[Federal Register Volume 76, Number 245 (Wednesday, December 21, 2011)]
[Rules and Regulations]
[Pages 79276-79305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-31727]



[[Page 79275]]

Vol. 76

Wednesday,

No. 245

December 21, 2011

Part II





Bureau of Consumer Financial Protection





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12 CFR Part 1030





Truth in Savings (Regulation DD); Interim Final Rule

  Federal Register / Vol. 76, No. 245 / Wednesday, December 21, 2011 / 
Rules and Regulations  

[[Page 79276]]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1030

[Docket No. CFPB-2011-0032]
RIN 3170-AA06


Truth in Savings (Regulation DD)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Interim final rule with request for public comment.

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SUMMARY: Title X of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act) transferred rulemaking authority for a 
number of consumer financial protection laws from seven federal 
agencies to the Bureau of Consumer Financial Protection (Bureau) as of 
July 21, 2011. The Bureau is in the process of republishing the 
regulations implementing those laws with technical and conforming 
changes to reflect the transfer of authority and certain other changes 
made by the Dodd-Frank Act. In light of the transfer of the Board of 
Governors of the Federal Reserve System's (Board's) rulemaking 
authority for the Truth in Savings Act (TISA) to the Bureau, the Bureau 
is publishing for public comment an interim final rule establishing a 
new Regulation DD (Truth in Savings). This interim final rule does not 
impose any new substantive obligations on persons subject to the 
existing Regulation DD, previously published by the Board.

DATES: This interim final rule is effective December 30, 2011. Comments 
must be received on or before February 21, 2012.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2011-
0032 or RIN 3170-AA06, by any of the following methods:
     Electronic: http://www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail: Monica Jackson, Office of the Executive Secretary, 
Bureau of Consumer Financial Protection, 1500 Pennsylvania Avenue NW., 
(Attn: 1801 L Street), Washington, DC 20220.
     Hand Delivery/Courier in Lieu of Mail: Monica Jackson, 
Office of the Executive Secretary, Bureau of Consumer Financial 
Protection, 1700 G Street NW., Washington, DC 20006.
    All submissions must include the agency name and docket number or 
Regulatory Information Number (RIN) for this rulemaking. In general, 
all comments received will be posted without change to http://www.regulations.gov. In addition, comments will be available for public 
inspection and copying at 1700 G Street NW., Washington, DC 20006, on 
official business days between the hours of 10 a.m. and 5 p.m. Eastern 
Time. You can make an appointment to inspect the documents by 
telephoning (202) 435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or social 
security numbers, should not be included. Comments will not be edited 
to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Krista Ayoub or Stephen Shin, Office 
of Regulations, at (202) 435-7700.

SUPPLEMENTARY INFORMATION: 

I. Background

    Congress enacted the Truth in Savings Act (TISA), 12 U.S.C. 4301 et 
seq., based on findings that economic stability would be enhanced, 
competition between depository institutions would be improved, and 
consumers' ability to make informed decisions regarding deposit 
accounts would be strengthened if there was uniformity in the 
disclosure of interest rates and fees. 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. Historically, TISA has been implemented in Regulation DD of the 
Board of Governors of the Federal Reserve System (Board), 12 CFR part 
230, and, with respect to credit unions, by regulations of the National 
Credit Union Administration (NCUA), 12 CFR part 707. The Dodd-Frank 
Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) \1\ 
amended a number of consumer financial protection laws, including TISA. 
In addition to various substantive amendments, the Dodd-Frank Act 
transferred the Board's rulemaking authority for TISA to the Bureau of 
Consumer Financial Protection (Bureau), effective July 21, 2011.\2\ See 
sections 1061 and 1100B of the Dodd-Frank Act. Pursuant to the Dodd-
Frank Act and TISA, as amended, the Bureau is publishing for public 
comment an interim final rule establishing a new Regulation DD (Truth 
in Savings), 12 CFR Part 1030, implementing TISA.
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    \1\ Public Law 111-203, 124 Stat. 1376 (2010).
    \2\ Dodd-Frank section 1029 generally excludes from this 
transfer of authority, subject to certain exceptions, any rulemaking 
authority over a motor vehicle dealer that is predominantly engaged 
in the sale and servicing of motor vehicles, the leasing and 
servicing of motor vehicles, or both. Further, Dodd-Frank section 
1100B did not grant the Bureau TISA rulemaking authority over credit 
unions or repeal the NCUA's TISA rulemaking authority over credit 
unions under 12 U.S.C. 4311.
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II. Summary of the Interim Final Rule

A. General

    The interim final rule substantially duplicates the Board's 
Regulation DD as the Bureau's new Regulation DD, 12 CFR part 1030, 
making only certain non-substantive, technical, formatting, and 
stylistic changes. To minimize any potential confusion, the Bureau is 
preserving where possible past numbering systems by republishing 
regulations with Bureau part numbers that correspond to regulations in 
existence prior to the transfer of rulemaking authority. For example, 
while this interim final rule generally incorporates the Board's 
existing regulatory text, appendices (including model forms and 
clauses), and supplements, as amended,\3\ the rule has been edited as 
necessary to reflect nomenclature and other technical amendments 
required by the Dodd-Frank Act. Notably, this interim final rule does 
not impose any new substantive obligations on regulated entities.
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    \3\ See 76 FR 42020 (July 18, 2011).
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B. Specific Changes

    In addition to the changes described above, the Bureau is making 
certain nomenclature and other non-substantive changes for clarity and 
consistency. For example, references to the Board and its 
administrative structure have been replaced with references to the 
Bureau. Conforming edits have been made to internal cross-references 
and addresses for filing applications and notices. In addition, edits 
to subheadings and numbering have been made for consistency and to fix 
typographical errors. Footnotes have been moved to the text of the 
regulation or commentary, as appropriate.

III. Legal Authority

A. Rulemaking Authority

    The Bureau is issuing this interim final rule pursuant to its 
authority under TISA and the Dodd-Frank Act. Effective July 21, 2011, 
section 1061 of the Dodd-Frank Act transferred to the Bureau the 
``consumer financial protection functions'' previously vested in 
certain other federal agencies. The term ``consumer financial 
protection function'' is defined to include ``all authority to 
prescribe rules or issue

[[Page 79277]]

orders or guidelines pursuant to any Federal consumer financial law, 
including performing appropriate functions to promulgate and review 
such rules, orders, and guidelines.'' \4\ TISA is a federal consumer 
financial law.\5\ Accordingly, effective July 21, 2011, the authority 
of the Board to issue regulations pursuant to TISA transferred to the 
Bureau.\6\
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    \4\ Public Law 111-203, section 1061(a)(1). Effective on the 
designated transfer date, July 21, 2011, the Bureau was also granted 
``all powers and duties'' vested in each of the federal agencies, 
relating to the consumer financial protection functions, on the day 
before the designated transfer date. Until this and other interim 
final rules take effect, existing regulations for which rulemaking 
authority transferred to the Bureau continue to govern persons 
covered by this rule. See 76 FR 43569 (July 21, 2011). See also 
footnote 2, supra.
    \5\ Public Law 111-203, section 1002(14) (defining ``Federal 
consumer financial law'' to include the ``enumerated consumer 
laws''); id. section 1002(12) (defining ``enumerated consumer laws'' 
to include TISA).
    \6\ Section 1066 of the Dodd-Frank Act grants the Secretary of 
the Treasury interim authority to perform certain functions of the 
Bureau. Pursuant to that authority, Treasury is publishing this 
interim final rule on behalf of the Bureau.
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    The TISA, as amended, authorizes the Bureau to issue regulations to 
carry out the provisions of TISA.\7\ These regulations may contain such 
classifications, differentiations, or other provisions, and may provide 
for such adjustments and exceptions for any class of transactions, that 
in the Bureau's judgment are necessary or proper to effectuate the 
purpose of TISA, facilitate compliance with TISA, or prevent 
circumvention or evasion of TISA.\8\
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    \7\ Id. Section 1100B(1); 12 U.S.C. 4302-4304, 4308.
    \8\ Id.
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B. Authority To Issue an Interim Final Rule Without Prior Notice and 
Comment

    The Administrative Procedure Act (APA) \9\ generally requires 
public notice and an opportunity to comment before promulgation of 
regulations.\10\ The APA provides exceptions to notice-and-comment 
procedures, however, where an agency for good cause finds that such 
procedures are impracticable, unnecessary, or contrary to the public 
interest or when a rulemaking relates to agency organization, 
procedure, and practice.\11\ The Bureau finds that there is good cause 
to conclude that providing notice and opportunity for comment would be 
unnecessary and contrary to the public interest under these 
circumstances. In addition, substantially all the changes made by this 
interim final rule, which were necessitated by the Dodd-Frank Act's 
transfer of TISA authority from the Board to the Bureau, relate to 
agency organization, procedure, and practice and are thus exempt from 
the APA's notice-and-comment requirements.
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    \9\ 5 U.S.C. 551 et seq.
    \10\ 5 U.S.C. 553(b), (c).
    \11\ 5 U.S.C. 553(b)(3)(A), (B).
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    The Bureau's good cause findings are based on the following 
considerations. As an initial matter, the Board's existing regulation 
was a result of notice-and-comment rulemaking to the extent required. 
Moreover, the interim final rule published today does not impose any 
new, substantive obligations on regulated entities. Rather, the interim 
final rule makes only non-substantive, technical changes to the 
existing text of the regulation, such as renumbering, changing internal 
cross-references, replacing appropriate nomenclature to reflect the 
transfer of authority to the Bureau, and changing the address for 
filing applications and notices. Given the technical nature of these 
changes, and the fact that the interim final rule does not impose any 
additional substantive requirements on covered entities, an opportunity 
for prior public comment is unnecessary. In addition, recodifying the 
Board's regulations to reflect the transfer of authority to the Bureau 
will help facilitate compliance with TISA and its implementing 
regulation, and the new regulations will help reduce uncertainty 
regarding the applicable regulatory framework. Using notice-and comment 
procedures would delay this process and thus be contrary to the public 
interest.
    The APA generally requires that rules be published not less than 30 
days before their effective dates. See 5 U.S.C. 553(d). As with the 
notice and comment requirement, however, the APA allows an exception 
when ``otherwise provided by the agency for good cause found and 
published with the rule.'' 5 U.S.C. 553(d)(3). The Bureau finds that 
there is good cause for providing less than 30 days notice here. A 
delayed effective date would harm consumers and regulated entities by 
needlessly perpetuating discrepancies between the amended statutory 
text and the implementing regulation, thereby hindering compliance and 
prolonging uncertainty regarding the applicable regulatory 
framework.\12\
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    \12\ This interim final rule is one of 14 companion rulemakings 
that together restate and recodify the implementing regulations 
under 14 existing consumer financial laws (part III.C, below, lists 
the 14 laws involved). In the interest of proper coordination of 
this overall regulatory framework, which includes numerous cross-
references among some of the regulations, the Bureau is establishing 
the same effective date of December 30, 2011 for those rules 
published on or before that date and making those published 
thereafter (if any) effective immediately.
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    In addition, delaying the effective date of the interim final rule 
for 30 days would provide no practical benefit to regulated entities in 
this context and in fact could operate to their detriment. As discussed 
above, the interim final rule published today does not impose any new, 
substantive obligations on regulated entities. Instead, the rule makes 
only non-substantive, technical changes to the existing text of the 
regulation. Thus, regulated entities that are already in compliance 
with the existing rules will not need to modify business practices as a 
result of this rule.

C. Section 1022(b)(2) of the Dodd-Frank Act

    In developing the interim final rule, the Bureau has conducted an 
analysis of potential benefits, costs, and impacts.\13\ The Bureau 
believes that the interim final rule will benefit consumers and covered 
persons by updating and recodifying Regulation DD to reflect the 
transfer of authority to the Bureau and certain other changes mandated 
by the Dodd-Frank Act. This will help facilitate compliance with TISA 
and its implementing regulations and help reduce any uncertainty 
regarding the applicable regulatory framework. The interim final rule 
will not impose any new substantive obligations on consumers or covered 
persons and is not expected to have any impact on consumers' access to 
consumer financial products and services.
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    \13\ Section 1022(b)(2)(A) of the Dodd-Frank Act addresses the 
consideration of the potential benefits and costs of regulation to 
consumers and covered persons, including the potential reduction of 
access by consumers to consumer financial products or services; the 
impact on depository institutions and credit unions with $10 billion 
or less in total assets as described in section 1026 of the Dodd-
Frank Act; and the impact on consumers in rural areas. Section 
1022(b)(2)(B) requires that the Bureau ``consult with the 
appropriate prudential regulators or other Federal agencies prior to 
proposing a rule and during the comment process regarding 
consistency with prudential, market, or systemic objectives 
administered by such agencies.'' The manner and extent to which 
these provisions apply to interim final rules and to benefits, 
costs, and impacts that are compelled by statutory changes rather 
than discretionary Bureau action is unclear. Nevertheless, to inform 
this rulemaking more fully, the Bureau performed the described 
analyses and consultations.
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    Although not required by the interim final rule, depository 
institutions may incur some costs in updating compliance manuals and 
related materials to reflect the new numbering and other technical 
changes reflected in the new Regulation DD. The Bureau has worked to 
reduce any such burden by preserving the existing numbering to the 
extent possible and believes that such costs will likely be minimal. 
These

[[Page 79278]]

changes could be handled in the short term by providing a short, 
standalone summary alerting users to the changes and in the long term 
could be combined with other updates at the creditor's convenience. The 
Bureau intends to continue investigating the possible costs to affected 
entities of updating manuals and related materials to reflect these 
changes and solicits comments on this and other issues discussed in 
this section.
    The interim final rule will have no unique impact on depository 
institutions or credit unions with $10 billion or less in assets as 
described in section 1026(a) of the Dodd-Frank Act. Also, the interim 
final rule will have no unique impact on rural consumers.
    In undertaking the process of recodifying Regulation DD, as well as 
regulations implementing thirteen other existing consumer financial 
laws, \14\ the Bureau consulted the Federal Deposit Insurance 
Corporation, the Office of the Comptroller of the Currency, the 
National Credit Union Administration, the Board of Governors of the 
Federal Reserve System, the Federal Trade Commission, and the 
Department of Housing and Urban Development, including with respect to 
consistency with any prudential, market, or systemic objectives that 
may be administered by such agencies.\15\ The Bureau also has consulted 
with the Office of Management and Budget for technical assistance. The 
Bureau expects to have further consultations with the appropriate 
federal agencies during the comment period.
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    \14\ The fourteen laws implemented by this and its companion 
rulemakings are: The Consumer Leasing Act, the Electronic Fund 
Transfer Act (except with respect to section 920 of that Act), the 
Equal Credit Opportunity Act, the Fair Credit Reporting Act (except 
with respect to sections 615(e) and 628 of that act), the Fair Debt 
Collection Practices Act, Subsections (b) through (f) of section 43 
of the Federal Deposit Insurance Act, sections 502 through 509 of 
the Gramm-Leach-Bliley Act (except for section 505 as it applies to 
section 501(b)), the Home Mortgage Disclosure Act, the Real Estate 
Settlement Procedures Act, the S.A.F.E. Mortgage Licensing Act, the 
Truth in Lending Act, the Truth in Savings Act, section 626 of the 
Omnibus Appropriations Act, 2009, and the Interstate Land Sales Full 
Disclosure Act.
    \15\ In light of the technical but voluminous nature of this 
recodification project, the Bureau focused the consultation process 
on a representative sample of the recodified regulations, while 
making information on the other regulations available. The Bureau 
expects to conduct differently its future consultations regarding 
substantive rulemakings.
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IV. Request for Comment

    Although notice and comment rulemaking procedures are not required, 
the Bureau invites comments on this notice. Commenters are specifically 
encouraged to identify any technical issues raised by the rule. The 
Bureau is also seeking comment in response to a notice published at 76 
FR 75825 (Dec. 5, 2011) concerning its efforts to identify priorities 
for streamlining regulations that it has inherited from other federal 
agencies to address provisions that are outdated, unduly burdensome, or 
unnecessary.

V. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires each 
agency to consider the potential impact of its regulations on small 
entities, including small businesses, small governmental units, and 
small not-for-profit organizations.\16\ The RFA generally requires an 
agency to conduct an initial regulatory flexibility analysis (IRFA) and 
a final regulatory flexibility analysis (FRFA) of any rule subject to 
notice-and-comment rulemaking requirements, unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities.\17\ The Bureau also is subject to 
certain additional procedures under the RFA involving the convening of 
a panel to consult with small business representatives prior to 
proposing a rule for which an IRFA is required.\18\
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    \16\ 5 U.S.C. 601 et seq.
    \17\ 5 U.S.C. 603, 604.
    \18\ 5 U.S.C. 609.
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    The IRFA and FRFA requirements described above apply only where a 
notice of proposed rulemaking is required,\19\ and the panel 
requirement applies only when a rulemaking requires an IRFA.\20\ As 
discussed above in part III, a notice of proposed rulemaking is not 
required for this rulemaking.
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    \19\ 5 U.S.C. 603(a), 604(a); 5 U.S.C. 553(b)(B).
    \20\ 5 U.S.C. 609(b).
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    In addition, as discussed above, this interim final rule has only a 
minor impact on entities subject to Regulation DD. The rule imposes no 
new, substantive obligations on depository institutions. Accordingly, 
the undersigned certifies that this interim final rule will not have a 
significant economic impact on a substantial number of small entities.

VI. Paperwork Reduction Act

    The Bureau may not conduct or sponsor, and a respondent is not 
required to respond to, an information collection unless it displays a 
currently valid Office of Management and Budget (OMB) control number. 
This rule contains information collection requirements under the 
Paperwork Reduction Act (PRA), which have been previously approved by 
OMB, and the ongoing PRA burden for which is unchanged by this rule. 
There are no new information collection requirements in this interim 
final rule. The Bureau's OMB control number for this information 
collection is: 3170-0004.

List of Subjects in 12 CFR Part 1030

    Advertising, Banks, Banking, Consumer protection, National banks, 
Reporting and recordkeeping requirements, Savings associations, Truth 
in savings.

Authority and Issuance

    For the reasons set forth above, the Bureau of Consumer Financial 
Protection adds Part 1030 to Chapter X in Title 12 of the Code of 
Federal Regulations to read as follows:

PART 1030--TRUTH IN SAVINGS (REGULATION DD)

Sec.
1030.1 Authority, purpose, coverage, and effect on state laws.
1030.2 Definitions.
1030.3 General disclosure requirements.
1030.4 Account disclosures.
1030.5 Subsequent disclosures.
1030.6 Periodic statement disclosures.
1030.7 Payment of interest.
1030.8 Advertising.
1030.9 Enforcement and record retention.
1030.10 [Reserved]
1030.11 Additional disclosure requirements for overdraft services.
Appendix A to Part 1030--Annual Percentage Yield Calculation
Appendix B to Part 1030--Model Clauses and Sample Forms
Appendix C to Part 1030--Effect on State Laws
Appendix D to Part 1030--Issuance of Official Interpretations
Supplement I to Part 1030--Official Interpretations

    Authority: 12 U.S.C. 4302-4304, 4308, 5512, 5581.


Sec.  1030.1  Authority, purpose, coverage, and effect on state laws.

    (a) Authority. This part, known as Regulation DD, is issued by the 
Bureau of Consumer Financial Protection 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., 
Public Law 102-242, 105 Stat. 2236), as amended by Title X, section 
1100B of the Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Pub. L. 111-203, 124 Stat. 1376). Information-collection requirements 
contained in this part have been approved by the Office of Management 
and Budget under the provisions of 44

[[Page 79279]]

U.S.C. 3501 et seq. and have been assigned OMB No. 3170-0004.
    (b) Purpose. The purpose of this part is to enable consumers to 
make informed decisions about accounts at depository institutions. This 
part requires depository institutions to provide disclosures so that 
consumers can make meaningful comparisons among depository 
institutions.
    (c) Coverage. This part applies to depository institutions except 
for credit unions. In addition, the advertising rules in Sec.  1030.8 
of this part apply to any person who advertises an account offered by a 
depository institution, including deposit brokers.
    (d) Effect on state laws. State law requirements that are 
inconsistent with the requirements of the act and this part are 
preempted to the extent of the inconsistency. Additional information on 
inconsistent state laws and the procedures for requesting a preemption 
determination from the Bureau are set forth in appendix C of this part.


Sec.  1030.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Account means a deposit account at a depository institution 
that is held by or offered to a consumer. It includes time, demand, 
savings, and negotiable order of withdrawal accounts. For purposes of 
the advertising requirements in Sec.  1030.8 of this part, the term 
also includes an account at a depository institution that is held by or 
on behalf of a deposit broker, if any interest in the account is held 
by or offered to a consumer.
    (b) Advertisement means a commercial message, appearing in any 
medium, that promotes directly or indirectly:
    (1) The availability or terms of, or a deposit in, a new account; 
and
    (2) For purposes of Sec. Sec.  1030.8(a) and 1030.11 of this part, 
the terms of, or a deposit in, a new or existing account.
    (c) Annual percentage yield means a percentage rate reflecting the 
total amount of interest paid on an account, based on the interest rate 
and the frequency of compounding for a 365-day period and calculated 
according to the rules in appendix A of this part.
    (d) Average daily balance method means the application of a 
periodic rate to the average daily balance in the account for the 
period. The average daily balance is determined by adding the full 
amount of principal in the account for each day of the period and 
dividing that figure by the number of days in the period.
    (e) Bureau means the Bureau of Consumer Financial Protection.
    (f) Bonus means a premium, gift, award, or other consideration 
worth more than $10 (whether in the form of cash, credit, merchandise, 
or any equivalent) given or offered to a consumer during a year in 
exchange for opening, maintaining, renewing, or increasing an account 
balance. The term does not include interest, other consideration worth 
$10 or less given during a year, the waiver or reduction of a fee, or 
the absorption of expenses.
    (g) Business day means a calendar day other than a Saturday, a 
Sunday, or any of the legal public holidays specified in 5 U.S.C. 
6103(a).
    (h) Consumer means a natural person who holds an account primarily 
for personal, family, or household purposes, or to whom such an account 
is offered. The term does not include a natural person who holds an 
account for another in a professional capacity.
    (i) Daily balance method means the application of a daily periodic 
rate to the full amount of principal in the account each day.
    (j) Depository institution and institution mean an institution 
defined in section 19(b)(1)(A)(i) through (vi) of the Federal Reserve 
Act (12 U.S.C. 461), except credit unions defined in section 
19(b)(1)(A)(iv).
    (k) Deposit broker means any person who is a deposit broker as 
defined in section 29(g) of the Federal Deposit Insurance Act (12 
U.S.C. 1831f(g)).
    (l) Fixed-rate account means an account for which the institution 
contracts to give at least 30 calendar days advance written notice of 
decreases in the interest rate.
    (m) Grace period means a period following the maturity of an 
automatically renewing time account during which the consumer may 
withdraw funds without being assessed a penalty.
    (n) Interest means any payment to a consumer or to an account for 
the use of funds in an account, calculated by application of a periodic 
rate to the balance. The term does not include the payment of a bonus 
or other consideration worth $10 or less given during a year, the 
waiver or reduction of a fee, or the absorption of expenses.
    (o) Interest rate means the annual rate of interest paid on an 
account which does not reflect compounding. For the purposes of the 
account disclosures in Sec.  1030.4(b)(1)(i) of this part, the interest 
rate may, but need not, be referred to as the ``annual percentage 
rate'' in addition to being referred to as the ``interest rate.''
    (p) Passbook savings account means a savings account in which the 
consumer retains a book or other document in which the institution 
records transactions on the account.
    (q) Periodic statement means a statement setting forth information 
about an account (other than a time account or passbook savings 
account) that is provided to a consumer on a regular basis four or more 
times a year.
    (r) State means a state, the District of Columbia, the commonwealth 
of Puerto Rico, and any territory or possession of the United States.
    (s) Stepped-rate account means an account that has two or more 
interest rates that take effect in succeeding periods and are known 
when the account is opened.
    (t) Tiered-rate account means an account that has two or more 
interest rates that are applicable to specified balance levels.
    (u) Time account means an account with a maturity of at least seven 
days in which the consumer generally does not have a right to make 
withdrawals for six days after the account is opened, unless the 
deposit is subject to an early withdrawal penalty of at least seven 
days' interest on amounts withdrawn.
    (v) Variable-rate account means an account in which the interest 
rate may change after the account is opened, unless the institution 
contracts to give at least 30 calendar days advance written notice of 
rate decreases.


Sec.  1030.3  General disclosure requirements.

    (a) Form. Depository institutions shall make the disclosures 
required by Sec. Sec.  1030.4 through 1030.6 of this part, as 
applicable, clearly and conspicuously, in writing, and in a form the 
consumer may keep. The disclosures required by this part may be 
provided to the consumer in electronic form, subject to compliance with 
the consumer consent and other applicable provisions of the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 
7001 et seq.). The disclosures required by Sec. Sec.  1030.4(a)(2) and 
1030.8 may be provided to the consumer in electronic form without 
regard to the consumer consent or other provisions of the E-Sign Act in 
the circumstances set forth in those sections. Disclosures for each 
account offered by an institution may be presented separately or 
combined with disclosures for the institution's other accounts, as long 
as it is clear which disclosures are applicable to the consumer's 
account.
    (b) General. The disclosures shall reflect the terms of the legal 
obligation of the account agreement between the consumer and the 
depository institution. Disclosures may be made in languages other than 
English, provided

[[Page 79280]]

the disclosures are available in English upon request.
    (c) Relation to Regulation E (12 CFR Part 1005). Disclosures 
required by and provided in accordance with the Electronic Fund 
Transfer Act (15 U.S.C. 1693 et seq.) and its implementing Regulation E 
(12 CFR Part 1005) that are also required by this part may be 
substituted for the disclosures required by this part.
    (d) Multiple consumers. If an account is held by more than one 
consumer, disclosures may be made to any one of the consumers.
    (e) Oral response to inquiries. In an oral response to a consumer's 
inquiry about interest rates payable on its accounts, the depository 
institution shall state the annual percentage yield. The interest rate 
may be stated in addition to the annual percentage yield. No other rate 
may be stated.
    (f) Rounding and accuracy rules for rates and yields. (1) Rounding. 
The annual percentage yield, the annual percentage yield earned, and 
the interest rate shall be rounded to the nearest one-hundredth of one 
percentage point (.01%) and expressed to two decimal places. For 
account disclosures, the interest rate may be expressed to more than 
two decimal places.
    (2) Accuracy. The annual percentage yield (and the annual 
percentage yield earned) will be considered accurate if not more than 
one-twentieth of one percentage point (.05%) above or below the annual 
percentage yield (and the annual percentage yield earned) determined in 
accordance with the rules in Appendix A of this part.


Sec.  1030.4  Account disclosures.

    (a) Delivery of account disclosures. (1) Account opening. (i) 
General. A depository institution shall provide account disclosures to 
a consumer before an account is opened or a service is provided, 
whichever is earlier. An institution is deemed to have provided a 
service when a fee required to be disclosed is assessed. Except as 
provided in paragraph (a)(1)(ii) of this section, if the consumer is 
not present at the institution when the account is opened or the 
service is provided and has not already received the disclosures, the 
institution shall mail or deliver the disclosures no later than 10 
business days after the account is opened or the service is provided, 
whichever is earlier.
    (ii) Timing of electronic disclosures. If a consumer who is not 
present at the institution uses electronic means (for example, an 
Internet Web site) to open an account or request a service, the 
disclosures required under paragraph (a)(1) of this section must be 
provided before the account is opened or the service is provided.
    (2) Requests. (i) A depository institution shall provide account 
disclosures to a consumer upon request. If a consumer who is not 
present at the institution makes a request, the institution shall mail 
or deliver the disclosures within a reasonable time after it receives 
the request and may provide the disclosures in paper form, or 
electronically if the consumer agrees.
    (ii) In providing disclosures upon request, the institution may:
    (A) Specify an interest rate and annual percentage yield that were 
offered within the most recent seven calendar days; state that the rate 
and yield are accurate as of an identified date; and provide a 
telephone number consumers may call to obtain current rate information.
    (B) State the maturity of a time account as a term rather than a 
date.
    (b) Content of account disclosures. Account disclosures shall 
include the following, as applicable:
    (1) Rate information. (i) Annual percentage yield and interest 
rate. The ``annual percentage yield'' and the ``interest rate,'' using 
those terms, and for fixed-rate accounts the period of time the 
interest rate will be in effect.
    (ii) Variable rates. For variable-rate accounts:
    (A) The fact that the interest rate and annual percentage yield may 
change;
    (B) How the interest rate is determined;
    (C) The frequency with which the interest rate may change; and
    (D) Any limitation on the amount the interest rate may change.
    (2) Compounding and crediting. (i) Frequency. The frequency with 
which interest is compounded and credited.
    (ii) Effect of closing an account. If consumers will forfeit 
interest if they close the account before accrued interest is credited, 
a statement that interest will not be paid in such cases.
    (3) Balance information. (i) Minimum balance requirements. (A) Any 
minimum balance required to:
    (1) Open the account;
    (2) Avoid the imposition of a fee; or
    (3) Obtain the annual percentage yield disclosed.
    (B) Except for the balance to open the account, the disclosure 
shall state how the balance is determined for these purposes.
    (ii) Balance computation method. An explanation of the balance 
computation method specified in Sec.  1030.7 of this part used to 
calculate interest on the account.
    (iii) When interest begins to accrue. A statement of when interest 
begins to accrue on noncash deposits.
    (4) Fees. The amount of any fee that may be imposed in connection 
with the account (or an explanation of how the fee will be determined) 
and the conditions under which the fee may be imposed.
    (5) Transaction limitations. Any limitations on the number or 
dollar amount of withdrawals or deposits.
    (6) Features of time accounts. For time accounts:
    (i) Time requirements. The maturity date.
    (ii) Early withdrawal penalties. A statement that a penalty will or 
may be imposed for early withdrawal, how it is calculated, and the 
conditions for its assessment.
    (iii) Withdrawal of interest prior to maturity. If compounding 
occurs during the term and interest may be withdrawn prior to maturity, 
a statement that the annual percentage yield assumes interest remains 
on deposit until maturity and that a withdrawal will reduce earnings. 
For accounts with a stated maturity greater than one year that do not 
compound interest on an annual or more frequent basis, that require 
interest payouts at least annually, and that disclose an APY determined 
in accordance with section E of Appendix A of this part, a statement 
that interest cannot remain on deposit and that payout of interest is 
mandatory.
    (iv) Renewal policies. A statement of whether or not the account 
will renew automatically at maturity. If it will, a statement of 
whether or not a grace period will be provided and, if so, the length 
of that period must be stated. If the account will not renew 
automatically, a statement of whether interest will be paid after 
maturity if the consumer does not renew the account must be stated.
    (7) Bonuses. The amount or type of any bonus, when the bonus will 
be provided, and any minimum balance and time requirements to obtain 
the bonus.
    (c) Notice to existing account holders. (1) Notice of availability 
of disclosures. Depository institutions shall provide a notice to 
consumers who receive periodic statements and who hold existing 
accounts of the type offered by the institution on June 21, 1993. The 
notice shall be included on or with the first periodic statement sent 
on or after June 21, 1993 (or on or with the first periodic statement 
for a statement cycle beginning on or after that date). The notice 
shall state that consumers may request account disclosures containing 
terms, fees, and rate information for their account. In responding to 
such a request, institutions shall provide

[[Page 79281]]

disclosures in accordance with paragraph (a)(2) of this section.
    (2) Alternative to notice. As an alternative to the notice 
described in paragraph (c)(1) of this section, institutions may provide 
account disclosures to consumers. The disclosures may be provided 
either with a periodic statement or separately, but must be sent no 
later than when the periodic statement described in paragraph (c)(1) is 
sent.


Sec.  1030.5  Subsequent disclosures.

