[Federal Register Volume 75, Number 150 (Thursday, August 5, 2010)]
[Rules and Regulations]
[Pages 47173-47176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19090]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 707

RIN 3133-AD72


Truth in Savings

AGENCY: National Credit Union Administration (NCUA).

ACTION: Interim final rule with request for comments.

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SUMMARY: On July 22, 2009, NCUA published a final rule amending part 
707, which implements the Truth in Savings Act, and the official staff 
interpretations to the regulation. The final rule addressed credit 
unions' disclosure practices related to overdraft services, including 
balances disclosed to members through automated systems. This interim 
final rule amends part 707 and official staff interpretations to 
address the application of the July 2009 final rule to retail sweep 
programs and the terminology for overdraft fee disclosures and to make 
amendments that conform to the Federal Reserve Board's (Federal 
Reserve) final Regulation E amendments addressing overdraft services, 
adopted in November 2009. This rule also includes a minor technical 
correction to sample form B-12 for formatting purposes.

DATES: This rule is effective September 7, 2010, except for the 
amendment to Sec.  707.11(a)(1(i), which is effective October 1, 2010. 
Comments must be received by October 4, 2010.

ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     NCUA Web Site: http://www.ncua.gov/news/proposed_regs/proposed_regs.html. Follow the instructions for submitting comments.
     E-mail: Address to [email protected]. Include ``[Your 
name] Comments on Interim Final Rule (Truth in Savings)'' in the e-mail 
subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for e-mail.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public inspection: All public comments are available on the 
agency's website at http://www.ncua.gov/RegulationsOpinionsLaws/comments as submitted, except as may not be possible for technical 
reasons. Public comments will not be edited to remove any identifying 
or contact information. Paper copies of comments may be inspected in 
NCUA's law library, at 1775 Duke Street, Alexandria, Virginia 22314, by 
appointment weekdays between 9 a.m. and 3 p.m. To make an appointment, 
call (703) 518-6546 or send an e-mail to [email protected].

FOR FURTHER INFORMATION CONTACT: Justin M. Anderson, Staff Attorney, 
Office of General Counsel, National Credit Union Administration, 1775 
Duke Street, Alexandria, Virginia 22314-3428, or telephone: (703) 518-
6540.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Truth in Savings Act (TISA) requires NCUA to promulgate 
regulations substantially similar to those promulgated by the Federal 
Reserve within 90 days of the effective date of the Federal Reserve's 
rules. 12 U.S.C. 4311(b). In doing so, NCUA is to take into account the 
unique nature of credit unions and the limitations under which they pay 
dividends on member accounts. Id. In compliance with TISA, NCUA is 
issuing this interim final rule with request for comment that is 
substantially similar to the Federal Reserve's June 2010 final rule. 
NCUA is also making technical corrections to the aggregate overdraft 
and returned item fees sample form for formatting purposes.
    On January 29, 2009, the Federal Reserve published a final rule 
amending Regulation DD, its TISA rule, and the official staff 
commentary to address depository institutions' disclosure practices 
related to overdraft services, including balances disclosed to 
consumers through automated systems. 74 FR 5584 (January 29, 2009). 
NCUA issued a similar final rule on July 22, 2009. 74 FR 36102 (July 
22, 2009). Both rules had an effective date of January 1, 2010.
    In November 2009, the Federal Reserve adopted a final rule amending 
Regulation E, which implements the Electronic Fund Transfer Act. This 
final rule limits a financial institution's ability to assess fees for 
paying ATM and one-time debit card transactions pursuant to the 
institution's discretionary overdraft service without the consumer's 
affirmative consent to such payment.
    Since publication of the Federal Reserve's January 2009 final rule, 
institutions and others have requested clarification of particular 
aspects of the rule and further guidance regarding compliance with the 
rule. In addition, the Federal Reserve believed conforming amendments 
to Regulation DD were necessary in light of certain provisions 
subsequently adopted in the Regulation E final rule. Accordingly, in 
March 2010, the Federal Reserve proposed to amend Regulation DD and the 
official staff commentary. 75 FR 9126 (March 1, 2010). Based on 
comments it received, the Federal Reserve issued a final rule on June 
4, 2010. 75 FR 31673 (June 4, 2010).

