Section 1 – Truth in Savings/Ncua Part 707

SECTION 1 – TRUTH IN SAVINGS/NCUA PART 707

Overview Coverage Credit unions are required to disclose to members fees, dividend and inter- Authority est rates, and other terms in connection with an account before an account is The Truth In Savings Act of 1991 opened, upon request, on periodic state- (TISA) was enacted in December 1991. ments, and upon subsequent events. The statute directed the Federal Reserve TISA also establishes rules for pay- Board (FRB) to implement regulations ment of dividends or interest and adver- for all depository institutions except tising rules for deposit accounts. credit unions. It also directed the National Credit Union Administration (NCUA) to issue regulations for state- NCUA Staff Commentary chartered and federally chartered credit On November 8, 1994, NCUA unions “substantially similar” to the issued its Official Staff Interpretation FRB Regulation DD (Reg. DD), taking (Commentary) to the Truth In Savings into account the unique nature of credit Rule (Part 707) incorporating much of unions and the limitations under which the Supplementary information issued they may pay dividends on member with Part 707 and addressing additional accounts. compliance questions. Good-faith compliance with NCUA’s Purpose commentary affords credit unions pro- tections from civil liability penalties. TISA is basically a disclosure law, the purpose of which is to enable consumers (credit union members and potential Credit unions members) to make meaningful compari- NCUA’s regulation applies to all sons of deposit accounts among deposi- federal and state‑chartered credit tory institutions. unions whether federally or privately Truth In Savings imposes special insured, except corporate credit unions. disclosure requirements at five differ- (Regulation DD does not directly apply ent points in the life cycle of a deposit to credit unions.) account: 1) preaccount opening, 2) account opening, 3) periodic state- Covered accounts ments, 4) changes in account terms and account maturity, and 5) advertising. The following are covered accounts: • Traditional accounts such as: share, share draft, checking, and time deposits.

• Dividend-bearing and nondividend- • Accounts of natural persons who, in bearing accounts. their professional capacity, hold the account for another (for example, • Insured and uninsured accounts (for attorney-client trust accounts and example, a jumbo certificate account trust accounts opened by a trustee as in excess of $100,000). a result of a formal written trust agree- • IRA accounts. ment).

• Uniform Gifts to Minors Act (UGMA) • Nondeposit type accounts, such as or Uniform Transfers to Minors Act mortgage escrow accounts, construc- (UTTMA) accounts. tion loan accounts, discount brokerage accounts, and overdraft line of credit • Accounts held by deposit brokers (only accounts. for purposes of advertising rules). Members and potential members Accounts not covered by TISA NCUA defines account coverage The rule does not cover the following for members by a consumer vs. busi- accounts: ness purpose account distinction. • Accounts held by an unincorporated The term member under the final rule nonbusiness association of natural per- includes the following persons holding sons (club or organization accounts). an account primarily for personal, fam- Originally, NCUA had included club ily, or household (consumer) purposes: accounts opened after the effective (1) natural person (individual) members date as accounts covered by Truth In who hold a consumer purpose account, Savings. and (2) a natural person nonmember (individual joint owner). Members hold- • In the Riegle Community Development ing an account for a purpose other than and Regulatory Improvement Act of primarily for personal, family, or house- 1994, Congress amended TISA to hold (consumer) purposes and members exempt unincorporated association holding an account for another in a pro- accounts. fessional capacity would not be covered. Note: While club accounts are not For example, members holding covered, credit unions may find it accounts for corporations, partnerships easier to treat these accounts as cov- and, sole proprietorships or other busi- ered accounts rather than maintain- ness purposes would not be covered. ing two different procedures, one for Similarly, attorney-client trust accounts club accounts and another for all other and certain trust, estate, and court- accounts. ordered accounts would not be covered. • Sole proprietorship accounts because The term potential member is impor- such accounts are held for a business tant as the credit union must give cer- purpose. tain disclosures to “potential members.” The term includes a natural person with-

in the credit union’s field of membership and quarterly). For some certificate or one eligible to become a member. accounts, the dividend period may be at Note: Similar to the coverage issues maturity. Credit union dividends are not for “accounts,” credit unions may also guaranteed. consider treating all members as cov- Note: In the commentary, NCUA ered members including members with makes the distinction between divi- business accounts. Again, compliance dend- and interest-bearing accounts by is easier with one set of account proce- emphasizing that federal credit unions dures. are only permitted to offer dividend- bearing accounts and only certain state-chartered credit unions may offer Rules Affecting Credit interest-bearing accounts. Union Accounts Interest-bearing accounts The nature of dividends In some states state-chartered credit One of the key differences between unions are permitted to offer interest- the Truth In Savings rules for banks and bearing accounts pursuant to state law; credit unions is the unique limitation on thus, the rule includes rules for pay- credit unions’ payment of dividends. ment of interest. (Check with your state Credit union dividends comprise the League to determine whether your state portion of available current and undivid- allows state-chartered credit unions to ed earnings of the credit union, which, offer interest-bearing accounts.) The by declaration of the board of directors, term interest means any payment to a is set aside for distribution to members member or to a member’s account for after required transfers to reserves. use of funds in the account of a state- Dividends cannot be guaranteed and chartered credit union under state law. members have no right to a dividend, For purposes of the rule, the term “inter- even on share certificates, unless avail- est” is generally substituted for the term able earnings exist and dividends are, in “dividends.” Like the term “dividends,” fact, declared for such accounts. “interest” excludes bonuses and similar The term dividends means any incentives. declared or prospective earnings on a member’s shares in a credit union to Rules governing be paid to a member or a member’s account terminology account. The term excludes bonuses, extraordinary dividends, and similar TISA requires the use of certain incentives. The dividend period is the basic account terminology to achieve time period, set by the credit union meaningful and uniform understand- board, at the end of which dividends are ing of accounts. In addition to the TISA earned and credited. The dividend peri- required terms, NCUA has imposed od may be different for different types of additional account terminology require- accounts (for example, weekly, monthly, ments.

Required TISA terms — dividend rate, • The term Annual Percentage Yield APY, and APYE (APY) means the percentage rate TISA requires the disclosure of an reflecting the total amount of divi- accurate reflection of the effective rate dends paid on an account based on of interest. This effective rate of inter- the dividend rate and the frequency of est is known as the “annual percentage compounding for a 365‑day period for yield” (APY) which is designed to permit share and share draft accounts or for a true comparison of deposit products the term of the account for term share among institutions. Credit unions are accounts. The APY assumes the princi- required to disclose earnings through pal amount remains in the account for the use of the terms: “dividend rate,” 365 days or the term of the account. “annual percentage yield,” and “annual Appendix A to the NCUA Rule sets percentage yield earned.” The APY dis- forth detailed computation specifica- closure is one of the most important fea- tions. tures of TISA and is required in the oral • The term Annual Percentage Yield rate disclosures, account disclosures, Earned (APYE) reflects the total renewal notices, and advertising. amount of dividends actually earned • The term dividend rate means the for the dividend or statement period as declared or prospective annual divi- a percent of the actual average daily dend rate paid on an account without balance in the account. The APYE is regard to compounding. “Prospective affected by additions and withdrawals rates” are rates set in good faith in during the period and is required for advance of the close of a dividend periodic statements only. The APYE period, which may be altered if suf- is calculated according to the formula ficient funds are not available or in provided in Appendix A to the NCUA the event of a superseding event such Rule. as a strike, plant closure, significant fluctuation in market rates and/or sig- Permissible account terms nificant change in financial structure, Credit unions are permitted to use the natural disaster, or emergency that following terms to describe accounts: alters the assumptions under which the “prospective rates” were made. • “Checking Account” for share draft The dividend rate used for account accounts disclosures and advertising is to be • “Money Market Account” for money rounded to the nearest basis point market share accounts (.01 percent) and disclosed to two decimal places (for example, 4.55%). • “Savings Account” for regular share or Bonuses (and similar incentives, such share accounts as the waiver or reduction of fees and • “Share Certificate,” “Certificate items worth less than $10 in a calen- Account,” or “Certificate” for share dar year) are excluded from dividends certificate accounts or dividend-bear- and in calculating the dividend rate. ing term share accounts

