REGULATION DD) Reverse Mortgage Transaction Begins on the First Day of the Month in Which Consumma- Sec

Pt. 1030 12 CFR Ch. X (1–1–12 Edition)

APPENDIX J—ANNUAL PERCENTAGE RATE COM- (b)(9) Assumption for discretionary cash PUTATIONS FOR CLOSED-END CREDIT TRANS- advances ACTIONS 1. Amount of credit. Creditors should com- 1. Use of Appendix J. Appendix J sets forth pute the total annual loan cost rates for the actuarial equations and instructions for transactions involving discretionary cash ad- calculating the annual percentage rate in vances by assuming that 50 percent of the closed-end credit transactions. While the for- initial amount of the credit available under the transaction is advanced at closing or, in mulas contained in this appendix may be di- an open-end transaction, when the consumer rectly applied to calculate the annual per- becomes obligated under the plan. (For the centage rate for an individual transaction, purposes of this assumption, the initial they may also be utilized to program cal- amount of the credit is the principal loan culators and computers to perform the cal- amount less any costs to the consumer under culations. § 1026.33(c)(1).) 2. Relation to Bureau tables. The Bureau’s Annual Percentage Rate Tables also provide (b)(10) Assumption for variable-rate reverse creditors with a calculation tool that applies mortgage transactions the technical information in Appendix J. An 1. Initial discount or premium rate. Where a annual percentage rate computed in accord- variable-rate reverse mortgage transaction ance with the instructions in the tables is includes an initial discount or premium rate, deemed to comply with the regulation. Vol- the creditor should apply the same rules for ume I of the tables may be used for credit calculating the total annual loan cost rate transactions involving equal payment as are applied when calculating the annual amounts and periods, as well as for trans- percentage rate for a loan with an initial dis- actions involving any of the following irreg- count or premium rate (see the commentary ularities: odd first period, odd first payment to § 1026.17(c)). and odd last payment. Volume II of the ta- (d) Reverse mortgage model form and sample bles may be used for transactions that in- form volve any type of irregularities. These tables may be obtained from the Bureau, 1700 G (d)(2) Sample form Street, NW., Washington, DC 20006, upon re- 1. General. The ‘‘clear and conspicuous’’ quest. standard for reverse mortgage disclosures does not require disclosures to be printed in APPENDIX K—TOTAL ANNUAL LOAN COST any particular type size. Disclosures may be RATE COMPUTATIONS FOR REVERSE MORT- made on more than one page, and use both GAGE TRANSACTIONS the front and the reverse sides, as long as the 1. General. The calculation of total annual pages constitute an integrated document and loan cost rates under Appendix K is based on the table disclosing the total annual loan the principles set forth and the estimation or cost rates is on a single page. ‘‘iteration’’ procedure used to compute an- APPENDIX L—ASSUMED LOAN PERIODS FOR nual percentage rates under Appendix J. COMPUTATIONS OF TOTAL ANNUAL LOAN Rather than restate this iteration process in COST RATES full, the regulation cross-references the pro- 1. General. The life expectancy figures used cedures found in Appendix J. In other as- in Appendix L are those found in the U.S. pects the appendix reflects the special na- Decennial Life Tables for women, as rounded ture of reverse mortgage transactions. Spe- to the nearest whole year and as published cial definitions and instructions are included by the U.S. Department of Health and where appropriate. Human Services. The figures contained in Appendix L must be used by creditors for all (b) Instructions and equations for the total consumers (men and women). Appendix L annual loan cost rate will be revised periodically by the Bureau to (b)(5) Number of unit-periods between two incorporate revisions to the figures made in the Decennial Tables. given dates 1. Assumption as to when transaction begins. PART 1030—TRUTH IN SAVINGS The computation of the total annual loan cost rate is based on the assumption that the (REGULATION DD) reverse mortgage transaction begins on the first day of the month in which consumma- Sec. tion is estimated to occur. Therefore, frac- 1030.1 Authority, purpose, coverage, and effect on state laws. tional unit-periods (used under Appendix J 1030.2 Definitions. for calculating annual percentage rates) are 1030.3 General disclosure requirements. not used. 1030.4 Account disclosures.

1020 Bur. of Consumer Financial Protection § 1030.2

1030.5 Subsequent disclosures. inconsistency. Additional information 1030.6 Periodic statement disclosures. on inconsistent state laws and the pro- 1030.7 Payment of interest. cedures for requesting a preemption de- 1030.8 Advertising. 1030.9 Enforcement and record retention. termination from the Bureau are set 1030.10 [Reserved] forth in appendix C of this part. 1030.11 Additional disclosure requirements for overdraft services. § 1030.2 Definitions. APPENDIX A TO PART 1030—ANNUAL PERCENT- For purposes of this part, the fol- AGE YIELD CALCULATION lowing definitions apply: APPENDIX B TO PART 1030—MODEL CLAUSES (a) Account means a deposit account AND SAMPLE FORMS at a depository institution that is held APPENDIX C TO PART 1030—EFFECT ON STATE LAWS by or offered to a consumer. It includes APPENDIX D TO PART 1030—ISSUANCE OF OFFI- time, demand, savings, and negotiable CIAL INTERPRETATIONS order of withdrawal accounts. For pur- SUPPLEMENT I TO PART 1030—OFFICIAL INTER- poses of the advertising requirements PRETATIONS in § 1030.8 of this part, the term also in- AUTHORITY: 12 U.S.C. 4302–4304, 4308, 5512, cludes an account at a depository insti- 5581. tution that is held by or on behalf of a SOURCE: 76 FR 79278, Dec. 21, 2011, unless deposit broker, if any interest in the otherwise noted. account is held by or offered to a consumer. § 1030.1 Authority, purpose, coverage, (b) Advertisement means a commercial and effect on state laws. message, appearing in any medium, (a) Authority. This part, known as that promotes directly or indirectly: Regulation DD, is issued by the Bureau (1) The availability or terms of, or a of Consumer Financial Protection to deposit in, a new account; and implement the Truth in Savings Act of (2) For purposes of §§ 1030.8(a) and 1991 (the act), contained in the Federal 1030.11 of this part, the terms of, or a Deposit Insurance Corporation Im- deposit in, a new or existing account. provement Act of 1991 (12 U.S.C. 3201 et (c) Annual percentage yield means a seq., Public Law 102–242, 105 Stat. 2236), percentage rate reflecting the total as amended by Title X, section 1100B of amount of interest paid on an account, the Dodd-Frank Wall Street Reform based on the interest rate and the fre- and Consumer Protection Act (Pub. L. quency of compounding for a 365-day 111–203, 124 Stat. 1376). Information-col- period and calculated according to the lection requirements contained in this rules in appendix A of this part. part have been approved by the Office (d) Average daily balance method of Management and Budget under the means the application of a periodic provisions of 44 U.S.C. 3501 et seq. and rate to the average daily balance in the have been assigned OMB No. 3170–0004. account for the period. The average (b) Purpose. The purpose of this part daily balance is determined by adding is to enable consumers to make in- the full amount of principal in the ac- formed decisions about accounts at de- count for each day of the period and di- pository institutions. This part re- viding that figure by the number of quires depository institutions to pro- days in the period. vide disclosures so that consumers can (e) Bureau means the Bureau of Con- make meaningful comparisons among sumer Financial Protection. depository institutions. (f) Bonus means a premium, gift, (c) Coverage. This part applies to de- award, or other consideration worth pository institutions except for credit more than $10 (whether in the form of unions. In addition, the advertising cash, credit, merchandise, or any rules in § 1030.8 of this part apply to equivalent) given or offered to a con- any person who advertises an account sumer during a year in exchange for offered by a depository institution, in- opening, maintaining, renewing, or including deposit brokers. creasing an account balance. The term (d) Effect on state laws. State law re- does not include interest, other consid- quirements that are inconsistent with eration worth $10 or less given during a the requirements of the act and this year, the waiver or reduction of a fee, part are preempted to the extent of the or the absorption of expenses.

1021 § 1030.3 12 CFR Ch. X (1–1–12 Edition)

(g) Business day means a calendar day (q) Periodic statement means a state- other than a Saturday, a Sunday, or ment setting forth information about any of the legal public holidays speci- an account (other than a time account fied in 5 U.S.C. 6103(a). or passbook savings account) that is (h) Consumer means a natural person provided to a consumer on a regular who holds an account primarily for basis four or more times a year. personal, family, or household pur- (r) State means a state, the District poses, or to whom such an account is of Columbia, the commonwealth of offered. The term does not include a Puerto Rico, and any territory or pos- natural person who holds an account session of the United States. for another in a professional capacity. (s) Stepped-rate account means an ac- (i) Daily balance method means the ap- count that has two or more interest plication of a daily periodic rate to the rates that take effect in succeeding pe- full amount of principal in the account riods and are known when the account each day. is opened. (j) Depository institution and institu- (t) Tiered-rate account means an action mean an institution defined in sec- count that has two or more interest tion 19(b)(1)(A)(i) through (vi) of the rates that are applicable to specified Federal Reserve Act (12 U.S.C. 461), ex- balance levels. cept credit unions defined in section (u) Time account means an account 19(b)(1)(A)(iv). with a maturity of at least seven days (k) Deposit broker means any person in which the consumer generally does who is a deposit broker as defined in not have a right to make withdrawals section 29(g) of the Federal Deposit In- for six days after the account is surance Act (12 U.S.C. 1831f(g)). opened, unless the deposit is subject to (l) Fixed-rate account means an ac- an early withdrawal penalty of at least count for which the institution con- seven days’ interest on amounts with- tracts to give at least 30 calendar days drawn. advance written notice of decreases in (v) Variable-rate account means an ac- the interest rate. count in which the interest rate may (m) Grace period means a period fol- change after the account is opened, un- lowing the maturity of an automati- less the institution contracts to give at cally renewing time account during least 30 calendar days advance written which the consumer may withdraw notice of rate decreases. funds without being assessed a penalty. (n) Interest means any payment to a § 1030.3 General disclosure require- consumer or to an account for the use ments. of funds in an account, calculated by (a) Form. Depository institutions application of a periodic rate to the shall make the disclosures required by balance. The term does not include the §§ 1030.4 through 1030.6 of this part, as payment of a bonus or other consider- applicable, clearly and conspicuously, ation worth $10 or less given during a in writing, and in a form the consumer year, the waiver or reduction of a fee, may keep. The disclosures required by or the absorption of expenses. this part may be provided to the con- (o) Interest rate means the annual sumer in electronic form, subject to rate of interest paid on an account compliance with the consumer consent which does not reflect compounding. and other applicable provisions of the For the purposes of the account disclo- Electronic Signatures in Global and sures in § 1030.4(b)(1)(i) of this part, the National Commerce Act (E-Sign Act) interest rate may, but need not, be re- (15 U.S.C. 7001 et seq.). The disclosures ferred to as the ‘‘annual percentage required by §§ 1030.4(a)(2) and 1030.8 may rate’’ in addition to being referred to be provided to the consumer in elec- as the ‘‘interest rate.’’ tronic form without regard to the con- (p) Passbook savings account means a sumer consent or other provisions of savings account in which the consumer the E–Sign Act in the circumstances retains a book or other document in set forth in those sections. Disclosures which the institution records trans- for each account offered by an institu- actions on the account. tion may be presented separately or

1022 Bur. of Consumer Financial Protection § 1030.4 combined with disclosures for the insti- vided, whichever is earlier. An institu- tution’s other accounts, as long as it is tion is deemed to have provided a serv- clear which disclosures are applicable ice when a fee required to be disclosed to the consumer’s account. is assessed. Except as provided in para- (b) General. The disclosures shall re- graph (a)(1)(ii) of this section, if the flect the terms of the legal obligation consumer is not present at the institu- of the account agreement between the tion when the account is opened or the consumer and the depository institu- service is provided and has not already tion. Disclosures may be made in lan- received the disclosures, the institu- guages other than English, provided tion shall mail or deliver the disclo- the disclosures are available in English sures no later than 10 business days upon request. after the account is opened or the serv- (c) Relation to Regulation E (12 CFR ice is provided, whichever is earlier. Part 1005). Disclosures required by and (ii) Timing of electronic disclosures. If a provided in accordance with the Elec- consumer who is not present at the in- tronic Fund Transfer Act (15 U.S.C. stitution uses electronic means (for ex- 1693 et seq.) and its implementing Regu- ample, an Internet Web site) to open an lation E (12 CFR Part 1005) that are account or request a service, the dis- also required by this part may be sub- closures required under paragraph stituted for the disclosures required by (a)(1) of this section must be provided this part. before the account is opened or the (d) Multiple consumers. If an account service is provided. is held by more than one consumer, (2) Requests. (i) A depository institu- disclosures may be made to any one of tion shall provide account disclosures the consumers. to a consumer upon request. If a con- (e) In an Oral response to inquiries. sumer who is not present at the insti- oral response to a consumer’s inquiry tution makes a request, the institution about interest rates payable on its ac- shall mail or deliver the disclosures counts, the depository institution shall within a reasonable time after it restate the annual percentage yield. The ceives the request and may provide the interest rate may be stated in addition disclosures in paper form, or electroni- to the annual percentage yield. No cally if the consumer agrees. other rate may be stated. (ii) In providing disclosures upon re- (f) Rounding and accuracy rules for quest, the institution may: rates and yields—(1) Rounding. The annual percentage yield, the annual per- (A) Specify an interest rate and an- centage yield earned, and the interest nual percentage yield that were offered rate shall be rounded to the nearest within the most recent seven calendar one-hundredth of one percentage point days; state that the rate and yield are (.01%) and expressed to two decimal accurate as of an identified date; and places. For account disclosures, the in- provide a telephone number consumers terest rate may be expressed to more may call to obtain current rate infor- than two decimal places. mation. (2) Accuracy. The annual percentage (B) State the maturity of a time ac- yield (and the annual percentage yield count as a term rather than a date. earned) will be considered accurate if (b) Content of account disclosures. Ac- not more than one-twentieth of one count disclosures shall include the fol- percentage point (.05%) above or below lowing, as applicable: the annual percentage yield (and the (1) Rate information—(i) Annual per- annual percentage yield earned) deter- centage yield and interest rate. The ‘‘an- mined in accordance with the rules in nual percentage yield’’ and the ‘‘inter- appendix A of this part. est rate,’’ using those terms, and for fixed-rate accounts the period of time § 1030.4 Account disclosures. the interest rate will be in effect. (a) Delivery of account disclosures—(1) (ii) Variable rates. For variable-rate Account opening. (i) General. A deposi- accounts: tory institution shall provide account (A) The fact that the interest rate disclosures to a consumer before an ac- and annual percentage yield may count is opened or a service is pro- change;

1023 § 1030.5 12 CFR Ch. X (1–1–12 Edition)