    (a) Change in terms. (1) Advance notice required. A depository 
institution shall give advance notice to affected consumers of any 
change in a term required to be disclosed under Sec.  1030.4(b) of this 
part if the change may reduce the annual percentage yield or adversely 
affect the consumer. The notice shall include the effective date of the 
change. The notice shall be mailed or delivered at least 30 calendar 
days before the effective date of the change.
    (2) No notice required. No notice under this section is required 
for:
    (i) Variable-rate changes. Changes in the interest rate and 
corresponding changes in the annual percentage yield in variable-rate 
accounts.
    (ii) Check printing fees. Changes in fees assessed for check 
printing.
    (iii) Short-term time accounts. Changes in any term for time 
accounts with maturities of one month or less.
    (b) Notice before maturity for time accounts longer than one month 
that renew automatically. For time accounts with a maturity longer than 
one month that renew automatically at maturity, institutions shall 
provide the disclosures described below before maturity. The 
disclosures shall be mailed or delivered at least 30 calendar days 
before maturity of the existing account. Alternatively, the disclosures 
may be mailed or delivered at least 20 calendar days before the end of 
the grace period on the existing account, provided a grace period of at 
least five calendar days is allowed.
    (1) Maturities of longer than one year. If the maturity is longer 
than one year, the institution shall provide account disclosures set 
forth in Sec.  1030.4(b) of this part for the new account, along with 
the date the existing account matures. If the interest rate and annual 
percentage yield that will be paid for the new account are unknown when 
disclosures are provided, the institution shall state that those rates 
have not yet been determined, the date when they will be determined, 
and a telephone number consumers may call to obtain the interest rate 
and the annual percentage yield that will be paid for the new account.
    (2) Maturities of one year or less but longer than one month. If 
the maturity is one year or less but longer than one month, the 
institution shall either:
    (i) Provide disclosures as set forth in paragraph (b)(1) of this 
section; or
    (ii) Disclose to the consumer:
    (A) The date the existing account matures and the new maturity date 
if the account is renewed;
    (B) The interest rate and the annual percentage yield for the new 
account if they are known (or that those rates have not yet been 
determined, the date when they will be determined, and a telephone 
number the consumer may call to obtain the interest rate and the annual 
percentage yield that will be paid for the new account); and
    (C) Any difference in the terms of the new account as compared to 
the terms required to be disclosed under Sec.  1030.4(b) of this part 
for the existing account.
    (c) Notice before maturity for time accounts longer than one year 
that do not renew automatically. For time accounts with a maturity 
longer than one year that do not renew automatically at maturity, 
institutions shall disclose to consumers the maturity date and whether 
interest will be paid after maturity. The disclosures shall be mailed 
or delivered at least 10 calendar days before maturity of the existing 
account.


Sec.  1030.6  Periodic statement disclosures.

    (a) General rule. If a depository institution mails or delivers a 
periodic statement, the statement shall include the following 
disclosures:
    (1) Annual percentage yield earned. The ``annual percentage yield 
earned'' during the statement period, using that term, calculated 
according to the rules in Appendix A of this part.
    (2) Amount of interest. The dollar amount of interest earned during 
the statement period.
    (3) Fees imposed. Fees required to be disclosed under Sec.  
1030.4(b)(4) of this part that were debited to the account during the 
statement period. The fees shall be itemized by type and dollar 
amounts. Except as provided in Sec.  1030.11(a)(1) of this part, when 
fees of the same type are imposed more than once in a statement period, 
a depository institution may itemize each fee separately or group the 
fees together and disclose a total dollar amount for all fees of that 
type.
    (4) Length of period. The total number of days in the statement 
period, or the beginning and ending dates of the period.
    (5) Aggregate fee disclosure. If applicable, the total overdraft 
and returned item fees required to be disclosed by Sec.  1030.11(a).
    (b) Special rule for average daily balance method. In making the 
disclosures described in paragraph (a) of this section, institutions 
that use the average daily balance method and that calculate interest 
for a period other than the statement period shall calculate and 
disclose the annual percentage yield earned and amount of interest 
earned based on that period rather than the statement period. The 
information in paragraph (a)(4) of this section shall be stated for 
that period as well as for the statement period.


Sec.  1030.7  Payment of interest.

    (a) Permissible methods. (1) Balance on which interest is 
calculated. Institutions shall calculate interest on the full amount of 
principal in an account for each day by use of either the daily balance 
method or the average daily balance method. Institutions shall 
calculate interest by use of a daily rate of at least 1/365 of the 
interest rate. In a leap year a daily rate of 1/366 of the interest 
rate may be used.
    (2) Determination of minimum balance to earn interest. An 
institution shall use the same method to determine any minimum balance 
required to earn interest as it uses to determine the balance on which 
interest is calculated. An institution may use an additional method 
that is unequivocally beneficial to the consumer.
    (b) Compounding and crediting policies. This section does not 
require institutions to compound or credit interest at any particular 
frequency.
    (c) Date interest begins to accrue. Interest shall begin to accrue 
not later than the business day specified for interest-bearing accounts 
in section 606 of the Expedited Funds Availability Act (12 U.S.C. 4005 
et seq.) and the Board of Governors of the Federal Reserve System's 
implementing Regulation CC (12 CFR part 229). Interest shall accrue 
until the day funds are withdrawn.


Sec.  1030.8  Advertising.

    (a) Misleading or inaccurate advertisements. An advertisement shall 
not:
    (1) Be misleading or inaccurate or misrepresent a depository 
institution's deposit contract; or
    (2) Refer to or describe an account as ``free'' or ``no cost'' (or 
contain a similar term) if any maintenance or activity fee may be 
imposed on the account. The word ``profit'' shall not be used in 
referring to interest paid on an account.

[[Page 79282]]

    (b) Permissible rates. If an advertisement states a rate of return, 
it shall state the rate as an ``annual percentage yield'' using that 
term. (The abbreviation ``APY'' may be used provided the term ``annual 
percentage yield'' is stated at least once in the advertisement.) The 
advertisement shall not state any other rate, except that the 
``interest rate,'' using that term, may be stated in conjunction with, 
but not more conspicuously than, the annual percentage yield to which 
it relates.
    (c) When additional disclosures are required. Except as provided in 
paragraph (e) of this section, if the annual percentage yield is stated 
in an advertisement, the advertisement shall state the following 
information, to the extent applicable, clearly and conspicuously:
    (1) Variable rates. For variable-rate accounts, a statement that 
the rate may change after the account is opened.
    (2) Time annual percentage yield is offered. The period of time the 
annual percentage yield will be offered, or a statement that the annual 
percentage yield is accurate as of a specified date.
    (3) Minimum balance. The minimum balance required to obtain the 
advertised annual percentage yield. For tiered-rate accounts, the 
minimum balance required for each tier shall be stated in close 
proximity and with equal prominence to the applicable annual percentage 
yield.
    (4) Minimum opening deposit. The minimum deposit required to open 
the account, if it is greater than the minimum balance necessary to 
obtain the advertised annual percentage yield.
    (5) Effect of fees. A statement that fees could reduce the earnings 
on the account.
    (6) Features of time accounts. For time accounts:
    (i) Time requirements. The term of the account.
    (ii) Early withdrawal penalties: A statement that a penalty will or 
may be imposed for early withdrawal.
    (iii) Required interest payouts. For noncompounding time accounts 
with a stated maturity greater than one year that do not compound 
interest on an annual or more frequent basis, that require interest 
payouts at least annually, and that disclose an APY determined in 
accordance with section E of Appendix A of this part, a statement that 
interest cannot remain on deposit and that payout of interest is 
mandatory.
    (d) Bonuses. Except as provided in paragraph (e) of this section, 
if a bonus is stated in an advertisement, the advertisement shall state 
the following information, to the extent applicable, clearly and 
conspicuously:
    (1) The ``annual percentage yield,'' using that term;
    (2) The time requirement to obtain the bonus;
    (3) The minimum balance required to obtain the bonus;
    (4) The minimum balance required to open the account, if it is 
greater than the minimum balance necessary to obtain the bonus; and
    (5) When the bonus will be provided.
    (e) Exemption for certain advertisements. (1) Certain media. If an 
advertisement is made through one of the following media, it need not 
contain the information in paragraphs (c)(1), (c)(2), (c)(4), (c)(5), 
(c)(6)(ii), (d)(4), and (d)(5) of this section:
    (i) Broadcast or electronic media, such as television or radio;
    (ii) Outdoor media, such as billboards; or
    (iii) Telephone response machines.
    (2) Indoor signs. (i) Signs inside the premises of a depository 
institution (or the premises of a deposit broker) are not subject to 
paragraphs (b), (c), (d) or (e)(1) of this section.
    (ii) If a sign exempt by paragraph (e)(2) of this section states a 
rate of return, it shall:
    (A) State the rate as an ``annual percentage yield,'' using that 
term or the term ``APY.'' The sign shall not state any other rate, 
except that the interest rate may be stated in conjunction with the 
annual percentage yield to which it relates.
    (B) Contain a statement advising consumers to contact an employee 
for further information about applicable fees and terms.
    (f) Additional disclosures in connection with the payment of 
overdrafts. Institutions that promote the payment of overdrafts in an 
advertisement shall include in the advertisement the disclosures 
required by Sec.  1030.11(b) of this part.


Sec.  1030.9  Enforcement and record retention.

    (a) Administrative enforcement. Section 270 of the act (12 U.S.C. 
4309) contains the provisions relating to administrative sanctions for 
failure to comply with the requirements of the act and this part. 
Compliance is enforced by the agencies listed in that section.
    (b) [Reserved]
    (c) Record retention. A depository institution shall retain 
evidence of compliance with this part for a minimum of two years after 
the date disclosures are required to be made or action is required to 
be taken. The administrative agencies responsible for enforcing this 
part may require depository institutions under their jurisdiction to 
retain records for a longer period if necessary to carry out their 
enforcement responsibilities under section 270 of the act.


Sec.  1030.10  [Reserved]


Sec.  1030.11  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, using the term 
``Total Overdraft Fees;'' 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.  1030.6(a)(3), using a format substantially 
similar to Sample Form B-10 in Appendix B to this part.
    (b) Advertising disclosures for overdraft services. (1) 
Disclosures. Except as provided in paragraphs (b)(2) through (4) of 
this section, any advertisement promoting the payment of overdrafts 
shall disclose in a clear and conspicuous manner:
    (i) The fee or fees for the payment of each overdraft;
    (ii) The categories of transactions for which a fee for paying an 
overdraft may be imposed;
    (iii) The time period by which the consumer must repay or cover any 
overdraft; and
    (iv) The circumstances under which the institution will not pay an 
overdraft.
    (2) Communications about the payment of overdrafts not subject to 
additional advertising disclosures. Paragraph (b)(1) of this section 
does not apply to:
    (i) An advertisement promoting a service where the institution's 
payment of overdrafts will be agreed upon in writing and subject to 
Regulation Z (12 CFR Part 1026);
    (ii) A communication by an institution about the payment of 
overdrafts in response to a consumer-initiated inquiry about deposit 
accounts or overdrafts. Providing information about the payment of 
overdrafts in

[[Page 79283]]

response to a balance inquiry made through an automated system, such as 
a telephone response machine, ATM, or an institution's Internet site, 
is not a response to a consumer-initiated inquiry for purposes of this 
paragraph;
    (iii) An advertisement made through broadcast or electronic media, 
such as television or radio;
    (iv) An advertisement made on outdoor media, such as billboards;
    (v) An ATM receipt;
    (vi) An in-person discussion with a consumer;
    (vii) Disclosures required by federal or other applicable law;
    (viii) Information included on a periodic statement or a notice 
informing a consumer about a specific overdrawn item or the amount the 
account is overdrawn;
    (ix) A term in a deposit account agreement discussing the 
institution's right to pay overdrafts;
    (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.
    (3) Exception for ATM screens and telephone response machines. The 
disclosures described in paragraphs (b)(1)(ii) and (iv) of this section 
are not required in connection with any advertisement made on an ATM 
screen or using a telephone response machine.
    (4) Exception for indoor signs. Paragraph (b)(1) of this section 
does not apply to advertisements for the payment of overdrafts on 
indoor signs as described by Sec.  1030.8(e)(2) of this part, provided 
that the sign contains a clear and conspicuous statement that fees may 
apply and that consumers should contact an employee for further 
information about applicable fees and terms. For purposes of this 
paragraph (b)(4), an indoor sign does not include an ATM screen.
    (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 Regulation Z (12 CFR part 1026), 
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 state s that any such balance includes such additional 
amounts and, if applicable, that additional amounts are not available 
for all transactions.

Appendix A to Part 1030--Annual Percentage Yield Calculation

    The annual percentage yield measures the total amount of 
interest paid on an account based on the interest rate and the 
frequency of compounding. The annual percentage yield reflects only 
interest and does not include the value of any bonus (or other 
consideration worth $10 or less) that may be provided to the 
consumer to open, maintain, increase or renew an account. Interest 
or other earnings are not to be included in the annual percentage 
yield if such amounts are determined by circumstances that may or 
may not occur in the future. The annual percentage yield is 
expressed as an annualized rate, based on a 365-day year. 
Institutions may calculate the annual percentage yield based on a 
365-day or a 366-day year in a leap year. Part I of this appendix 
discusses the annual percentage yield calculations for account 
disclosures and advertisements, while Part II discusses annual 
percentage yield earned calculations for periodic statements.

Part I. Annual Percentage Yield for Account Disclosures and Advertising 
Purposes

    In general, the annual percentage yield for account disclosures 
under Sec. Sec.  1030.4 and 1030.5 and for advertising under Sec.  
1030.8 is an annualized rate that reflects the relationship between 
the amount of interest that would be earned by the consumer for the 
term of the account and the amount of principal used to calculate 
that interest. Special rules apply to accounts with tiered and 
stepped interest rates, and to certain time accounts with a stated 
maturity greater than one year.

A. General Rules

    Except as provided in Part I.E. of this appendix, the annual 
percentage yield shall be calculated by the formula shown below. 
Institutions shall calculate the annual percentage yield based on 
the actual number of days in the term of the account. For accounts 
without a stated maturity date (such as a typical savings or 
transaction account), the calculation shall be based on an assumed 
term of 365 days. In determining the total interest figure to be 
used in the formula, institutions shall assume that all principal 
and interest remain on deposit for the entire term and that no other 
transactions (deposits or withdrawals) occur during the term. This 
assumption shall not be used if an institution requires, as a 
condition of the account, that consumers withdraw interest during 
the term. In such a case, the interest (and annual percentage yield 
calculation) shall reflect that requirement. For time accounts that 
are offered in multiples of months, institutions may base the number 
of days on either the actual number of days during the applicable 
period, or the number of days that would occur for any actual 
sequence of that many calendar months. If institutions choose to use 
the latter rule, they must use the same number of days to calculate 
the dollar amount of interest earned on the account that is used in 
the annual percentage yield formula (where ``Interest'' is divided 
by ``Principal'').
    The annual percentage yield is calculated by use of the 
following general formula (``APY'' is used for convenience in the 
formulas):

APY = 100 [(1 + Interest/Principal)(365/Days in term)-1]

    ``Principal'' is the amount of funds assumed to have been 
deposited at the beginning of the account.
    ``Interest'' is the total dollar amount of interest earned on 
the Principal for the term of the account.
    ``Days in term'' is the actual number of days in the term of the 
account. When the ``days in term'' is 365 (that is, where the stated 
maturity is 365 days or where the account does not have a stated 
maturity), the annual percentage yield can be calculated by use of 
the following simple formula:
    APY=100 (Interest/Principal)

Examples

    (1) If an institution pays $61.68 in interest for a 365-day year 
on $1,000 deposited into a NOW account, using the general formula 
above, the annual percentage yield is 6.17%:

APY = 100 [(1 + 61.68/1,000) (365/365) - 1]
APY = 6.17%

    Or, using the simple formula above (since, as an account without 
a stated term, the term is deemed to be 365 days):

APY = 100 (61.68/1,000)
APY = 6.17%

    (2) If an institution pays $30.37 in interest on a $1,000 six-
month certificate of deposit (where the six-month period used by the 
institution contains 182 days), using the general formula above, the 
annual percentage yield is 6.18%:

APY = 100 [(1 + 30.37/1,000) (365/182) - 1]
APY = 6.18%

B. Stepped-Rate Accounts (Different Rates Apply in Succeeding 
Periods)

    For accounts with two or more interest rates applied in 
succeeding periods (where the rates are known at the time the 
account is opened), an institution shall assume each interest rate 
is in effect for the length of time provided for in the deposit 
contract.