Prohibited account terms than a “low” daily balance would be Federal credit unions are prohibited used. Under the average daily balance from describing a Certificate Account method the credit union adds the full with terms such as “Certificate of amount of principal in the account each Deposit,” “CD,” “time account,” day of the period, divides that figure by and “time deposit.” Similarly, state- the number of days in the period, and chartered credit unions may not use applies a periodic rate to the result. such terms to describe dividend- 2. Dividend nonpayment rules. There bearing certificate accounts. However, are certain instances when credit unions state-chartered credit unions that can are not required to pay dividends. They offer interest-bearing accounts can use would not be required to pay dividends such terms for interest-bearing certifi- on term share accounts (term share/ cate accounts. share certificates) during the grace period of a rollover term share account, Rules affecting account earnings after maturity of a nonrollover term share account, or for the time period during The TISA rule contains five categories which checks are returned unpaid. Credit of substantive provisions governing the unions also have the option of not paying computation and disclosure of account accrued dividends if a member closes earnings: (1) balance computation rules, an account before those dividends are (2) dividend nonpayment rules, (3) divi- paid. However, this policy must be in the dend accrual rules, (4) compounding account disclosures. Be sure to check and crediting; and (5) minimum balance for any state law concerning accrued rules. dividends and closed accounts as well as 1. Balance computation rules. As a gen- any bylaws outlining when an account is eral rule, credit unions must calculate considered closed. dividends/interest “on the full amount of Dividends must continue to be principal in the account for each day of paid on dormant or inactive accounts. the stated calculation period.” NCUA’s If a credit union accrues dividends rule prohibits payment of dividends on funds represented by a deposited based on a “rollback” or “low balance” check that is later dishonored, the accounts method, increments of par credit union need not pay dividends value, ending balance, or investable for the time period the check was balance method. To calculate interest/ outstanding. Dividends must be paid dividends credit unions must use either on accounts of members who have the daily balance or the average daily caused the credit union a loss. To balance method. Under the daily bal- read the NCUA letter addressing these ance method the credit union applies a issues, go to www.ncua.gov/Legal/ daily periodic rate to the exact daily bal- OpinionLetters/OL1999-0448.pdf ance in the account for each day. Since 3. Dividend accrual rules. Credit dividends must be calculated on the unions must begin to accrue dividends full amount of principal in the account on accounts no later than the day the for each day, the ending balance rather

credit union receives provisional credit For credit unions using a daily bal- for the deposit, and must continue to ance method, an account balance need accrue on those funds until the day they only meet the minimum requirement for are withdrawn from the account. (For the particular day to earn dividends for example, if a share draft is debited from that day. (For example, a credit union the account on Tuesday, the credit union may not provide that a member will earn must accrue dividends on those funds on a 5.00% rate only if a minimum bal- deposit through Monday.) Credit unions ance of $500 is maintained each day in may not accrue or pay dividends on par- the period.) For credit unions using an value increments. (For example, prior to average daily balance, the average daily the new regulation, if par value was $5 account balance needs to meet the mini- and an account had a $24 balance, divi- mum balance requirement for the period dends could be paid on $20 rather than to earn dividends for the period. Credit the entire $24 balance.) unions must use the same method to 4. Compounding and crediting. NCUA’s determine a minimum balance required rule does not mandate a particular mini- to earn dividends as they use to deter- mum or maximum frequency with which mine the balance upon which dividends dividends are compounded or credited will accrue and be paid. (For example, (for example, daily, monthly, quarterly, a credit union calculating dividends on annually, continuously, etc.). However, a daily balance method must use the the compounding frequency must be dis- daily balance method to calculate the closed in the account disclosures. Credit minimum balance requirement, if any, unions are not required to pay dividends to earn dividends.) that have accrued but that have not yet been credited if the account is closed Account Disclosures between crediting dates. 5. Minimum balance rules. Credit unions Oral disclosures to rate inquiries are permitted to set minimum balance As a further promotion of compara- requirements that must be met for the tive shopping, credit unions must give member to earn dividends or to earn a standardized responses to oral inqui- specified rate on an account. (For exam- ries regarding rates. While there is no ple, the credit union may choose to pay duty that credit unions respond to rate a 4.00% dividend rate on an account inquiries, if the credit union elects to only for those days the minimum bal- respond, standard oral disclosure infor- ance of $500 is met.) Credit unions may mation must be provided. The required not refuse to pay dividends on a portion disclosure information is much less than of a balance once a member has met a the full TISA account disclosures. required minimum balance. (For exam- Any rates quoted by the credit union ple, if the minimum balance requirement must be stated as an annual percent- for dividends is $250 and the member age yield (APY). For dividend-bearing maintains a $500 balance, the credit accounts (except term share accounts), union must pay dividends on the entire the credit union must disclose the APY $500.)

as of the last dividend declaration date e-mail address or retrieve them from the or the prospective APY offered on the credit union’s website, the credit union account. For term share accounts and must follow the regulation’s require- interest-bearing accounts, the APY dis- ments for electronic communication. closed must be accurate as of the last See the Electronic Communication sec- seven calendar days. The credit union tion for details. must also (1) state that the APY is accu- The TISA account disclosures for rate as of a specified date and (2) pro- each account may be presented sepa- vide a telephone number for members to rately, or combined with disclosures for call to obtain current rate information. other accounts and services (for exam- The dividend/interest rate figure may ple, Regulation CC funds availability also be provided, but not in lieu of the disclosures and Regulation E Electronic APY figure. No other rate may be stated. Fund Transfer disclosures), as long as it Credit union staff responding to oral is clear which disclosures are applicable rate inquiries need only provide disclo- to the member’s account. The TISA sures as appropriate. (For example, the disclosures may be provided in multiple requirement to give a telephone num- account documents (for example, a sig- ber to call about rates for a term share nature card, rate sheet, fee schedule, account would not be necessary when a and brochure describing other terms), member was calling for a rate.) but all relevant documents must be pro- Note: Similar to the redundant tele- vided at the same time. If an account is phone number information, the accu- held by more than one accountholder, racy date for a term share account rate disclosures may be made to any one of should not be necessary if the rate is the account holders. current as of that day and the rate pro- Note: A credit union should avoid vided disclosed as current. TISA account disclosures that cross ref- To the extent the oral rate inquiry erence terms or information contained involves a request for account disclo- in a credit union’s bylaws or other collat- sures rather than an account rate, the eral documents unless the credit union credit union must provide the TISA intends to provide copies of its bylaws or account disclosures as explained in the other collateral documents along with its following text. TISA account disclosures. There is no particular type size or Account-opening disclosures “more conspicuous” standard or segre- gation requirements for the disclosures. General disclosure rules Other than the terms “annual percentage yield” and “dividend rate,” there are Credit unions must make disclosures no required terms or conspicuous term as applicable, clearly, conspicuously, requirements. The term “annual percent- and in writing, in a form the member age yield” must be used when referring may keep. These disclosures can be to a rate of return and, for purposes of delivered either in paper or electronic account disclosures, must be so labeled. form. If the member agrees to receive There is no APY abbreviation provision. these disclosures electronically via their