(B) How the interest rate is deter- a stated maturity greater than one mined; year that do not compound interest on (C) The frequency with which the in- an annual or more frequent basis, that terest rate may change; and require interest payouts at least annu- (D) Any limitation on the amount ally, and that disclose an APY deter- the interest rate may change. mined in accordance with section E of (2) Compounding and crediting—(i) Fre- appendix A of this part, a statement quency. The frequency with which in- that interest cannot remain on deposit terest is compounded and credited. and that payout of interest is manda- (ii) Effect of closing an account. If con- tory. sumers will forfeit interest if they (iv) Renewal policies. A statement of close the account before accrued inter- whether or not the account will renew est is credited, a statement that inter- automatically at maturity. If it will, a est will not be paid in such cases. statement of whether or not a grace pe- (3) Balance information—(i) Minimum riod will be provided and, if so, the balance requirements. (A) Any minimum balance required to: length of that period must be stated. If (1) Open the account; the account will not renew automati- (2) Avoid the imposition of a fee; or cally, a statement of whether interest (3) Obtain the annual percentage will be paid after maturity if the con- yield disclosed. sumer does not renew the account (B) Except for the balance to open must be stated. the account, the disclosure shall state (7) Bonuses. The amount or type of how the balance is determined for any bonus, when the bonus will be pro- these purposes. vided, and any minimum balance and (ii) Balance computation method. An time requirements to obtain the bonus. explanation of the balance computa- (c) Notice to existing account holders— tion method specified in § 1030.7 of this (1) Notice of availability of disclosures. part used to calculate interest on the Depository institutions shall provide a account. notice to consumers who receive peri- (iii) When interest begins to accrue. A odic statements and who hold existing statement of when interest begins to accounts of the type offered by the in- accrue on noncash deposits. stitution on June 21, 1993. The notice (4) Fees. The amount of any fee that shall be included on or with the first may be imposed in connection with the periodic statement sent on or after account (or an explanation of how the June 21, 1993 (or on or with the first fee will be determined) and the condi- periodic statement for a statement tions under which the fee may be im- cycle beginning on or after that date). posed. The notice shall state that consumers (5) Transaction limitations. Any limi- may request account disclosures con- tations on the number or dollar taining terms, fees, and rate informa- amount of withdrawals or deposits. tion for their account. In responding to (6) Features of time accounts. For time such a request, institutions shall pro- accounts: vide disclosures in accordance with (i) Time requirements. The maturity paragraph (a)(2) of this section. date. (2) Alternative to notice. As an alter- (ii) Early withdrawal penalties. A native to the notice described in para- statement that a penalty will or may be imposed for early withdrawal, how graph (c)(1) of this section, institutions it is calculated, and the conditions for may provide account disclosures to its assessment. consumers. The disclosures may be pro- (iii) Withdrawal of interest prior to ma- vided either with a periodic statement turity. If compounding occurs during or separately, but must be sent no the term and interest may be with- later than when the periodic statement drawn prior to maturity, a statement described in paragraph (c)(1) is sent. that the annual percentage yield assumes interest remains on deposit § 1030.5 Subsequent disclosures. until maturity and that a withdrawal (a) Change in terms—(1) Advance notice will reduce earnings. For accounts with required. A depository institution shall

1024 Bur. of Consumer Financial Protection § 1030.6 give advance notice to affected con- (i) Provide disclosures as set forth in sumers of any change in a term re- paragraph (b)(1) of this section; or quired to be disclosed under § 1030.4(b) (ii) Disclose to the consumer: of this part if the change may reduce (A) The date the existing account the annual percentage yield or ad- matures and the new maturity date if versely affect the consumer. The notice the account is renewed; shall include the effective date of the (B) The interest rate and the annual change. The notice shall be mailed or percentage yield for the new account if delivered at least 30 calendar days be- they are known (or that those rates fore the effective date of the change. have not yet been determined, the date (2) No notice required. No notice under when they will be determined, and a this section is required for: telephone number the consumer may (i) Variable-rate changes. Changes in call to obtain the interest rate and the the interest rate and corresponding annual percentage yield that will be changes in the annual percentage yield paid for the new account); and in variable-rate accounts. (C) Any difference in the terms of the (ii) Check printing fees. Changes in new account as compared to the terms fees assessed for check printing. required to be disclosed under § 1030.4(b) of this part for the existing account. (iii) Short-term time accounts. Changes (c) Notice before maturity for time ac- in any term for time accounts with ma- counts longer than one year that do not turities of one month or less. renew automatically. For time accounts (b) Notice before maturity for time ac- with a maturity longer than one year counts longer than one month that renew that do not renew automatically at automatically. For time accounts with a maturity, institutions shall disclose to maturity longer than one month that consumers the maturity date and renew automatically at maturity, in- whether interest will be paid after ma- stitutions shall provide the disclosures turity. The disclosures shall be mailed described below before maturity. The or delivered at least 10 calendar days disclosures shall be mailed or delivered before maturity of the existing ac- at least 30 calendar days before matu- count. rity of the existing account. Alter- natively, the disclosures may be § 1030.6 Periodic statement disclo- mailed or delivered at least 20 calendar sures. days before the end of the grace period (a) General rule. If a depository insti- on the existing account, provided a tution mails or delivers a periodic grace period of at least five calendar statement, the statement shall include days is allowed. the following disclosures: (1) Maturities of longer than one year. (1) Annual percentage yield earned. If the maturity is longer than one year, The ‘‘annual percentage yield earned’’ the institution shall provide account during the statement period, using disclosures set forth in § 1030.4(b) of that term, calculated according to the this part for the new account, along rules in appendix A of this part. with the date the existing account ma- (2) Amount of interest. The dollar tures. If the interest rate and annual amount of interest earned during the percentage yield that will be paid for statement period. the new account are unknown when (3) Fees imposed. Fees required to be disclosures are provided, the institu- disclosed under § 1030.4(b)(4) of this part tion shall state that those rates have that were debited to the account dur- not yet been determined, the date when ing the statement period. The fees they will be determined, and a tele- shall be itemized by type and dollar phone number consumers may call to amounts. Except as provided in obtain the interest rate and the annual § 1030.11(a)(1) of this part, when fees of percentage yield that will be paid for the same type are imposed more than the new account. once in a statement period, a deposi- (2) Maturities of one year or less but tory institution may itemize each fee longer than one month. If the maturity separately or group the fees together is one year or less but longer than one and disclose a total dollar amount for month, the institution shall either: all fees of that type.

1025 § 1030.7 12 CFR Ch. X (1–1–12 Edition)

(4) Length of period. The total number § 1030.8 Advertising. of days in the statement period, or the (a) Misleading or inaccurate advertise- beginning and ending dates of the pe- ments. An advertisement shall not: riod. (1) Be misleading or inaccurate or (5) Aggregate fee disclosure. If applica- misrepresent a depository institution’s ble, the total overdraft and returned deposit contract; or item fees required to be disclosed by (2) Refer to or describe an account as § 1030.11(a). ‘‘free’’ or ‘‘no cost’’ (or contain a simi- (b) Special rule for average daily bal- lar term) if any maintenance or activ- ance method. In making the disclosures ity fee may be imposed on the account. described in paragraph (a) of this sec- The word ‘‘profit’’ shall not be used in tion, institutions that use the average referring to interest paid on an ac- daily balance method and that cal- count. culate interest for a period other than (b) Permissible rates. If an advertise- the statement period shall calculate ment states a rate of return, it shall and disclose the annual percentage state the rate as an ‘‘annual percent- yield earned and amount of interest age yield’’ using that term. (The abbre- earned based on that period rather viation ‘‘APY’’ may be used provided than the statement period. The infor- the term ‘‘annual percentage yield’’ is mation in paragraph (a)(4) of this sec- stated at least once in the advertise- tion shall be stated for that period as ment.) The advertisement shall not well as for the statement period. state any other rate, except that the ‘‘interest rate,’’ using that term, may § 1030.7 Payment of interest. be stated in conjunction with, but not (a) Permissible methods—(1) Balance on more conspicuously than, the annual which interest is calculated. Institutions percentage yield to which it relates. shall calculate interest on the full (c) When additional disclosures are re- amount of principal in an account for quired. Except as provided in paragraph each day by use of either the daily bal- (e) of this section, if the annual per- ance method or the average daily bal- centage yield is stated in an advertise- ance method. Institutions shall cal- ment, the advertisement shall state culate interest by use of a daily rate of the following information, to the ex- at least 1/365 of the interest rate. In a tent applicable, clearly and conspicu- leap year a daily rate of 1/366 of the in- ously: terest rate may be used. (1) Variable rates. For variable-rate (2) Determination of minimum balance accounts, a statement that the rate to earn interest. An institution shall use may change after the account is the same method to determine any opened. minimum balance required to earn in- (2) Time annual percentage yield is of- terest as it uses to determine the bal- fered. The period of time the annual ance on which interest is calculated. percentage yield will be offered, or a An institution may use an additional statement that the annual percentage method that is unequivocally bene- yield is accurate as of a specified date. ficial to the consumer. (3) Minimum balance. The minimum (b) Compounding and crediting policies. balance required to obtain the adver- This section does not require institu- tised annual percentage yield. For tions to compound or credit interest at tiered-rate accounts, the minimum bal- any particular frequency. ance required for each tier shall be (c) Date interest begins to accrue. In- stated in close proximity and with terest shall begin to accrue not later equal prominence to the applicable an- than the business day specified for in- nual percentage yield. terest-bearing accounts in section 606 (4) Minimum opening deposit. The min- of the Expedited Funds Availability imum deposit required to open the ac- Act (12 U.S.C. 4005 et seq.) and the count, if it is greater than the min- Board of Governors of the Federal Re- imum balance necessary to obtain the serve System’s implementing Regula- advertised annual percentage yield. tion CC (12 CFR part 229). Interest shall (5) Effect of fees. A statement that accrue until the day funds are with- fees could reduce the earnings on the drawn. account.

1026 Bur. of Consumer Financial Protection § 1030.11

(6) Features of time accounts. For time any other rate, except that the interest accounts: rate may be stated in conjunction with (i) Time requirements. The term of the the annual percentage yield to which it account. relates. (ii) Early withdrawal penalties: A (B) Contain a statement advising statement that a penalty will or may consumers to contact an employee for be imposed for early withdrawal. further information about applicable (iii) Required interest payouts. For fees and terms. noncompounding time accounts with a (f) Additional disclosures in connection stated maturity greater than one year with the payment of overdrafts. Institu- that do not compound interest on an tions that promote the payment of annual or more frequent basis, that re- overdrafts in an advertisement shall quire interest payouts at least annu- include in the advertisement the dis- ally, and that disclose an APY deter- closures required by § 1030.11(b) of this mined in accordance with section E of appendix A of this part, a statement part. that interest cannot remain on deposit § 1030.9 Enforcement and record re- and that payout of interest is manda- tention. tory. (d) Bonuses. Except as provided in (a) Administrative enforcement. Section paragraph (e) of this section, if a bonus 270 of the act (12 U.S.C. 4309) contains is stated in an advertisement, the ad- the provisions relating to administra- vertisement shall state the following tive sanctions for failure to comply information, to the extent applicable, with the requirements of the act and clearly and conspicuously: this part. Compliance is enforced by (1) The ‘‘annual percentage yield,’’ the agencies listed in that section. using that term; (b) [Reserved] (2) The time requirement to obtain (c) Record retention. A depository in- the bonus; stitution shall retain evidence of com- (3) The minimum balance required to pliance with this part for a minimum obtain the bonus; of two years after the date disclosures (4) The minimum balance required to are required to be made or action is re- open the account, if it is greater than quired to be taken. The administrative the minimum balance necessary to ob- agencies responsible for enforcing this tain the bonus; and part may require depository institu- (5) When the bonus will be provided. tions under their jurisdiction to retain (e) Exemption for certain advertise- records for a longer period if necessary ments—(1) Certain media. If an adver- to carry out their enforcement respon- tisement is made through one of the sibilities under section 270 of the act. following media, it need not contain the information in paragraphs (c)(1), § 1030.10 [Reserved] (c)(2), (c)(4), (c)(5), (c)(6)(ii), (d)(4), and (d)(5) of this section: § 1030.11 Additional disclosure re- (i) Broadcast or electronic media, quirements for overdraft services. such as television or radio; (ii) Outdoor media, such as bill- (a) Disclosure of total fees on periodic boards; or statements—(1) General. A depository in- (iii) Telephone response machines. stitution must separately disclose on (2) Indoor signs. (i) Signs inside the each periodic statement, as applicable: premises of a depository institution (or (i) The total dollar amount for all the premises of a deposit broker) are fees or charges imposed on the account not subject to paragraphs (b), (c), (d) or for paying checks or other items when (e)(1) of this section. there are insufficient or unavailable (ii) If a sign exempt by paragraph funds and the account becomes over- (e)(2) of this section states a rate of re- drawn, using the term ‘‘Total Over- turn, it shall: draft Fees;’’ and (A) State the rate as an ‘‘annual per- (ii) The total dollar amount for all centage yield,’’ using that term or the fees or charges imposed on the account term ‘‘APY.’’ The sign shall not state for returning items unpaid.

1027 § 1030.11 12 CFR Ch. X (1–1–12 Edition)

(2) Totals required. The disclosures re- (vii) Disclosures required by federal quired by paragraph (a)(1) of this sec- or other applicable law; tion must be provided for the state- (viii) Information included on a peri- ment period and for the calendar year- odic statement or a notice informing a to-date; consumer about a specific overdrawn (3) Format requirements. The aggre- item or the amount the account is gate fee disclosures required by para- overdrawn; graph (a) of this section must be dis- (ix) A term in a deposit account closed in close proximity to fees identi- agreement discussing the institution’s fied under § 1030.6(a)(3), using a format right to pay overdrafts; substantially similar to Sample Form (x) A notice provided to a consumer, B–10 in appendix B to this part. such as at an ATM, that completing a (b) Advertising disclosures for overdraft requested transaction may trigger a fee services—(1) Disclosures. Except as pro- for overdrawing an account, or a gen- vided in paragraphs (b)(2) through (4) of eral notice that items overdrawing an this section, any advertisement pro- account may trigger a fee; moting the payment of overdrafts shall (xi) Informational or educational ma- disclose in a clear and conspicuous terials concerning the payment of over- manner: drafts if the materials do not specifi- (i) The fee or fees for the payment of cally describe the institution’s over- each overdraft; draft service; or (ii) The categories of transactions for which a fee for paying an overdraft (xii) An opt-out or opt-in notice re- may be imposed; garding the institution’s payment of (iii) The time period by which the overdrafts or provision of discretionary consumer must repay or cover any overdraft services. overdraft; and (3) Exception for ATM screens and tele- (iv) The circumstances under which phone response machines. The disclo- the institution will not pay an over- sures described in paragraphs (b)(1)(ii) draft. and (iv) of this section are not required (2) Communications about the payment in connection with any advertisement of overdrafts not subject to additional ad- made on an ATM screen or using a tele- vertising disclosures. Paragraph (b)(1) of phone response machine. this section does not apply to: (4) Exception for indoor signs. Para- (i) An advertisement promoting a graph (b)(1) of this section does not service where the institution’s pay- apply to advertisements for the payment of overdrafts will be agreed upon ment of overdrafts on indoor signs as in writing and subject to Regulation Z described by § 1030.8(e)(2) of this part, (12 CFR Part 1026); provided that the sign contains a clear (ii) A communication by an institu- and conspicuous statement that fees tion about the payment of overdrafts may apply and that consumers should in response to a consumer-initiated in- contact an employee for further infor- quiry about deposit accounts or over- mation about applicable fees and drafts. Providing information about terms. For purposes of this paragraph the payment of overdrafts in response (b)(4), an indoor sign does not include to a balance inquiry made through an an ATM screen. automated system, such as a telephone (c) Disclosure of account balances. If an response machine, ATM, or an institu- institution discloses balance information’s Internet site, is not a response to tion to a consumer through an auto- a consumer-initiated inquiry for pur- mated system, the balance may not in- poses of this paragraph; clude additional amounts that the in- (iii) An advertisement made through stitution may provide to cover an item broadcast or electronic media, such as when there are insufficient or unavail- television or radio; able funds in the consumer’s account, (iv) An advertisement made on out- whether under a service provided in its door media, such as billboards; discretion, a service subject to Regula- (v) An ATM receipt; tion Z (12 CFR part 1026), or a service (vi) An in-person discussion with a to transfer funds from another account consumer; of the consumer. The institution may,