Examples

    (1) If an institution offers a $1,000 6-month certificate of 
deposit on which it pays a 5% interest rate, compounded daily, for 
the first three months (which contain 91 days), and a 5.5% interest 
rate, compounded daily, for the next three months (which contain 92 
days), the total interest for six months is $26.68 and, using the 
general formula above, the annual percentage yield is 5.39%:

APY = 100 [(1 + 26.68/1,000) (365/183) - 1]
APY = 5.39%


[[Page 79284]]


    (2) If an institution offers a $1,000 two-year certificate of 
deposit on which it pays a 6% interest rate, compounded daily, for 
the first year, and a 6.5% interest rate, compounded daily, for the 
next year, the total interest for two years is $133.13, and, using 
the general formula above, the annual percentage yield is 6.45%:

APY = 100 [(1 + 133.13/1,000) (365/730) - 1]
APY = 6.45%

C. Variable-Rate Accounts

    For variable-rate accounts without an introductory premium or 
discounted rate, an institution must base the calculation only on 
the initial interest rate in effect when the account is opened (or 
advertised), and assume that this rate will not change during the 
year.
    Variable-rate accounts with an introductory premium (or 
discount) rate must be calculated like a stepped-rate account. Thus, 
an institution shall assume that: (1) The introductory interest rate 
is in effect for the length of time provided for in the deposit 
contract; and (2) the variable interest rate that would have been in 
effect when the account is opened or advertised (but for the 
introductory rate) is in effect for the remainder of the year. If 
the variable rate is tied to an index, the index-based rate in 
effect at the time of disclosure must be used for the remainder of 
the year. If the rate is not tied to an index, the rate in effect 
for existing consumers holding the same account (who are not 
receiving the introductory interest rate) must be used for the 
remainder of the year.
    For example, if an institution offers an account on which it 
pays a 7% interest rate, compounded daily, for the first three 
months (which, for example, contain 91 days), while the variable 
interest rate that would have been in effect when the account was 
opened was 5%, the total interest for a 365-day year for a $1,000 
deposit is $56.52 (based on 91 days at 7% followed by 274 days at 
5%). Using the simple formula, the annual percentage yield is 5.65%:

APY = 100 (56.52/1,000)
APY = 5.65%

D. Tiered-Rate Accounts (Different Rates Apply to Specified Balance 
Levels)

    For accounts in which two or more interest rates paid on the 
account are applicable to specified balance levels, the institution 
must calculate the annual percentage yield in accordance with the 
method described below that it uses to calculate interest. In all 
cases, an annual percentage yield (or a range of annual percentage 
yields, if appropriate) must be disclosed for each balance tier.
    For purposes of the examples discussed below, assume the 
following:

----------------------------------------------------------------------------------------------------------------
          Interest rate (percent)                           Deposit balance required to earn rate
----------------------------------------------------------------------------------------------------------------
5.25.......................................  Up to but not exceeding $2,500.
5.50.......................................  Above $2,500 but not exceeding $15,000.
5.75.......................................  Above $15,000.
----------------------------------------------------------------------------------------------------------------

    Tiering Method A. Under this method, an institution pays on the 
full balance in the account the stated interest rate that 
corresponds to the applicable deposit tier. For example, if a 
consumer deposits $8,000, the institution pays the 5.50% interest 
rate on the entire $8,000.
    When this method is used to determine interest, only one annual 
percentage yield will apply to each tier. Within each tier, the 
annual percentage yield will not vary with the amount of principal 
assumed to have been deposited.
    For the interest rates and deposit balances assumed above, the 
institution will state three annual percentage yields--one 
corresponding to each balance tier. Calculation of each annual 
percentage yield is similar for this type of account as for accounts 
with a single interest rate. Thus, the calculation is based on the 
total amount of interest that would be received by the consumer for 
each tier of the account for a year and the principal assumed to 
have been deposited to earn that amount of interest.
    First tier. Assuming daily compounding, the institution will pay 
$53.90 in interest on a $1,000 deposit. Using the general formula, 
for the first tier, the annual percentage yield is 5.39%:

APY = 100 [(1 + 53.90/1,000) (365/365) - 1]
APY = 5.39%

    Using the simple formula:

APY = 100 (53.90/1,000)
APY = 5.39%

    Second tier. The institution will pay $452.29 in interest on an 
$8,000 deposit. Thus, using the simple formula, the annual 
percentage yield for the second tier is 5.65%:

APY = 100 (452.29/8,000)
APY = 5.65%

    Third tier. The institution will pay $1,183.61 in interest on a 
$20,000 deposit. Thus, using the simple formula, the annual 
percentage yield for the third tier is 5.92%:

APY = 100 (1,183.61/20,000)
APY = 5.92%

    Tiering Method B. Under this method, an institution pays the 
stated interest rate only on that portion of the balance within the 
specified tier. For example, if a consumer deposits $8,000, the 
institution pays 5.25% on $2,500 and 5.50% on $5,500 (the difference 
between $8,000 and the first tier cut-off of $2,500).
    The institution that computes interest in this manner must 
provide a range that shows the lowest and the highest annual 
percentage yields for each tier (other than for the first tier, 
which, like the tiers in Method A, has the same annual percentage 
yield throughout). The low figure for an annual percentage yield 
range is calculated based on the total amount of interest earned for 
a year assuming the minimum principal required to earn the interest 
rate for that tier. The high figure for an annual percentage yield 
range is based on the amount of interest the institution would pay 
on the highest principal that could be deposited to earn that same 
interest rate. If the account does not have a limit on the maximum 
amount that can be deposited, the institution may assume any amount.
    For the tiering structure assumed above, the institution would 
state a total of five annual percentage yields--one figure for the 
first tier and two figures stated as a range for the other two 
tiers.
    First tier. Assuming daily compounding, the institution would 
pay $53.90 in interest on a $1,000 deposit. For this first tier, 
using the simple formula, the annual percentage yield is 5.39%:

APY = 100 (53.90/1,000)
APY = 5.39%

    Second tier. For the second tier, the institution would pay 
between $134.75 and $841.45 in interest, based on assumed balances 
of $2,500.01 and $15,000, respectively. For $2,500.01, interest 
would be figured on $2,500 at 5.25% interest rate plus interest on 
$.01 at 5.50%. For the low end of the second tier, therefore, the 
annual percentage yield is 5.39%, using the simple formula:

APY = 100 (134.75/2,500)
APY = 5.39%

    For $15,000, interest is figured on $2,500 at 5.25% interest 
rate plus interest on $12,500 at 5.50% interest rate. For the high 
end of the second tier, the annual percentage yield, using the 
simple formula, is 5.61%:

APY = 100 (841.45/15,000)
APY = 5.61%

    Thus, the annual percentage yield range for the second tier is 
5.39% to 5.61%.
    Third tier. For the third tier, the institution would pay 
$841.45 in interest on the low end of the third tier (a balance of 
$15,000.01). For $15,000.01, interest would be figured on $2,500 at 
5.25% interest rate, plus interest on $12,500 at 5.50% interest 
rate, plus interest on $.01 at 5.75% interest rate. For the low end 
of the third tier, therefore, the annual percentage yield (using the 
simple formula) is 5.61%:

APY = 100 (841.45/15,000)
APY = 5.61%

    Since the institution does not limit the account balance, it may 
assume any maximum amount for the purposes of computing the annual 
percentage yield for the high end of the third tier. For an assumed 
maximum balance amount of $100,000, interest would be figured on 
$2,500 at 5.25% interest rate, plus interest on $12,500 at 5.50% 
interest rate, plus interest on $85,000 at 5.75% interest rate. For 
the high end of the

[[Page 79285]]

third tier, therefore, the annual percentage yield, using the simple 
formula, is 5.87%.

APY = 100 (5,871.79/100,000)
APY = 5.87%

    Thus, the annual percentage yield range that would be stated for 
the third tier is 5.61% to 5.87%.
    If the assumed maximum balance amount is $1,000,000 instead of 
$100,000, the institution would use $985,000 rather than $85,000 in 
the last calculation. In that case, for the high end of the third 
tier the annual percentage yield, using the simple formula, is 
5.91%:

APY = 100 (59,134.22/1,000,000)
APY = 5.91%

    Thus, the annual percentage yield range that would be stated for 
the third tier is 5.61% to 5.91%.

E. Time Accounts With a Stated Maturity Greater Than One Year That 
Pay Interest at Least Annually

    1. For time accounts with a stated maturity greater than one 
year that do not compound interest on an annual or more frequent 
basis, and that require the consumer to withdraw interest at least 
annually, the annual percentage yield may be disclosed as equal to 
the interest rate.

Example

    (1) If an institution offers a $1,000 two-year certificate of 
deposit that does not compound and that pays out interest semi-
annually by check or transfer at a 6.00% interest rate, the annual 
percentage yield may be disclosed as 6.00%.
    (2) For time accounts covered by this paragraph that are also 
stepped-rate accounts, the annual percentage yield may be disclosed 
as equal to the composite interest rate.

Example

    (1) If an institution offers a $1,000 three-year certificate of 
deposit that does not compound and that pays out interest annually 
by check or transfer at a 5.00% interest rate for the first year, 
6.00% interest rate for the second year, and 7.00% interest rate for 
the third year, the institution may compute the composite interest 
rate and APY as follows:
    (a) Multiply each interest rate by the number of days it will be 
in effect;
    (b) Add these figures together; and
    (c) Divide by the total number of days in the term.
    (2) Applied to the example, the products of the interest rates 
and days the rates are in effect are (5.00% x 365 days) 1825, (6.00% 
x 365 days) 2190, and (7.00% x 365 days) 2555, respectively. The sum 
of these products, 6570, is divided by 1095, the total number of 
days in the term. The composite interest rate and APY are both 
6.00%.

Part II. Annual Percentage Yield Earned for Periodic Statements

    The annual percentage yield earned for periodic statements under 
Sec.  1030.6(a) is an annualized rate that reflects the relationship 
between the amount of interest actually earned on the consumer's 
account during the statement period and the average daily balance in 
the account for the statement period. Pursuant to Sec.  1030.6(b), 
however, if an institution uses the average daily balance method and 
calculates interest for a period other than the statement period, 
the annual percentage yield earned shall reflect the relationship 
between the amount of interest earned and the average daily balance 
in the account for that other period.
    The annual percentage yield earned shall be calculated by using 
the following formulas (``APY Earned'' is used for convenience in 
the formulas):

A. General Formula

APY Earned = 100 [(1 + Interest earned/Balance) (365/Days in period) 
- 1]
``Balance'' is the average daily balance in the account for the 
period.
``Interest earned'' is the actual amount of interest earned on the 
account for the period.
``Days in period'' is the actual number of days for the period.

Examples

    (1) Assume an institution calculates interest for the statement 
period (and uses either the daily balance or the average daily 
balance method), and the account has a balance of $1,500 for 15 days 
and a balance of $500 for the remaining 15 days of a 30-day 
statement period. The average daily balance for the period is 
$1,000. The interest earned (under either balance computation 
method) is $5.25 during the period. The annual percentage yield 
earned (using the formula above) is 6.58%:

APY Earned = 100 [(1 + 5.25/1,000) (365/30) - 1]
APY Earned = 6.58%

    (2) Assume an institution calculates interest on the average 
daily balance for the calendar month and provides periodic 
statements that cover the period from the 16th of one month to the 
15th of the next month. The account has a balance of $2,000 
September 1 through September 15 and a balance of $1,000 for the 
remaining 15 days of September. The average daily balance for the 
month of September is $1,500, which results in $6.50 in interest 
earned for the month. The annual percentage yield earned for the 
month of September would be shown on the periodic statement covering 
September 16 through October 15. The annual percentage yield earned 
(using the formula above) is 5.40%:

APY Earned = 100 [(6.50/1,500) (365/30) - 1]
APY Earned = 5.40%

    (3) Assume an institution calculates interest on the average 
daily balance for a quarter (for example, the calendar months of 
September through November), and provides monthly periodic 
statements covering calendar months. The account has a balance of 
$1,000 throughout the 30 days of September, a balance of $2,000 
throughout the 31 days of October, and a balance of $3,000 
throughout the 30 days of November. The average daily balance for 
the quarter is $2,000, which results in $21 in interest earned for 
the quarter. The annual percentage yield earned would be shown on 
the periodic statement for November. The annual percentage yield 
earned (using the formula above) is 4.28%:

APY Earned = 100 [(1 + 21/2,000) (365/91) - 1]
APY Earned = 4.28%

B. Special Formula for Use Where Periodic Statement Is Sent More 
Often Than the Period for Which Interest Is Compounded

    Institutions that use the daily balance method to accrue 
interest and that issue periodic statements more often than the 
period for which interest is compounded shall use the following 
special formula:
[GRAPHIC] [TIFF OMITTED] TR21DE11.035

    The following definition applies for use in this formula (all 
other terms are defined under Part II):
    ``Compounding'' is the number of days in each compounding 
period.
    Assume an institution calculates interest for the statement 
period using the daily balance method, pays a 5.00% interest rate, 
compounded annually, and provides periodic statements for each 
monthly cycle. The account has a daily balance of $1,000 for a 30-
day statement period. The interest earned is $4.11 for the period, 
and the annual percentage yield earned (using the special formula 
above) is 5.00%:
[GRAPHIC] [TIFF OMITTED] TR21DE11.036


[[Page 79286]]


APY Earned = 5.00%

Appendix B to Part 1030--Model Clauses and Sample Forms

Table of Contents

B-1--Model Clauses for Account Disclosures (Section 1030.4(b))
B-2--Model Clauses for Change in Terms (Section 1030.5(a))
B-3--Model Clauses for Pre-Maturity Notices for Time Accounts 
(Section 1030.5(b)(2) and 1030.5(d))
B-4--Sample Form (Multiple Accounts)
B-5--Sample Form (Now Account)
B-6--Sample Form (Tiered Rate Money Market Account)
B-7--Sample Form (Certificate of Deposit)
B-8--Sample Form (Certificate of Deposit Advertisement)
B-9--Sample Form (Money Market Account Advertisement)
B-10--Sample Form (Aggregate Overdraft and Returned Item Fees)

B-1--Model Clauses for Account Disclosures

(a) Rate Information

(i) Fixed-Rate Accounts

    The interest rate on your account is ----% with an annual 
percentage yield of ----%. You will be paid this rate [for (time 
period)/until (date)/for at least 30 calendar days].

(ii) Variable-Rate Accounts

    The interest rate on your account is ----% with an annual 
percentage yield of ----%.
    Your interest rate and annual percentage yield may change.

Determination of Rate

    The interest rate on your account is based on (name of index) 
[plus/minus a margin of ----]; or
    At our discretion, we may change the interest rate on your 
account.

Frequency of Rate Changes

    We may change the interest rate on your account [every (time 
period)/at any time].

Limitations on Rate Changes

    The interest rate for your account will never change by more 
than ----% each (time period).
    The interest rate will never be [less/more] than ----%; or
    The interest rate will never [exceed----% above/drop more than 
----% below] the interest rate initially disclosed to you.

(iii) Stepped-Rate Accounts

    The initial interest rate for your account is ----%. You will be 
paid this rate [for (time period)/until (date)]. After that time, 
the interest rate for your account will be ----%, and you will be 
paid this rate [for (time period)/until (date)]. The annual 
percentage yield for your account is ----%.

(iv) Tiered-Rate Accounts

Tiering Method A

     If your [daily balance/average daily balance] is $---- 
or more, the interest rate paid on the entire balance in your 
account will be ----% with an annual percentage yield of ----%.
     If your [daily balance/average daily balance] is more 
than $----, but less than $----, the interest rate paid on the 
entire balance in your account will be ----% with an annual 
percentage yield of ----%.
     If your [daily balance/average daily balance] is $---- 
or less, the interest rate paid on the entire balance will be ----% 
with an annual percentage yield of ----%.

Tiering Method B

     An interest rate of ----% will be paid only for that 
portion of your [daily balance/average daily balance] that is 
greater than $----. The annual percentage yield for this tier will 
range from ----% to ----%, depending on the balance in the account.
     An interest rate of ----% will be paid only for that 
portion of your [daily balance/average daily balance] that is 
greater than $----. The annual percentage yield for this tier will 
range from ----% to ----%, depending on the balance in the account.
     If your [daily balance/average daily balance] is $---- 
or less, the interest rate paid on the entire balance will be ----% 
with an annual percentage yield of ----%.

(b) Compounding and Crediting

(i) Frequency

    Interest will be compounded [on a ---- basis/every (time 
period)]. Interest will be credited to your account [on a ---- 
basis/every (time period)].

(ii) Effect of Closing an Account

    If you close your account before interest is credited, you will 
not receive the accrued interest.

(c) Minimum Balance Requirements

(i) To Open the Account

    You must deposit $---- to open this account.