The annual percentage yield, annual provided and the disclosures remain percentage yield earned, and dividend accurate at the time of the new account rate figures must be rounded to the opening. If the account is not opened in nearest 1/100 of one percent (.01%) person (for example, telephone, mail, (for example, 5.644% would be rounded or wire transfer), the TISA account dis- to 5.64%) and disclosed to two deci- closures must be mailed or delivered to mal places. However, for TISA account the address shown on the credit union’s disclosures, the dividend rate may be records no later than 10 business days expressed to more than two decimal after the account opening. places. There is a 1/20 of one percent- The renewal of a term share account age point (.05%) tolerance for accu- that does not automatically renew (non- rate disclosure of the annual percent- rollover) is a “new account,” which age yield and annual percentage yield requires new disclosures. In contrast, earned. There is no tolerance for divi- the renewal of an automatically renew- dend rates. able (rollover) term share account is not a new account and does not require new Account opening TISA account disclosures. A credit union must provide the TISA Upon request account disclosures to a member or potential member before an account is Credit unions are required to provide opened or services provided (for exam- TISA account disclosures to any member ple, a credit check fee is imposed before or potential member upon request. If opening an account), whichever is ear- the individual is not at the credit union lier. The same holds true when an indi- when the request is made (for example vidual opens an account via the credit the request is made over the telephone), union’s website. The member or poten- the disclosures must be mailed or deliv- tial member must be required to access ered within a reasonable time (10 busi- the TISA disclosures before the account ness days after the request is made). is opened or the credit union provides Disclosures can be in paper form or be services, whichever is earlier. A link to provided electronically. the disclosures satisfies the timing rule When providing disclosures electroni- if the member cannot bypass the disclo- cally, the credit union must send the sures before opening the account. Or the disclosures to the member or potential disclosures must automatically appear member’s e-mail address or send the NOTE: on the screen even if multiple screens member a notice describing the location Credit unions with account are required to display the entire disclo- of the disclosures on the credit union’s representatives must closely sure. The credit union is not required to website. Posting the disclosures on the review their procedures to confirm that the member has read the website, however, does not relieve a determine whether certain initial membership activities disclosure. credit union’s duty to provide disclo- constitute the opening of an New account disclosures need not be sures upon request. See the Electronic account. provided for a subsequent account open- Communication section for details on ing if proper disclosures were previously providing electronic disclosures.

Content of TISA • APY and dividend rate. Credit unions account disclosures must disclose the APY and dividend rate (or interest rate, if applicable) The TISA account disclosures must effective the day of the account open- contain eight categories of information ing. For dividend-bearing accounts, to the extent applicable. Sample cop- except term share accounts, the APY ies of the Loanliner® Truth In Savings and dividend/interest rate must be Rate and Fee Schedule for savings and either as of the last dividend declara- checking accounts, and Form D3100 tion date, or the prospective (antici- Rate and Fee Schedule for certificate pated) rate and APY offered for that accounts, are included as Appendix 1-A dividend period. Credit unions cannot and 1-B to this section. guarantee dividend rates, but can The type of rate information that provide prospective rates and APYs. needs to be disclosed depends on For term share accounts and interest- whether the account is a fixed-rate bearing accounts, the rate and APY or variable-rate account. Fixed-rate must be the rate and APY offered that accounts are any accounts that are day. Also, for fixed-rate accounts, the not variable-rate accounts. This means period of time the dividend rate will an account in which the rate will not be in effect (for example, for at least change unless the credit union con- thirty days) must also be disclosed. tracts to give at least 30 calendar days’ Note: No retroactive rate setting advance written notice of dividend/inter- is permissible on any term share est rate decreases. account including club accounts that (For example, credit unions’ term are term share accounts. share accounts and state-chartered In the case of variable-rate accounts, credit unions’ payment of interest on four additional disclosures are required: deposit accounts are considered fixed- (1) the fact that the dividend rate and rate accounts.) APY may change, (2) how the dividend A variable-rate account is an account rate is determined (for example, identify in which the dividend/interest rate may the index or state that the rate is deter- change after the account is opened. mined by the credit union’s board), (3) However, if the credit union contracts the frequency with which the dividend to change rates but only after providing rate may change (for example, weekly, the member at least 30 calendar days’ monthly, and so on; credit unions that advance written notice of rate decreases, reserve a right to change rates at any the rate would constitute a fixed-rate. time must state that fact.), and (4) any Note: Except for term share accounts limitation on the amount the dividend in which credit unions promise fixed-rate rate may change (for example, rate floor returns, there is little, if any, advantage or ceiling; if there are no limitations, the to offering fixed rates on transaction or credit union may, but need not, disclose savings-type accounts. Under variable- that fact). rate accounts, credit unions gain the A stepped-rate account is an benefit of changing rates without notice. account that has two or more divi-

dend rates that take effect in suc- must be disclosed. For dividend-bear- ceeding periods and are known when ing accounts, the dividend period (for the account is opened (for example, example, monthly, quarterly, etc.) must a one-year term share account with be disclosed. If the member will for- a 5% dividend rate for the first six feit dividends if they close an account months, a 6% rate for the second six before accrued dividends are credited, months). For stepped-rate accounts, a statement that the dividends will not each rate must be disclosed, but only be paid in such cases. one (composite) APY may be given. A • The credit union tiered-rate account is an account that Balance information. must make four types of balance dis- has two or more dividend rates that are closures: (1) any minimum balance applicable to specified balance levels required to open the account, avoid (for example, 5% paid on balances the imposition of a fee, or obtain the below $1,000; 6% on balances of APY disclosed, (2) the balance com- $1,000 and above). Unlike stepped- putation methods for dividends (daily rate accounts, there is no single composite APY for tiered-rate accounts. or average daily method), (3) the minimum balance determination, including Each applicable dividend rate and the an explanation of how the balance is corresponding APY must be given, and determined; or (4) the credit union’s the applicable tier balance method membership share par value. used must be disclosed [for example, Tier Method A (Full Balance) or Tier Note: While NCUA seems to equate membership share par value with Method B (Pure); see Appendix A to a minimum balance requirement, NCUA Part 707, APY Calculator for a credit unions should be careful not to discussion on these methods]. confuse the two. Minimum-balance Note: A credit union policy that div- requirement features require careful idends are not paid below a specified account price planning, independent amount would not constitute a tiered- of any par value requirement. Also, rate account. Similarly, the credit credit unions may have various mini- union cannot label the nondividend mum balance requirements for differ- portion as earning 0%, as zero is not a ent accounts, but there is generally rate. This policy would violate the gen- only one membership share required eral rule that dividends are paid on the for all accounts, not each account. full balance of the account. • Fees. The amount of any fee that may • Compounding and crediting policies. be imposed in connection with the The frequency with which dividends or account (or an explanation of how the interest are compounded and credited fee will be determined) and the con- must be disclosed (for example, quar- ditions under which the fee may be terly or monthly). If the credit union imposed (name and description of fee) will not pay dividends or interest that must be disclosed. The commentary has accrued but has not been credited includes the following list of fees that on an account that is closed, that fact are considered related to the routine

use of an account: paid from current income and available earnings after required transfers 1. Maintenance fees (for example, a to reserves at the end of a dividend monthly service fee) period. This disclosure should protect 2. Fees related to deposits or with- credit unions in the rare event a pro- drawals (per-check fees, ATM fees) spective dividend rate cannot be paid 3. Fees for special services (stop-pay- or is not properly payable. ment requests; balance inquiries; • F eatures of term share accounts. fees to certify checks) The term term share accounts 4. Return check fees includes time deposits, time or term 5. Fees to open or close accounts share accounts, share certificates, and certificate of deposit accounts 6. Check printing fees (a range of pric- with a maturity of at least seven days es or a statement that prices vary) in which withdrawals are restricted, 7. Dormant account fees unless an early withdrawal penalty of Fees that may be charged for ser- at least seven days’ dividends applies. vices unrelated to a particular account, A Christmas or vacation club account such as traveler’s check fees, cashier that contains both a maturity date and check purchase fees, wire transfer an early withdrawal penalty feature fees, safe deposit fees, or “incidental would be considered a term share fees,” such as photocopy fees or state- account for purposes of these disclo- NOTE: ment copy fees, need not be disclosed. sures. Generally, credit union club Also, fee disclosures required under There are four required disclosures accounts are structured Regulation E do not have to be dupli- for term share accounts, to the extent as savings or regular share cated so long as the Regulation E dis- applicable: (1) the maturity date, (2) accounts, and do not contain a maturity date. Also, by closures are provided at the same time. early withdrawal penalties, (3) conse- definition, NCUA states • Transaction limitations. The credit quences of withdrawal prior to matu- club accounts are not term rity, and (4) a statement of whether or share accounts unless they union must disclose any limitations not the account will renew automati- also require a penalty of at on the number or dollar amount of least seven days dividends withdrawals or deposits (for example, cally at maturity. If it will, a statement for withdrawals in the first minimum withdrawal limits on sav- of whether or not a “grace period” six days after the account is must be provided and the length of the opened. ings accounts under Regulation D, minimum withdrawal amounts or grace period. restrictions on deposits to term share Note: The term “grace period” accounts). Regulation E disclosures will means a period following the maturity satisfy this requirement to the extent of an automatically renewing term of limitations on the frequency and share account during which the mem- amount of Electronic Funds Transfers. ber may withdraw funds without being assessed a penalty. A credit union • Nature of dividends. For dividend- has the option of providing a grace bearing accounts other than term share period or not. If it does not renew auto- accounts, credit unions are required to matically, a statement must be made include a statement that dividends are

