 U.S.C. 4301. TISA requires the Board to prescribe regulations to 
carry out the purpose and provisions of the statute. 12 U.S.C. 
4308(a)(1).
    The Board is revising Regulation DD to expand the current 
requirements for disclosing totals for overdraft and returned item fees 
on periodic statements. The requirement is expanded to all institutions 
and not solely to institutions that promote the payment of overdrafts. 
Thus, all consumers that use overdraft services will receive additional 
information about fees to help them better understand the costs 
associated with their accounts, regardless of whether the service is 
marketed to them. The Board is also revising Regulation DD to address 
balance disclosures provided to consumers through automated systems.
    2. Significant issues raised by comments in response to the initial 
regulatory flexibility analysis. In accordance with section 3(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.
    3. Description and estimate of classes of small entities affected 
by the final rule. Approximately 12,356 depository institutions in the 
United States that must comply with TISA have assets of $175 million or 
less and thus are considered small entities for purposes of the RFA, 
based on June 30, 2008, Call Report data. Approximately 5,075 are 
institutions that must comply with the Board's Regulation DD; 
approximately 7,281 are credit unions that must comply with NCUA's 
Truth in Savings regulations which must be substantially similar to the 
Board's Regulation DD.
    The Board believes that many small depository institutions will not 
be significantly impacted by the final rule because many of these 
institutions already have required systems in place for compliance with 
the rule, either in conformity with the May 2005 Regulation DD 
amendments or the February 2005 Joint Guidance containing similar 
obligations. Under the rule, all small depository institutions that did 
not previously revise their periodic statement

[[Page 5592]]

disclosures to comply with the prior May 2005 Regulation DD amendments 
because they did not promote their overdraft service will need to do so 
to reflect aggregate overdraft and aggregate returned-item fees for the 
statement period and year-to-date. Those institutions that previously 
revised their periodic statements may also need to reprogram their 
automated systems to include the specified fee table format in the 
statement. Institutions may also have to reprogram their automated 
systems to disclose balances that exclude additional funds the 
institution may provide to cover an overdraft, if the institution has 
not done so as previously recommended by the February 2005 Joint 
Guidance, and to exclude funds paid by the institution under a service 
subject to Regulation Z, or funds transferred from another account held 
individually or jointly by a consumer. To the extent institutions 
disclose an additional balance that includes overdraft funds, 
institutions may also have to reprogram their systems to prominently 
state that the balance includes those additional overdraft funds, as 
described in the preamble.
    4. Recordkeeping, reporting, and other compliance requirements. As 
discussed in more detail above, institutions that have not previously 
provided total dollar amounts of fees imposed on the account for paying 
overdrafts and total dollar amounts of fees for returning items unpaid 
will be required to do so for both the statement period and the 
calendar year-to-date. Institutions that disclose balances through any 
automated system must also, at a minimum, disclose balances that are 
not supplemented by additional funds that may be provided to cover an 
overdraft. For example, the balance must exclude funds that will be 
paid by the institution under a service subject to Regulation Z, and 
funds transferred from another account held individually or jointly by 
a consumer.
    5. Steps taken to minimize the economic impact on small entities. 
The factual, policy, and legal reasons for selecting the alternatives 
adopted and why other significant alternatives were not adopted, are 
described above in the SUPPLEMENTARY INFORMATION. For example, the 
Board has provided more specific commentary on the balance disclosure 
rule in response to comments received in order to ease compliance 
burdens. In addition, based on the Board's review of comments received 
and consumer testing results, the Board is not adopting the proposed 
format, content and timing requirements regarding a consumer's right to 
opt out of overdraft coverage under Regulation DD, and instead is 
proposing these requirements under Regulation E (as well as an 
alternative opt-in proposal), revised in response to commenter 
suggestions. An initial RFA analysis is included in that proposal.
    The Board is also providing an implementation period that responds 
to commenters' concerns about the time needed to comply with the final 
rule. The Board believes the extended effective date will decrease 
costs for small entities by providing them with sufficient time to come 
into compliance with the final rule's requirements.