1028 Bur. of Consumer Financial Protection Pt. 1030, App. A at its option, disclose additional ac- term and that no other transactions (depos- count balances that include such addi- its or withdrawals) occur during the term. tional amounts, if the institution This assumption shall not be used if an insti- prominently state s that any such bal- tution requires, as a condition of the ac- ance includes such additional amounts count, that consumers withdraw interest and, if applicable, that additional during the term. In such a case, the interest (and annual percentage yield calculation) amounts are not available for all trans- shall reflect that requirement. For time ac- actions. counts that are offered in multiples of months, institutions may base the number of APPENDIX A TO PART 1030—ANNUAL days on either the actual number of days PERCENTAGE YIELD CALCULATION during the applicable period, or the number The annual percentage yield measures the of days that would occur for any actual se- total amount of interest paid on an account quence of that many calendar months. If in- based on the interest rate and the frequency stitutions choose to use the latter rule, they of compounding. The annual percentage must use the same number of days to cal- yield reflects only interest and does not in- culate the dollar amount of interest earned clude the value of any bonus (or other con- on the account that is used in the annual sideration worth $10 or less) that may be pro- percentage yield formula (where ‘‘Interest’’ vided to the consumer to open, maintain, in- is divided by ‘‘Principal’’). crease or renew an account. Interest or other The annual percentage yield is calculated earnings are not to be included in the annual by use of the following general formula percentage yield if such amounts are deter- (‘‘APY’’ is used for convenience in the for- mined by circumstances that may or may mulas): not occur in the future. The annual percentage yield is expressed as an annualized rate, APY = 100 [(1 + Interest/Principal)(365/Days ¥ based on a 365-day year. Institutions may in term) 1] calculate the annual percentage yield based ‘‘Principal’’ is the amount of funds as- on a 365-day or a 366-day year in a leap year. sumed to have been deposited at the begin- Part I of this appendix discusses the annual ning of the account. percentage yield calculations for account ‘‘Interest’’ is the total dollar amount of in- disclosures and advertisements, while Part II terest earned on the Principal for the term discusses annual percentage yield earned cal- of the account. culations for periodic statements. ‘‘Days in term’’ is the actual number of days in the term of the account. When the PART I. ANNUAL PERCENTAGE YIELD FOR AC- ‘‘days in term’’ is 365 (that is, where the stat- COUNT DISCLOSURES AND ADVERTISING PUR- POSES ed maturity is 365 days or where the account does not have a stated maturity), the annual In general, the annual percentage yield for percentage yield can be calculated by use of account disclosures under §§ 1030.4 and 1030.5 the following simple formula: and for advertising under § 1030.8 is an APY=100 (Interest/Principal) annualized rate that reflects the relationship between the amount of interest that would Examples be earned by the consumer for the term of the account and the amount of principal (1) If an institution pays $61.68 in interest used to calculate that interest. Special rules for a 365-day year on $1,000 deposited into a apply to accounts with tiered and stepped in- NOW account, using the general formula terest rates, and to certain time accounts above, the annual percentage yield is 6.17%: with a stated maturity greater than one APY = 100 [(1 + 61.68/1,000) (365/365) ¥ 1] year. APY = 6.17% A. General Rules Or, using the simple formula above (since, as an account without a stated term, the Except as provided in Part I.E. of this appendix, the annual percentage yield shall be term is deemed to be 365 days): calculated by the formula shown below. In- APY = 100 (61.68/1,000) stitutions shall calculate the annual per- APY = 6.17% centage yield based on the actual number of (2) If an institution pays $30.37 in interest days in the term of the account. For ac- on a $1,000 six-month certificate of deposit counts without a stated maturity date (such (where the six-month period used by the in- as a typical savings or transaction account), stitution contains 182 days), using the gen- the calculation shall be based on an assumed eral formula above, the annual percentage term of 365 days. In determining the total in- yield is 6.18%: terest figure to be used in the formula, institutions shall assume that all principal and APY = 100 [(1 + 30.37/1,000) (365/182) ¥ 1] interest remain on deposit for the entire APY = 6.18%

1029 Pt. 1030, App. A 12 CFR Ch. X (1–1–12 Edition)

B. Stepped-Rate Accounts (Different Rates institution shall assume that: (1) The intro- Apply in Succeeding Periods) ductory interest rate is in effect for the length of time provided for in the deposit For accounts with two or more interest contract; and (2) the variable interest rate rates applied in succeeding periods (where that would have been in effect when the ac- the rates are known at the time the account count is opened or advertised (but for the in- is opened), an institution shall assume each troductory rate) is in effect for the remain- interest rate is in effect for the length of der of the year. If the variable rate is tied to time provided for in the deposit contract. an index, the index-based rate in effect at Examples the time of disclosure must be used for the remainder of the year. If the rate is not tied (1) If an institution offers a $1,000 6-month to an index, the rate in effect for existing certificate of deposit on which it pays a 5% consumers holding the same account (who interest rate, compounded daily, for the first are not receiving the introductory interest three months (which contain 91 days), and a rate) must be used for the remainder of the 5.5% interest rate, compounded daily, for the year. next three months (which contain 92 days), For example, if an institution offers an ac- the total interest for six months is $26.68 count on which it pays a 7% interest rate, and, using the general formula above, the an- compounded daily, for the first three months nual percentage yield is 5.39%: (which, for example, contain 91 days), while APY = 100 [(1 + 26.68/1,000) (365/183) ¥ 1] the variable interest rate that would have APY = 5.39% been in effect when the account was opened (2) If an institution offers a $1,000 two-year was 5%, the total interest for a 365-day year certificate of deposit on which it pays a 6% for a $1,000 deposit is $56.52 (based on 91 days interest rate, compounded daily, for the first at 7% followed by 274 days at 5%). Using the year, and a 6.5% interest rate, compounded simple formula, the annual percentage yield daily, for the next year, the total interest for is 5.65%: two years is $133.13, and, using the general APY = 100 (56.52/1,000) formula above, the annual percentage yield APY = 5.65% is 6.45%: APY = 100 [(1 + 133.13/1,000) (365/730) ¥ 1] D. Tiered-Rate Accounts (Different Rates Apply APY = 6.45% to Specified Balance Levels) For accounts in which two or more inter- C. Variable-Rate Accounts est rates paid on the account are applicable For variable-rate accounts without an in- to specified balance levels, the institution troductory premium or discounted rate, an must calculate the annual percentage yield institution must base the calculation only in accordance with the method described on the initial interest rate in effect when the below that it uses to calculate interest. In account is opened (or advertised), and as- all cases, an annual percentage yield (or a sume that this rate will not change during range of annual percentage yields, if appro- the year. priate) must be disclosed for each balance Variable-rate accounts with an introduc- tier. tory premium (or discount) rate must be cal- For purposes of the examples discussed culated like a stepped-rate account. Thus, an 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 For the interest rates and deposit balances institution pays on the full balance in the assumed above, the institution will state account the stated interest rate that cor- three annual percentage yields—one cor- responds to the applicable deposit tier. For responding to each balance tier. Calculation example, if a consumer deposits $8,000, the of each annual percentage yield is similar for institution pays the 5.50% interest rate on this type of account as for accounts with a the entire $8,000. single interest rate. Thus, the calculation is When this method is used to determine in- based on the total amount of interest that terest, only one annual percentage yield will would be received by the consumer for each apply to each tier. Within each tier, the an- tier of the account for a year and the prin- nual percentage yield will not vary with the cipal assumed to have been deposited to earn amount of principal assumed to have been that amount of interest. deposited.

1030 Bur. of Consumer Financial Protection Pt. 1030, App. A

First tier. Assuming daily compounding, the $2,500.01 and $15,000, respectively. For institution will pay $53.90 in interest on a $2,500.01, interest would be figured on $2,500 $1,000 deposit. Using the general formula, for at 5.25% interest rate plus interest on $.01 at the first tier, the annual percentage yield is 5.50%. For the low end of the second tier, 5.39%: therefore, the annual percentage yield is APY = 100 [(1 + 53.90/1,000) (365/365) ¥ 1] 5.39%, using the simple formula: APY = 5.39% APY = 100 (134.75/2,500) Using the simple formula: APY = 5.39% APY = 100 (53.90/1,000) For $15,000, interest is figured on $2,500 at APY = 5.39% 5.25% interest rate plus interest on $12,500 at 5.50% interest rate. For the high end of the Second tier. The institution will pay $452.29 second tier, the annual percentage yield, in interest on an $8,000 deposit. Thus, using using the simple formula, is 5.61%: the simple formula, the annual percentage yield for the second tier is 5.65%: APY = 100 (841.45/15,000) APY = 5.61% APY = 100 (452.29/8,000) APY = 5.65% Thus, the annual percentage yield range for the second tier is 5.39% to 5.61%. Third tier. The institution will pay $1,183.61 Third tier. For the third tier, the institu- in interest on a $20,000 deposit. Thus, using tion would pay $841.45 in interest on the low the simple formula, the annual percentage end of the third tier (a balance of $15,000.01). yield for the third tier is 5.92%: For $15,000.01, interest would be figured on APY = 100 (1,183.61/20,000) $2,500 at 5.25% interest rate, plus interest on APY = 5.92% $12,500 at 5.50% interest rate, plus interest on Tiering Method B. Under this method, an $.01 at 5.75% interest rate. For the low end of institution pays the stated interest rate only the third tier, therefore, the annual percent- on that portion of the balance within the age yield (using the simple formula) is 5.61%: specified tier. For example, if a consumer de- APY = 100 (841.45/15,000) posits $8,000, the institution pays 5.25% on APY = 5.61% $2,500 and 5.50% on $5,500 (the difference be- Since the institution does not limit the ac- tween $8,000 and the first tier cut-off of count balance, it may assume any maximum $2,500). amount for the purposes of computing the The institution that computes interest in annual percentage yield for the high end of this manner must provide a range that shows the third tier. For an assumed maximum bal- the lowest and the highest annual percent- ance amount of $100,000, interest would be age yields for each tier (other than for the figured on $2,500 at 5.25% interest rate, plus first tier, which, like the tiers in Method A, interest on $12,500 at 5.50% interest rate, plus has the same annual percentage yield interest on $85,000 at 5.75% interest rate. For throughout). The low figure for an annual the high end of the third tier, therefore, the percentage yield range is calculated based on annual percentage yield, using the simple the total amount of interest earned for a formula, is 5.87%. year assuming the minimum principal required to earn the interest rate for that tier. APY = 100 (5,871.79/100,000) The high figure for an annual percentage APY = 5.87% yield range is based on the amount of inter- Thus, the annual percentage yield range est the institution would pay on the highest that would be stated for the third tier is principal that could be deposited to earn 5.61% to 5.87%. that same interest rate. If the account does If the assumed maximum balance amount not have a limit on the maximum amount is $1,000,000 instead of $100,000, the institu- that can be deposited, the institution may tion would use $985,000 rather than $85,000 in assume any amount. the last calculation. In that case, for the For the tiering structure assumed above, high end of the third tier the annual percent- the institution would state a total of five an- age yield, using the simple formula, is 5.91%: nual percentage yields—one figure for the APY = 100 (59,134.22/1,000,000) first tier and two figures stated as a range APY = 5.91% for the other two tiers. Thus, the annual percentage yield range First tier. Assuming daily compounding, the that would be stated for the third tier is institution would pay $53.90 in interest on a 5.61% to 5.91%. $1,000 deposit. For this first tier, using the simple formula, the annual percentage yield E. Time Accounts With a Stated Maturity is 5.39%: Greater Than One Year That Pay Interest at APY = 100 (53.90/1,000) Least Annually APY = 5.39% 1. For time accounts with a stated matu- Second tier. For the second tier, the institu- rity greater than one year that do not com- tion would pay between $134.75 and $841.45 in pound interest on an annual or more fre- interest, based on assumed balances of quent basis, and that require the consumer

1031 Pt. 1030, App. A 12 CFR Ch. X (1–1–12 Edition)

to withdraw interest at least annually, the ‘‘Interest earned’’ is the actual amount of in- annual percentage yield may be disclosed as terest earned on the account for the pe- equal to the interest rate. riod. ‘‘Days in period’’ is the actual number of Example days for the period. (1) If an institution offers a $1,000 two-year certificate of deposit that does not com- Examples pound and that pays out interest semi-annu- (1) Assume an institution calculates inter- ally by check or transfer at a 6.00% interest est for the statement period (and uses either rate, the annual percentage yield may be dis- the daily balance or the average daily bal- closed as 6.00%. ance method), and the account has a balance (2) For time accounts covered by this para- of $1,500 for 15 days and a balance of $500 for graph that are also stepped-rate accounts, the remaining 15 days of a 30-day statement the annual percentage yield may be disclosed period. The average daily balance for the pe- as equal to the composite interest rate. riod is $1,000. The interest earned (under ei- Example ther balance computation method) is $5.25 during the period. The annual percentage (1) If an institution offers a $1,000 three- yield earned (using the formula above) is year certificate of deposit that does not com- 6.58%: pound and that pays out interest annually by APY Earned = 100 [(1 + 5.25/1,000) (365/30) ¥ 1] check or transfer at a 5.00% interest rate for APY Earned = 6.58% the first year, 6.00% interest rate for the second year, and 7.00% interest rate for the (2) Assume an institution calculates inter- third year, the institution may compute the est on the average daily balance for the cal- composite interest rate and APY as follows: endar month and provides periodic state- (a) Multiply each interest rate by the num- ments that cover the period from the 16th of ber of days it will be in effect; one month to the 15th of the next month. (b) Add these figures together; and The account has a balance of $2,000 Sep- (c) Divide by the total number of days in tember 1 through September 15 and a balance the term. of $1,000 for the remaining 15 days of Sep- (2) Applied to the example, the products of tember. The average daily balance for the the interest rates and days the rates are in month of September is $1,500, which results effect are (5.00% × 365 days) 1825, (6.00% × 365 in $6.50 in interest earned for the month. The days) 2190, and (7.00% × 365 days) 2555, respec- annual percentage yield earned for the tively. The sum of these products, 6570, is di- month of September would be shown on the vided by 1095, the total number of days in the periodic statement covering September 16 term. The composite interest rate and APY through October 15. The annual percentage are both 6.00%. yield earned (using the formula above) is 5.40%: PART II. ANNUAL PERCENTAGE YIELD EARNED APY Earned = 100 [(6.50/1,500) (365/30) ¥ 1] FOR PERIODIC STATEMENTS APY Earned = 5.40% The annual percentage yield earned for (3) Assume an institution calculates inter- periodic statements under § 1030.6(a) is an est on the average daily balance for a quar- annualized rate that reflects the relationship ter (for example, the calendar months of between the amount of interest actually September through November), and provides earned on the consumer’s account during the monthly periodic statements covering cal- statement period and the average daily bal- endar months. The account has a balance of ance in the account for the statement period. $1,000 throughout the 30 days of September, a Pursuant to § 1030.6(b), however, if an institu- balance of $2,000 throughout the 31 days of tion uses the average daily balance method October, and a balance of $3,000 throughout and calculates interest for a period other the 30 days of November. The average daily than the statement period, the annual per- balance for the quarter is $2,000, which re- centage yield earned shall reflect the rela- sults in $21 in interest earned for the quar- tionship between the amount of interest ter. The annual percentage yield earned earned and the average daily balance in the would be shown on the periodic statement account for that other period. for November. The annual percentage yield The annual percentage yield earned shall earned (using the formula above) is 4.28%: be calculated by using the following for- ¥ mulas (‘‘APY Earned’’ is used for conven- APY Earned = 100 [(1 + 21/2,000) (365/91) 1] ience in the formulas): APY Earned = 4.28% A. General Formula B. Special Formula for Use Where Periodic Statement Is Sent More Often Than the Pe- APY Earned = 100 [(1 + Interest earned/Bal- riod for Which Interest Is Compounded ance) (365/Days in period) ¥ 1] ‘‘Balance’’ is the average daily balance in Institutions that use the daily balance the account for the period. method to accrue interest and that issue