(ii) To Avoid Imposition of Fees

    A minimum balance fee of $---- will be imposed every (time 
period) if the balance in the account falls below $---- any day of 
the (time period).
    A minimum balance fee of $---- will be imposed every (time 
period) if the average daily balance for the (time period) falls 
below $----. The average daily balance is calculated by adding the 
principal in the account for each day of the period and dividing 
that figure by the number of days in the period.

(iii) To Obtain the Annual Percentage Yield Disclosed

    You must maintain a minimum balance of $---- in the account each 
day to obtain the disclosed annual percentage yield.
    You must maintain a minimum average daily balance of $---- to 
obtain the disclosed annual percentage yield. The average daily 
balance is calculated by adding the principal in the account for 
each day of the period and dividing that figure by the number of 
days in the period.

(d) Balance Computation Method

(i) Daily Balance Method

    We use the daily balance method to calculate the interest on 
your account. This method applies a daily periodic rate to the 
principal in the account each day.

(ii) Average Daily Balance Method

    We use the average daily balance method to calculate interest on 
your account. This method applies a periodic rate to the average 
daily balance in the account for the period. The average daily 
balance is calculated by adding the principal in the account for 
each day of the period and dividing that figure by the number of 
days in the period.

(e) Accrual of Interest on Noncash Deposits

    Interest begins to accrue no later than the business day we 
receive credit for the deposit of noncash items (for example, 
checks); or
    Interest begins to accrue on the business day you deposit 
noncash items (for example, checks).

(f) Fees

    The following fees may be assessed against your account:

----$----
----$----
----$----
----(conditions for imposing fee) $----
----% of ----.

(g) Transaction Limitations

    The minimum amount you may [withdraw/write a check for] is $--
--.
    You may make ---- [deposits into/withdrawals from] your account 
each (time period).
    You may not make [deposits into/withdrawals from] your account 
until the maturity date.

(h) Disclosures Relating to Time Accounts

(i) Time Requirements

    Your account will mature on (date).
    Your account will mature in (time period).

(ii) Early Withdrawal Penalties

    We [will/may] impose a penalty if you withdraw [any/all] of the 
[deposited funds/principal] before the maturity date. The fee 
imposed will equal ---- days/week[s]/month[s] of interest; or
    We [will/may] impose a penalty of $---- if you withdraw [any/
all] of the [deposited funds/principal] before the maturity date.
    If you withdraw some of your funds before maturity, the interest 
rate for the remaining funds in your account will be ----% with an 
annual percentage yield of ----%.

(iii) Withdrawal of Interest Prior to Maturity

    The annual percentage yield assumes interest will remain on 
deposit until maturity. A withdrawal will reduce earnings.

(iv) Renewal Policies

(1) Automatically Renewable Time Accounts

    This account will automatically renew at maturity.
    You will have [---- calendar/business] days after the maturity 
date to withdraw funds without penalty; or
    There is no grace period following the maturity of this account 
to withdraw funds without penalty.

(2) Non-Automatically Renewable Time Accounts

    This account will not renew automatically at maturity. If you do 
not renew the account,

[[Page 79287]]

your deposit will be placed in [an interest-bearing/a noninterest-
bearing] account.

(v) Required Interest Distribution

    This account requires the distribution of interest and does not 
allow interest to remain in the account.

(i) Bonuses

    You will [be paid/receive] [$----/(description of item)] as a 
bonus [when you open the account/on (date) ----].s
    You must maintain a minimum [daily balance/average daily 
balance] of $---- to obtain the bonus.
    To earn the bonus, [$----/your entire principal] must remain on 
deposit [for (time period)/until (date)----].

B-2--Model Clauses for Change in Terms

    On (date), the cost of (type of fee) will increase to $----.
    On (date), the interest rate on your account will decrease to --
--% with an annual percentage yield of ----%.
    On (date), the minimum [daily balance/average daily balance] 
required to avoid imposition of a fee will increase to $----.

B-3--Model Clauses for Pre-Maturity Notices for Time Accounts

(a) Automatically Renewable Time Accounts With Maturities of One 
Year or Less But Longer Than One Month

    Your account will mature on (date).
    If the account renews, the new maturity date will be (date).
    The interest rate for the renewed account will be ----% with an 
annual percentage yield of ----%; or
    The interest rate and annual percentage yield have not yet been 
determined. They will be available on (date). Please call (phone 
number) to learn the interest rate and annual percentage yield for 
your new account.

(b) Non-Automatically Renewable Time Accounts With Maturities 
Longer Than One Year

    Your account will mature on (date).
    If you do not renew the account, interest [will/will not] be 
paid after maturity.
BILLING CODE 4810-AM-P

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[GRAPHIC] [TIFF OMITTED] TR21DE11.045

BILLING CODE 4810-AM-C

[[Page 79297]]

Appendix C to Part 1030--Effect on State Laws

(a) Inconsistent Requirements

    State law requirements that are inconsistent with the 
requirements of the act and this part are preempted to the extent of 
the inconsistency. A state law is inconsistent if it requires a 
depository institution to make disclosures or take actions that 
contradict the requirements of the federal law. A state law is also 
contradictory if it requires the use of the same term to represent a 
different amount or a different meaning than the federal law, 
requires the use of a term different from that required in the 
federal law to describe the same item, or permits a method of 
calculating interest on an account different from that required in 
the federal law.

(b) Preemption Determinations

    A depository institution, state, or other interested party may 
request the Bureau to determine whether a state law requirement is 
inconsistent with the federal requirements. A request for a 
determination shall be in writing and addressed to the Bureau of 
Consumer Financial Protection, 1700 G Street NW., Washington, DC 
20006. Notice that the Bureau intends to make a determination 
(either on request or on its own motion) will be published in the 
Federal Register, with an opportunity for public comment unless the 
Bureau finds that notice and opportunity for comment would be 
impracticable, unnecessary, or contrary to the public interest and 
publishes its reasons for such decision. Notice of a final 
determination will be published in the Federal Register and 
furnished to the party who made the request and to the appropriate 
state official.

(c) Effect of Preemption Determinations

    After the Bureau determines that a state law is inconsistent, a 
depository institution may not make disclosures using the 
inconsistent term or take actions relying on the inconsistent law.

(d) Reversal of Determination

    The Bureau reserves the right to reverse a determination for any 
reason bearing on the coverage or effect of state or federal law. 
Notice of reversal of a determination will be published in the 
Federal Register and a copy furnished to the appropriate state 
official.

Appendix D to Part 1030--Issuance of Official Interpretations

    Except in unusual circumstances, interpretations will not be 
issued separately but will be incorporated in an official commentary 
to this part, which will be amended periodically. No interpretations 
will be issued approving depository institutions' forms, statements, 
or calculation tools or methods.

Supplement I to Part 1030--Official Interpretations

Introduction

    1. Official status. This commentary is the means by which the 
Bureau of Consumer Financial Protection issues official 
interpretations of Regulation DD.

Section 1030.1 Authority, purpose, coverage, and effect on state 
laws

(c) Coverage

    1. Foreign applicability. Regulation DD applies to all 
depository institutions, except credit unions, that offer deposit 
accounts to residents (including resident aliens) of any state as 
defined in Sec.  1030.2(r). Accounts held in an institution located 
in a state are covered, even if funds are transferred periodically 
to a location outside the United States. Accounts held in an 
institution located outside the United States are not covered, even 
if held by a U.S. resident.
    2. Persons who advertise accounts. Persons who advertise 
accounts are subject to the advertising rules. For example, if a 
deposit broker places an advertisement offering consumers an 
interest in an account at a depository institution, the advertising 
rules apply to the advertisement, whether the account is to be held 
by the broker or directly by the consumer.

Section 1030.2--Definitions

    (a) Account.
    1. Covered accounts. Examples of accounts subject to the 
regulation are:
    i. Interest-bearing and noninterest-bearing accounts.
    ii. Deposit accounts opened as a condition of obtaining a credit 
card.
    iii. Accounts denominated in a foreign currency.
    iv. Individual retirement accounts (IRAs) and simplified 
employee pension (SEP) accounts.
    v. Payable on death (POD) or ``Totten trust'' accounts.
    2. Other accounts. Examples of accounts not subject to the 
regulation are:
    i. Mortgage escrow accounts for collecting taxes and property 
insurance premiums.
    ii. Accounts established to make periodic disbursements on 
construction loans.
    iii. Trust accounts opened by a trustee pursuant to a formal 
written trust agreement (not merely declarations of trust on a 
signature card such as a ``Totten trust,'' or an IRA and SEP 
account).
    iv. Accounts opened by an executor in the name of a decedent's 
estate.
    3. Other investments. The term ``account'' does not apply to all 
products of a depository institution. Examples of products not 
covered are:
    i. Government securities.
    ii. Mutual funds.
    iii. Annuities.
    iv. Securities or obligations of a depository institution.
    v. Contractual arrangements such as repurchase agreements, 
interest rate swaps, and bankers acceptances.
    (b) Advertisement.
    1. Covered messages. Advertisements include commercial messages 
in visual, oral, or print media that invite, offer, or otherwise 
announce generally to prospective customers the availability of 
consumer accounts--such as:
    i. Telephone solicitations.
    ii. Messages on automated teller machine (ATM) screens.
    iii. Messages on a computer screen in an institution's lobby 
(including any printout) other than a screen viewed solely by the 
institution's employee.
    iv. Messages in a newspaper, magazine, or promotional flyer or 
on radio.
    v. Messages that are provided along with information about the 
consumer's existing account and that promote another account at the 
institution.
    2. Other messages. Examples of messages that are not 
advertisements are:
    i. Rate sheets in a newspaper, periodical, or trade journal 
(unless the depository institution, or a deposit broker offering 
accounts at the institution, pays a fee for or otherwise controls 
publication).
    ii. In-person discussions with consumers about the terms for a 
specific account.
    iii. For purposes of Sec.  1030.8(b) of this part through Sec.  
1030.8(e) of this part, information given to consumers about 
existing accounts, such as current rates recorded on a voice-
response machine or notices for automatically renewable time account 
sent before renewal.
    iv. Information about a particular transaction in an existing 
account.
    v. Disclosures required by federal or other applicable law.
    vi. A deposit account agreement.
    (f) Bonus.
    1. Examples. Bonuses include items of value, other than 
interest, offered as incentives to consumers, such as an offer to 
pay the final installment deposit for a holiday club account. Items 
that are not a bonus include discount coupons for goods or services 
at restaurants or stores.
    2. De minimis rule. Items with a de minimis value of $10 or less 
are not bonuses. Institutions may rely on the valuation standard 
used by the Internal Revenue Service to determine if the value of 
the item is de minimis. Examples of items of de minimis value are:
    i. Disability insurance premiums valued at an amount of $10 or 
less per year.
    ii. Coffee mugs, T-shirts or other merchandise with a market 
value of $10 or less.
    3. Aggregation. In determining if an item valued at $10 or less 
is a bonus, institutions must aggregate per account per calendar 
year items that may be given to consumers. In making this 
determination, institutions aggregate per account only the market 
value of items that may be given for a specific promotion. To 
illustrate, assume an institution offers in January to give 
consumers an item valued at $7 for each calendar quarter during the 
year that the average account balance in a negotiable order of 
withdrawal (NOW) account exceeds $10,000. The bonus rules are 
triggered, since consumers are eligible under the promotion to 
receive up to $28 during the year. However, the bonus rules are not 
triggered if an item valued at $7 is offered to consumers opening a 
NOW account during the month of January, even though in November the 
institution introduces a new promotion that includes, for example, 
an offer to existing NOW account holders for an item valued at $8 
for maintaining an average balance of $5,000 for the month.
    4. Waiver or reduction of a fee or absorption of expenses. 
Bonuses do not

[[Page 79298]]

include value that consumers receive through the waiver or reduction 
of fees (even if the fees waived exceed $10) for banking-related 
services such as the following:
    i. A safe deposit box rental fee for consumers who open a new 
account.
    ii. Fees for travelers checks for account holders.
    iii. Discounts on interest rates charged for loans at the 
institution.
    (h) Consumer.
    1. Professional capacity. Examples of accounts held by a natural 
person in a professional capacity for another are attorney-client 
trust accounts and landlord-tenant security accounts.
    2. Other accounts. Accounts not held in a professional capacity 
include accounts held by an individual for a child under the Uniform 
Gifts to Minors Act.
    3. Sole proprietors. Accounts held by individuals as sole 
proprietors are not covered.
    4. Retirement plans. IRAs and SEP accounts are consumer accounts 
to the extent that funds are invested in covered accounts. Keogh 
accounts are not subject to the regulation.
    (j) Depository institution and institution.
    1. Foreign institutions. Branches of foreign institutions 
located in the United States are subject to the regulation if they 
offer deposit accounts to consumers. Edge Act and Agreement 
corporations, and agencies of foreign institutions, are not 
depository institutions for purposes of this part.
    (k) Deposit broker.
    1. General. A deposit broker is a person who is in the business 
of placing or facilitating the placement of deposits in an 
institution, as defined by the Federal Deposit Insurance Act (12 
U.S.C. 29(g)).
    (n) Interest.
    1. Relation to bonuses. Bonuses are not interest for purposes of 
this part.
    (p) Passbook savings account.
    1. Relation to Regulation E. Passbook savings accounts include 
accounts accessed by preauthorized electronic fund transfers to the 
account (as defined in 12 CFR 1005.2(j)), such as an account that 
receives direct deposit of social security payments. Accounts 
permitting access by other electronic means are not ``passbook 
saving accounts'' and must comply with the requirements of Sec.  
1030.6 if statements are sent four or more times a year.
    (q) Periodic statement.
    1. Examples. Periodic statements do not include:
    i. Additional statements provided solely upon request.
    ii. General service information such as a quarterly newsletter 
or other correspondence describing available services and products.
    (t) Tiered-rate account.
    1. Time accounts. Time accounts paying different rates based 
solely on the amount of the initial deposit are not tiered-rate 
accounts.
    2. Minimum balance requirements. A requirement to maintain a 
minimum balance to earn interest does not make an account a tiered-
rate account.
    (u) Time account.
    1. Club accounts. Although club accounts typically have a 
maturity date, they are not time accounts unless they also require a 
penalty of at least seven days' interest for withdrawals during the 
first six days after the account is opened.
    2. Relation to Regulation D. Regulation D of the Board of 
Governors of the Federal Reserve System (12 CFR part 204) permits in 
limited circumstances the withdrawal of funds without penalty during 
the first six days after a ``time deposit'' is opened. (See 12 CFR 
204.2(c)(1)(i).) But the fact that a consumer makes a withdrawal as 
permitted by Regulation D does not disqualify the account from being 
a time account for purposes of this part.
    (v) Variable-rate account.
    1. General. A certificate of deposit permitting one or more rate 
adjustments prior to maturity at the consumer's option is a 
variable-rate account.

Section 1030.3--General Disclosure Requirements

    (a) Form.
    1. Design requirements. Disclosures must be presented in a 
format that allows consumers to readily understand the terms of 
their account. Institutions are not required to use a particular 
type size or typeface, nor are institutions required to state any 
term more conspicuously than any other term. Disclosures may be 
made:
    i. In any order.
    ii. In combination with other disclosures or account terms.
    iii. In combination with disclosures for other types of 
accounts, as long as it is clear to consumers which disclosures 
apply to their account.
    iv. On more than one page and on the front and reverse sides.
    v. By using inserts to a document or filling in blanks.
    vi. On more than one document, as long as the documents are 
provided at the same time.
    2. Consistent terminology. Institutions must use consistent 
terminology to describe terms or features required to be disclosed. 
For example, if an institution describes a monthly fee (regardless 
of account activity) as a ``monthly service fee'' in account-opening 
disclosures, the periodic statement and change-in-term notices must 
use the same terminology so that consumers can readily identify the 
fee.
    (b) General.
    1. Specificity of legal obligation. Institutions may refer to 
the calendar month or to roughly equivalent intervals during a 
calendar year as a ``month.''
    (c) Relation to Regulation E.
    1. General rule. Compliance with Regulation E (12 CFR Part 1005) 
is deemed to satisfy the disclosure requirements of this part, such 
as when:
    i. An institution changes a term that triggers a notice under 
Regulation E, and uses the timing and disclosure rules of Regulation 
E for sending change-in-term notices.
    ii. Consumers add an ATM access feature to an account, and the 
institution provides disclosures pursuant to Regulation E, including 
disclosure of fees (see 12 CFR 1005.7.)
    iii. An institution complying with the timing rules of 
Regulation E discloses at the same time fees for electronic services 
(such as for balance inquiry fees at ATMs) required to be disclosed 
by this part but not by Regulation E.
    iv. An institution relies on Regulation E's rules regarding 
disclosure of limitations on the frequency and amount of electronic 
fund transfers, including security-related exceptions. But any 
limitations on ``intra-institutional transfers'' to or from the 
consumer's other accounts during a given time period must be 
disclosed, even though intra-institutional transfers are exempt from 
Regulation E.
    (e) Oral response to inquiries.
    1. Application of rule. Institutions are not required to provide 
rate information orally.
    2. Relation to advertising. The advertising rules do not cover 
an oral response to a question about rates.
    3. Existing accounts. This paragraph does not apply to oral 
responses about rate information for existing accounts. For example, 
if a consumer holding a one-year certificate of deposit (CD) 
requests interest rate information about the CD during the term, the 
institution need not disclose the annual percentage yield.
    (f) Rounding and accuracy rules for rates and yields
    (f)(1) Rounding.
    1. Permissible rounding. Examples of permissible rounding are an 
annual percentage yield calculated to be 5.644%, rounded down and 
disclosed as 5.64%; 5.645% rounded up and disclosed as 5.65%.
    (f)(2) Accuracy.
    1. Annual percentage yield and annual percentage yield earned. 
The tolerance for annual percentage yield and annual percentage 
yield earned calculations is designed to accommodate inadvertent 
errors. Institutions may not purposely incorporate the tolerance 
into their calculation of yields.