VII. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (PRA) of 1995 (44 
U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the 
final rule under the authority delegated to the Federal Reserve 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 the information collection displays a currently valid OMB 
control number. The OMB control number is 7100-0271.
    This information collection is required to provide benefits for 
consumers and is mandatory (15 U.S.C. 1601 et seq.). Since the Board 
does not collect any information, no issue of confidentiality arises. 
The respondents/recordkeepers are entities subject to Regulation DD, 
including for-profit small business depository institutions.
    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.
    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. Under the PRA, the 
Federal Reserve accounts for the paperwork burden associated with 
Regulation DD only for Federal Reserve-supervised institutions. 
Regulation DD defines Federal Reserve-regulated institutions 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 rulemaking makes the current requirements for disclosing totals 
for overdraft and returned item fees on periodic statements applicable 
to all institutions and not solely to institutions that promote the 
payment of overdrafts. The rulemaking also requires that institutions 
that disclose balances through any automated system must, at a minimum, 
disclose a balance that is not supplemented by additional funds that 
may be provided to cover an overdraft. For example, the balance must 
exclude funds that will be paid by the institution in its discretion or 
under a service subject to Regulation Z, or funds transferred from 
another account held individually or jointly by a consumer.
    On May 19, 2008, a notice of proposed rulemaking (NPR) was 
published in the Federal Register (73 FR 28739). The comment period for 
this notice expired July 18, 2008. No comments specifically addressing 
the burden estimate were received. As mentioned above, the proposed 
amendment regarding notice of a consumer's right to opt out of an 
institution's overdraft service has been withdrawn. Instead, the 
Federal Reserve is separately proposing to incorporate this notice 
requirement into its Regulation E (OMB No. 7100-0200).
    The Federal Reserve has revised its burden estimate in this final 
rule to reflect the withdrawn proposed notice. In addition, the number 
of Federal Reserve-regulated institutions that are deemed to be 
respondents for the purposes of the PRA has been updated from 1,172 to 
1,138.
    The current total annual burden is estimated to be 170,984 hours. 
The final

[[Page 5593]]

rule will impose a one-time increase in the total annual burden under 
Regulation DD by 18,208 hours to 189,192 hours.
    The Board estimates that 1,138 respondents regulated by the Federal 
Reserve would take, on average, 16 hours (two business days) to re-
program and update their systems to comply with the disclosure 
requirements. These disclosure requirements include disclosure of total 
fees on periodic statements (Sec.  230.11(a)) and disclosure of account 
balances (Sec.  230.11(c)). The Federal Reserve estimates the total 
annual one-time burden to be 18,208 hours and believes that, on a 
continuing basis, there would be no increase in burden as the 
disclosures would be sufficiently accounted for once incorporated into 
the current periodic statement disclosure (Sec.  230.6). To ease the 
compliance burden, model clause B-10 (aggregate overdraft and returned 
item fees sample clause) (Sec.  230.11), is adopted in Appendix B.
    The other federal financial agencies are responsible for estimating 
and reporting to OMB the total paperwork burden for the institutions 
for which they have administrative enforcement authority. They may, but 
are not required to, use the Board's burden estimation methodology. 
Using the Board's method, the total estimated annual burden for all 
financial institutions subject to Regulation DD, including Federal 
Reserve-regulated institutions, would be approximately 2,584,275 hours. 
The final rule would impose a one-time increase in the estimated annual 
burden for all institutions subject to Regulation DD by 275,200 hours 
to 2,859,475 hours. The above estimates represent an average across all 
respondents and reflect variations between institutions based on their 
size, complexity, and practices. All covered institutions, including 
depository institutions (of which there are approximately 17,200), 
potentially are affected by this collection of information, and thus 
are respondents for purposes of the PRA.
    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 (7100-0271), 
Washington, DC 20503.

List of Subjects in 12 CFR Part 230

    Advertising, Banks, Banking, Consumer protection, Reporting and 
recordkeeping requirements, Truth in savings.

0
For the reasons set forth in the preamble, the Board amends Regulation 
DD, 12 CFR part 230, and the Official Staff Commentary, 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 230.1 is amended by revising paragraph (a) to read as 
follows:


Sec.  230.1  Authority, purpose, coverage, and effect on state laws.

    (a) Authority. This part, known as Regulation DD, is issued by the 
Board of Governors of the Federal Reserve System to implement the Truth 
in Savings Act of 1991 (the act), contained in the Federal Deposit 
Insurance Corporation Improvement Act of 1991 (12 U.S.C. 3201 et seq., 
Pub. L. 102-242, 105 Stat. 2236). Information-collection requirements 
contained in this part have been approved by the Office of Management 
and Budget under the provisions of 44 U.S.C. 3501 et seq. and have been 
assigned OMB No. 7100-0271.
* * * * *

0
3. Section 230.11 is amended by revising the heading, paragraphs (a), 
(b)(2)(x) and (b)(2)(xi), and adding paragraphs (b)(2)(xii) and (c) to 
read as follows:


Sec.  230.11  Additional disclosure requirements for overdraft 
services.