whether dividends/interest will be paid tial member “affirmatively consents” after maturity if the member does not after receiving certain information. See renew the account. the Electronic Communication section for full details and the RegTraC General • Bonuses. If the credit union offers Operations Regulations book for infor- a “bonus” for opening, maintaining, mation on ESIGN’s requirements. renewing, or increasing an account Disclosures provided by mail or e-mail balance, the TISA account disclosures are considered timely based on when the must include the following disclosures, disclosures are sent. Disclosures posted if applicable: 1) the amount or type of on an Internet website, such as periodic any bonus, 2) when the bonus will be statements, change-in-terms notices, or - provided, and 3) any minimum bal other notices are considered timely when ance and time requirements to obtain the credit union has both made the dis- the bonus. closures available and sent a notice to the member that the disclosures have Periodic Statement been posted. NCUA’s previous regulation address- Disclosures ing the electronic delivery of periodic statements was withdrawn. However, General rules credit unions will not have to redeliver disclosures subject to ESIGN’s consent If a credit union mails or delivers a provisions for members who agreed to periodic statement, the statement must receive periodic statements electroni- include certain required TISA disclosures cally under NCUA’s earlier rule. for each account on the statement known as “periodic statement disclosures.” A periodic statement means a state- Content of periodic statement ment setting forth information about disclosures an account (other than newsletters and “Annual Percentage Yield Earned” promotional materials) that is provided usage required to a member on a regular basis four or more times a year. Credit unions are not The periodic statement must show the required to send periodic statements, annual percentage yield earned, using but disclosures are required if the credit this exact term. No abbreviations such union chooses to send such statements. as APY earned or APYE are allowed. The Periodic statements can be delivered annual percentage yield earned reflects electronically as long as the credit union the relation of the actual dividend/inter- complies with the consumer consent est earned during the statement period provisions of the Electronic Signatures and the balance in the account for the in Global and National Commerce Act same period. This disclosure should (ESIGN). NCUA’s TISA regulation was capture all rate changes that occurred, revised to reflect ESIGN’s requirement producing a single composite annual that disclosures be provided in elec- percentage yield earned. (For tiered-rate tronic form only if the member or poten- accounts, the single annual percent-

age yield earned figure demonstrates Fees imposed the effect of the tiering method on total The periodic statement must disclose earnings.) The figure is not affected by all fees of the type required under the fees imposed or bonuses provided, and initial account disclosures that were should be distinguished from the pro- debited from the account during the spective annual percentage yield earned statement period, such as monthly fees, figure used for account disclosures and NSF charges, or stop payment fees. The advertising. This is a “historical” figure, fees shall be itemized by type and dol- not a projected figure, and is formulated lar amounts and must be identified the differently according to specific calcula- same as they are in the account disclo- tions set forth in Appendix A, Part 2 of sures. See also: “Overdraft Privilege the NCUA rule. Plans” regarding the aggregate disclosure of overdraft and returned item fees Amount of dividends/interest earned on periodic statements. The periodic statement must show the Fees related to a credit account such dollar amount of dividends/interest earned as fees for accessing an overdraft fea- during the statement period. This disclo- ture (covered by Regulation Z) and ATM sure may show either dividends accrued fees (covered by Regulation E) would but not yet credited to the account or divi- be excluded from the TISA disclosure. dends paid and credited to the account. Similarly, fees not imposed in connec- However, if a member closes an tion with the account (such as safe account between crediting periods and deposit box fees or wire transfer fees) forfeits accrued dividends, the credit would be excluded. The periodic state- union may not show any figures for “divi- ment need not include a total fee figure dends earned” or annual percentage or a net earnings figure (that is, the total yield earned for the period. dividend earned less any fees imposed). If no dividends are earned for a statement period, credit unions need not state Number of days in period that fact or may show “$0 dividends The statement must show either the earned” and a “0% annual percentage total number of days in the statement yield earned.” period or the beginning and ending The amount of any extraordinary dates of the period. Current statements dividends earned during the statement typically provide the beginning and end- period is not a component of the annual ing dates for the period. The statement percentage yield earned, but must be must clearly disclose whether the begin- disclosed as a separate figure. ning and ending dates are included, Bonuses should be excluded from the such as “May 1 through May 31.” total dividend/interest figure, but the value of any bonuses could be disclosed Optional information elsewhere on the statement as additional on periodic statements information. Additional information may be shown on a statement including: dividend

rates, year-to-date dividends, bonuses Savings regulations to address overdraft paid, and excluded fees. privilege plans. These regulations only required financial institutions that pro- Special rules for moted the payment of overdrafts to dis- noncalendar month crediting close on the periodic statement the fees charged for overdraft services and the NCUA provides a special rule for cred- fees charged for returning items unpaid, it unions that calculate dividends for a for the both the statement period and period other than the statement period year-to-date. (for example, quarterly, or from the 16th In 2008, the Fed amended its regu- of one month to the 15th of another lation with the NCUA following suit in month). Credit unions may disclose the 2009. The amended rules required required information either upon each all financial institutions to disclose periodic statement or upon the state- the periodic and year-to-date overdraft ment on which dividends are actually fees and returned item fees on periodic earned or credited to the account. For statements, regardless of whether they example, if a credit union has quarterly promoted the payment of overdrafts. The dividend periods or uses a quarterly amended regulations also addressed bal- average daily balance on an account, ance disclosures provided to consumers the first two monthly statements may through automated systems, such as not state annual percentage yield earned ATMs, telephone response systems and and dividends earned figures; the third websites. The mandatory compliance “monthly” statement will reflect the div- date was January 1, 2010. idends earned and the annual percentage yield earned for the entire quarter. Account-opening disclosures Each statement must show both the length of the statement period and divi- TISA requires the disclosure of any dend period. However, the fees imposed fee that may be imposed in connection disclosure must be included on the with the account and the conditions periodic statement on which they are when it may be imposed. Credit unions imposed. Credit unions that calculate must specify in their TISA account- dividends monthly but only send quar- opening disclosures the categories of terly statements may show one single transactions an overdraft fee may be dividend figure and annual percentage imposed on. yield earned for the quarter or three divi- This description does not have to be dend figures and three annual percent- an exhaustive list. Model language is age yield earned figures so long as the included in which the credit union may dividend periods are shown. simply state that the fee is imposed for overdrafts “created by checks, in-person Overdraft Privilege Plans withdrawals, ATM withdrawals, or by other electronic means,” as applicable. However, describing the fee as a fee for In 2005, the Federal Reserve Board “overdraft items” is not sufficient since and NCUA amended their Truth in