II. Interim Final Rule

    The NCUA Board (the Board) is adopting interim final revisions to 
part 707 and the accompanying official staff interpretations that are 
substantively identical to the Federal Reserve's June 2010 final rule. 
Like the Federal Reserve's approach, the effective date of this rule 
will be 30 days from the date of publication in the Federal Register, 
but compliance with the changes to Sec.  707.11(a)(1(i) will not be 
mandatory until October 1, 2010. This will give credit unions 
sufficient time to implement the necessary system changes to comply 
with this rule.
    The Board is issuing this rule as an interim final rule because 
there is a strong public interest in having consumer-oriented rules in 
places that are consistent with those recently promulgated by the 
Federal Reserve. Additionally, as discussed above, NCUA is statutorily 
required to issue rules substantially similar to those of the Federal 
Reserve within 90 days of the effective date of the Federal Reserve's 
rules.

III. Section-by-Section Analysis

A. Section 707.6(b)--Periodic Statement Disclosures; Statement 
Disclosures

    Section 707.6(b) describes disclosures regarding certain charges or 
fees required when a credit union provides a periodic statement to its 
members. The Board is making an amendment to Sec.  707.6(b) and the 
related official staff interpretation. First, the Board is adding new 
Sec.  707.6(b)(5) to state explicitly that the aggregate fee 
disclosures required by Sec.  707.11(a)(1), discussed below, are among 
the disclosures required to be provided on periodic statements for 
purposes of Sec.  707.6(b). Second, the Board is revising comment 
6(b)(3)-2 to eliminate the reference to the promotion

[[Page 47174]]

of the payment of overdrafts because NCUA's July 22, 2009 final rule 
eliminated the distinction between credit unions that promote overdraft 
fees and those that do not.

B. Section 707.11(a)--Additional Disclosure Requirements for Overdraft 
Services

    Although periodic statements are not required under TISA, Sec.  
707.11(a)(1(i) requires credit unions that provide periodic statements 
to disclose the total dollar amount of 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 for 
the month and calendar year-to-date. 12 CFR 707.11(a)(1)(i). Sample 
Form B-12 displays this total as ``Total Overdraft Fees.'' Section 
707.11(a)(1)(ii) requires credit unions to separately disclose the 
total dollar amount of all fees or charges imposed on the account for 
returning items unpaid for the month and calendar year-to-date. 12 CFR 
707.11(a)(1)(ii). Comment 11(a)(1)-3 states that credit unions may use 
terminology such as ``returned item fee'' or ``NSF fee'' to describe 
fees for returning items unpaid. These fee totals must be disclosed in 
a tabular format substantially similar to Sample Form B-12. 12 CFR 
707.11(a)(3).
    Some credit unions may use terms other than ``Overdraft Fee'' to 
describe per item overdraft fees in their account agreements. Comment 
3(a)-3 to part 707 provides that credit unions must use consistent 
terminology to describe terms or features that are required to be 
disclosed. Based on this comment and a similar comment in Regulation 
DD, institutions have questioned whether they may use terminology other 
than ``Total Overdraft Fees'' in the periodic statement aggregate fee 
disclosure to describe the total amount of all fees or charges imposed 
on the account for paying overdrafts.
    This interim final rule, in conformity with the Federal Reserve's 
recent final rule, revises Sec.  707.11(a)(1)(i) to clarify that the 
periodic statement aggregate fee disclosure must state the total dollar 
amount for all fees or charges imposed on the account for paying 
overdrafts, using the term ``Total Overdraft Fees.'' This rule also 
amends comment 11(a)(1)-2 to explain that this provision supersedes 
comment 3(a)-3.
    Section 707.11(a)(1)(i) requires credit union to provide a fee 
total that includes all overdraft fees, including any additional daily 
or sustained overdraft, negative balance, or similar fees or charges 
imposed by the credit union. See comment 11(a)(1)-2. Thus, the use of 
terminology other than ``Total Overdraft Fees'' may not capture the 
various fees associated with an overdraft service. Further, the purpose 
of the aggregate fee disclosure is to provide members who use overdraft 
services with additional information about fees to help them better 
understand the costs associated with the service. The Board believes 
permitting the use of terminology other than ``Total Overdraft Fees'' 
could be confusing to members and potentially undermines their ability 
to compare costs, particularly if a member has accounts at different 
credit unions that each use different terminology.