    (a) Disclosure of total fees on periodic statements--(1) General. A 
depository institution must separately disclose on each periodic 
statement, as applicable:
    (i) The total dollar amount for all fees or charges imposed on the 
account for paying checks or other items when there are insufficient or 
unavailable funds and the account becomes overdrawn; and
    (ii) The total dollar amount for all fees or charges imposed on the 
account for returning items unpaid.
    (2) Totals required. The disclosures required by paragraph (a)(1) 
of this section must be provided for the statement period and for the 
calendar year-to-date;
    (3) Format requirements. The aggregate fee disclosures required by 
paragraph (a) of this section must be disclosed in close proximity to 
fees identified under Sec.  230.6(a)(3), using a format substantially 
similar to Sample Form B-10 in Appendix B to this part.
    (b) * * *
    (2) * * *
    (x) A notice provided to a consumer, such as at an ATM, that 
completing a requested transaction may trigger a fee for overdrawing an 
account, or a general notice that items overdrawing an account may 
trigger a fee;
    (xi) Informational or educational materials concerning the payment 
of overdrafts if the materials do not specifically describe the 
institution's overdraft service; or
    (xii) An opt-out or opt-in notice regarding the institution's 
payment of overdrafts or provision of discretionary overdraft services.
* * * * *
    (c) Disclosure of account balances. If an institution discloses 
balance information to a consumer through an automated system, the 
balance may not include additional amounts that the institution may 
provide to cover an item when there are insufficient or unavailable 
funds in the consumer's account, whether under a service provided in 
its discretion, a service subject to the Board's Regulation Z (12 CFR 
part 226), or a service to transfer funds from another account of the 
consumer. The institution may, at its option, disclose additional 
account balances that include such additional amounts, if the 
institution prominently states that any such balance includes such 
additional amounts and, if applicable, that additional amounts are not 
available for all transactions.

0
4. Amend Appendix B to part 230, by adding B-10 to read as follows:

Appendix B to Part 230--Model Clauses and Sample Forms

* * * * *

B-10 Aggregate Overdraft and Returned Item Fees Sample Form

------------------------------------------------------------------------
                                       Total for this    Total year-to-
                                           period             date
------------------------------------------------------------------------
Total Overdraft Fees................            $60.00           $150.00
Total Returned Item Fees............              0.00             30.00
------------------------------------------------------------------------


[[Page 5594]]


0
5. In Supplement I to part 230:
0
a. In Section 230.11 and Section 230.11(a), the headings are revised 
and paragraphs (a)(1)-1. and (a)(1)-2. are removed.
0
b. In Section 230.11, paragraphs (a)(1)-3. through (a)(1)-8. are 
redesignated as paragraphs (a)(1)-1. through (a)(1)-6, respectively.
0
c. In Section 230.11, newly designated paragraphs (a)(1)-2. through 
(a)(1)-4. are revised.
0
d. In Section 230.11, paragraph (a)(3)-1. is revised.
0
e. In Section 230.11, paragraph (a)(5). is removed.
0
f. In Section 230.11, new paragraphs (c)-1. through (c)-3. are added.