Section 1030.4--Account Disclosures

    (a) Delivery of account disclosures.
    (a)(1) Account opening.
    1. New accounts. New account disclosures must be provided when:
    i. A time account that does not automatically rollover is 
renewed by a consumer.
    ii. A consumer changes a term for a renewable time account (see 
comment 5(b)-5 regarding disclosure alternatives.)
    iii. An institution transfers funds from an account to open a 
new account not at the consumer's request, unless the institution 
previously gave account disclosures and any change-in-term notices 
for the new account.
    iv. An institution accepts a deposit from a consumer to an 
account that the institution had deemed closed for the purpose of 
treating accrued but uncredited interest as forfeited interest (see 
comment 7(b)-3.)
    2. Acquired accounts. New account disclosures need not be given 
when an institution acquires an account through an acquisition of or 
merger with another institution (but see Sec.  1030.5(a) of this 
part regarding advance notice requirements if terms are changed).
    (a)(2) Requests.
    Paragraph (a)(2)(i).
    1. Inquiries versus requests. A response to an oral inquiry (by 
telephone or in person)

[[Page 79299]]

about rates and yields or fees does not trigger the duty to provide 
account disclosures. But when consumers ask for written information 
about an account (whether by telephone, in person, or by other 
means), the institution must provide disclosures unless the account 
is no longer offered to the public.
    2. General requests. When responding to a consumer's general 
request for disclosures about a type of account (a NOW account, for 
example), an institution that offers several variations may provide 
disclosures for any one of them.
    3. Timing for response. Ten business days is a reasonable time 
for responding to requests for account information that consumers do 
not make in person, including requests made by electronic means 
(such as by electronic mail).
    4. Use of electronic means. If a consumer who is not present at 
the institution makes a request for account disclosures, including a 
request made by telephone, email, or via the institution's Web site, 
the institution may send the disclosures in paper form or, if the 
consumer agrees, may provide the disclosures electronically, such as 
to an email address that the consumer provides for that purpose, or 
on the institution's Web site, without regard to the consumer 
consent or other provisions of the E-Sign Act. The regulation does 
not require an institution to provide, nor a consumer to agree to 
receive, the disclosures required by Sec.  1030.4(a)(2) in 
electronic form.
    Paragraph (a)(2)(ii)(A).
    1. Recent rates. Institutions comply with this paragraph if they 
disclose an interest rate and annual percentage yield accurate 
within the seven calendar days preceding the date they send the 
disclosures.
    Paragraph (a)(2)(ii)(B).
    1. Term. Describing the maturity of a time account as ``1 year'' 
or ``6 months,'' for example, illustrates a statement of the 
maturity of a time account as a term rather than a date (``January 
10, 1995'').
    (b) Content of account disclosures.
    (b)(1) Rate information.
    (b)(1)(i) Annual percentage yield and interest rate.
    1. Rate disclosures. In addition to the interest rate and annual 
percentage yield, institutions may disclose a periodic rate 
corresponding to the interest rate. No other rate or yield (such as 
``tax effective yield'') is permitted. If the annual percentage 
yield is the same as the interest rate, institutions may disclose a 
single figure but must use both terms.
    2. Fixed-rate accounts. For fixed-rate time accounts paying the 
opening rate until maturity, institutions may disclose the period of 
time the interest rate will be in effect by stating the maturity 
date. (See Appendix B, B-7--Sample Form.) For other fixed-rate 
accounts, institutions may use a date (``This rate will be in effect 
through May 4, 1995'') or a period (``This rate will be in effect 
for at least 30 days'').
    3. Tiered-rate accounts. Each interest rate, along with the 
corresponding annual percentage yield for each specified balance 
level (or range of annual percentage yields, if appropriate), must 
be disclosed for tiered-rate accounts. (See Appendix A, Part I, 
Paragraph D.)
    4. Stepped-rate accounts. A single composite annual percentage 
yield must be disclosed for stepped-rate accounts. (See Appendix A, 
Part I, Paragraph B.) The interest rates and the period of time each 
will be in effect also must be provided. When the initial rate 
offered for a specified time on a variable-rate account is higher or 
lower than the rate that would otherwise be paid on the account, the 
calculation of the annual percentage yield must be made as if for a 
stepped-rate account. (See Appendix A, Part I, Paragraph C.)
    (b)(1)(ii) Variable rates.
    Paragraph (b)(1)(ii)(B).
    1. Determining interest rates. To disclose how the interest rate 
is determined, institutions must:
    i. Identify the index and specific margin, if the interest rate 
is tied to an index.
    ii. State that rate changes are within the institution's 
discretion, if the institution does not tie changes to an index.
    Paragraph (b)(1)(ii)(C).
    1. Frequency of rate changes. An institution reserving the right 
to change rates at its discretion must state the fact that rates may 
change at any time.
    Paragraph (b)(1)(ii)(D).
    1. Limitations. A floor or ceiling on rates or on the amount the 
rate may decrease or increase during any time period must be 
disclosed. Institutions need not disclose the absence of limitations 
on rate changes.
    (b)(2) Compounding and crediting.
    (b)(2)(ii) Effect of closing an account.
    1. Deeming an account closed. An institution may, subject to 
state or other law, provide in its deposit contracts the actions by 
consumers that will be treated as closing the account and that will 
result in the forfeiture of accrued but uncredited interest. An 
example is the withdrawal of all funds from the account prior to the 
date that interest is credited.
    (b)(3) Balance information.
    (b)(3)(ii) Balance computation method.
    1. Methods and periods. Institutions may use different methods 
or periods to calculate minimum balances for purposes of imposing a 
fee (the daily balance for a calendar month, for example) and 
accruing interest (the average daily balance for a statement period, 
for example). Each method and corresponding period must be 
disclosed.
    (b)(3)(iii) When interest begins to accrue.
    1. Additional information. Institutions may disclose additional 
information such as the time of day after which deposits are treated 
as having been received the following business day, and may use 
additional descriptive terms such as ``ledger'' or ``collected'' 
balances to disclose when interest begins to accrue.
    (b)(4) Fees.
    1. Covered fees. The following are types of fees that must be 
disclosed:
    i. Maintenance fees, such as monthly service fees.
    ii. Fees to open or to close an account.
    iii. Fees related to deposits or withdrawals, such as fees for 
use of the institution's ATMs.
    iv. Fees for special services, such as stop-payment fees, fees 
for balance inquiries or verification of deposits, fees associated 
with checks returned unpaid, and fees for regularly sending to 
consumers checks that otherwise would be held by the institution.
    2. Other fees. Institutions need not disclose fees such as the 
following:
    i. Fees for services offered to account and nonaccount holders 
alike, such as travelers checks and wire transfers (even if 
different amounts are charged to account and nonaccount holders).
    ii. Incidental fees, such as fees associated with state escheat 
laws, garnishment or attorneys fees, and fees for photocopying.
    3. Amount of fees. Institutions must state the amount and 
conditions under which a fee may be imposed. Naming and describing 
the fee (such as ``$4.00 monthly service fee'') will typically 
satisfy these requirements.
    4. Tied-accounts. Institutions must state if fees that may be 
assessed against an account are tied to other accounts at the 
institution. For example, if an institution ties the fees payable on 
a NOW account to balances held in the NOW account and a savings 
account, the NOW account disclosures must state that fact and 
explain how the fee is determined.
    5. Fees for overdrawing an account. Under Sec.  1030.4(b)(4) of 
this part, institutions must disclose the conditions under which a 
fee may be imposed. In satisfying this requirement institutions must 
specify the categories of transactions for which an overdraft fee 
may be imposed. An exhaustive list of transactions is not required. 
It is sufficient for an institution to state that the fee applies to 
overdrafts ``created by check, in-person withdrawal, ATM withdrawal, 
or other electronic means,'' as applicable. Disclosing a fee ``for 
overdraft items'' would not be sufficient.
    (b)(5) Transaction limitations.
    1. General rule. Examples of limitations on the number or dollar 
amount of deposits or withdrawals that institutions must disclose 
are:
    i. Limits on the number of checks that may be written on an 
account within a given time period.
    ii. Limits on withdrawals or deposits during the term of a time 
account.
    iii. Limitations required by Regulation D of the Board of 
Governors of the Federal Reserve System (12 CFR part 204) on the 
number of withdrawals permitted from money market deposit accounts 
by check to third parties each month. Institutions need not disclose 
reservations of right to require notices for withdrawals from 
accounts required by federal or state law.
    (b)(6) Features of time accounts.
    (b)(6)(i) Time requirements.
    1. ``Callable'' time accounts. In addition to the maturity date, 
an institution must state the date or the circumstances under which 
it may redeem a time account at the institution's option (a 
``callable'' time account).
    (b)(6)(ii) Early withdrawal penalties.
    1. General. The term ``penalty'' may but need not be used to 
describe the loss of interest that consumers may incur for early 
withdrawal of funds from time accounts.
    2. Examples. Examples of early withdrawal penalties are:
    i. Monetary penalties, such as ``$10.00'' or ``seven days' 
interest plus accrued but uncredited interest.''

[[Page 79300]]

    ii. Adverse changes to terms such as a lowering of the interest 
rate, annual percentage yield, or compounding frequency for funds 
remaining on deposit.
    iii. Reclamation of bonuses.
    3. Relation to rules for IRAs or similar plans. Penalties 
imposed by the Internal Revenue Code for certain withdrawals from 
IRAs or similar pension or savings plans are not early withdrawal 
penalties for purposes of this part.
    4. Disclosing penalties. Penalties may be stated in months, 
whether institutions assess the penalty using the actual number of 
days during the period or using another method such as a number of 
days that occurs in any actual sequence of the total calendar months 
involved. For example, stating ``one month's interest'' is 
permissible, whether the institution assesses 30 days' interest 
during the month of April, or selects a time period between 28 and 
31 days for calculating the interest for all early withdrawals 
regardless of when the penalty is assessed.
    (b)(6)(iv) Renewal policies.
    1. Rollover time accounts. Institutions offering a grace period 
on time accounts that automatically renew need not state whether 
interest will be paid if the funds are withdrawn during the grace 
period.
    2. Nonrollover time accounts. Institutions paying interest on 
funds following the maturity of time accounts that do not renew 
automatically need not state the rate (or annual percentage yield) 
that may be paid. (See Appendix B, Model Clause B-1(h)(iv)(2).)

Section 1030.5--Subsequent Disclosures

    (a) Change in terms.
    (a)(1) Advance notice required.
    1. Form of notice. Institutions may provide a change-in-term 
notice on or with a periodic statement or in another mailing. If an 
institution provides notice through revised account disclosures, the 
changed term must be highlighted in some manner. For example, 
institutions may note that a particular fee has been changed (also 
specifying the new amount) or use an accompanying letter that refers 
to the changed term.
    2. Effective date. An example of language for disclosing the 
effective date of a change is ``As of November 21, 1994.''
    3. Terms that change upon the occurrence of an event. An 
institution offering terms that will automatically change upon the 
occurrence of a stated event need not send an advance notice of the 
change provided the institution fully describes the conditions of 
the change in the account opening disclosures (and sends any change-
in-term notices regardless of whether the changed term affects that 
consumer's account at that time).
    4. Examples. Examples of changes not requiring an advance 
change-in-terms notice are:
    i. The termination of employment for consumers for whom account 
maintenance or activity fees were waived during their employment by 
the depository institution.
    ii. The expiration of one year in a promotion described in the 
account opening disclosures to ``waive $4.00 monthly service charges 
for one year.''
    (a)(2) No notice required.
    (a)(2)(ii) Check printing fees.
    1. Increase in fees. A notice is not required for an increase in 
fees for printing checks (or deposit and withdrawal slips) even if 
the institution adds some amount to the price charged by the vendor.
    (b) Notice before maturity for time accounts longer than one 
month that renew automatically.
    1. Maturity dates on nonbusiness days. In determining the term 
of a time account, institutions may disregard the fact that the term 
will be extended beyond the disclosed number of days because the 
disclosed maturity falls on a nonbusiness day. For example, a 
holiday or weekend may cause a ``one-year'' time account to extend 
beyond 365 days (or 366, in a leap year) or a ``one-month'' time 
account to extend beyond 31 days.
    2. Disclosing when rates will be determined. Ways to disclose 
when the annual percentage yield will be available include the use 
of:
    i. A specific date, such as ``October 28.''
    ii. A date that is easily determinable, such as ``the Tuesday 
before the maturity date stated on this notice'' or ``as of the 
maturity date stated on this notice.''
    3. Alternative timing rule. Under the alternative timing rule, 
an institution offering a 10-day grace period would have to provide 
the disclosures at least 10 days prior to the scheduled maturity 
date.
    4. Club accounts. If consumers have agreed to the transfer of 
payments from another account to a club time account for the next 
club period, the institution must comply with the requirements for 
automatically renewable time accounts--even though consumers may 
withdraw funds from the club account at the end of the current club 
period.
    5. Renewal of a time account. In the case of a change in terms 
that becomes effective if a rollover time account is subsequently 
renewed:
    i. If the change is initiated by the institution, the disclosure 
requirements of this paragraph apply. (Paragraph 1030.5(a) applies 
if the change becomes effective prior to the maturity of the 
existing time account.)
    ii. If the change is initiated by the consumer, the account 
opening disclosure requirements of Sec.  1030.4(b) apply. (If the 
notice required by this paragraph has been provided, institutions 
may give new account disclosures or disclosures highlighting only 
the new term.)
    6. Example. If a consumer receives a prematurity notice on a 
one-year time account and requests a rollover to a six-month 
account, the institution must provide either account opening 
disclosures including the new maturity date or, if all other terms 
previously disclosed in the prematurity notice remain the same, only 
the new maturity date.
    (b)(1) Maturities of longer than one year.
    1. Highlighting changed terms. Institutions need not highlight 
terms that changed since the last account disclosures were provided.
    (c) Notice before maturity for time accounts longer than one 
year that do not renew automatically.
    1. Subsequent account. When funds are transferred following 
maturity of a nonrollover time account, institutions need not 
provide account disclosures unless a new account is established.