C. Section 707.11(c)--Disclosure of Account Balances

Comment 11(c)-2--Retail Sweep Programs
    Section 707.11(c) of NCUA's TISA rule addresses the disclosure of 
account balance information to a member through an automated system. 
Under Sec.  707.11(c), credit unions must disclose a balance that does 
not include additional amounts the credit union may provide to cover an 
item when there are insufficient or unavailable funds in the member's 
account, including under a service to transfer funds from another 
account of the member. The Board adopted this provision in its July 
2009 final rule to ensure members receive accurate information about 
their account balances and to help avoid member confusion as to whether 
an account has sufficient funds to cover a transaction.
    After publication of the final rule, questions were raised about 
the application of this provision to retail sweep programs. In a retail 
sweep program, a credit union establishes two legally distinct 
subaccounts, a share draft subaccount and a share savings subaccount, 
which together make up the member's account. The credit union allocates 
and transfers funds between the two subaccounts in order to maximize 
the balance in the share savings subaccount while complying with the 
monthly limitations on transfers out of savings accounts under the 
Federal Reserve's Regulation D. 12 CFR 204.2(d)(2).
    Retail sweep programs are distinguishable in several respects from 
overdraft protection plans that transfer funds from a member's linked 
accounts. In particular, retail sweep programs are generally not 
established for the purpose of covering overdrafts. Rather, a credit 
union typically establishes retail sweep programs by agreement with the 
member in order for the credit union to minimize its transaction 
account reserve requirements and, in some cases, to provide a higher 
interest rate than the member would earn on a transaction account 
alone. Furthermore, most retail sweep programs are structured so that 
the member (or person acting on behalf of the member) cannot 
independently access the funds in the share savings subaccount; all 
transfers out of, and deposits or transfers into, the share savings 
subaccount component of a retail sweep program are effected through the 
share draft subaccount. Notwithstanding the establishment of two 
legally distinct subaccounts under a retail sweep program, the periodic 
statements that members receive show a single member account balance 
and a single account on which all transactions into and out of the 
account are reflected.
    By contrast, linked accounts can be used and funded independently 
of one another. For example, a member can directly make deposits into 
and withdrawals from a share savings account whether or not it is 
linked to a share draft account. The link between accounts under an 
overdraft protection program is primarily established for purposes of 
providing funds from the share savings account in the event the member 
has insufficient funds in the share draft account. Additionally, while 
retail sweep programs typically do not impose fees on transfers between 
the share subaccount and the share draft subaccount, credit unions 
typically charge fees for transfers from linked accounts to cover an 
overdraft.
    Based on the foregoing, the Board believes that members under a 
retail sweep program may reasonably expect to see a single balance 
combining the funds in the share draft subaccount and the share savings 
subaccount when they request an account balance. Members could be 
confused if a balance that only includes funds in the share draft 
subaccount were provided because, in some cases, the balance in the 
share draft subaccount could be zero if funds had been transferred to 
the share subaccount at the time of the balance inquiry. This rule, 
therefore, adds new comment 11(c)-2 to clarify that Sec.  707.11(c) 
does not require a credit union to exclude funds that may be 
transferred from another account pursuant to a retail sweep program 
from the member's balance.
Comment 11(c)-3--Additional Balance
    Section 707.11(c) of NCUA's July 2009 final rule permitted credit 
unions to disclose an additional balance including overdraft funds so 
long as the credit union prominently states that the

[[Page 47175]]

balance contains additional overdraft funds. Comment 11(c)-2 of the 
final rule provided guidance on how credit unions could appropriately 
identify the additional funds. The comment, however, only addressed 
opt-outs. The Federal Reserve subsequently adopted the November 2009 
Regulation E final rule, which requires institutions to obtain a 
consumer's affirmative consent, or opt-in, to the institution's 
overdraft service, before charging any fees for paying ATM and one-time 
debit card transactions. In light of the final Regulation E opt-in 
requirement, the Board is amending comment 11(c)-2, redesignated as 
comment 11(c)-3, to include references to the opt-in requirement. 
References to opt-outs were retained in some instances because some 
credit unions may provide an opt-out choice with respect to checks, 
ACH, and other types of transactions not subject to the Regulation E 
final rule restrictions.
    The Board is also extending the requirement to indicate, when 
applicable, that funds in the additional balance may not be available 
for all transactions to circumstances under which funds from overdraft 
services subject to the Federal Reserve's Regulation Z or from services 
that transfer funds from another account are not available for all 
transactions. For example, if a member has an overdraft line of credit, 
but under the terms of the agreement, the member cannot access the line 
of credit when using a debit card at a point-of-sale transaction, any 
additional balance displayed through an automated system should 
indicate that the overdraft funds are not available for all 
transactions.
Appendix B: B-12--Aggregate Overdraft and Returned Item Fees Sample 
Form
    The Board is also making minor technical corrections to sample form 
B-12. These changes are for formatting purposes and to ensure 
conformity with the Federal Reserve's model disclosure.