this would not describe whether it would Sample Aggregate Overdraft and apply only to share drafts or whether it Returned Item Fees Sample Form applies to other transactions, such as Total For This Total Year- ATM withdrawals or other types of elec- Period to-Date tronic transactions. Total Overdraft $60.00 $150.00 Periodic statement disclosures Fees All credit unions must disclose Total on periodic statements a total dol- Returned $0.00 $30.00 lar amount for all overdraft fees and Item Fees returned item (NSF) fees imposed on (Appendix B to Part 707, Sample B-12) a member’s account. The credit union The fee disclosure does not have to be must disclose separate totals for the provided if no fees have been charged statement period and for the calendar whatsoever. If a fee is waived in a later year-to-date. The total dollar amount periodic statement period, the credit includes per-item fees as well as interest union may (but is not required to) show charges, daily or other periodic fees, or that adjustment in the year-to-date total fees charged for maintaining an account on that later statement. If the fee is in overdraft status, whether the overdraft assessed and waived during the same is by check or by other means. It does statement period, the credit union may not include fees for transferring funds at its option show the adjustment in from another member account to avoid both the year-to-date total and the total an overdraft, or fees related to overdraft for that statement period. lines of credit subject to Regulation Z. The total dollar amount for all fees Advertising disclosures for returning items unpaid must include all fees charged to the account for dis- Credit unions that promote the pay- honoring or returning checks or other ment of overdrafts are required to items drawn on the account. The credit include the following disclosures in their union must disclose separate totals for advertisements for this service. the statement period and for the calen- • The applicable fee or charge. dar year-to-date. Fees imposed when deposited items are returned are not • The categories of transactions that included. are covered. The model language for The disclosure must be made in a account-opening disclosures may be tabular format (including gridlines) and used. be near the other itemized fees. The • The time period members have to regulation includes a sample form for repay or cover the overdraft. If a credit making this disclosure. The credit union union reserves the right to require must use this sample format, or a sub- repayment immediately or on demand, stantially similar one, when making this instead of providing a specific time disclosure. period for repayment, the credit union

may comply with the requirement by credit union will not pay an overdraft will disclosing this information. not be required for advertisements made through these methods. Advertisements • The circumstances when the credit on indoor signs must indicate that fees union would not pay an overdraft. The may apply and that the member should official staff interpretation provides the contact an employee for further informa- following model language: “Whether tion about fees and terms. your overdrafts will be paid is discretionary and we reserve the right not to pay. For example, we typically do not Prohibiting misleading pay overdrafts if your account is not in advertisements good standing, or you are not making The interim final rule expanded regular deposits, or you have too many TISA’s prohibition against advertise- overdrafts.” ments, announcements, or solicitations Stating the available overdraft limit for new accounts that are misleading or the amount of funds available on a or misrepresent the deposit contract to periodic statement would be considered include communications with current an advertisement that would trigger the members about the terms of their exist- required disclosures. The rule provides ing accounts. The following are exam- exceptions to these requirements, simi- ples of misleading advertisements: lar to those described above for periodic • Representing an overdraft service as a statement disclosures. For example, the “line of credit.” advertising disclosure requirements will • Representing that the credit union will not apply when providing educational honor all checks or transactions, when materials, responding to member-initiat- ed inquiries about overdrafts or deposit the credit union has discretion to not accounts, or notifying a member about a honor a transaction. specific overdraft on their account. • Representing that members with an These advertising disclosures are overdrawn account are allowed to also not required on ATM receipts or for maintain a negative balance when the advertisements using broadcast media, terms of the overdraft service require such as television or radio, or outdoor the member to promptly return the media, such as billboards. These excep- account to a positive balance. tions do not apply to advertisements on Internet websites, ATM screens, adver- • Describing the overdraft service solely tisements on telephone response sys- as protection against bounced share tems, or those sent by e-mail. However, drafts when the credit union also per- limited disclosures are required on an mits overdrafts in connection with ATM ATM screen, on telephone response withdrawals or other electronic fund machines and on indoor signs. The spe- transfers. cific disclosures described above regard- • Describing the account as “free” or ing the categories of transactions cov- “no cost” in an advertisement that ered and the circumstances in which the also promotes a service in which there

is a fee, such as an overdraft service, of the service (or have not opted-in, if unless the advertisement for the applicable). In the case of members account clearly indicates that there is who opt-out of some, but not all, of the a cost for this service. Advertisements credit union’s overdraft services (e.g., for the overdraft program itself must member elects overdraft services for disclose the amount of the fee, as well ATM and point-of-sale [POS] debit card as the other required information. transactions only), the credit union may provide the second balance, but only if the balance information indicates that Disclosure of account balances overdraft funds are not available for all When displaying available balance transactions. information on an ATM screen, website or telephone response system, NCUA’s Part 707 prohibits a credit union from Disclosures upon Maturity including any additional amounts that and Changes in Terms may be provided through overdraft protection plans, lines of credit, or through Renewal notices for rollover transfers from other accounts. The balance may, but need not, term share accounts include funds that are deposited in the Term share accounts that automati- member’s account, such as from a cally renew at maturity without member check, that are not yet made available action request (“rollover” or “renewal for withdrawal in accordance with the term share accounts”) are not treated as funds availability rules (Regulation CC). the opening of a new account. Thus, for In addition, the balance may, but need most term share accounts less disclo- not, include funds that are held by the sure is required at renewal. For a term credit union to satisfy a prior obligation share account with a maturity of more of the member, for example, to cover a than one month, credit unions must mail hold for an ATM or debit card transac- or deliver a notice containing both matu- tion that has been authorized but for rity and renewal account information at which the credit union has not settled. least 30 calendar days before maturity The credit union may choose to dis- or 20 calendar days prior to the end of a play a second balance that includes five-day grace period (except short-term amounts available through an overdraft accounts). protection plan, as long as it promi- The type of account disclosures in nently discloses that this second bal- a renewal notice depends on the term ance includes the additional amount. of the term share account. For rollover Disclosing the second balance simply as accounts with maturity greater than the “unavailable balance” or “available one year, the notice must state the date funds” will not be sufficient. the existing account matures, and the The ATM should not display a second full account disclosures applicable on balance connected to an overdraft ser- renewal must be provided. If the divi- vice for members who have opted-out dend rate and APY are undetermined

at the time of notice, the credit union state the maturity date and whether divi- shall state that rates have not been dend/interest will be paid after maturity. determined, specify the date they will be For nonrollover accounts with maturity determined, and include a credit union less than one year, no maturity notice is telephone number to call to obtain the required. Again, a renewal is considered rate and APY for the new account. a new account requiring full account For rollover accounts with a maturity disclosures. A sample of the Loanliner greater than one month but less than one Account Maturity Notice is included as year, the credit union has two options: (1) Appendix 1-D to this section. the renewal notice would state the date the existing account matures, the new Change-in-terms notice maturity date of the renewal account, the dividend rate and APY, if known (or if Credit unions must give advance unknown, the date it will be determined notice to affected members (members and a telephone number), and any dif- holding the account being changed) of ferences in terms between the existing any change in terms required under the and renewal accounts or (2) the full TISA initial TISA account disclosure require- account disclosures in the manner dis- ments, if the change may reduce the cussed above. APY or adversely affect the member. The For rollover accounts with a maturity notice must be mailed or delivered at of one month or less, credit unions must least 30 calendar days before the effec- provide a renewal notice disclosing any tive date of the change. (If the change differences in the terms between the affects a Regulation E term, the shorter existing and the renewal account (except Regulation E change-in-terms rules may the dividend rate and the APY) within a apply.) The notice must be in writing in reasonable time after renewal (generally a form the member can keep and must 20 days). describe the change and state the effec- A sample of the Loanliner Account tive date of the change. The notice may Renewal Notice is included as Appendix be included on a periodic statement or 1-C to this section. in another mailing. When overdraft protection services or Maturity notices for nonrollover bounce protection services are added to term share accounts an existing account, a change in terms notice, 30 days prior to the effective For term share accounts (maturity date of the change, may be required if greater than one year) that do not roll the fee for the service exceeds the fee over but renew only upon the member’s for accounts that do not have the ser- request, the credit union must give a vice. An advance change in terms notice maturity notice to members. A renewal is would not be required if the account considered a new account requiring full opening disclosures stated that an over- account disclosures. The maturity notice draft check may or may not be paid and must be mailed or delivered at least ten the same fee would apply. calendar days before a maturity and A change-in-terms notice is not