Supplement I to Part 230--Official Staff Interpretations

* * * * *
    Section 230.11 Additional disclosures regarding the payment of 
overdrafts
    (a) Disclosure of total fees on periodic statements
    (a)(1) General
* * * * *
    2. Fees for paying overdrafts. Institutions must disclose on 
periodic statements a total dollar amount for all fees or charges 
imposed on the account for paying overdrafts. The institution must 
disclose separate totals for the statement period and for the 
calendar year-to-date. The total dollar amount includes per-item 
fees as well as interest charges, daily or other periodic fees, or 
fees charged for maintaining an account in overdraft status, whether 
the overdraft is by check or by other means. It also includes fees 
charged when there are insufficient funds because previously 
deposited funds are subject to a hold or are uncollected. It does 
not include fees for transferring funds from another account of the 
consumer to avoid an overdraft, or fees charged under a service 
subject to the Board's Regulation Z (12 CFR part 226).
    3. Fees for returning items unpaid. The total dollar amount for 
all fees for returning items unpaid must include all fees charged to 
the account for dishonoring or returning checks or other items drawn 
on the account. The institution must disclose separate totals for 
the statement period and for the calendar year-to-date. Fees imposed 
when deposited items are returned are not included. Institutions may 
use terminology such as ``returned item fee'' or ``NSF fee'' to 
describe fees for returning items unpaid.
    4. Waived fees. In some cases, an institution may provide a 
statement for the current period reflecting that fees imposed during 
a previous period were waived and credited to the account. 
Institutions may, but are not required to, reflect the adjustment in 
the total for the calendar year-to-date and in the applicable 
statement period. For example, if an institution assesses a fee in 
January and refunds the fee in February, the institution could 
disclose a year-to-date total reflecting the amount credited, but it 
should not affect the total disclosed for the February statement 
period, because the fee was not assessed in the February statement 
period. If an institution assesses and then waives and credits a fee 
within the same cycle, the institution may, at its option, reflect 
the adjustment in the total disclosed for fees imposed during the 
current statement period and for the total for the calendar year-to-
date. Thus, if the institution assesses and waives the fee in the 
February statement period, the February fee total could reflect a 
total net of the waived fee.
* * * * *
    (a)(3) Time period covered by disclosures
    1. Periodic statement disclosures. The disclosures under section 
230.11(a) must be included on periodic statements provided by an 
institution starting the first statement period that begins after 
January 1, 2010. For example, if a consumer's statement period 
typically closes on the 15th of each month, an institution must 
provide the disclosures required by Sec.  230.11(a)(1) on subsequent 
periodic statements for that consumer beginning with the statement 
reflecting the period from January 16, 2010 to February 15, 2010.
* * * * *
    (c) Disclosure of account balances
    1. Balance that does not include additional amounts. For 
purposes of the balance disclosure requirement in Sec.  230.11(c), 
if an institution discloses balance information to a consumer 
through an automated system, it must disclose a balance that 
excludes any funds that the institution may provide to cover an 
overdraft pursuant to a discretionary overdraft service, that will 
be paid by the institution under a service subject to the Board's 
Regulation Z (12 CFR part 226), or that will be transferred from 
another account held individually or jointly by a consumer. The 
balance may, but need not, include funds that are deposited in the 
consumer's account, such as from a check, that are not yet made 
available for withdrawal in accordance with the funds availability 
rules under the Board's Regulation CC (12 CFR part 229). In 
addition, the balance may, but need not, include funds that are held 
by the institution to satisfy a prior obligation of the consumer 
(for example, to cover a hold for an ATM or debit card transaction 
that has been authorized but for which the bank has not settled).
    2. Additional balance. The institution may disclose additional 
balances supplemented by funds that may be provided by the 
institution to cover an overdraft, whether pursuant to a 
discretionary overdraft service, a service subject to the Board's 
Regulation Z (12 CFR part 226), or a service that transfers funds 
from another account held individually or jointly by the consumer, 
so long as the institution prominently states that any additional 
balance includes these additional overdraft amounts. The institution 
may not simply state, for instance, that the second balance is the 
consumer's ``available balance,'' or contains ``available funds.'' 
Rather, the institution should provide enough information to convey 
that the second balance includes these amounts. For example, the 
institution may state that the balance includes ``overdraft funds.'' 
Where a consumer has opted out of the institution's discretionary 
overdraft service, any additional balance disclosed should not 
include funds institutions provide under that service. Where a 
consumer has opted out of the institution's discretionary overdraft 
service for some, but not all transactions (e.g., the consumer has 
opted out overdraft services for ATM and debit card transactions), 
an institution that includes funds from its discretionary overdraft 
service in the balance should convey that the overdraft funds are 
not available for all transactions. For example, the institution 
could state that overdraft funds are not available for ATM and debit 
card transactions.
    3. Automated systems. The balance disclosure requirement in 
Sec.  230.11(c) applies to any automated system through which the 
consumer requests a balance, including, but not limited to, a 
telephone response system, the institution's Internet site, or an 
ATM. The requirement applies whether the institution discloses a 
balance through an ATM owned or operated by the institution or 
through an ATM not owned or operated by the institution (including 
an ATM operated by a non-depository institution). If the balance is 
obtained at an ATM, the requirement also applies whether the balance 
is disclosed on the ATM screen or on a paper receipt.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, December 18, 2008.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E8-31183 Filed 1-28-09; 8:45 am]
BILLING CODE 6210-01-P