D. Effective Date

    Because some credit unions may be using terminology other than 
``Total Overdraft Fees'' in their aggregate fee disclosure under Sec.  
707.11(a)(1), the revisions to Sec.  707.11(a)(1)(i) are effective 
October 1, 2010, which conforms to the effective date set by the 
Federal Reserve. This effective date also satisfies Sec.  302 of the 
Riegle Community Improvement Development and Regulatory Improvement Act 
of 1994, 12 U.S.C. 4802, which requires regulations that impose 
additional disclosure requirements to take effect on the first day of a 
calendar quarter beginning on or after the date on which the 
regulations are published in final form, unless the agency determines, 
for good cause published with the regulation, that the regulation 
should become effective before such time. 12 U.S.C. 4802(b). The Board 
believes that this effective date is appropriate because the final 
Sec.  707.11(a)(1)(i) amendments will require some credit unions to 
modify the disclosures provided to members. The remaining provisions of 
the final rule are effective September 7, 2010.

III. Regulatory Procedures

    Section III of the Supplementary Information to the July 2009 final 
rule sets forth the Board's analyses under the Regulatory Flexibility 
Act (5 U.S.C. 601 et seq.), the Paperwork Reduction Act of 1995 (44 
U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Small Business 
Regulatory Enforcement Fairness Act (Pub. L. 104-121), Executive Order 
13132, and the Treasury and General Government Appropriations Act (Pub. 
L. 105-277, 112 Stat. 2681 1998). See 74 FR 36102-36106. Because the 
final amendments are clarifications and do not alter the substance of 
the analyses and determinations accompanying that final rule, the Board 
continues to rely on those analyses and determinations for purposes of 
this rulemaking.

    By the National Credit Union Administration Board on July 29, 
2010.
Mary F. Rupp,
Secretary of the Board.

List of Subjects in 12 CFR Part 707

    Advertising, Credit unions, Consumer protection, Reporting and 
recordkeeping requirements, Truth in Savings.

0
For the reasons set forth in the preamble, NCUA amends 12 CFR part 707, 
the Model Disclosures, and the Official Staff Interpretations, as set 
forth below:

PART 707--TRUTH IN SAVINGS

0
1. The authority citation for part 707 continues to read as follows:

    Authority: 12 U.S.C. 4311.

0
2. Section 707.6 is amended by adding paragraph (b)(5) to read as 
follows:


Sec.  707.6  Periodic statement disclosures.

    (b) * * *
    (5) Aggregate fee disclosure. If applicable, the total overdraft 
and returned item fees required to be disclosed by Sec.  707.11(a).
* * * * *

0
3. Section 707.11 is amended by revising paragraph (a)(1)(i) to read as 
follows:


Sec.  707.11  Additional disclosure requirements for overdraft 
services.

    (a) * * *
    (1) * * *
    (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, using the term 
``Total Overdraft Fees;'' and
* * * * *

0
4. Amend Appendix B to part 707, by revising B-12 to read as follows:

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

* * * * *

                           B-12 Aggregate Overdraft and Returned Item Fees Sample Form
----------------------------------------------------------------------------------------------------------------
                                                                 Total for this period      Total year-to-date
----------------------------------------------------------------------------------------------------------------
Total overdraft fees..........................................                   $60.00                  $150.00
Total returned item fees......................................                    $0.00                   $30.00
----------------------------------------------------------------------------------------------------------------


0
5. In Appendix C to part 707,
0
a. Under Section 707.6(b)(3), the first two sentences of paragraph 2. 
are revised.
0
b. Under Section 707.11(a)(1), paragraph 2. is revised.
0
c. Under Section 707.11(c), paragraphs 2. and 3. are redesignated as 
paragraphs 3. and 4. respectively.
0
d. Under Section 707.11(c), new paragraph 2. is added.
0
e. Under Section 707.11(c), newly designated paragraph 3. is revised.