required for: changes in the dividend/ Account rate sheets are not consid- interest rate and corresponding changes ered commercial messages (and thus in the APY for variable-rate accounts; not advertising) as long as there is no fee changes in fees for share draft and paid by the credit union and no control check printing fees; changes in any term by the credit union over whether the for short-term term share accounts (one information will be published. month or less); or terms that will auto- The term account covers all share and matically change upon the occurrence deposit accounts offered to or held by of a stated event, provided the contem- members. IRA advertisements fall within plated change is fully described in the the advertisement rules to the extent TISA account disclosures (for example, that the funds are held in a credit union expiration of a reduced or waived fee account. Promotional messages that promotion). cross-sell deposit products are advertisements, including promotions that appear Advertising in leaflets, brochures, periodic account statements, and statement stuffers. Advertisements of financial services, The TISA advertising rules control such as safe deposit boxes and cashier’s what information must be disclosed and checks, are not covered. Similarly, annu- the manner in which the information is ities are not covered because they are presented in order to give members stan- not a deposit account. dardized deposit account information to Credit union newsletters, lobby rate enhance comparative shopping. boards, and certain types of advertising These rules include general rules media require less disclosure of account prohibiting inaccurate and misleading information due to the inherent limita- advertisements, rules for advertising key tions of time and space in such media. deposit terms like “APY” and “bonus- The special media include: (1) broad- es,” the additional disclosures triggered cast and electronic media, (2) outdoor by use of such terms, and exemptions media, such as billboards, and (3) tele- for certain types of media. phone response machines.

Scope of the advertising rules Prohibition on misleading or The rule defines advertisement as a inaccurate advertising commercial message appearing in any NCUA’s rule contains a broad prohibi- medium that promotes directly or indi- tion that “an advertisement shall not be rectly the availability of, or deposit in, an misleading or inaccurate and shall not account. While this term is not defined misrepresent a credit union’s account in the rule, it means virtually anything contract.” The prohibition applies to all that conveys a message promoting a advertisements regardless of the ad con- deposit account product. There is one tent or the media used. express exception in the rule for “rate The rule contains a specific prohibi- sheets” that are published in newspa- tion of advertising an account using the pers, periodicals, or trade journals.

terms “free,” “no cost,” or other words old”). In contrast to the free account having similar meaning (for example, prohibition, credit union services may be fees waived) if any regular maintenance advertised as “free” or with “no cost,” or activity fee may be applied to the so long as there is no fee imposed for the account. Thus, if there are no mainte- service or feature. For example, a credit nance fees related to the account or any union that offers free ATM services costs for the member to have or use an could advertise that fact. If the service is account, it can be advertised as “free.” free for a limited time, the time restric- A maintenance or activity fee tion must be stated. includes transaction and service fees members reasonably expect to be regu- Disclosure requirements larly imposed on an account. For example, monthly service charges, and fees General rules imposed to deposit, withdraw, or trans- If any rate or yield is stated in an fer funds, (including per-share draft or advertisement, it must be the annual check charges, or $0.25 for each with- percentage yield using that term. While drawal, by check or in person). It also advertisements are not required to dis- includes fees imposed if a minimum bal- close an annual percentage yield (unless ance requirement is not met or if a trans- a bonus is stated), if the credit union action limit is exceeded. A maintenance states a rate or yield, the rate or yield fee would not include stop-payment must be stated in terms of the annual fees, fees for returned items, NSF fees, percentage yield. If an advertisement fees unrelated to the account (such as discloses an annual percentage yield as cashier’s check fees), third-party check of a specified date, that date must be printing charges, fees for copies of share recent in relation to the publication. drafts or checks, dormant account fees, An advertisement can state the divi- balance inquiry fees, fees to use a pro- dend rate as long as the annual percent- prietary or nonproprietary ATM, and fees age yield is also disclosed. If a dividend for electronic transfer services that are rate is stated, the term “dividend rate” not required to obtain an account (such must be used, and the rate stated must as preauthorized transfers or home elec- correspond to the annual percentage tronic credit union services.) yield stated. The abbreviation “APY” may If the account is free for a limited be used, provided that the term “annual time, the time restriction must be stat- percentage yield” is stated at least once ed. Credit unions may not use a term in the advertisement. The term “dividend such as “fees waived” if a maintenance rate” cannot be abbreviated. or activity fee may be imposed since it is In addition, a dividend rate can be similar to the terms “free” or “no cost.” stated only if it is provided in conjunc- However, credit unions may advertise tion with, but not more conspicuously accounts as “free” for members who than, the annual percentage yield it meet conditions not related to share relates to. Advertisements on a credit accounts, such as the member’s age (for union’s website must display both rates example, “free for persons over 65 years simultaneously. This requirement is not

satisfied if the individual can only view “for example, 1% over our current rate.” the annual percentage yield by using a There are six disclosures, triggered link to another location. by the APY. These disclosures must be There are special format rules for shown in the ad, clearly and conspicu- advertising tiered-rate accounts. The ously, as follows: annual percentage yield for each tier 1. Variable-rate accounts. If the adver- must be shown in the advertisement tisement covers a variable-rate account, along with the corresponding tier bal- the ad must also state that the “rate may ance requirements. Also, an advertise- change” after the account is opened. ment that states a dividend rate for a stepped-rate account must state all the 2. Time the APY is offered. The ad must dividend rates and the time period that provide an accuracy disclosure as fol- each rate is in effect. lows: 1) for dividend-bearing accounts except term share accounts, a statement that the APY is accurate as of the last Representative example dividend declaration date or that the An advertisement that states an annu- disclosed prospective APY is accurate al percentage yield for a type of account or 2) for interest-bearing accounts and need not state the annual percent- dividend-bearing term share accounts, age yield applicable to every variation the period the APY is offered for that offered by the credit union. If rates vary account or a statement that the APY depending on the initial deposit amount is accurate as of a specified date. For or term for a term share account, a example, “the APY is offered as of Sept. representative example may be shown 7, 2013.” clearly describing the annual percent- 3. Minimum balance. The minimum bal- age yield offered and stating that various ance required to obtain the advertised rates are available. (For example, “our APY must be disclosed. For tiered-rate six-month share certificate currently accounts, the minimum balance require- pays a 3.15% annual percentage yield,” ment for each tier must be stated in and “we offer share certificates with NOTE: close proximity to the applicable APY annual percentage yields that depend on and given equal prominence. The credit union should the maturity you choose.”) provide a reference in the 4. Minimum opening deposit. The mini- advertisement indicating the mum balance requirement to open an APY is accurate as of the APY disclosures date of publication. account must be provided if it is greater than the minimum balance necessary to If an APY is stated in an advertise- obtain the advertised APY. ment, additional advertising disclosures relating to fees and terms applicable to 5. Effect of fees. A statement that “fees the account must be given (the “APY could reduce earnings” must also be disclosures”). General rate information included if maintenance or activity fees in an advertisement will not be consid- could be imposed that would reduce ered trigger terms so long as rates are earnings (for example, monthly service not determinable from the advertisement charges, per-draft charges, a fee if a minimum balance is not maintained).