1032 Bur. of Consumer Financial Protection Pt. 1030, App. B

periodic statements more often than the period for which interest is compounded shall use the following special formula:

The following definition applies for use in compounded annually, and provides periodic this formula (all other terms are defined statements for each monthly cycle. The ac- under Part II): count has a daily balance of $1,000 for a 30- ‘‘Compounding’’ is the number of days in day statement period. The interest earned is each compounding period. $4.11 for the period, and the annual percent- Assume an institution calculates interest age yield earned (using the special formula for the statement period using the daily bal- above) is 5.00%: ance method, pays a 5.00% interest rate,

APY Earned = 5.00% (ii) Variable-Rate Accounts The interest rate on your account is ll% APPENDIX B TO PART 1030—MODEL with an annual percentage yield of ll%. CLAUSES AND SAMPLE FORMS Your interest rate and annual percentage TABLE OF CONTENTS yield may change. B–1—Model Clauses for Account Disclosures Determination of Rate (Section 1030.4(b)) The interest rate on your account is based B–2—Model Clauses for Change in Terms on (name of index) [plus/minus a margin of (Section 1030.5(a)) ll]; or B–3—Model Clauses for Pre-Maturity Notices At our discretion, we may change the infor Time Accounts (Section 1030.5(b)(2) and terest rate on your account. 1030.5(d)) B–4—Sample Form (Multiple Accounts) Frequency of Rate Changes B–5—Sample Form (Now Account) We may change the interest rate on your B–6—Sample Form (Tiered Rate Money Mar- account [every (time period)/at any time]. ket Account) B–7—Sample Form (Certificate of Deposit) Limitations on Rate Changes B–8—Sample Form (Certificate of Deposit Advertisement) The interest rate for your account will B–9—Sample Form (Money Market Account never change by more than ll% each (time Advertisement) period). B–10—Sample Form (Aggregate Overdraft The interest rate will never be [less/more] and Returned Item Fees) than ll%; or The interest rate will never [exceedll% B–1—MODEL CLAUSES FOR ACCOUNT above/drop more than ll% below] the inter- DISCLOSURES est rate initially disclosed to you.

(a) Rate Information (iii) Stepped-Rate Accounts

(i) Fixed-Rate Accounts The initial interest rate for your account is ll%. You will be paid this rate [for (time The interest rate on your account is ll% period)/until (date)]. After that time, the in- with an annual percentage yield of ll%. terest rate for your account will be ll%, You will be paid this rate [for (time period)/ and you will be paid this rate [for (time pe- until (date)/for at least 30 calendar days]. riod)/until (date)]. The annual percentage yield for your account is ll%.

1033 Pt. 1030, App. B 12 CFR Ch. X (1–1–12 Edition)

(iv) Tiered-Rate Accounts that figure by the number of days in the period. Tiering Method A (iii) To Obtain the Annual Percentage Yield • If your [daily balance/average daily bal- Disclosed ance] is $ll or more, the interest rate paid on the entire balance in your account will be You must maintain a minimum balance of ll% with an annual percentage yield of $ll in the account each day to obtain the ll%. disclosed annual percentage yield. • If your [daily balance/average daily bal- You must maintain a minimum average ance] is more than $ll, but less than $ll, daily balance of $ll to obtain the disclosed the interest rate paid on the entire balance annual percentage yield. The average daily in your account will be ll% with an annual balance is calculated by adding the principal percentage yield of ll%. in the account for each day of the period and • If your [daily balance/average daily bal- dividing that figure by the number of days in ance] is $ll or less, the interest rate paid the period. on the entire balance will be ll% with an annual percentage yield of ll%. (d) Balance Computation Method Tiering Method B (i) Daily Balance Method • An interest rate of ll% will be paid We use the daily balance method to cal- only for that portion of your [daily balance/ culate the interest on your account. This average daily balance] that is greater than method applies a daily periodic rate to the $ll. The annual percentage yield for this principal in the account each day. tier will range from ll% to ll%, depending on the balance in the account. (ii) Average Daily Balance Method • An interest rate of ll% will be paid We use the average daily balance method only for that portion of your [daily balance/ to calculate interest on your account. This average daily balance] that is greater than method applies a periodic rate to the average $ll. The annual percentage yield for this daily balance in the account for the period. tier will range from ll% to ll%, depend- The average daily balance is calculated by ing on the balance in the account. adding the principal in the account for each • If your [daily balance/average daily bal- day of the period and dividing that figure by ance] is $ll or less, the interest rate paid the number of days in the period. on the entire balance will be ll% with an annual percentage yield of ll%. (e) Accrual of Interest on Noncash Deposits (b) Compounding and Crediting Interest begins to accrue no later than the business day we receive credit for the deposit (i) Frequency of noncash items (for example, checks); or Interest begins to accrue on the business Interest will be compounded [on a ll day you deposit noncash items (for example, basis/every (time period)]. Interest will be checks). credited to your account [on a ll basis/ every (time period)]. (f) Fees (ii) Effect of Closing an Account The following fees may be assessed against If you close your account before interest is your account: credited, you will not receive the accrued in- ll$ll terest. ll$ll ll$ll (c) Minimum Balance Requirements ll(conditions for imposing fee) $ll ll% of ll. (i) To Open the Account You must deposit $ll to open this ac- (g) Transaction Limitations count. The minimum amount you may [withdraw/ write a check for] is $ll. (ii) To Avoid Imposition of Fees You may make ll [deposits into/with- A minimum balance fee of $ll will be im- drawals from] your account each (time pe- posed every (time period) if the balance in riod). the account falls below $ll any day of the You may not make [deposits into/with- (time period). drawals from] your account until the matu- A minimum balance fee of $ll will be im- rity date. posed every (time period) if the average daily balance for the (time period) falls below (h) Disclosures Relating to Time Accounts $ll. The average daily balance is cal- (i) Time Requirements culated by adding the principal in the account for each day of the period and dividing Your account will mature on (date).

1034 Bur. of Consumer Financial Protection Pt. 1030, App. B

Your account will mature in (time period). (i) Bonuses

(ii) Early Withdrawal Penalties You will [be paid/receive] [$ll/(description of item)] as a bonus [when you open the We [will/may] impose a penalty if you account/on (date) ll].s withdraw [any/all] of the [deposited funds/ You must maintain a minimum [daily bal- principal] before the maturity date. The fee ance/average daily balance] of $ll to obtain imposed will equal ll days/week[s]/ the bonus. month[s] of interest; or To earn the bonus, [$ll/your entire prin- We [will/may] impose a penalty of $ll if cipal] must remain on deposit [for (time pe- you withdraw [any/all] of the [deposited riod)/until (date)ll]. funds/principal] before the maturity date. If you withdraw some of your funds before B–2—MODEL CLAUSES FOR CHANGE IN TERMS maturity, the interest rate for the remaining funds in your account will be ll% with an On (date), the cost of (type of fee) will in- annual percentage yield of ll%. crease to $ll. On (date), the interest rate on your ac- (iii) Withdrawal of Interest Prior to count will decrease to ll% with an annual Maturity percentage yield of ll%. The annual percentage yield assumes in- On (date), the minimum [daily balance/av- terest will remain on deposit until maturity. erage daily balance] required to avoid impo- A withdrawal will reduce earnings. sition of a fee will increase to $ll.

(iv) Renewal Policies B–3—MODEL CLAUSES FOR PRE-MATURITY NOTICES FOR TIME ACCOUNTS (1) Automatically Renewable Time Accounts (a) Automatically Renewable Time Accounts This account will automatically renew at With Maturities of One Year or Less But maturity. Longer Than One Month You will have [ll calendar/business] days after the maturity date to withdraw funds Your account will mature on (date). without penalty; or If the account renews, the new maturity There is no grace period following the ma- date will be (date). turity of this account to withdraw funds The interest rate for the renewed account without penalty. will be ll% with an annual percentage yield of ll%; or (2) Non-Automatically Renewable Time The interest rate and annual percentage Accounts yield have not yet been determined. They This account will not renew automatically will be available on (date). Please call (phone at maturity. If you do not renew the ac- number) to learn the interest rate and an- count, your deposit will be placed in [an in- nual percentage yield for your new account. terest-bearing/a noninterest-bearing] account. (b) Non-Automatically Renewable Time Ac- counts With Maturities Longer Than One (v) Required Interest Distribution Year This account requires the distribution of Your account will mature on (date). interest and does not allow interest to re- If you do not renew the account, interest main in the account. [will/will not] be paid after maturity.

1035 Pt. 1030, App. B 12 CFR Ch. X (1–1–12 Edition)

1036 Bur. of Consumer Financial Protection Pt. 1030, App. B

1037 Pt. 1030, App. B 12 CFR Ch. X (1–1–12 Edition)

1038 Bur. of Consumer Financial Protection Pt. 1030, App. B

1039 Pt. 1030, App. B 12 CFR Ch. X (1–1–12 Edition)

1040 Bur. of Consumer Financial Protection Pt. 1030, App. B

1041 Pt. 1030, App. B 12 CFR Ch. X (1–1–12 Edition)

1042 Bur. of Consumer Financial Protection Pt. 1030, App. B

1043 Pt. 1030, App. B 12 CFR Ch. X (1–1–12 Edition)

1044 Bur. of Consumer Financial Protection Pt. 1030, Supp. I

APPENDIX C TO PART 1030—EFFECT ON proving depository institutions’ forms, state- STATE LAWS ments, or calculation tools or methods.

(A) INCONSISTENT REQUIREMENTS SUPPLEMENT I TO PART 1030—OFFICIAL State law requirements that are incon- INTERPRETATIONS sistent with the requirements of the act and INTRODUCTION this part are preempted to the extent of the inconsistency. A state law is inconsistent if 1. Official status. This commentary is the it requires a depository institution to make means by which the Bureau of Consumer Fi- disclosures or take actions that contradict nancial Protection issues official interpreta- the requirements of the federal law. A state tions of Regulation DD. law is also contradictory if it requires the use of the same term to represent a different Section 1030.1 Authority, purpose, coverage, and amount or a different meaning than the fed- effect on state laws eral law, requires the use of a term different from that required in the federal law to de- (c) Coverage scribe the same item, or permits a method of 1. Foreign applicability. Regulation DD ap- calculating interest on an account different plies to all depository institutions, except from that required in the federal law. credit unions, that offer deposit accounts to residents (including resident aliens) of any (B) PREEMPTION DETERMINATIONS state as defined in § 1030.2(r). Accounts held A depository institution, state, or other in- in an institution located in a state are cov- terested party may request the Bureau to de- ered, even if funds are transferred periodi- termine whether a state law requirement is cally to a location outside the United States. inconsistent with the federal requirements. Accounts held in an institution located out- A request for a determination shall be in side the United States are not covered, even writing and addressed to the Bureau of Con- if held by a U.S. resident. sumer Financial Protection, 1700 G Street 2. Persons who advertise accounts. Persons NW., Washington, DC 20006. Notice that the who advertise accounts are subject to the ad- Bureau intends to make a determination (ei- vertising rules. For example, if a deposit ther on request or on its own motion) will be broker places an advertisement offering con- published in the FEDERAL REGISTER, with an sumers an interest in an account at a deposi- opportunity for public comment unless the tory institution, the advertising rules apply Bureau finds that notice and opportunity for to the advertisement, whether the account is comment would be impracticable, unneces- to be held by the broker or directly by the sary, or contrary to the public interest and consumer. publishes its reasons for such decision. No- tice of a final determination will be pub- Section 1030.2—Definitions lished in the FEDERAL REGISTER and furnished to the party who made the request (a) Account. and to the appropriate state official. 1. Covered accounts. Examples of accounts subject to the regulation are: (C) EFFECT OF PREEMPTION DETERMINATIONS i. Interest-bearing and noninterest-bearing After the Bureau determines that a state accounts. law is inconsistent, a depository institution ii. Deposit accounts opened as a condition may not make disclosures using the incon- of obtaining a credit card. sistent term or take actions relying on the iii. Accounts denominated in a foreign cur- inconsistent law. rency. iv. Individual retirement accounts (IRAs) (D) REVERSAL OF DETERMINATION and simplified employee pension (SEP) ac- The Bureau reserves the right to reverse a counts. determination for any reason bearing on the v. Payable on death (POD) or ‘‘Totten coverage or effect of state or federal law. No- trust’’ accounts. tice of reversal of a determination will be 2. Other accounts. Examples of accounts not published in the FEDERAL REGISTER and a subject to the regulation are: copy furnished to the appropriate state offi- i. Mortgage escrow accounts for collecting cial. taxes and property insurance premiums. ii. Accounts established to make periodic APPENDIX D TO PART 1030—ISSUANCE OF disbursements on construction loans. OFFICIAL INTERPRETATIONS iii. Trust accounts opened by a trustee pursuant to a formal written trust agreement Except in unusual circumstances, interpre- (not merely declarations of trust on a signa- tations will not be issued separately but will ture card such as a ‘‘Totten trust,’’ or an be incorporated in an official commentary to IRA and SEP account). this part, which will be amended periodi- iv. Accounts opened by an executor in the cally. No interpretations will be issued ap- name of a decedent’s estate.