Section 1030.6--Periodic Statement Disclosures

    (a) General rule.
    1. General. Institutions are not required to provide periodic 
statements. If they do provide statements, disclosures need only be 
furnished to the extent applicable. For example, if no interest is 
earned for a statement period, institutions need not state that 
fact. Or, institutions may disclose ``$0'' interest earned and 
``0%'' annual percentage yield earned.
    2. Regulation E interim statements. When an institution provides 
regular quarterly statements, and in addition provides a monthly 
interim statement to comply with Regulation E, the interim statement 
need not comply with this section unless it states interest or rate 
information. (See 12 CFR 1005.9(b).)
    3. Combined statements. Institutions may provide information 
about an account (such as a MMDA) on the periodic statement for 
another account (such as a NOW account) without triggering the 
disclosures required by this section, as long as:
    i. The information is limited to the account number, the type of 
account, or balance information, and
    ii. The institution also provides a periodic statement complying 
with this section for each account.
    4. Other information. Additional information that may be given 
on or with a periodic statement includes:
    i. Interest rates and corresponding periodic rates applied to 
balances during the statement period.
    ii. The dollar amount of interest earned year-to-date.
    iii. Bonuses paid (or any de minimis consideration of $10 or 
less).
    iv. Fees for products such as safe deposit boxes.
    (a)(1) Annual percentage yield earned.
    1. Ledger and collected balances. Institutions that accrue 
interest using the collected balance method may use either the 
ledger or the collected balance in determining the annual percentage 
yield earned.
    (a)(2) Amount of interest.
    1. Accrued interest. Institutions must state the amount of 
interest that accrued during the statement period, even if it was 
not credited.
    2. Terminology. In disclosing interest earned for the period, 
institutions must use the term ``interest'' or terminology such as:
    i. ``Interest paid,'' to describe interest that has been 
credited.
    ii. ``Interest accrued'' or ``interest earned,'' to indicate 
that interest is not yet credited.
    3. Closed accounts. If consumers close an account between 
crediting periods and forfeits accrued interest, the institution may 
not show any figures for interest earned or annual percentage yield 
earned for the period (other than zero, at the institution's 
option).
    (a)(3) Fees imposed.

[[Page 79301]]

    1. General. Periodic statements must state fees disclosed under 
Sec.  1030.4(b) that were debited to the account during the 
statement period, even if assessed for an earlier period.
    2. Itemizing fees by type. In itemizing fees imposed more than 
once in the period, institutions may group fees if they are the same 
type. (See Sec.  1030.11(a)(1) of this part regarding certain fees 
that are required to be grouped.) When fees of the same type are 
grouped together, the description must make clear that the dollar 
figure represents more than a single fee, for example, ``total fees 
for checks written this period.'' Examples of fees that may not be 
grouped together are--
    i. Monthly maintenance and excess-activity fees.
    ii. ``Transfer'' fees, if different dollar amounts are imposed, 
such as $.50 for deposits and $1.00 for withdrawals.
    iii. Fees for electronic fund transfers and fees for other 
services, such as balance-inquiry or maintenance fees.
    iv. Fees for paying overdrafts and fees for returning checks or 
other items unpaid.
    3. Identifying fees. Statement details must enable consumers to 
identify the specific fee. For example:
    i. Institutions may use a code to identify a particular fee if 
the code is explained on the periodic statement or in documents 
accompanying the statement.
    ii. Institutions using debit slips may disclose the date the fee 
was debited on the periodic statement and show the amount and type 
of fee on the dated debit slip.
    4. Relation to Regulation E. Disclosure of fees in compliance 
with Regulation E complies with this section for fees related to 
electronic fund transfers (for example, totaling all electronic 
funds transfer fees in a single figure).
    (a)(4) Length of period.
    1. General. Institutions providing the beginning and ending 
dates of the period must make clear whether both dates are included 
in the period.
    2. Opening or closing an account mid-cycle. If an account is 
opened or closed during the period for which a statement is sent, 
institutions must calculate the annual percentage yield earned based 
on account balances for each day the account was open.
    (b) Special rule for average daily balance method.
    1. Monthly statements and quarterly compounding. This rule 
applies, for example, when an institution calculates interest on a 
quarterly average daily balance and sends monthly statements. In 
this case, the first two monthly statements would omit annual 
percentage yield earned and interest earned figures; the third 
monthly statement would reflect the interest earned and the annual 
percentage yield earned for the entire quarter.
    2. Length of the period. Institutions must disclose the length 
of both the interest calculation period and the statement period. 
For example, a statement could disclose a statement period of April 
16 through May 15 and further state that ``the interest earned and 
the annual percentage yield earned are based on your average daily 
balance for the period April 1 through April 30.''
    3. Quarterly statements and monthly compounding. Institutions 
that use the average daily balance method to calculate interest on a 
monthly basis and that send statements on a quarterly basis may 
disclose a single interest (and annual percentage yield earned) 
figure. Alternatively, an institution may disclose three interest 
and three annual percentage yield earned figures, one for each month 
in the quarter, as long as the institution states the number of days 
(or beginning and ending dates) in the interest period if different 
from the statement period.

Section 1030.7--Payment of Interest

    (a)(1) Permissible methods.
    1. Prohibited calculation methods. Calculation methods that do 
not comply with the requirement to pay interest on the full amount 
of principal in the account each day include:
    i. Paying interest on the balance in the account at the end of 
the period (the ``ending balance'' method).
    ii. Paying interest for the period based on the lowest balance 
in the account for any day in that period (the ``low balance'' 
method).
    iii. Paying interest on a percentage of the balance, excluding 
the amount set aside for reserve requirements (the ``investable 
balance'' method).
    2. Use of 365-day basis. Institutions may apply a daily periodic 
rate greater than 1/365 of the interest rate--such as 1/360 of the 
interest rate--as long as it is applied 365 days a year.
    3. Periodic interest payments. An institution can pay interest 
each day on the account and still make uniform interest payments. 
For example, for a one-year certificate of deposit an institution 
could make monthly interest payments equal to 1/12 of the amount of 
interest that will be earned for a 365-day period (or 11 uniform 
monthly payments--each equal to roughly 1/12 of the total amount of 
interest--and one payment that accounts for the remainder of the 
total amount of interest earned for the period).
    4. Leap year. Institutions may apply a daily rate of 1/366 or 1/
365 of the interest rate for 366 days in a leap year, if the account 
will earn interest for February 29.
    5. Maturity of time accounts. Institutions are not required to 
pay interest after time accounts mature. (See 12 CFR Part 217, 
Regulation Q of the Board of Governors of the Federal Reserve 
System, for limitations on duration of interest payments.) Examples 
include:
    i. During a grace period offered for an automatically renewable 
time account, if consumers decide during that period not to renew 
the account.
    ii. Following the maturity of nonrollover time accounts.
    iii. When the maturity date falls on a holiday, and consumers 
must wait until the next business day to obtain the funds.
    6. Dormant accounts. Institutions must pay interest on funds in 
an account, even if inactivity or the infrequency of transactions 
would permit the institution to consider the account to be 
``inactive'' or ``dormant'' (or similar status) as defined by state 
or other law or the account contract.
    (a)(2) Determination of minimum balance to earn interest.
    1. Daily balance accounts. Institutions that require a minimum 
balance may choose not to pay interest for days when the balance 
drops below the required minimum, if they use the daily balance 
method to calculate interest.
    2. Average daily balance accounts. Institutions that require a 
minimum balance may choose not to pay interest for the period in 
which the balance drops below the required minimum, if they use the 
average daily balance method to calculate interest.
    3. Beneficial method. Institutions may not require that 
consumers maintain both a minimum daily balance and a minimum 
average daily balance to earn interest, such as by requiring 
consumers to maintain a $500 daily balance and a prescribed average 
daily balance (whether higher or lower). But an institution could 
offer a minimum balance to earn interest that includes an additional 
method that is ``unequivocally beneficial'' to consumers such as the 
following: An institution using the daily balance method to 
calculate interest and requiring a $500 minimum daily balance could 
offer to pay interest on the account for those days the minimum 
balance is not met as long as consumers maintain an average daily 
balance throughout the month of $400.
    4. Paying on full balance. Institutions must pay interest on the 
full balance in the account that meets the required minimum balance. 
For example, if $300 is the minimum daily balance required to earn 
interest, and a consumer deposits $500, the institution must pay the 
stated interest rate on the full $500 and not just on $200.
    5. Negative balances prohibited. Institutions must treat a 
negative account balance as zero to determine:
    i. The daily or average daily balance on which interest will be 
paid.
    ii. Whether any minimum balance to earn interest is met.
    6. Club accounts. Institutions offering club accounts (such as a 
``holiday'' or ``vacation'' club) cannot impose a minimum balance 
requirement for interest based on the total number or dollar amount 
of payments required under the club plan. For example, if a plan 
calls for $10 weekly payments for 50 weeks, the institution cannot 
set a $500 ``minimum balance'' and then pay interest only if the 
consumer has made all 50 payments.
    7. Minimum balances not affecting interest. Institutions may use 
the daily balance, average daily balance, or any other computation 
method to calculate minimum balance requirements not involving the 
payment of interest--such as to compute minimum balances for 
assessing fees.
    (b) Compounding and crediting policies.
    1. General. Institutions choosing to compound interest may 
compound or credit interest annually, semi-annually, quarterly, 
monthly, daily, continuously, or on any other basis.
    2. Withdrawals prior to crediting date. If consumers withdraw 
funds (without closing the account) prior to a scheduled crediting 
date, institutions may delay paying the accrued interest on the 
withdrawn amount until the scheduled crediting date, but may not 
avoid paying interest.

[[Page 79302]]

    3. Closed accounts. Subject to state or other law, an 
institution may choose not to pay accrued interest if consumers 
close an account prior to the date accrued interest is credited, as 
long as the institution has disclosed that fact.
    (c) Date interest begins to accrue.
    1. Relation to Regulation CC. Institutions may rely on the 
Expedited Funds Availability Act (EFAA) and Regulation CC of the 
Board of Governors of the Federal Reserve System (12 CFR part 229) 
to determine, for example, when a deposit is considered made for 
purposes of interest accrual, or when interest need not be paid on 
funds because a deposited check is later returned unpaid.
    2. Ledger and collected balances. Institutions may calculate 
interest by using a ``ledger'' or ``collected'' balance method, as 
long as the crediting requirements of the EFAA are met (12 CFR 
229.14).
    3. Withdrawal of principal. Institutions must accrue interest on 
funds until the funds are withdrawn from the account. For example, 
if a check is debited to an account on a Tuesday, the institution 
must accrue interest on those funds through Monday.

Section 1030.8--Advertising

    (a) Misleading or inaccurate advertisements.
    1. General. All advertisements are subject to the rule against 
misleading or inaccurate advertisements, even though the disclosures 
applicable to various media differ.
    2. Indoor signs. An indoor sign advertising an annual percentage 
yield is not misleading or inaccurate when:
    i. For a tiered-rate account, it also provides the lower dollar 
amount of the tier corresponding to the advertised annual percentage 
yield.
    ii. For a time account, it also provides the term required to 
obtain the advertised annual percentage yield.
    3. Fees affecting ``free'' accounts. For purposes of determining 
whether an account can be advertised as ``free'' or ``no cost,'' 
maintenance and activity fees include:
    i. Any fee imposed when a minimum balance requirement is not 
met, or when consumers exceed a specified number of transactions.
    ii. Transaction and service fees that consumers reasonably 
expect to be imposed on a regular basis.
    iii. A flat fee, such as a monthly service fee.
    iv. Fees imposed to deposit, withdraw, or transfer funds, 
including per-check or per-transaction charges (for example, $.25 
for each withdrawal, whether by check or in person).
    4. Other fees. Examples of fees that are not maintenance or 
activity fees include:
    i. Fees not required to be disclosed under Sec.  1030.4(b)(4).
    ii. Check printing fees.
    iii. Balance inquiry fees.
    iv. Stop-payment fees and fees associated with checks returned 
unpaid.
    v. Fees assessed against a dormant account.
    vi. Fees for ATM or electronic transfer services (such as 
preauthorized transfers or home banking services) not required to 
obtain an account.
    5. Similar terms. An advertisement may not use the term ``fees 
waived'' if a maintenance or activity fee may be imposed because it 
is similar to the terms ``free'' or ``no cost.''
    6. Specific account services. Institutions may advertise a 
specific account service or feature as free if no fee is imposed for 
that service or feature. For example, institutions offering an 
account that is free of deposit or withdrawal fees could advertise 
that fact, as long as the advertisement does not mislead consumers 
by implying that the account is free and that no other fee (a 
monthly service fee, for example) may be charged.
    7. Free for limited time. If an account (or a specific account 
service) is free only for a limited period of time--for example, for 
one year following the account opening--the account (or service) may 
be advertised as free if the time period is also stated.
    8. Conditions not related to deposit accounts. Institutions may 
advertise accounts as ``free'' for consumers meeting conditions not 
related to deposit accounts, such as the consumer's age. For 
example, institutions may advertise a NOW account as ``free for 
persons over 65 years old,'' even though a maintenance or activity 
fee is assessed on accounts held by consumers 65 or younger.
    9. Electronic advertising. If an electronic advertisement (such 
as an advertisement appearing on an Internet Web site) displays a 
triggering term (such as a bonus or annual percentage yield) the 
advertisement must clearly refer the consumer to the location where 
the additional required information begins. For example, an 
advertisement that includes a bonus or annual percentage yield may 
be accompanied by a link that directly takes the consumer to the 
additional information.
    10. Examples. Examples of advertisements that would ordinarily 
be misleading, inaccurate, or misrepresent the deposit contract are:
    i. Representing an overdraft service as a ``line of credit,'' 
unless the service is subject to Regulation Z, 12 CFR part 1026.
    ii. Representing that the institution will honor all checks or 
authorize payment of all transactions that overdraw an account, with 
or without a specified dollar limit, when the institution retains 
discretion at any time not to honor checks or authorize 
transactions.
    iii. Representing that consumers with an overdrawn account are 
allowed to maintain a negative balance when the terms of the 
account's overdraft service require consumers promptly to return the 
deposit account to a positive balance.
    iv. Describing an institution's overdraft service solely as 
protection against bounced checks when the institution also permits 
overdrafts for a fee for overdrawing their accounts by other means, 
such as ATM withdrawals, debit card transactions, or other 
electronic fund transfers.
    v. Advertising an account-related service for which the 
institution charges a fee in an advertisement that also uses the 
word ``free'' or ``no cost'' (or a similar term) to describe the 
account, unless the advertisement clearly and conspicuously 
indicates that there is a cost associated with the service. If the 
fee is a maintenance or activity fee under Sec.  1030.8(a)(2) of 
this part, however, an advertisement may not describe the account as 
``free'' or ``no cost'' (or contain a similar term) even if the fee 
is disclosed in the advertisement.
    11. Additional disclosures in connection with the payment of 
overdrafts. The rule in Sec.  1030.3(a), providing that disclosures 
required by Sec.  1030.8 may be provided to the consumer in 
electronic form without regard to E-Sign Act requirements, applies 
to the disclosures described in Sec.  1030.11(b), which are 
incorporated by reference in Sec.  1030.8(f).
    (b) Permissible rates.
    1. Tiered-rate accounts. An advertisement for a tiered-rate 
account that states an annual percentage yield must also state the 
annual percentage yield for each tier, along with corresponding 
minimum balance requirements. Any interest rates stated must appear 
in conjunction with the applicable annual percentage yields for each 
tier.
    2. Stepped-rate accounts. An advertisement that states an 
interest rate for a stepped-rate account must state all the interest 
rates and the time period that each rate is in effect.
    3. Representative examples. An advertisement that states an 
annual percentage yield for a given type of account (such as a time 
account for a specified term) need not state the annual percentage 
yield applicable to other time accounts offered by the institution 
or indicate that other maturity terms are available. In an 
advertisement stating that rates for an account may vary depending 
on the amount of the initial deposit or the term of a time account, 
institutions need not list each balance level and term offered. 
Instead, the advertisement may:
    i. Provide a representative example of the annual percentage 
yields offered, clearly described as such. For example, if an 
institution offers a $25 bonus on all time accounts and the annual 
percentage yield will vary depending on the term selected, the 
institution may provide a disclosure of the annual percentage yield 
as follows: ``For example, our 6-month certificate of deposit 
currently pays a 3.15% annual percentage yield.''
    ii. Indicate that various rates are available, such as by 
stating short-term and longer-term maturities along with the 
applicable annual percentage yields: ``We offer certificates of 
deposit with annual percentage yields that depend on the maturity 
you choose. For example, our one-month CD earns a 2.75% APY. Or, 
earn a 5.25% APY for a three-year CD.''
    (c) When additional disclosures are required.
    1. Trigger terms. The following are examples of information 
stated in advertisements that are not ``trigger'' terms:
    i. ``One, three, and five year CDs available.''
    ii. ``Bonus rates available.''
    iii. ``1% over our current rates,'' so long as the rates are not 
determinable from the advertisement.
    (c)(2) Time annual percentage yield is offered.
    1. Specified date. If an advertisement discloses an annual 
percentage yield as of a specified date, that date must be recent in 
relation to the publication or broadcast

[[Page 79303]]

frequency of the media used, taking into account the particular 
circumstances or production deadlines involved. For example, the 
printing date of a brochure printed once for a deposit account 
promotion that will be in effect for six months would be considered 
``recent,'' even though rates change during the six-month period. 
Rates published in a daily newspaper or on television must reflect 
rates offered shortly before (or on) the date the rates are 
published or broadcast.
    2. Reference to date of publication. An advertisement may refer 
to the annual percentage yield as being accurate as of the date of 
publication, if the date is on the publication itself. For instance, 
an advertisement in a periodical may state that a rate is ``current 
through the date of this issue,'' if the periodical shows the date.
    (c)(5) Effect of fees.
    1. Scope. This requirement applies only to maintenance or 
activity fees described in comment 8(a).
    (c)(6) Features of time accounts.
    (c)(6)(i) Time requirements.
    1. Club accounts. If a club account has a maturity date but the 
term may vary depending on when the account is opened, institutions 
may use a phrase such as: ``The maturity date of this club account 
is November 15; its term varies depending on when the account is 
opened.''
    (c)(6)(ii) Early withdrawal penalties.
    1. Discretionary penalties. Institutions imposing early 
withdrawal penalties on a case-by-case basis may disclose that they 
``may'' (rather than ``will'') impose a penalty if such a disclosure 
accurately describes the account terms.
    (d) Bonuses.
    1. General reference to ``bonus.'' General statements such as 
``bonus checking'' or ``get a bonus when you open a checking 
account'' do not trigger the bonus disclosures.
    (e) Exemption for certain advertisements.
    (e)(1) Certain media.
    Paragraph (e)(1)(i).
    1. Internet advertisements. The exemption for advertisements 
made through broadcast or electronic media does not extend to 
advertisements posted on the Internet or sent by email.
    Paragraph (e)(1)(iii).
    1. Tiered-rate accounts. Solicitations for a tiered-rate account 
made through telephone response machines must provide the annual 
percentage yields and the balance requirements applicable to each 
tier.
    (e)(2) Indoor signs.
    Paragraph (e)(2)(i).
    1. General. Indoor signs include advertisements displayed on 
computer screens, banners, preprinted posters, and chalk or peg 
boards. Any advertisement inside the premises that can be retained 
by a consumer (such as a brochure or a printout from a computer) is 
not an indoor sign.