Neither the applicable fee nor the condi- (for example, free checks), nondividend tions for imposing the fee need be shown membership benefits, extraordinary divi- in the advertisement. dends, and life savings benefits, regard- 6. Features of term share accounts. For less of value, are excluded from the term term share accounts, a statement of the “dividends.” term of the account and a statement that Note: Because the term “bonus” a penalty will or may be imposed for excludes most incentives credit unions early withdrawal must be provided. The offer with accounts (for example, the phrase “will or may” is used to cover waiver or reduction of fees or the absorp- credit unions that impose early with- tion of expenses, nondividend member- drawal penalties either on a mandatory ship benefits, extraordinary dividends), basis or discretionary basis. bonus disclosures will be triggered only in limited situations (for example, cash or merchandise worth more than $10). Bonus disclosures There are five disclosures triggered If a bonus is offered in an advertise- by a bonus. These disclosures must be ment, additional advertising disclo- shown in the ad as follows: sures relating to terms applicable to 1. The annual percentage yield must be the account must be given (the “bonus stated using that term. Since the APY disclosures”). A general reference to is itself a trigger term, the five annual bonuses or the word “bonus” itself is percentage yield disclosures must not a trigger term (for example, “bonus also be given. checking”). 2. A statement of the time requirement A bonus is a premium, gift, award, necessary to obtain the bonus. or other consideration, paid in cash or merchandise, worth more than $10 dur- 3. A statement of the minimum balance ing the course of a year, given or offered required to obtain the bonus. If the to a member for opening, maintaining, balance requirement is the same as renewing, or increasing an account bal- for the APY, the disclosures may be ance. Under the commentary, NCUA combined. states that credit unions may rely on 4. The minimum balance required to IRS valuation standards to determine open the account must be given if it the $10 de minimis value standard (for is greater than the balance necessary example, fair market valuation). Credit to obtain the bonus. unions must aggregate per account, 5. The ad must state when the bonus will per calendar year, any items given to a be paid or provided to the member. member that are individually valued at If a credit union’s Web adver- $10 or less. Such items will be a bonus Note: tisement displays a triggering term (such if their aggregate value exceeds $10. De as a bonus or annual percentage yield) minimis incentives, such as pens or cof- fee mugs (with a market value of $10 or the advertisement must clearly refer less), and any waiver or reduction of an the member or potential member to the account fee, the absorption of expenses location where the additional required

information begins. For example, an ment of overdrafts. These include the advertisement that includes a bonus or amount of the overdraft fee, the trans- annual percentage yield can include a actions in which they apply, the time link that takes the individual to the addi- period in which the member must repay tional information. the overdraft, and the circumstances in which the overdraft will not be repaid. Credit union newsletters, However, the credit union’s opt-in/opt- out notice that it provides with regard lobby signs, and special media to the payment of overdrafts is a com- There are limited advertising dis- munication that is not subject to these closures required for advertisements additional disclosures. through special media such as credit Note: Advertisements may be “indoor union newsletters, indoor signs, and signs” even though members from out- electronic media. side may view them. For example, a ban- Credit union newsletters sent to exist- ner located behind a teller counter facing members or reasonably calculated to ing members but readable by a passerby reach only members (for example, news- is still an indoor sign. letters displayed or offered in the credit union lobby) are generally not subject Electronic Disclosures to the advertising requirements but are subject to the minimal rules. The credit Truth in Savings disclosures that are union newsletter must include the APY required to be in writing can be provided if a rate is stated and must contain a electronically as long as the credit union notice advising members to contact the complies with the consumer consent credit union for further information on provisions of the Electronic Signatures applicable fees and terms. A dividend in Global and National Commerce Act rate may be shown in conjunction with (ESIGN) of 2000. Under Part 707, TIS the APY that it refers to. disclosures must be provided before the Indoor signs (including computer account is opened or the service is pro- screens, banners, preprinted posters) vided — this includes instances when and lobby boards located inside a credit a member or potential member who union are generally not subject to the is not present at the credit union uses advertising requirements. The exemp- an Internet website or other electronic tion for lobby boards applies to signs means to open an account or request a inside the premises of the credit union, service. including signs facing outside which ESIGN requires that members “affir- are intended to be viewed from outside. matively consent” before receiving elec- Advertisements on inside banners, pre- tronic disclosures relating to a transac- printed posters, chalk boards, and com- tion when those disclosures are required puter screens are subject to the same by law or regulation to be in writing. exemption that applies to lobby boards. Before a member can give consent, the TIS regulations require additional credit union must provide the member disclosures in ads that promote the pay- with a disclosure informing them of

their rights as they relate to electronic ing federal law, state law continues in transactions. This disclosure must also effect. Check with your state League as include a statement of the hardware and to whether your state law differs from software requirements for access and the requirements under NCUA Part 707. retention of electronic records. For more information on ESIGN, see the RegTraC Model clauses and sample forms Credit unions should General Operations Regulations book. In take extreme care in using addition, electronic disclosures remain NCUA published its own model NCUA model clauses and subject to TISA’s format, timing, and clauses and sample forms for compli- forms. The incorrect use of retainability rules as well as the “clear ance with the Truth In Savings regula- provisions or the inclusion of incorrect or irrelevant and conspicuous” standard. tions. According to NCUA’s commen- contract provisions may Certain disclosures are not considered tary, credit unions providing disclosures create liability rather than “related to a transaction” for purposes properly using the model clauses will be protect a credit union. of ESIGN’s consumer consent provision. deemed in compliance with applicable These include disclosures used in con- disclosure rules. The forms are similar nection with advertisements as well as to the FRB model forms with numerous disclosures about deposit accounts that modifications to address specific credit are provided upon request. Advertising union issues. disclosures fall under this exception since they are considered to be available to Administrative enforcement the general public. Disclosures given to members and potential members upon Compliance by all credit unions will request are exempt as these recipients be enforced by the National Credit may decide not to open an account. Those Union Administration. TISA was amend- who do open accounts should receive ed to repeal the civil liability provisions, timely disclosures subject to the consent effective September 30, 2001. Thus, requirements at account opening. TISA does not contain a private right of action. State Law, Model Clauses, Enforcement Record retention Credit unions are required to retain Pre-emption of state law evidence of compliance with this regulation for at least two years after the date State law requirements that are disclosures are required to be made. inconsistent with requirements of NCUA Credit unions must retain copies of all Part 707 are pre-empted to the extent of the disclosures, notices, and advertising the inconsistency. A state law is incon- copy (including the text of advertise- sistent if it requires a credit union to ments conveyed by electronic and broad- make disclosures or take actions that cast media) to evidence compliance. To contradict the requirements of federal meet the record retention requirements law. In other words, if the credit union of NCUA’s rules, credit unions need not can comply with state law without violat- retain copies of each disclosure provided

to a member but must demonstrate they have established and maintained procedures for providing proper disclosures and notices when required. Sample disclosures, notices, and advertising copy should be retained. Credit unions need not retain periodic statements or logs of rate inquiries or disclosure requests. Records may be stored by use of micro- fiche, microfilm, magnetic tape, or other methods capable of retaining and repro- ducing information.