1045 Pt. 1030, Supp. I 12 CFR Ch. X (1–1–12 Edition)

3. Other investments. The term ‘‘account’’ i. Disability insurance premiums valued at does not apply to all products of a depository an amount of $10 or less per year. institution. Examples of products not cov- ii. Coffee mugs, T-shirts or other merchan- ered are: dise with a market value of $10 or less. i. Government securities. 3. Aggregation. In determining if an item ii. Mutual funds. valued at $10 or less is a bonus, institutions iii. Annuities. must aggregate per account per calendar iv. Securities or obligations of a depository year items that may be given to consumers. institution. In making this determination, institutions v. Contractual arrangements such as re- aggregate per account only the market value purchase agreements, interest rate swaps, of items that may be given for a specific pro- and bankers acceptances. motion. To illustrate, assume an institution (b) Advertisement. offers in January to give consumers an item 1. Covered messages. Advertisements include valued at $7 for each calendar quarter during commercial messages in visual, oral, or print the year that the average account balance in media that invite, offer, or otherwise an- a negotiable order of withdrawal (NOW) ac- nounce generally to prospective customers count exceeds $10,000. The bonus rules are the availability of consumer accounts—such triggered, since consumers are eligible under as: the promotion to receive up to $28 during the i. Telephone solicitations. year. However, the bonus rules are not trig- ii. Messages on automated teller machine gered if an item valued at $7 is offered to (ATM) screens. consumers opening a NOW account during iii. Messages on a computer screen in an the month of January, even though in No- institution’s lobby (including any printout) vember the institution introduces a new pro- other than a screen viewed solely by the in- motion that includes, for example, an offer stitution’s employee. to existing NOW account holders for an item iv. Messages in a newspaper, magazine, or valued at $8 for maintaining an average bal- promotional flyer or on radio. ance of $5,000 for the month. v. Messages that are provided along with 4. Waiver or reduction of a fee or absorption information about the consumer’s existing of expenses. Bonuses do not include value account and that promote another account that consumers receive through the waiver at the institution. or reduction of fees (even if the fees waived 2. Other messages. Examples of messages exceed $10) for banking-related services such that are not advertisements are: as the following: i. Rate sheets in a newspaper, periodical, i. A safe deposit box rental fee for con- or trade journal (unless the depository insti- sumers who open a new account. tution, or a deposit broker offering accounts ii. Fees for travelers checks for account at the institution, pays a fee for or otherwise holders. controls publication). iii. Discounts on interest rates charged for ii. In-person discussions with consumers loans at the institution. about the terms for a specific account. (h) Consumer. iii. For purposes of § 1030.8(b) of this part 1. Professional capacity. Examples of ac- through § 1030.8(e) of this part, information counts held by a natural person in a profes- given to consumers about existing accounts, sional capacity for another are attorney-cli- such as current rates recorded on a voice-re- ent trust accounts and landlord-tenant secu- sponse machine or notices for automatically rity accounts. renewable time account sent before renewal. 2. Other accounts. Accounts not held in a iv. Information about a particular trans- professional capacity include accounts held action in an existing account. by an individual for a child under the Uni- v. Disclosures required by federal or other form Gifts to Minors Act. applicable law. 3. Sole proprietors. Accounts held by indi- vi. A deposit account agreement. viduals as sole proprietors are not covered. (f) Bonus. 4. Retirement plans. IRAs and SEP accounts 1. Examples. Bonuses include items of are consumer accounts to the extent that value, other than interest, offered as incen- funds are invested in covered accounts. tives to consumers, such as an offer to pay Keogh accounts are not subject to the regu- the final installment deposit for a holiday lation. club account. Items that are not a bonus in- (j) Depository institution and institution. clude discount coupons for goods or services 1. Foreign institutions. Branches of foreign at restaurants or stores. institutions located in the United States are 2. De minimis rule. Items with a de minimis subject to the regulation if they offer deposit value of $10 or less are not bonuses. Institu- accounts to consumers. Edge Act and Agree- tions may rely on the valuation standard ment corporations, and agencies of foreign used by the Internal Revenue Service to de- institutions, are not depository institutions termine if the value of the item is de minimis. for purposes of this part. Examples of items of de minimis value are: (k) Deposit broker.

1046 Bur. of Consumer Financial Protection Pt. 1030, Supp. I

1. General. A deposit broker is a person who particular type size or typeface, nor are in- is in the business of placing or facilitating stitutions required to state any term more the placement of deposits in an institution, conspicuously than any other term. Disclo- as defined by the Federal Deposit Insurance sures may be made: Act (12 U.S.C. 29(g)). i. In any order. (n) Interest. ii. In combination with other disclosures 1. Relation to bonuses. Bonuses are not in- or account terms. terest for purposes of this part. iii. In combination with disclosures for (p) Passbook savings account. other types of accounts, as long as it is clear 1. Relation to Regulation E. Passbook sav- to consumers which disclosures apply to ings accounts include accounts accessed by their account. preauthorized electronic fund transfers to iv. On more than one page and on the front the account (as defined in 12 CFR 1005.2(j)), such as an account that receives direct de- and reverse sides. posit of social security payments. Accounts v. By using inserts to a document or filling permitting access by other electronic means in blanks. are not ‘‘passbook saving accounts’’ and vi. On more than one document, as long as must comply with the requirements of the documents are provided at the same § 1030.6 if statements are sent four or more time. times a year. 2. Consistent terminology. Institutions must (q) Periodic statement. use consistent terminology to describe terms 1. Examples. Periodic statements do not in- or features required to be disclosed. For exclude: ample, if an institution describes a monthly i. Additional statements provided solely fee (regardless of account activity) as a upon request. ‘‘monthly service fee’’ in account-opening ii. General service information such as a disclosures, the periodic statement and quarterly newsletter or other correspondence change-in-term notices must use the same describing available services and products. terminology so that consumers can readily (t) Tiered-rate account. identify the fee. 1. Time accounts. Time accounts paying dif- (b) General. ferent rates based solely on the amount of 1. Specificity of legal obligation. Institutions the initial deposit are not tiered-rate ac- may refer to the calendar month or to rough- counts. ly equivalent intervals during a calendar 2. Minimum balance requirements. A require- year as a ‘‘month.’’ ment to maintain a minimum balance to (c) Relation to Regulation E. earn interest does not make an account a 1. General rule. Compliance with Regula- tiered-rate account. tion E (12 CFR Part 1005) is deemed to satisfy (u) Time account. 1. Club accounts. Although club accounts the disclosure requirements of this part, typically have a maturity date, they are not such as when: time accounts unless they also require a pen- i. An institution changes a term that trig- alty of at least seven days’ interest for with- gers a notice under Regulation E, and uses drawals during the first six days after the ac- the timing and disclosure rules of Regulation count is opened. E for sending change-in-term notices. 2. Relation to Regulation D. Regulation D of ii. Consumers add an ATM access feature the Board of Governors of the Federal Re- to an account, and the institution provides serve System (12 CFR part 204) permits in disclosures pursuant to Regulation E, includ- limited circumstances the withdrawal of ing disclosure of fees (see 12 CFR 1005.7.) funds without penalty during the first six iii. An institution complying with the tim- days after a ‘‘time deposit’’ is opened. (See 12 ing rules of Regulation E discloses at the CFR 204.2(c)(1)(i).) But the fact that a con- same time fees for electronic services (such sumer makes a withdrawal as permitted by as for balance inquiry fees at ATMs) required Regulation D does not disqualify the account to be disclosed by this part but not by Regu- from being a time account for purposes of lation E. this part. iv. An institution relies on Regulation E’s (v) Variable-rate account. rules regarding disclosure of limitations on 1. General. A certificate of deposit permit- the frequency and amount of electronic fund ting one or more rate adjustments prior to transfers, including security-related excep- maturity at the consumer’s option is a vari- tions. But any limitations on ‘‘intra-institu- able-rate account. tional transfers’’ to or from the consumer’s other accounts during a given time period Section 1030.3—General Disclosure Requirements must be disclosed, even though intra-institu- (a) Form. tional transfers are exempt from Regulation 1. Design requirements. Disclosures must be E. presented in a format that allows consumers (e) Oral response to inquiries. to readily understand the terms of their ac- 1. Application of rule. Institutions are not count. Institutions are not required to use a required to provide rate information orally.

1047 Pt. 1030, Supp. I 12 CFR Ch. X (1–1–12 Edition)

2. Relation to advertising. The advertising about a type of account (a NOW account, for rules do not cover an oral response to a ques- example), an institution that offers several tion about rates. variations may provide disclosures for any 3. Existing accounts. This paragraph does one of them. not apply to oral responses about rate infor- 3. Timing for response. Ten business days is mation for existing accounts. For example, if a reasonable time for responding to requests a consumer holding a one-year certificate of for account information that consumers do deposit (CD) requests interest rate informa- not make in person, including requests made tion about the CD during the term, the insti- by electronic means (such as by electronic tution need not disclose the annual percent- mail). age yield. 4. Use of electronic means. If a consumer who (f) Rounding and accuracy rules for rates and is not present at the institution makes a re- yields quest for account disclosures, including a re- (f)(1) Rounding. quest made by telephone, email, or via the 1. Permissible rounding. Examples of permis- institution’s Web site, the institution may sible rounding are an annual percentage send the disclosures in paper form or, if the yield calculated to be 5.644%, rounded down consumer agrees, may provide the disclo- and disclosed as 5.64%; 5.645% rounded up and sures electronically, such as to an email ad- disclosed as 5.65%. dress that the consumer provides for that (f)(2) Accuracy. purpose, or on the institution’s Web site, 1. Annual percentage yield and annual per- without regard to the consumer consent or centage yield earned. The tolerance for annual other provisions of the E–Sign Act. The regu- percentage yield and annual percentage yield lation does not require an institution to pro- earned calculations is designed to accommo- vide, nor a consumer to agree to receive, the date inadvertent errors. Institutions may disclosures required by § 1030.4(a)(2) in elec- not purposely incorporate the tolerance into tronic form. their calculation of yields. Paragraph (a)(2)(ii)(A). Section 1030.4—Account Disclosures 1. Recent rates. Institutions comply with this paragraph if they disclose an interest (a) Delivery of account disclosures. rate and annual percentage yield accurate (a)(1) Account opening. within the seven calendar days preceding the 1. New accounts. New account disclosures date they send the disclosures. must be provided when: Paragraph (a)(2)(ii)(B). i. A time account that does not automati- 1. Term. Describing the maturity of a time cally rollover is renewed by a consumer. account as ‘‘1 year’’ or ‘‘6 months,’’ for ex- ii. A consumer changes a term for a renewable time account (see comment 5(b)–5 re- ample, illustrates a statement of the matu- garding disclosure alternatives.) rity of a time account as a term rather than iii. An institution transfers funds from an a date (‘‘January 10, 1995’’). account to open a new account not at the (b) Content of account disclosures. consumer’s request, unless the institution (b)(1) Rate information. previously gave account disclosures and any (b)(1)(i) Annual percentage yield and interest change-in-term notices for the new account. rate. iv. An institution accepts a deposit from a 1. Rate disclosures. In addition to the inter- consumer to an account that the institution est rate and annual percentage yield, institu- had deemed closed for the purpose of treat- tions may disclose a periodic rate cor- ing accrued but uncredited interest as for- responding to the interest rate. No other feited interest (see comment 7(b)–3.) rate or yield (such as ‘‘tax effective yield’’) is 2. Acquired accounts. New account disclo- permitted. If the annual percentage yield is sures need not be given when an institution the same as the interest rate, institutions acquires an account through an acquisition may disclose a single figure but must use of or merger with another institution (but both terms. see § 1030.5(a) of this part regarding advance 2. Fixed-rate accounts. For fixed-rate time notice requirements if terms are changed). accounts paying the opening rate until ma- (a)(2) Requests. turity, institutions may disclose the period Paragraph (a)(2)(i). of time the interest rate will be in effect by 1. Inquiries versus requests. A response to an stating the maturity date. (See Appendix B, oral inquiry (by telephone or in person) B–7—Sample Form.) For other fixed-rate ac- about rates and yields or fees does not trig- counts, institutions may use a date (‘‘This ger the duty to provide account disclosures. rate will be in effect through May 4, 1995’’) or But when consumers ask for written infor- a period (‘‘This rate will be in effect for at mation about an account (whether by tele- least 30 days’’). phone, in person, or by other means), the in- 3. Tiered-rate accounts. Each interest rate, stitution must provide disclosures unless the along with the corresponding annual per- account is no longer offered to the public. centage yield for each specified balance level 2. General requests. When responding to a (or range of annual percentage yields, if ap- consumer’s general request for disclosures propriate), must be disclosed for tiered-rate

1048 Bur. of Consumer Financial Protection Pt. 1030, Supp. I

accounts. (See Appendix A, Part I, Para- 1. Covered fees. The following are types of graph D.) fees that must be disclosed: 4. Stepped-rate accounts. A single composite i. Maintenance fees, such as monthly serv- annual percentage yield must be disclosed ice fees. for stepped-rate accounts. (See Appendix A, ii. Fees to open or to close an account. Part I, Paragraph B.) The interest rates and iii. Fees related to deposits or withdrawals, the period of time each will be in effect also such as fees for use of the institution’s must be provided. When the initial rate of- ATMs. fered for a specified time on a variable-rate iv. Fees for special services, such as stop- account is higher or lower than the rate that payment fees, fees for balance inquiries or would otherwise be paid on the account, the verification of deposits, fees associated with calculation of the annual percentage yield checks returned unpaid, and fees for regu- must be made as if for a stepped-rate ac- larly sending to consumers checks that oth- count. (See Appendix A, Part I, Paragraph erwise would be held by the institution. C.) 2. Other fees. Institutions need not disclose (b)(1)(ii) Variable rates. fees such as the following: Paragraph (b)(1)(ii)(B). i. Fees for services offered to account and 1. Determining interest rates. To disclose how nonaccount holders alike, such as travelers the interest rate is determined, institutions checks and wire transfers (even if different must: amounts are charged to account and non- i. Identify the index and specific margin, if account holders). the interest rate is tied to an index. ii. Incidental fees, such as fees associated ii. State that rate changes are within the with state escheat laws, garnishment or at- institution’s discretion, if the institution torneys fees, and fees for photocopying. does not tie changes to an index. 3. Amount of fees. Institutions must state Paragraph (b)(1)(ii)(C). the amount and conditions under which a fee 1. Frequency of rate changes. An institution may be imposed. Naming and describing the reserving the right to change rates at its dis- fee (such as ‘‘$4.00 monthly service fee’’) will cretion must state the fact that rates may typically satisfy these requirements. change at any time. 4. Tied-accounts. Institutions must state if Paragraph (b)(1)(ii)(D). fees that may be assessed against an account 1. Limitations. A floor or ceiling on rates or are tied to other accounts at the institution. on the amount the rate may decrease or in- For example, if an institution ties the fees crease during any time period must be dis- payable on a NOW account to balances held closed. Institutions need not disclose the ab- in the NOW account and a savings account, sence of limitations on rate changes. the NOW account disclosures must state that (b)(2) Compounding and crediting. fact and explain how the fee is determined. (b)(2)(ii) Effect of closing an account. 5. Fees for overdrawing an account. Under 1. Deeming an account closed. An institution § 1030.4(b)(4) of this part, institutions must may, subject to state or other law, provide in disclose the conditions under which a fee its deposit contracts the actions by con- may be imposed. In satisfying this require- sumers that will be treated as closing the ac- ment institutions must specify the cat- count and that will result in the forfeiture of egories of transactions for which an over- accrued but uncredited interest. An example draft fee may be imposed. An exhaustive list is the withdrawal of all funds from the ac- of transactions is not required. It is suffi- count prior to the date that interest is cred- cient for an institution to state that the fee ited. applies to overdrafts ‘‘created by check, in- (b)(3) Balance information. person withdrawal, ATM withdrawal, or (b)(3)(ii) Balance computation method. other electronic means,’’ as applicable. Dis- 1. Methods and periods. Institutions may closing a fee ‘‘for overdraft items’’ would not use different methods or periods to calculate be sufficient. minimum balances for purposes of imposing (b)(5) Transaction limitations. a fee (the daily balance for a calendar 1. General rule. Examples of limitations on month, for example) and accruing interest the number or dollar amount of deposits or (the average daily balance for a statement withdrawals that institutions must disclose period, for example). Each method and cor- are: responding period must be disclosed. i. Limits on the number of checks that (b)(3)(iii) When interest begins to accrue. may be written on an account within a given 1. Additional information. Institutions may time period. disclose additional information such as the ii. Limits on withdrawals or deposits dur- time of day after which deposits are treated ing the term of a time account. as having been received the following busi- iii. Limitations required by Regulation D ness day, and may use additional descriptive of the Board of Governors of the Federal Re- terms such as ‘‘ledger’’ or ‘‘collected’’ bal- serve System (12 CFR part 204) on the num- ances to disclose when interest begins to ac- ber of withdrawals permitted from money crue. market deposit accounts by check to third (b)(4) Fees. parties each month. Institutions need not