Section 1030.9--Enforcement and Record Retention

    (c) Record retention.
    1. Evidence of required actions. Institutions comply with the 
regulation by demonstrating that they have done the following:
    i. Established and maintained procedures for paying interest and 
providing timely disclosures as required by the regulation, and
    ii. Retained sample disclosures for each type of account offered 
to consumers, such as account-opening disclosures, copies of 
advertisements, and change-in-term notices; and information 
regarding the interest rates and annual percentage yields offered.
    2. Methods of retaining evidence. Institutions must be able to 
reconstruct the required disclosures or other actions. They need not 
keep disclosures or other business records in hard copy. Records 
evidencing compliance may be retained on microfilm, microfiche, or 
by other methods that reproduce records accurately (including 
computer files).
    3. Payment of interest. Institutions must retain sufficient rate 
and balance information to permit the verification of interest paid 
on an account, including the payment of interest on the full 
principal balance.

Section 1030.10--[Reserved]

Section 1030.11--Additional Disclosures Regarding the Payment of 
Overdrafts

    (a) Disclosure of total fees on periodic statements.
    (a)(1) General.
    1. Transfer services. The overdraft services covered by Sec.  
1030.11(a)(1) of this part do not include a service providing for 
the transfer of funds from another deposit account of the consumer 
to permit the payment of items without creating an overdraft, even 
if a fee is charged for the transfer.
    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 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 
consumer to avoid an overdraft, or fees charged under a service 
subject to Regulation Z (12 CFR part 1026). See also comment 11(c)-
2. Under Sec.  1030.11(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.
    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.
    5. Totals for the calendar year to date. Some institutions' 
statement periods do not coincide with the calendar month. In such 
cases, the institution may disclose a calendar year-to-date total by 
aggregating fees for 12 monthly cycles, starting with the period 
that begins during January and finishing with the period that begins 
during December. For example, if statement periods begin on the 10th 
day of each month, the statement covering December 10, 2006 through 
January 9, 2007 may disclose the year-to-date total for fees imposed 
from January 10, 2006 through January 9, 2007. Alternatively, the 
institution could provide a statement for the cycle ending January 
9, 2007 showing the year-to-date total for fees imposed January 1, 
2006 through December 31, 2006.
    6. Itemization of fees. An institution may itemize each fee in 
addition to providing the disclosures required by Sec.  
1030.11(a)(1) of this part.
    (a)(3) Format requirements.
    1. Time period covered by periodic statement disclosures. The 
disclosures under Sec.  1030.11(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.  
1030.11(a)(1) on subsequent periodic statements for that consumer 
beginning with the statement reflecting the period from January 16, 
2010 to February 15, 2010.
    (b) Advertising disclosures for overdraft services.
    1. Examples of institutions promoting the payment of overdrafts. 
A depository institution would be required to include the 
advertising disclosures in Sec.  1030.11(b)(1) of this part if the 
institution:
    i. Promotes the institution's policy or practice of paying 
overdrafts (unless the service would be subject to Regulation Z (12 
CFR part 1026)). This includes advertisements using print media such 
as newspapers or brochures, telephone solicitations, electronic 
mail, or messages posted on an Internet site. (But see

[[Page 79304]]

Sec.  1030.11(b)(2) of this part for communications that are not 
subject to the additional advertising disclosures.)
    ii. Includes a message on a periodic statement informing the 
consumer of an overdraft limit or the amount of funds available for 
overdrafts. For example, an institution that includes a message on a 
periodic statement informing the consumer of a $500 overdraft limit 
or that the consumer has $300 remaining on the overdraft limit, is 
promoting an overdraft service.
    iii. 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. (See, however, Sec.  1030.11(b)(3) of 
this part.)
    2. Transfer services. The overdraft services covered by Sec.  
1030.11(b)(1) of this part do not include a service providing for 
the transfer of funds from another deposit account of the consumer 
to permit the payment of items without creating an overdraft, even 
if a fee is charged for the transfer.
    3. Electronic media. The exception for advertisements made 
through broadcast or electronic media, such as television or radio, 
does not apply to advertisements posted on an institution's Internet 
site, on an ATM screen, provided on telephone response machines, or 
sent by electronic mail.
    4. Fees. The fees that must be disclosed under Sec.  
1030.11(b)(1) of this part include per-item fees as well as interest 
charges, daily or other periodic fees, and fees charged for 
maintaining an account in overdraft status, whether the overdraft is 
by check or by other means. The fees also include fees charged when 
there are insufficient funds because previously deposited funds are 
subject to a hold or are uncollected. The fees do not include fees 
for transferring funds from another account to avoid an overdraft, 
or fees charged when the institution has previously agreed in 
writing to pay items that overdraw the account and the service is 
subject to Regulation Z, 12 CFR Part 1026.
    5. Categories of transactions. An exhaustive list of 
transactions is not required. Disclosing that a fee may be imposed 
for covering overdrafts ``created by check, in-person withdrawal, 
ATM withdrawal, or other electronic means'' would satisfy the 
requirements of Sec.  1030.11(b)(1)(ii) of this part where the fee 
may be imposed in these circumstances. See comment 4(b)(4)-5 of this 
part.
    6. Time period to repay. If a depository institution reserves 
the right to require a consumer to pay an overdraft immediately or 
on demand instead of affording consumers a specific time period to 
establish a positive balance in the account, an institution may 
comply with Sec.  1030.11(b)(1)(iii) of this part by disclosing this 
fact.
    7. Circumstances for nonpayment. An institution must describe 
the circumstances under which it will not pay an overdraft. It is 
sufficient to state, as applicable: ``Whether your overdrafts will 
be paid is discretionary and we reserve the right not to pay. For 
example, we typically do not pay overdrafts if your account is not 
in good standing, or you are not making regular deposits, or you 
have too many overdrafts.''
    8. Advertising an account as ``free.'' If the advertised 
account-related service is an overdraft service subject to the 
requirements of Sec.  1030.11(b)(1) of this part, institutions must 
disclose the fee or fees for the payment of each overdraft, not 
merely that a cost is associated with the overdraft service, as well 
as other required information. Compliance with comment 8(a)-10.v. is 
not sufficient.
    (c) Disclosure of account balances.
    1. Balance that does not include additional amounts. For 
purposes of the balance disclosure requirement in Sec.  1030.11(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 Regulation Z 
(12 CFR Part 1026), 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 
Regulation CC of the Board of Governors of the Federal Reserve 
System (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. Retail sweep programs. In a retail sweep program, an 
institution establishes two legally distinct subaccounts, a 
transaction subaccount and a savings subaccount, which together make 
up the consumer's account. The institution allocates and transfers 
funds between the two subaccounts in order to maximize the balance 
in the savings account while complying with the monthly limitations 
on transfers out of savings accounts under Regulation D of the Board 
of Governors of the Federal Reserve System (12 CFR 204.2(d)(2)). 
Retail sweep programs are generally not established for the purpose 
of covering overdrafts. Rather, institutions typically establish 
retail sweep programs by agreement with the consumer, in order for 
the institution to minimize its transaction account reserve 
requirements and, in some cases, to provide a higher interest rate 
than the consumer would earn on a transaction account alone. Section 
1030.11(c) does not require an institution to exclude from the 
consumer's balance funds 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 Regulation D of the Board 
of Governors of the Federal Reserve System (12 CFR 204.2(d)(2));
    ii. The consumer does not have direct access to the non-
transaction subaccount that is part of the retail sweep program; and
    iii. The consumer's periodic statements show the account balance 
as the combined balance in the subaccounts.
    3. 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 Regulation Z 
(12 CFR Part 1026), 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 not opted into, or as applicable, has opted out of the 
institution's discretionary overdraft service, any additional 
balance disclosed should not include funds that otherwise might be 
available under that service. Where a consumer has not opted into, 
or as applicable, has opted out of, the institution's discretionary 
overdraft service for some, but not all transactions (e.g. , the 
consumer has not opted into overdraft services for ATM and one-time 
debit card transactions), an institution 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 institution 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 Regulation Z (12 CFR 
part 1026) or a service that transfers funds from another account, a 
second balance that includes such funds should also indicate this 
fact.
    4. Automated systems. The balance disclosure requirement in 
Sec.  1030.11(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.

Appendix A to Part 1030--Annual Percentage Yield Calculation

Part I. Annual Percentage Yield for Account Disclosures and Advertising 
Purposes

    1. Rounding for calculations. The following are examples of 
permissible rounding for calculating interest and the annual 
percentage yield:
    i. The daily rate applied to a balance carried to five or more 
decimal places
    ii. The daily interest earned carried to five or more decimal 
places

[[Page 79305]]

Part II. Annual Percentage Yield Earned for Periodic Statements

    1. Balance method. The interest figure used in the calculation 
of the annual percentage yield earned may be derived from the daily 
balance method or the average daily balance method. The balance used 
in the formula for the annual percentage yield earned is the sum of 
the balances for each day in the period divided by the number of 
days in the period.
    2. Negative balances prohibited. Institutions must treat a 
negative account balance as zero to determine the balance on which 
the annual percentage yield earned is calculated. (See commentary to 
Sec.  1030.7(a)(2).)

A. General Formula

    1. Accrued but uncredited interest. To calculate the annual 
percentage yield earned, accrued but uncredited interest:
    i. May not be included in the balance for statements issued at 
the same time or less frequently than the account's compounding and 
crediting frequency. For example, if monthly statements are sent for 
an account that compounds interest daily and credits interest 
monthly, the balance may not be increased each day to reflect the 
effect of daily compounding.
    ii. Must be included in the balance for succeeding statements if 
a statement is issued more frequently than compounded interest is 
credited on an account. For example, if monthly statements are sent 
for an account that compounds interest daily and credits interest 
quarterly, the balance for the second monthly statement would 
include interest that had accrued for the prior month.
    2. Rounding. The interest earned figure used to calculate the 
annual percentage yield earned must be rounded to two decimals and 
reflect the amount actually paid. For example, if the interest 
earned for a statement period is $20.074 and the institution pays 
the consumer $20.07, the institution must use $20.07 (not $20.074) 
to calculate the annual percentage yield earned. For accounts paying 
interest based on the daily balance method that compound and credit 
interest quarterly, and send monthly statements, the institution 
may, but need not, round accrued interest to two decimals for 
calculating the annual percentage yield earned on the first two 
monthly statements issued during the quarter. However, on the 
quarterly statement the interest earned figure must reflect the 
amount actually paid.

B. Special Formula for Use Where Periodic Statement Is Sent More 
Often Than the Period for Which Interest Is Compounded

    1. Statements triggered by Regulation E. Institutions may, but 
need not, use this formula to calculate the annual percentage yield 
earned for accounts that receive quarterly statements and are 
subject to Regulation E's rule calling for monthly statements when 
an electronic fund transfer has occurred. They may do so even though 
no monthly statement was issued during a specific quarter. But 
institutions must use this formula for accounts that compound and 
credit interest quarterly and receive monthly statements that, while 
triggered by Regulation E, comply with the provisions of Sec.  
1030.6.
    2. Days in compounding period. Institutions using the special 
annual percentage yield earned formula must use the actual number of 
days in the compounding period.

Appendix B to Part 1030--Model Clauses and Sample Forms

    1. Modifications. Institutions that modify the model clauses 
will be deemed in compliance as long as they do not delete required 
information or rearrange the format in a way that affects the 
substance or clarity of the disclosures.
    2. Format. Institutions may use inserts to a document (see 
Sample Form B-4) or fill-in blanks (see Sample Forms B-5, B-6 and B-
7, which use underlining to indicate terms that have been filled in) 
to show current rates, fees, or other terms.
    3. Disclosures for opening accounts. The sample forms illustrate 
the information that must be provided to consumers when an account 
is opened, as required by Sec.  1030.4(a)(1). (See Sec.  
1030.4(a)(2), which states the requirements for disclosing the 
annual percentage yield, the interest rate, and the maturity of a 
time account in responding to a consumer's request.)
    4. Compliance with Regulation E. Institutions may satisfy 
certain requirements under Regulation DD with disclosures that meet 
the requirements of Regulation E. (See Sec.  1030.3(c).) For 
disclosures covered by both this part and Regulation E (such as the 
amount of fees for ATM usage, institutions should consult Appendix A 
to Regulation E for appropriate model clauses.
    5. Duplicate disclosures. If a requirement such as a minimum 
balance applies to more than one account term (to obtain a bonus and 
determine the annual percentage yield, for example), institutions 
need not repeat the requirement for each term, as long as it is 
clear which terms the requirement applies to.
    6. Sample forms. The sample forms (B-4 through B-8) serve a 
purpose different from the model clauses. They illustrate ways of 
adapting the model clauses to specific accounts. The clauses shown 
relate only to the specific transactions described.

B-1 Model Clauses for Account Disclosures

B-1(h) Disclosures Relating to Time Accounts

    1. Maturity. The disclosure in Clause (h)(i) stating a specific 
date may be used in all cases. The statement describing a time 
period is appropriate only when providing disclosures in response to 
a consumer's request.

B-2 Model Clauses for Change in Terms

    1. General. The second clause, describing a future decrease in 
the interest rate and annual percentage yield, applies to fixed-rate 
accounts only.

B-4 Sample Form (Multiple Accounts)

    1. Rate sheet insert. In the rate sheet insert, the calculations 
of the annual percentage yield for the three-month and six-month 
certificates are based on 92 days and 181 days respectively. All 
calculations in the insert assume daily compounding.

B-6 Sample Form (Tiered-Rate Money Market Account)

    1. General. Sample Form B-6 uses Tiering Method A (discussed in 
Appendix A and Clause (a)(iv)) to calculate interest. It gives a 
narrative description of a tiered-rate account; institutions may use 
different formats (for example, a chart similar to the one in Sample 
Form B-4), as long as all required information for each tier is 
clearly presented. The form does not contain a separate disclosure 
of the minimum balance required to obtain the annual percentage 
yield; the tiered-rate disclosure provides that information.

    Dated: October 24, 2011.
Alastair M. Fitzpayne,
Deputy Chief of Staff and Executive Secretary, Department of the 
Treasury.
[FR Doc. 2011-31727 Filed 12-20-11; 8:45 am]
BILLING CODE 4810-AM-P