Title 12--Banks and Banking CHAPTER II--FEDERAL RESERVE SYSTEM PART 230--TRUTH IN SAVINGS (REGULATION DD) |
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Sec. 230.1 Authority, purpose, coverage, and effect on state laws. |
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(a) Authority. This part, known as Regulation DD, is issued by the
Board of Governors of the Federal Reserve System to implement the Truth
in Savings Act of 1991 (the act), contained in the Federal Deposit
Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4301 et seq.,
Pub. L. 102-242, 105 Stat. 2236). Information collection requirements
contained in this part have been approved by the Office of Management
and Budget under the provisions of 44 U.S.C. 3501 et seq. and have been
assigned OMB No. 7100-0255.
[[Page 581]]
(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. 230.8 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 Board are set forth in appendix C of this part.
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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. 230.8 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 the availability of, or a
deposit in, an 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) Board means the Board of Governors of the Federal Reserve
System.
(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)-(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
[[Page 582]]
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. 230.4(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.
[57 FR 43376, Sept. 21, 1992, as amended at 58 FR 15081, Mar. 19, 1993;
59 FR 52658, Oct. 19, 1994]
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(a) Form. Depository institutions shall make the disclosures
required by Secs. 230.4 through 230.6 of this part, as applicable,
clearly and conspicuously in writing and in a form the consumer may
keep. 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 the disclosures are available in English upon request.
(c) Relation to Regulation E (12 CFR part 205). Disclosures required
by and provided in accordance with the Electronic Fund Transfer Act (15
U.S.C. 1601) and its implementing Regulation E (12 CFR part 205) 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 that 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.
[[Page 583]]
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Sec. 230.4 Account disclosures. |
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(a) Delivery of account disclosures--(1) Account opening. 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. 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.
(2) Requests. (i) A depository institution shall provide account
disclosures to a consumer upon request. If the consumer is not present
at the institution when a request is made, the institution shall mail or
deliver the disclosures within a reasonable time after it receives the
request.
(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. Any
minimum balance required to:
(A) Open the account;
(B) Avoid the imposition of a fee; or
(C) Obtain the annual percentage yield disclosed.
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. 230.7 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
[[Page 584]]
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 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.
[57 FR 43376, Sept. 21, 1992, as amended at 58 FR 15081, Mar. 19, 1993;
Reg. DD, 60 FR 5130, Jan. 26, 1995; Reg. DD, 63 FR 40637, July 30, 1998]
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Sec. 230.5 Subsequent disclosures. |
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(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. 230.4(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. 230.4(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:
[[Page 585]]
(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. 230.4(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.
[57 FR 43376, Sept. 21, 1992, as amended at 58 FR 15081, Mar. 19, 1993;
Reg. DD, 63 FR 52107, Sept. 29, 1998]
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Sec. 230.6 Periodic statement disclosures. |
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(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. 230.4(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.
(4) Length of period. The total number of days in the statement
period, or the beginning and ending dates of the period.
(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.
(c) Electronic communication. (1) Definition. The term electronic
communication means a message transmitted electronically between a
consumer and a depository institution in a format that allows visual
text to be displayed on equipment such as a personal computer monitor.
(2) Electronic communication between depository institution and
consumer. A depository institution and a consumer may agree that the
institution will send by electronic communication periodic-statement
disclosures required by Sec. 230.6. Periodic-statement disclosures sent
by electronic communication to a consumer must comply with Sec. 230.3
and any applicable timing requirements contained in this part.
[Reg. DD 57 FR 43376, Sept. 21, 1992, as amended at 57 FR 46480, Oct. 9,
1992; 64 FR 49848, Sept. 14, 1999]
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Sec. 230.7 Payment of interest. |
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(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.\1\
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\1\ 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.
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(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.
[[Page 586]]
(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 implementing Regulation CC (12 CFR part 229). Interest
shall accrue until the day funds are withdrawn.
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Sec. 230.8 Advertising. |
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(a) Misleading or inaccurate advertisements. An advertisement shall
not be misleading or inaccurate and shall not misrepresent a depository
institution's deposit contract. An advertisement shall not 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.
(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.
[[Page 587]]
(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.
[57 FR 43376, Sept. 21, 1992, as amended at 58 FR 15081, Mar. 19, 1993;
Reg. DD, 60 FR 5130, Jan. 26, 1995; Reg. DD, 63 FR 40638, July 30, 1998;
Reg. DD, 63 FR 52107, Sept. 29, 1998]
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Sec. 230.9 Enforcement and record retention. |
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(a) Administrative enforcement. Section 270 of the act 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) Civil liability. Section 271 of the Act contains the provisions
relating to civil liability for failure to comply with the requirements
of the act and this part; Section 271 is repealed effective September
30, 2001.
(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.
[57 FR 43376, Sept. 21, 1992, as amended by Reg. DD, 63 FR 52107, Sept.
29, 1998]
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