1049 Pt. 1030, Supp. I 12 CFR Ch. X (1–1–12 Edition) disclose reservations of right to require no- has been changed (also specifying the new tices for withdrawals from accounts required amount) or use an accompanying letter that by federal or state law. refers to the changed term. (b)(6) Features of time accounts. 2. Effective date. An example of language (b)(6)(i) Time requirements. for disclosing the effective date of a change 1. ‘‘Callable’’ time accounts. In addition to is ‘‘As of November 21, 1994.’’ the maturity date, an institution must state 3. Terms that change upon the occurrence of the date or the circumstances under which it an event. An institution offering terms that may redeem a time account at the institu- will automatically change upon the occur- tion’s option (a ‘‘callable’’ time account). rence of a stated event need not send an ad- (b)(6)(ii) Early withdrawal penalties. vance notice of the change provided the in- 1. General. The term ‘‘penalty’’ may but stitution fully describes the conditions of need not be used to describe the loss of inter- the change in the account opening disclo- est that consumers may incur for early with- sures (and sends any change-in-term notices drawal of funds from time accounts. regardless of whether the changed term af- 2. Examples. Examples of early withdrawal fects that consumer’s account at that time). penalties are: 4. Examples. Examples of changes not re- i. Monetary penalties, such as ‘‘$10.00’’ or quiring an advance change-in-terms notice ‘‘seven days’ interest plus accrued but are: uncredited interest.’’ i. The termination of employment for con- ii. Adverse changes to terms such as a low- sumers for whom account maintenance or ering of the interest rate, annual percentage activity fees were waived during their em- yield, or compounding frequency for funds ployment by the depository institution. remaining on deposit. ii. The expiration of one year in a pro- iii. Reclamation of bonuses. motion described in the account opening dis- 3. Relation to rules for IRAs or similar plans. closures to ‘‘waive $4.00 monthly service Penalties imposed by the Internal Revenue charges for one year.’’ Code for certain withdrawals from IRAs or (a)(2) No notice required. similar pension or savings plans are not (a)(2)(ii) Check printing fees. early withdrawal penalties for purposes of 1. Increase in fees. A notice is not required this part. for an increase in fees for printing checks (or 4. Disclosing penalties. Penalties may be deposit and withdrawal slips) even if the in- stated in months, whether institutions as- stitution adds some amount to the price sess the penalty using the actual number of charged by the vendor. days during the period or using another (b) Notice before maturity for time accounts method such as a number of days that occurs longer than one month that renew automati- in any actual sequence of the total calendar cally. months involved. For example, stating ‘‘one 1. Maturity dates on nonbusiness days. In de- month’s interest’’ is permissible, whether termining the term of a time account, insti- the institution assesses 30 days’ interest dur- tutions may disregard the fact that the term ing the month of April, or selects a time pe- will be extended beyond the disclosed num- riod between 28 and 31 days for calculating ber of days because the disclosed maturity the interest for all early withdrawals regard- falls on a nonbusiness day. For example, a less of when the penalty is assessed. holiday or weekend may cause a ‘‘one-year’’ (b)(6)(iv) Renewal policies. time account to extend beyond 365 days (or 1. Rollover time accounts. Institutions offer- 366, in a leap year) or a ‘‘one-month’’ time ing a grace period on time accounts that account to extend beyond 31 days. automatically renew need not state whether 2. Disclosing when rates will be determined. interest will be paid if the funds are with- Ways to disclose when the annual percentage drawn during the grace period. yield will be available include the use of: 2. Nonrollover time accounts. Institutions i. A specific date, such as ‘‘October 28.’’ paying interest on funds following the matu- ii. A date that is easily determinable, such rity of time accounts that do not renew as ‘‘the Tuesday before the maturity date automatically need not state the rate (or an- stated on this notice’’ or ‘‘as of the maturity nual percentage yield) that may be paid. date stated on this notice.’’ (See Appendix B, Model Clause B–1(h)(iv)(2).) 3. Alternative timing rule. Under the alternative timing rule, an institution offering a Section 1030.5—Subsequent Disclosures 10-day grace period would have to provide (a) Change in terms. the disclosures at least 10 days prior to the (a)(1) Advance notice required. scheduled maturity date. 1. Form of notice. Institutions may provide 4. Club accounts. If consumers have agreed a change-in-term notice on or with a periodic to the transfer of payments from another ac- statement or in another mailing. If an insti- count to a club time account for the next tution provides notice through revised ac- club period, the institution must comply count disclosures, the changed term must be with the requirements for automatically re- highlighted in some manner. For example, newable time accounts—even though con- institutions may note that a particular fee sumers may withdraw funds from the club

1050 Bur. of Consumer Financial Protection Pt. 1030, Supp. I

account at the end of the current club pe- ii. The institution also provides a periodic riod. statement complying with this section for 5. Renewal of a time account. In the case of each account. a change in terms that becomes effective if a 4. Other information. Additional informa- rollover time account is subsequently re- tion that may be given on or with a periodic newed: statement includes: i. If the change is initiated by the institu- i. Interest rates and corresponding periodic tion, the disclosure requirements of this rates applied to balances during the state- paragraph apply. (Paragraph 1030.5(a) applies ment period. if the change becomes effective prior to the ii. The dollar amount of interest earned maturity of the existing time account.) year-to-date. ii. If the change is initiated by the con- iii. Bonuses paid (or any de minimis consid- sumer, the account opening disclosure re- eration of $10 or less). quirements of § 1030.4(b) apply. (If the notice required by this paragraph has been pro- iv. Fees for products such as safe deposit vided, institutions may give new account boxes. disclosures or disclosures highlighting only (a)(1) Annual percentage yield earned. the new term.) 1. Ledger and collected balances. Institutions 6. Example. If a consumer receives a pre- that accrue interest using the collected bal- maturity notice on a one-year time account ance method may use either the ledger or and requests a rollover to a six-month ac- the collected balance in determining the an- count, the institution must provide either nual percentage yield earned. account opening disclosures including the (a)(2) Amount of interest. new maturity date or, if all other terms pre- 1. Accrued interest. Institutions must state viously disclosed in the prematurity notice the amount of interest that accrued during remain the same, only the new maturity the statement period, even if it was not cred- date. ited. (b)(1) Maturities of longer than one year. 2. Terminology. In disclosing interest 1. Highlighting changed terms. Institutions earned for the period, institutions must use need not highlight terms that changed since the term ‘‘interest’’ or terminology such as: the last account disclosures were provided. i. ‘‘Interest paid,’’ to describe interest that (c) Notice before maturity for time accounts has been credited. longer than one year that do not renew auto- ii. ‘‘Interest accrued’’ or ‘‘interest earned,’’ matically. to indicate that interest is not yet credited. 1. Subsequent account. When funds are 3. Closed accounts. If consumers close an ac- transferred following maturity of a nonroll- count between crediting periods and forfeits over time account, institutions need not pro- accrued interest, the institution may not vide account disclosures unless a new ac- show any figures for interest earned or an- count is established. nual percentage yield earned for the period Section 1030.6—Periodic Statement Disclosures (other than zero, at the institution’s option). (a)(3) Fees imposed. (a) General rule. 1. General. Periodic statements must state 1. General. Institutions are not required to fees disclosed under § 1030.4(b) that were deb- provide periodic statements. If they do pro- ited to the account during the statement pe- vide statements, disclosures need only be riod, even if assessed for an earlier period. furnished to the extent applicable. For example, if no interest is earned for a state- 2. Itemizing fees by type. In itemizing fees ment period, institutions need not state that imposed more than once in the period, insti- fact. Or, institutions may disclose ‘‘$0’’ in- tutions may group fees if they are the same terest earned and ‘‘0%’’ annual percentage type. (See § 1030.11(a)(1) of this part regarding yield earned. certain fees that are required to be grouped.) 2. Regulation E interim statements. When an When fees of the same type are grouped to- institution provides regular quarterly state- gether, the description must make clear that ments, and in addition provides a monthly the dollar figure represents more than a sin- interim statement to comply with Regula- gle fee, for example, ‘‘total fees for checks tion E, the interim statement need not com- written this period.’’ Examples of fees that ply with this section unless it states interest may not be grouped together are— or rate information. (See 12 CFR 1005.9(b).) i. Monthly maintenance and excess-activ- 3. Combined statements. Institutions may ity fees. provide information about an account (such ii. ‘‘Transfer’’ fees, if different dollar as a MMDA) on the periodic statement for amounts are imposed, such as $.50 for depos- another account (such as a NOW account) its and $1.00 for withdrawals. without triggering the disclosures required iii. Fees for electronic fund transfers and by this section, as long as: fees for other services, such as balance-in- i. The information is limited to the ac- quiry or maintenance fees. count number, the type of account, or bal- iv. Fees for paying overdrafts and fees for ance information, and returning checks or other items unpaid.

1051 Pt. 1030, Supp. I 12 CFR Ch. X (1–1–12 Edition)

3. Identifying fees. Statement details must 1. Prohibited calculation methods. Calcula- enable consumers to identify the specific fee. tion methods that do not comply with the For example: requirement to pay interest on the full i. Institutions may use a code to identify a amount of principal in the account each day particular fee if the code is explained on the include: periodic statement or in documents accom- i. Paying interest on the balance in the ac- panying the statement. count at the end of the period (the ‘‘ending ii. Institutions using debit slips may dis- balance’’ method). close the date the fee was debited on the ii. Paying interest for the period based on periodic statement and show the amount and the lowest balance in the account for any type of fee on the dated debit slip. day in that period (the ‘‘low balance’’ meth- 4. Relation to Regulation E. Disclosure of od). fees in compliance with Regulation E com- iii. Paying interest on a percentage of the plies with this section for fees related to balance, excluding the amount set aside for electronic fund transfers (for example, total- reserve requirements (the ‘‘investable bal- ing all electronic funds transfer fees in a sin- ance’’ method). gle figure). 2. Use of 365-day basis. Institutions may (a)(4) Length of period. apply a daily periodic rate greater than 1/365 1. General. Institutions providing the be- of the interest rate—such as 1/360 of the in- ginning and ending dates of the period must terest rate—as long as it is applied 365 days make clear whether both dates are included a year. in the period. 3. Periodic interest payments. An institution 2. Opening or closing an account mid-cycle. If can pay interest each day on the account and an account is opened or closed during the pe- still make uniform interest payments. For riod for which a statement is sent, institu- example, for a one-year certificate of deposit tions must calculate the annual percentage an institution could make monthly interest yield earned based on account balances for payments equal to 1/12 of the amount of in- each day the account was open. terest that will be earned for a 365-day period (b) Special rule for average daily balance (or 11 uniform monthly payments—each method. equal to roughly 1/12 of the total amount of 1. Monthly statements and quarterly interest—and one payment that accounts for compounding. This rule applies, for example, the remainder of the total amount of inter- when an institution calculates interest on a est earned for the period). quarterly average daily balance and sends 4. Leap year. Institutions may apply a daily monthly statements. In this case, the first rate of 1/366 or 1/365 of the interest rate for two monthly statements would omit annual 366 days in a leap year, if the account will percentage yield earned and interest earned earn interest for February 29. figures; the third monthly statement would 5. Maturity of time accounts. Institutions reflect the interest earned and the annual are not required to pay interest after time percentage yield earned for the entire quar- accounts mature. (See 12 CFR Part 217, Reg- ter. ulation Q of the Board of Governors of the 2. Length of the period. Institutions must Federal Reserve System, for limitations on disclose the length of both the interest cal- duration of interest payments.) Examples in- culation period and the statement period. clude: For example, a statement could disclose a i. During a grace period offered for an statement period of April 16 through May 15 automatically renewable time account, if and further state that ‘‘the interest earned consumers decide during that period not to and the annual percentage yield earned are renew the account. based on your average daily balance for the ii. Following the maturity of nonrollover period April 1 through April 30.’’ time accounts. 3. Quarterly statements and monthly iii. When the maturity date falls on a holi- compounding. Institutions that use the aver- day, and consumers must wait until the next age daily balance method to calculate inter- business day to obtain the funds. est on a monthly basis and that send state- 6. Dormant accounts. Institutions must pay ments on a quarterly basis may disclose a interest on funds in an account, even if inac- single interest (and annual percentage yield tivity or the infrequency of transactions earned) figure. Alternatively, an institution would permit the institution to consider the may disclose three interest and three annual account to be ‘‘inactive’’ or ‘‘dormant’’ (or percentage yield earned figures, one for each similar status) as defined by state or other month in the quarter, as long as the institu- law or the account contract. tion states the number of days (or beginning (a)(2) Determination of minimum balance to and ending dates) in the interest period if earn interest. different from the statement period. 1. Daily balance accounts. Institutions that require a minimum balance may choose not Section 1030.7—Payment of Interest to pay interest for days when the balance (a)(1) Permissible methods. drops below the required minimum, if they