Appendix C to Part 707--Official Staff Interpretations

* * * * *

Section 707.6--Periodic Statement Disclosures

(b) Statement Disclosures

* * * * *

[[Page 47176]]

(b)(3) Fees Imposed

* * * * *
    2. Itemizing fees by type. In itemizing fees imposed more than 
once in the period, credit unions may group fees if they are the 
same type. (See Sec.  707.11(a)(1) of this part regarding certain 
fees that are required to be grouped.) * * *
* * * * *

Section 707.11--Additional Disclosures Regarding the Payment of 
Overdrafts

(a) Disclosure of total fees on periodic statements

(a)(1) General

* * * * *
    2. Fees for paying overdrafts. Credit unions must disclose on 
periodic statements a total dollar amount for all fees or charges 
imposed on the account for paying overdrafts. The credit union must 
disclose separate totals for the statement period and for the 
calendar year-to-date. The total dollar amount for each of these 
periods 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, debit card 
transaction, or by any other transaction type. 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 
member to avoid an overdraft, or fees charged under a service 
subject to the Federal Reserve Board's Regulation Z (12 CFR part 
226). See also comment 11(c)-2. Under Sec.  707.11(a)(1)(i), the 
disclosure must describe the total dollar amount for all fees or 
charges imposed on the account for the statement period and calendar 
year-to-date for paying overdrafts using the term ``Total Overdraft 
Fees.'' This requirement applies notwithstanding comment 3(a)-2.
* * * * *

(c) Disclosure of account balances

* * * * *
    2. Retail sweep programs. In a retail sweep program, a credit 
union establishes two legally distinct subaccounts, a share draft 
subaccount and a share savings subaccount, which together make up 
the member's account. The credit union allocates and transfers funds 
between the two subaccounts in order to maximize the balance in the 
share savings account while complying with the monthly limitations 
on transfers out of savings accounts under the Federal Reserve 
Board's Regulation D, 12 CFR 204.2(d)(2). Retail sweep programs are 
generally not established for the purpose of covering overdrafts. 
Rather, credit unions typically establish retail sweep programs by 
agreement with the member in order for the credit union to minimize 
its transaction account reserve requirements and, in some cases, to 
provide a higher interest rate than the member would earn on a share 
draft account alone. Section 707.11(c) does not require a credit 
union to exclude funds from the member's balance that may be 
transferred from another account pursuant to a retail sweep program 
that is established for such purposes and that has the following 
characteristics:
    i. The account involved complies with the Federal Reserve 
Board's Regulation D, 12 CFR 204.2(d)(2),
    ii. The member does not have direct access to the share savings 
subaccount that is part of the retail sweep program, and
    iii. The member's periodic statements show the account balance 
as the combined balance in the subaccounts.
    3. Additional balance. The credit union may disclose additional 
balances supplemented by funds that may be provided by the credit 
union to cover an overdraft, whether pursuant to a discretionary 
overdraft service, a service subject to the Federal Reserve Board's 
Regulation Z (12 CFR part 226), or a service that transfers funds 
from another account held individually or jointly by the member, so 
long as the credit union prominently states that any additional 
balance includes these additional overdraft amounts. The credit 
union may not simply state, for instance, that the second balance is 
the members ``available balance,'' or contains ``available funds.'' 
Rather, the credit union should provide enough information to convey 
that the second balance includes these amounts. For example, the 
credit union may state that the balance includes ``overdraft 
funds.'' Where a member has not opted into, or as applicable, has 
opted out of the credit union's discretionary overdraft service, any 
additional balance disclosed should not include funds that otherwise 
might be available under that service. Where a member has not opted 
into, or as applicable, has opted out of, the credit union's 
discretionary overdraft service for some, but not all transactions 
(e.g., the member has not opted into overdraft services for ATM and 
one-time debit card transactions), a credit union that includes 
these additional overdraft funds in the second balance should convey 
that the overdraft funds are not available for all transactions. For 
example, the credit union could state that overdraft funds are not 
available for ATM and one-time (or everyday) debit card 
transactions. Similarly, if funds are not available for all 
transactions pursuant to a service subject to the Federal Reserve 
Board's Regulation Z (12 CFR part 226) or a service that transfers 
funds from another account, a second balance that includes such 
funds should also indicate this fact.

[FR Doc. 2010-19090 Filed 8-4-10; 8:45 am]
BILLING CODE 7535-01-P