1052 Bur. of Consumer Financial Protection Pt. 1030, Supp. I

use the daily balance method to calculate in- account) prior to a scheduled crediting date, terest. institutions may delay paying the accrued 2. Average daily balance accounts. Institu- interest on the withdrawn amount until the tions that require a minimum balance may scheduled crediting date, but may not avoid choose not to pay interest for the period in paying interest. which the balance drops below the required 3. Closed accounts. Subject to state or other minimum, if they use the average daily bal- law, an institution may choose not to pay ance method to calculate interest. accrued interest if consumers close an ac- 3. Beneficial method. Institutions may not count prior to the date accrued interest is require that consumers maintain both a min- credited, as long as the institution has dis- imum daily balance and a minimum average closed that fact. daily balance to earn interest, such as by re- (c) Date interest begins to accrue. quiring consumers to maintain a $500 daily 1. Relation to Regulation CC. Institutions balance and a prescribed average daily bal- may rely on the Expedited Funds Avail- ance (whether higher or lower). But an insti- ability Act (EFAA) and Regulation CC of the tution could offer a minimum balance to Board of Governors of the Federal Reserve earn interest that includes an additional System (12 CFR part 229) to determine, for method that is ‘‘unequivocally beneficial’’ to example, when a deposit is considered made consumers such as the following: An institu- for purposes of interest accrual, or when in- tion using the daily balance method to cal- terest need not be paid on funds because a culate interest and requiring a $500 min- deposited check is later returned unpaid. imum daily balance could offer to pay inter- 2. Ledger and collected balances. Institutions est on the account for those days the min- may calculate interest by using a ‘‘ledger’’ imum balance is not met as long as con- or ‘‘collected’’ balance method, as long as sumers maintain an average daily balance the crediting requirements of the EFAA are throughout the month of $400. met (12 CFR 229.14). 4. Paying on full balance. Institutions must 3. Withdrawal of principal. Institutions pay interest on the full balance in the ac- must accrue interest on funds until the funds count that meets the required minimum bal- are withdrawn from the account. For exam- ance. For example, if $300 is the minimum ple, if a check is debited to an account on a daily balance required to earn interest, and a Tuesday, the institution must accrue inter- consumer deposits $500, the institution must est on those funds through Monday. pay the stated interest rate on the full $500 and not just on $200. Section 1030.8—Advertising 5. Negative balances prohibited. Institutions (a) Misleading or inaccurate advertisements. must treat a negative account balance as 1. General. All advertisements are subject zero to determine: to the rule against misleading or inaccurate i. The daily or average daily balance on advertisements, even though the disclosures which interest will be paid. applicable to various media differ. ii. Whether any minimum balance to earn 2. Indoor signs. An indoor sign advertising interest is met. an annual percentage yield is not misleading 6. Club accounts. Institutions offering club or inaccurate when: accounts (such as a ‘‘holiday’’ or ‘‘vacation’’ i. For a tiered-rate account, it also pro- club) cannot impose a minimum balance re- vides the lower dollar amount of the tier cor- quirement for interest based on the total responding to the advertised annual percent- number or dollar amount of payments re- age yield. quired under the club plan. For example, if a ii. For a time account, it also provides the plan calls for $10 weekly payments for 50 term required to obtain the advertised an- weeks, the institution cannot set a $500 nual percentage yield. ‘‘minimum balance’’ and then pay interest 3. Fees affecting ‘‘free’’ accounts. For pur- only if the consumer has made all 50 pay- poses of determining whether an account can ments. be advertised as ‘‘free’’ or ‘‘no cost,’’ mainte- 7. Minimum balances not affecting interest. nance and activity fees include: Institutions may use the daily balance, aver- i. Any fee imposed when a minimum bal- age daily balance, or any other computation ance requirement is not met, or when con- method to calculate minimum balance re- sumers exceed a specified number of trans- quirements not involving the payment of in- actions. terest—such as to compute minimum bal- ii. Transaction and service fees that con- ances for assessing fees. sumers reasonably expect to be imposed on a (b) Compounding and crediting policies. regular basis. 1. General. Institutions choosing to com- iii. A flat fee, such as a monthly service pound interest may compound or credit in- fee. terest annually, semi-annually, quarterly, iv. Fees imposed to deposit, withdraw, or monthly, daily, continuously, or on any transfer funds, including per-check or per- other basis. transaction charges (for example, $.25 for 2. Withdrawals prior to crediting date. If con- each withdrawal, whether by check or in per- sumers withdraw funds (without closing the son).

1053 Pt. 1030, Supp. I 12 CFR Ch. X (1–1–12 Edition)

4. Other fees. Examples of fees that are not not to honor checks or authorize trans- maintenance or activity fees include: actions. i. Fees not required to be disclosed under iii. Representing that consumers with an § 1030.4(b)(4). overdrawn account are allowed to maintain a ii. Check printing fees. negative balance when the terms of the ac- iii. Balance inquiry fees. count’s overdraft service require consumers iv. Stop-payment fees and fees associated promptly to return the deposit account to a with checks returned unpaid. positive balance. v. Fees assessed against a dormant ac- iv. Describing an institution’s overdraft count. service solely as protection against bounced vi. Fees for ATM or electronic transfer checks when the institution also permits services (such as preauthorized transfers or overdrafts for a fee for overdrawing their ac- home banking services) not required to ob- counts by other means, such as ATM with- tain an account. drawals, debit card transactions, or other 5. Similar terms. An advertisement may not electronic fund transfers. use the term ‘‘fees waived’’ if a maintenance v. Advertising an account-related service or activity fee may be imposed because it is for which the institution charges a fee in an similar to the terms ‘‘free’’ or ‘‘no cost.’’ advertisement that also uses the word ‘‘free’’ 6. Specific account services. Institutions may or ‘‘no cost’’ (or a similar term) to describe advertise a specific account service or fea- the account, unless the advertisement clear- ture as free if no fee is imposed for that serv- ly and conspicuously indicates that there is ice or feature. For example, institutions of- a cost associated with the service. If the fee fering an account that is free of deposit or is a maintenance or activity fee under withdrawal fees could advertise that fact, as § 1030.8(a)(2) of this part, however, an adver- long as the advertisement does not mislead tisement may not describe the account as consumers by implying that the account is ‘‘free’’ or ‘‘no cost’’ (or contain a similar free and that no other fee (a monthly service term) even if the fee is disclosed in the ad- fee, for example) may be charged. vertisement. 7. Free for limited time. If an account (or a 11. Additional disclosures in connection with specific account service) is free only for a the payment of overdrafts. The rule in limited period of time—for example, for one § 1030.3(a), providing that disclosures re- year following the account opening—the acquired by § 1030.8 may be provided to the con- count (or service) may be advertised as free sumer in electronic form without regard to if the time period is also stated. E-Sign Act requirements, applies to the dis- 8. Conditions not related to deposit accounts. closures described in § 1030.11(b), which are Institutions may advertise accounts as incorporated by reference in § 1030.8(f). ‘‘free’’ for consumers meeting conditions not (b) Permissible rates. related to deposit accounts, such as the con- 1. Tiered-rate accounts. An advertisement sumer’s age. For example, institutions may for a tiered-rate account that states an an- advertise a NOW account as ‘‘free for persons nual percentage yield must also state the an- over 65 years old,’’ even though a mainte- nual percentage yield for each tier, along nance or activity fee is assessed on accounts with corresponding minimum balance re- held by consumers 65 or younger. quirements. Any interest rates stated must 9. Electronic advertising. If an electronic ad- appear in conjunction with the applicable vertisement (such as an advertisement ap- annual percentage yields for each tier. pearing on an Internet Web site) displays a 2. Stepped-rate accounts. An advertisement triggering term (such as a bonus or annual that states an interest rate for a stepped- percentage yield) the advertisement must rate account must state all the interest clearly refer the consumer to the location rates and the time period that each rate is in where the additional required information effect. begins. For example, an advertisement that 3. Representative examples. An advertise- includes a bonus or annual percentage yield ment that states an annual percentage yield may be accompanied by a link that directly for a given type of account (such as a time takes the consumer to the additional infor- account for a specified term) need not state mation. the annual percentage yield applicable to 10. Examples. Examples of advertisements other time accounts offered by the institu- that would ordinarily be misleading, inac- tion or indicate that other maturity terms curate, or misrepresent the deposit contract are available. In an advertisement stating are: that rates for an account may vary depend- i. Representing an overdraft service as a ing on the amount of the initial deposit or ‘‘line of credit,’’ unless the service is subject the term of a time account, institutions need to Regulation Z, 12 CFR part 1026. not list each balance level and term offered. ii. Representing that the institution will Instead, the advertisement may: honor all checks or authorize payment of all i. Provide a representative example of the transactions that overdraw an account, with annual percentage yields offered, clearly de- or without a specified dollar limit, when the scribed as such. For example, if an institu- institution retains discretion at any time tion offers a $25 bonus on all time accounts

1054 Bur. of Consumer Financial Protection Pt. 1030, Supp. I

and the annual percentage yield will vary de- a disclosure accurately describes the account pending on the term selected, the institution terms. may provide a disclosure of the annual per- (d) Bonuses. centage yield as follows: ‘‘For example, our 1. General reference to ‘‘bonus.’’ General 6-month certificate of deposit currently pays statements such as ‘‘bonus checking’’ or a 3.15% annual percentage yield.’’ ‘‘get a bonus when you open a checking ac- ii. Indicate that various rates are avail- count’’ do not trigger the bonus disclosures. able, such as by stating short-term and longer-term maturities along with the appli- (e) Exemption for certain advertisements. cable annual percentage yields: ‘‘We offer (e)(1) Certain media. certificates of deposit with annual percent- Paragraph (e)(1)(i). age yields that depend on the maturity you 1. Internet advertisements. The exemption choose. For example, our one-month CD for advertisements made through broadcast earns a 2.75% APY. Or, earn a 5.25% APY for or electronic media does not extend to adver- a three-year CD.’’ tisements posted on the Internet or sent by (c) When additional disclosures are required. email. 1. Trigger terms. The following are examples Paragraph (e)(1)(iii). of information stated in advertisements that 1. Tiered-rate accounts. Solicitations for a are not ‘‘trigger’’ terms: tiered-rate account made through telephone i. ‘‘One, three, and five year CDs available.’’ response machines must provide the annual ii. ‘‘Bonus rates available.’’ percentage yields and the balance require- iii. ‘‘1% over our current rates,’’ so long as ments applicable to each tier. the rates are not determinable from the ad- (e)(2) Indoor signs. vertisement. Paragraph (e)(2)(i). (c)(2) Time annual percentage yield is offered. 1. General. Indoor signs include advertise- 1. Specified date. If an advertisement dis- ments displayed on computer screens, ban- closes an annual percentage yield as of a ners, preprinted posters, and chalk or peg specified date, that date must be recent in boards. Any advertisement inside the prem- relation to the publication or broadcast fre- ises that can be retained by a consumer quency of the media used, taking into ac- (such as a brochure or a printout from a count the particular circumstances or pro- computer) is not an indoor sign. duction deadlines involved. For example, the printing date of a brochure printed once for Section 1030.9—Enforcement and Record a deposit account promotion that will be in Retention effect for six months would be considered ‘‘recent,’’ even though rates change during (c) Record retention. the six-month period. Rates published in a 1. Evidence of required actions. Institutions daily newspaper or on television must reflect comply with the regulation by dem- rates offered shortly before (or on) the date onstrating that they have done the fol- the rates are published or broadcast. lowing: 2. Reference to date of publication. An adver- i. Established and maintained procedures tisement may refer to the annual percentage for paying interest and providing timely dis- yield as being accurate as of the date of pub- closures as required by the regulation, and lication, if the date is on the publication ii. Retained sample disclosures for each itself. For instance, an advertisement in a type of account offered to consumers, such periodical may state that a rate is ‘‘current through the date of this issue,’’ if the peri- as account-opening disclosures, copies of ad- odical shows the date. vertisements, and change-in-term notices; (c)(5) Effect of fees. and information regarding the interest rates 1. Scope. This requirement applies only to and annual percentage yields offered. maintenance or activity fees described in 2. Methods of retaining evidence. Institu- comment 8(a). tions must be able to reconstruct the re- (c)(6) Features of time accounts. quired disclosures or other actions. They (c)(6)(i) Time requirements. need not keep disclosures or other business 1. Club accounts. If a club account has a records in hard copy. Records evidencing maturity date but the term may vary de- compliance may be retained on microfilm, pending on when the account is opened, in- microfiche, or by other methods that repro- stitutions may use a phrase such as: ‘‘The duce records accurately (including computer maturity date of this club account is Novem- files). ber 15; its term varies depending on when the 3. Payment of interest. Institutions must re- account is opened.’’ tain sufficient rate and balance information (c)(6)(ii) Early withdrawal penalties. 1. Discretionary penalties. Institutions im- to permit the verification of interest paid on posing early withdrawal penalties on a case- an account, including the payment of inter- by-case basis may disclose that they ‘‘may’’ est on the full principal balance. (rather than ‘‘will’’) impose a penalty if such

1055 Pt. 1030, Supp. I 12 CFR Ch. X (1–1–12 Edition)

Section 1030.10 [Reserved] ment period, because the fee was not assessed in the February statement period. If Section 1030.11—Additional Disclosures an institution assesses and then waives and Regarding the Payment of Overdrafts credits a fee within the same cycle, the insti- (a) Disclosure of total fees on periodic state- tution may, at its option, reflect the adjustments. ment in the total disclosed for fees imposed (a)(1) General. during the current statement period and for 1. Transfer services. The overdraft services the total for the calendar year-to-date. Thus, covered by § 1030.11(a)(1) of this part do not if the institution assesses and waives the fee include a service providing for the transfer of in the February statement period, the Feb- funds from another deposit account of the ruary fee total could reflect a total net of consumer to permit the payment of items the waived fee. without creating an overdraft, even if a fee is 5. Totals for the calendar year to date. Some charged for the transfer. institutions’ statement periods do not coin- 2. Fees for paying overdrafts. Institutions cide with the calendar month. In such cases, must disclose on periodic statements a total the institution may disclose a calendar year- dollar amount for all fees or charges imposed to-date total by aggregating fees for 12 on the account for paying overdrafts. The in- monthly cycles, starting with the period stitution must disclose separate totals for that begins during January and finishing the statement period and for the calendar with the period that begins during Decem- year-to-date. The total dollar amount for ber. For example, if statement periods begin each of these periods includes per-item fees on the 10th day of each month, the state- as well as interest charges, daily or other ment covering December 10, 2006 through periodic fees, or fees charged for maintaining January 9, 2007 may disclose the year-to-date an account in overdraft status, whether the total for fees imposed from January 10, 2006 overdraft is by check, debit card transaction, through January 9, 2007. Alternatively, the or by any other transaction type. It also in- institution could provide a statement for the cludes fees charged when there are insuffi- cycle ending January 9, 2007 showing the cient funds because previously deposited year-to-date total for fees imposed January funds are subject to a hold or are uncol- 1, 2006 through December 31, 2006. lected. It does not include fees for transfer- 6. Itemization of fees. An institution may ring funds from another account of the con- itemize each fee in addition to providing the sumer to avoid an overdraft, or fees charged disclosures required by § 1030.11(a)(1) of this under a service subject to Regulation Z (12 part. CFR part 1026). See also comment 11(c)–2. (a)(3) Format requirements. Under § 1030.11(a)(1)(i), the disclosure must 1. Time period covered by periodic statement describe the total dollar amount for all fees disclosures. The disclosures under § 1030.11(a) or charges imposed on the account for the must be included on periodic statements pro- statement period and calendar year-to-date vided by an institution starting the first for paying overdrafts using the term ‘‘Total statement period that begins after January Overdraft Fees.’’ This requirement applies 1, 2010. For example, if a consumer’s state- notwithstanding comment 3(a)–2. ment period typically closes on the 15th of 3. Fees for returning items unpaid. The total each month, an institution must provide the dollar amount for all fees for returning items disclosures required by § 1030.11(a)(1) on sub- unpaid must include all fees charged to the sequent periodic statements for that con- account for dishonoring or returning checks sumer beginning with the statement reflect- or other items drawn on the account. The in- ing the period from January 16, 2010 to Feb- stitution must disclose separate totals for ruary 15, 2010. the statement period and for the calendar (b) Advertising disclosures for overdraft serv- year-to-date. Fees imposed when deposited ices. items are returned are not included. Institu- 1. Examples of institutions promoting the pay- tions may use terminology such as ‘‘returned ment of overdrafts. A depository institution item fee’’ or ‘‘NSF fee’’ to describe fees for would be required to include the advertising returning items unpaid. disclosures in § 1030.11(b)(1) of this part if the 4. Waived fees. In some cases, an institution institution: may provide a statement for the current pe- i. Promotes the institution’s policy or riod reflecting that fees imposed during a practice of paying overdrafts (unless the previous period were waived and credited to service would be subject to Regulation Z (12 the account. Institutions may, but are not CFR part 1026)). This includes advertise- required to, reflect the adjustment in the ments using print media such as newspapers total for the calendar year-to-date and in the or brochures, telephone solicitations, elec- applicable statement period. For example, if tronic mail, or messages posted on an Inter- an institution assesses a fee in January and net site. (But see § 1030.11(b)(2) of this part refunds the fee in February, the institution for communications that are not subject to could disclose a year-to-date total reflecting the additional advertising disclosures.) the amount credited, but it should not affect ii. Includes a message on a periodic state- the total disclosed for the February statement informing the consumer of an overdraft

1056 Bur. of Consumer Financial Protection Pt. 1030, Supp. I

limit or the amount of funds available for we typically do not pay overdrafts if your ac- overdrafts. For example, an institution that count is not in good standing, or you are not includes a message on a periodic statement making regular deposits, or you have too informing the consumer of a $500 overdraft many overdrafts.’’ limit or that the consumer has $300 remain- 8. Advertising an account as ‘‘free.’’ If the ing on the overdraft limit, is promoting an advertised account-related service is an overdraft service. overdraft service subject to the requirements iii. Discloses an overdraft limit or includes of § 1030.11(b)(1) of this part, institutions the dollar amount of an overdraft limit in a must disclose the fee or fees for the payment balance disclosed on an automated system, of each overdraft, not merely that a cost is such as a telephone response machine, ATM associated with the overdraft service, as well screen or the institution’s Internet site. as other required information. Compliance (See, however, § 1030.11(b)(3) of this part.) with comment 8(a)–10.v. is not sufficient. 2. Transfer services. The overdraft services (c) Disclosure of account balances. covered by § 1030.11(b)(1) of this part do not 1. Balance that does not include additional include a service providing for the transfer of amounts. For purposes of the balance disclo- funds from another deposit account of the sure requirement in § 1030.11(c), if an institu- consumer to permit the payment of items tion discloses balance information to a con- without creating an overdraft, even if a fee is sumer through an automated system, it charged for the transfer. 3. Electronic media. The exception for adver- must disclose a balance that excludes any tisements made through broadcast or elec- funds that the institution may provide to tronic media, such as television or radio, cover an overdraft pursuant to a discre- does not apply to advertisements posted on tionary overdraft service, that will be paid an institution’s Internet site, on an ATM by the institution under a service subject to screen, provided on telephone response ma- Regulation Z (12 CFR Part 1026), or that will chines, or sent by electronic mail. be transferred from another account held in- 4. Fees. The fees that must be disclosed dividually or jointly by a consumer. The bal- under § 1030.11(b)(1) of this part include per- ance may, but need not, include funds that item fees as well as interest charges, daily or are deposited in the consumer’s account, other periodic fees, and fees charged for such as from a check, that are not yet made maintaining an account in overdraft status, available for withdrawal in accordance with whether the overdraft is by check or by the funds availability rules under Regulation other means. The fees also include fees CC of the Board of Governors of the Federal charged when there are insufficient funds be- Reserve System (12 CFR part 229). In addi- cause previously deposited funds are subject tion, the balance may, but need not, include to a hold or are uncollected. The fees do not funds that are held by the institution to sat- include fees for transferring funds from an- isfy a prior obligation of the consumer (for other account to avoid an overdraft, or fees example, to cover a hold for an ATM or debit charged when the institution has previously card transaction that has been authorized agreed in writing to pay items that overdraw but for which the bank has not settled). the account and the service is subject to 2. Retail sweep programs. In a retail sweep Regulation Z, 12 CFR Part 1026. program, an institution establishes two le- 5. Categories of transactions. An exhaustive gally distinct subaccounts, a transaction list of transactions is not required. Dis- subaccount and a savings subaccount, which closing that a fee may be imposed for cov- together make up the consumer’s account. ering overdrafts ‘‘created by check, in-person The institution allocates and transfers funds withdrawal, ATM withdrawal, or other elec- between the two subaccounts in order to tronic means’’ would satisfy the require- maximize the balance in the savings account ments of § 1030.11(b)(1)(ii) of this part where while complying with the monthly limita- the fee may be imposed in these cir- tions on transfers out of savings accounts cumstances. See comment 4(b)(4)–5 of this under Regulation D of the Board of Gov- part. ernors of the Federal Reserve System (12 6. Time period to repay. If a depository insti- CFR 204.2(d)(2)). Retail sweep programs are tution reserves the right to require a con- generally not established for the purpose of sumer to pay an overdraft immediately or on covering overdrafts. Rather, institutions demand instead of affording consumers a typically establish retail sweep programs by specific time period to establish a positive agreement with the consumer, in order for balance in the account, an institution may the institution to minimize its transaction comply with § 1030.11(b)(1)(iii) of this part by account reserve requirements and, in some disclosing this fact. cases, to provide a higher interest rate than 7. Circumstances for nonpayment. An institu- the consumer would earn on a transaction tion must describe the circumstances under account alone. Section 1030.11(c) does not re- which it will not pay an overdraft. It is suffi- quire an institution to exclude from the con- cient to state, as applicable: ‘‘Whether your sumer’s balance funds that may be trans- overdrafts will be paid is discretionary and ferred from another account pursuant to a we reserve the right not to pay. For example, retail sweep program that is established for

1057 Pt. 1030, Supp. I 12 CFR Ch. X (1–1–12 Edition)

such purposes and that has the following tained at an ATM, the requirement also ap- characteristics: plies whether the balance is disclosed on the i. The account involved complies with Reg- ATM screen or on a paper receipt. ulation D of the Board of Governors of the Federal Reserve System (12 CFR 204.2(d)(2)); APPENDIX A TO PART 1030—ANNUAL ii. The consumer does not have direct ac- PERCENTAGE YIELD CALCULATION cess to the non-transaction subaccount that is part of the retail sweep program; and PART I. ANNUAL PERCENTAGE YIELD FOR AC- iii. The consumer’s periodic statements COUNT DISCLOSURES AND ADVERTISING PUR- show the account balance as the combined POSES balance in the subaccounts. 1. Rounding for calculations. The following 3. Additional balance. The institution may are examples of permissible rounding for cal- disclose additional balances supplemented by culating interest and the annual percentage funds that may be provided by the institu- yield: tion to cover an overdraft, whether pursuant i. The daily rate applied to a balance car- to a discretionary overdraft service, a serv- ried to five or more decimal places ice subject to Regulation Z (12 CFR Part ii. The daily interest earned carried to five 1026), or a service that transfers funds from or more decimal places another account held individually or jointly by the consumer, so long as the institution PART II. ANNUAL PERCENTAGE YIELD EARNED prominently states that any additional bal- FOR PERIODIC STATEMENTS ance includes these additional overdraft 1. Balance method. The interest figure used amounts. The institution may not simply in the calculation of the annual percentage state, for instance, that the second balance yield earned may be derived from the daily is the consumer’s ‘‘available balance,’’ or balance method or the average daily balance contains ‘‘available funds.’’ Rather, the in- method. The balance used in the formula for stitution should provide enough information the annual percentage yield earned is the to convey that the second balance includes sum of the balances for each day in the pe- these amounts. For example, the institution may state that the balance includes ‘‘over- riod divided by the number of days in the pe- draft funds.’’ Where a consumer has not riod. opted into, or as applicable, has opted out of 2. Negative balances prohibited. Institutions the institution’s discretionary overdraft must treat a negative account balance as service, any additional balance disclosed zero to determine the balance on which the should not include funds that otherwise annual percentage yield earned is calculated. might be available under that service. Where (See commentary to § 1030.7(a)(2).) a consumer has not opted into, or as applica- A. General Formula ble, has opted out of, the institution’s discretionary overdraft service for some, but not 1. Accrued but uncredited interest. To cal- all transactions (e.g. , the consumer has not culate the annual percentage yield earned, opted into overdraft services for ATM and accrued but uncredited interest: one-time debit card transactions), an institu- i. May not be included in the balance for tion that includes these additional overdraft statements issued at the same time or less funds in the second balance should convey frequently than the account’s compounding that the overdraft funds are not available for and crediting frequency. For example, if all transactions. For example, the institu- monthly statements are sent for an account tion could state that overdraft funds are not that compounds interest daily and credits in- available for ATM and one-time (or every- terest monthly, the balance may not be in- day) debit card transactions. Similarly, if creased each day to reflect the effect of daily funds are not available for all transactions compounding. pursuant to a service subject to Regulation Z ii. Must be included in the balance for suc- (12 CFR part 1026) or a service that transfers ceeding statements if a statement is issued funds from another account, a second bal- more frequently than compounded interest is ance that includes such funds should also in- credited on an account. For example, if dicate this fact. monthly statements are sent for an account 4. Automated systems. The balance disclo- that compounds interest daily and credits in- sure requirement in § 1030.11(c) applies to any terest quarterly, the balance for the second automated system through which the con- monthly statement would include interest sumer requests a balance, including, but not that had accrued for the prior month. limited to, a telephone response system, the 2. Rounding. The interest earned figure institution’s Internet site, or an ATM. The used to calculate the annual percentage requirement applies whether the institution yield earned must be rounded to two deci- discloses a balance through an ATM owned mals and reflect the amount actually paid. or operated by the institution or through an For example, if the interest earned for a ATM not owned or operated by the institu- statement period is $20.074 and the institution (including an ATM operated by a non- tion pays the consumer $20.07, the institu- depository institution). If the balance is ob- tion must use $20.07 (not $20.074) to calculate

1058 Bur. of Consumer Financial Protection Pt. 1070

the annual percentage yield earned. For ac- should consult Appendix A to Regulation E counts paying interest based on the daily for appropriate model clauses. balance method that compound and credit 5. Duplicate disclosures. If a requirement interest quarterly, and send monthly state- such as a minimum balance applies to more ments, the institution may, but need not, than one account term (to obtain a bonus round accrued interest to two decimals for and determine the annual percentage yield, calculating the annual percentage yield for example), institutions need not repeat earned on the first two monthly statements the requirement for each term, as long as it issued during the quarter. However, on the is clear which terms the requirement applies quarterly statement the interest earned fig- to. ure must reflect the amount actually paid. 6. Sample forms. The sample forms (B–4 through B–8) serve a purpose different from B. Special Formula for Use Where Periodic the model clauses. They illustrate ways of Statement Is Sent More Often Than the Pe- adapting the model clauses to specific ac- riod for Which Interest Is Compounded counts. The clauses shown relate only to the specific transactions described. 1. Statements triggered by Regulation E. In- stitutions may, but need not, use this for- B–1 MODEL CLAUSES FOR ACCOUNT mula to calculate the annual percentage DISCLOSURES yield earned for accounts that receive quarterly statements and are subject to Regula- B–1(h) Disclosures Relating to Time Accounts tion E’s rule calling for monthly statements 1. Maturity. The disclosure in Clause (h)(i) when an electronic fund transfer has oc- stating a specific date may be used in all curred. They may do so even though no cases. The statement describing a time pe- monthly statement was issued during a spe- riod is appropriate only when providing dis- cific quarter. But institutions must use this closures in response to a consumer’s request. formula for accounts that compound and credit interest quarterly and receive month- B–2 MODEL CLAUSES FOR CHANGE IN TERMS ly statements that, while triggered by Regu- lation E, comply with the provisions of 1. General. The second clause, describing a § 1030.6. future decrease in the interest rate and annual percentage yield, applies to fixed-rate 2. Days in compounding period. Institutions accounts only. using the special annual percentage yield earned formula must use the actual number B–4 SAMPLE FORM (MULTIPLE ACCOUNTS) of days in the compounding period. 1. Rate sheet insert. In the rate sheet insert, APPENDIX B TO PART 1030—MODEL CLAUSES the calculations of the annual percentage AND SAMPLE FORMS yield for the three-month and six-month certificates are based on 92 days and 181 days re- 1. Modifications. Institutions that modify spectively. All calculations in the insert as- the model clauses will be deemed in compli- sume daily compounding. ance as long as they do not delete required information or rearrange the format in a B–6 SAMPLE FORM (TIERED-RATE MONEY way that affects the substance or clarity of MARKET ACCOUNT) the disclosures. 1. General. Sample Form B–6 uses Tiering 2. Format. Institutions may use inserts to a Method A (discussed in Appendix A and document (see Sample Form B–4) or fill-in Clause (a)(iv)) to calculate interest. It gives blanks (see Sample Forms B–5, B–6 and B–7, a narrative description of a tiered-rate ac- which use underlining to indicate terms that count; institutions may use different for- have been filled in) to show current rates, mats (for example, a chart similar to the one fees, or other terms. in Sample Form B–4), as long as all required 3. Disclosures for opening accounts. The sam- information for each tier is clearly pre- ple forms illustrate the information that sented. The form does not contain a separate must be provided to consumers when an ac- disclosure of the minimum balance required count is opened, as required by § 1030.4(a)(1). to obtain the annual percentage yield; the (See § 1030.4(a)(2), which states the require- tiered-rate disclosure provides that informa- ments for disclosing the annual percentage tion. yield, the interest rate, and the maturity of a time account in responding to a consumer’s request.) PART 1070—DISCLOSURE OF 4. Compliance with Regulation E. Institu- RECORDS AND INFORMATION tions may satisfy certain requirements under Regulation DD with disclosures that Subpart A—General Provisions and meet the requirements of Regulation E. (See Definitions § 1030.3(c).) For disclosures covered by both this part and Regulation E (such as the Sec. amount of fees for ATM usage, institutions 1070.1 Authority, purpose, and scope.

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