Appendix 1–A

Truth In Savings Disclosure for Savings and Checking Accounts

FORM# (D37002/D30002)-eFORM# INSERT See SectionSee 6 ACCOUNT LIMITATIONS LIMITATIONS ACCOUNT

Method INSERT Balance LAST DIVIDEND DECLARATION DATE: DATE: DECLARATION LAST DIVIDEND

INSERT Earn the Earn Minimum Balance to Stated APY StatedAPY

TRUTH-IN-SAVINGS DISCLOSURE TRUTH-IN-SAVINGS

Credit Union may offer other rates for these accounts from time to time. to time from accounts these for rates other offer may Union Credit Avoid a INSERT Minimum Balance to ServiceFee BALANCE REQUIREMENTS BALANCE

INSERT Deposit Opening Minimum

Period INSERT Dividend RATE SCHEDULE RATE SCHEDULE ACCOUNT DISCLOSURES DISCLOSURES ACCOUNT

INSERT Credited Dividends t Union are provided in this Truth-in-Savings Disclosure. The Disclosure. Truth-in-Savings this in provided are Union t

DIVIDENDS INSERT Dividends Compounded (APY) (APY) Annual Annual

/ / / / / / / / the accounts. All accounts accounts All accounts. the DividendRate/ PercentageYield

The rates, fees and terms applicable to your account at the Credi the at account your to applicable terms and fees The rates, ACCOUNT TYPE ACCOUNT HERE Names Account Exceptas specifically described, following the of all to apply disclosures describedTruth-In-Savings in this Disclosure are share accounts. GroupMutual CUNA © 2008 ReservedRights All -10

FORM# (D305019)-eFORM#

INSERT See SectionSee 6 $3.00/Transaction $2.00/Transfer $5.00/Item overcoin for 3% Does$200.00. to apply not Club Kids $5.00/Item $5.00/Copy $25.00 $5.00/Item Truth-in-Savings Disclosure. ACCOUNT LIMITATIONS LIMITATIONS ACCOUNT

INSERT Balance MethodBalance

Statement CopyStatement Printout Activity Account Item Deposited Return Process Legal Telephone Transfer $2.00/Printout responseaudio (not ATM) or $15.00/Item CheckTelephone Withdrawal RegD $1.00/Check Copy Check Official Third Party Payable Check ExpressAmerican Check Gift Mail Return $2.00/Check $2.00/Check ForeignItem (plus fee)correspondent Coin Bulk Escheat $10.00 Payment Stop Check Official SHARE VALUE $15.00/Item of Value Par OneShare accurate are ratesThe the of as appearing Schedule this in this on indicated Date Effective 5.00 $ anyhave questions If requireor you current rate andfee on information you/rUnion. Credit the call please accounts,

INSERT Earn the Earn Minimum Balance to Stated APY StatedAPY TRUTH-IN-SAVINGS DISCLOSURE TRUTH-IN-SAVINGS Credit Union may offer other rates for these accounts from time to time. to time from accounts these for rates other offer may Union Credit LAST DIVIDEND DECLARATION DATE/EFFECTIVE DATE: DATE/EFFECTIVE DECLARATION LAST DIVIDEND

Avoid a INSERT Minimum Balance to BALANCE REQUIREMENTS BALANCE ServiceFee

$2.00/Money Order $25.00/Month daily average minimum If met not is balance $ 29.00/Item coverage CourtesyPay at discretion Union Credit $40.00/Transfer $15.00/Hour $15.00/Item vary depending may Prices Infinity ~ style upon receive will Checking forreimbursement boxone checksstandard of per order ~ $5.00/Month Primary Age Owner or 50 $4.00/Montholder $10.00/Item $5.00/Item

TY DRAFT ACCOUNT INSERT Deposit Opening Minimum RATE SCHEDULE RATE SCHEDULE

ACCOUNT DISCLOSURES DISCLOSURES ACCOUNT INSERT InterestCredited t Union are provided in this Truth-in-Savings Disclosure. The Disclosure. Truth-in-Savings this in provided are Union t Wire Transfer Wire (Incoming) Transfer Wire (Outgoing) Wire Foreign $10.00/Transfer OrderMoney $16.50/Transfer TravelersCheck forTwo Reconciliation Account Research Account $1.50/$100.00 $15.00/Hour MEMBERS SELECT SHARE DRAFT MEMBERS SELECT ACCOUNT FEES Balance Low SHARE DRAFT/INFINI FEES Courtesy Pay NSF $29.00/Item Payment Stop TransferOverdraft Copy Check Printing Check Share Draft Infinity Checking SERVICE FESS OTHER

Interest INSERT Compounded DIVIDENDS

EXAMPLE

$25.00* $ 2.00/Month Accountforone inactive (1) year andbalance isless $100.00 than account$10.00/If closed (3) within three months $5.00/Withdrawal four of excess In per(4) month $5.00/Withdrawal $2.00/Month daily average minimum If met not balance Share Accounts; any type any Accounts; Share Yield (APY) (APY) Yield InterestRate/ / / / / / Annual Percentage Percentage Annual

The rates, fees and terms applicable to your account at the Credi the at account your to applicable terms and fees The rates,

FEE SCHEDULE ACCOUNT TYPE ACCOUNT SHARE ACCOUNT FEES Dormant Closure Account Membership New Fee Non-Bundle Fee memberif imposed fee “Newtime elect *one not does the joining when Bundle” Account The union. credit New feetime $5.00/One Regular includes Bundle Account Card;Debit account; Checking of Homebankingand or Voiceline. ACCOUNT FEES CLUB HOLIDAY Withdrawal Early AND PREMIUM MONEY MONEY MARKET MARKET ACCOUNT FEES Balance Low Withdrawal Account Names HERE Names Account Except as accounts. of the all to apply specifically disclosures described, the following GroupMutual CUNA © 2007 ReservedRights All

Appendix 1-B

Truth In Savings Disclosure for Term Share/Certificate Accounts

INSERT Renewable

FORM# (D31001/D3800)-e MATURITY DATE: DATE: MATURITY EFFECTIVE DATE: DATE: EFFECTIVE INSERT Withdrawals Deposits Additional Additional Period Dividend TRUTH-IN-SAVINGS DISCLOSURE TRUTH-IN-SAVINGS Credit Union may offer other rates for these accounts from time to time. to time from accounts these for rates other offer may Union Credit Credited Dividends Dividends Compounded RATE SCHEDULE RATE SCHEDULE ACCOUNT DISCLOSURES DISCLOSURES ACCOUNT Deposit Opening Minimum t Union are provided in this Truth-in-Savings Disclosure. The Disclosure. in this provided Truth-in-Savings are t Union Rate Type INSERT INSERT INSERT INSERT INSERT INSERT

Annual Annual Percentage Yield (APY) % % (APY) Yield

(%) Rate

Dividend

The rates, fees and terms applicable to your account at the Credi the at account your to applicable terms and fees The rates, Account Name Here Account

TERM GOES HEREGOES TERM Except as specifically described, the following accounts. All accounts disclosures apply to all of the describedTruth-in-Savingsthisin Disclosure are share accounts. GroupMutual CUNA © 1993, 2007 ReservedRights All

Appendix 1-C

Account Renewal Notice

RENEWAL NOTICE

Member No:

Change in Account Terms (if applicable): Maturity Date: Grace Period: days New Maturity Date:

TRUTH-IN-SAVINGS DISCLOSURES

1. Maturity. Your account will mature on the maturity date set forth above. 2. Grace Period. If indicated above, after maturity your account provides a grace period within which you may withdraw or transfer account funds without penalty. 3. Account Renew al. Unless you withdraw or transfer the account funds at maturity or within the grace period, if applicable, your account will automatically renew for an additional term, and the new maturity date is set forth above. The terms and conditions applicable to your renew al account (except Dividend Rat e and Annual Percentage Yield) will be the original account terms and conditions unless indicated above or as set forth in the Truth-in-Savings Disclosure accompanying this Renew al Notice. 4. Rat e Information. The Dividend Rat e and Annual Percentage Yield that will apply to your account, if renew ed, have not yet been determined. This rate information will be available from the credit union on the maturity date. You may call the credit union at the telephone number set forth above for current rate information on your account or if you have any instructions or questions related to your account. This Renew al Notice informs you of the renew al of your account with the credit union pursuant to the terms of the Membership and Account Agreement, Account Card, any applicable Account Change Card(s), and current Truth-in-Savings Disclosure.

ACCOUNT OWNER(S) MAILING NAME AND ADDRESS:

CUNA Mutual Group, 1993, 2006 D34001 Rev.4/06

Appendix 1-D

Account Maturity Notice

MATURITY NOTICE

Dear Member:

Your Account No. will mature on , and will not automatically renew . To renew, contact the credit union and request an account renewal.

Upon the maturity date, dividends will will not be paid after the maturity date. Unless renew ed, the account balance will be paid in accordance with your previous payment instructions.

Please call us if you have questions about your account.

ACCOUNT OWNER(S) MAILING NAME AND ADDRESS:

CUNA Mutual Group, 1993, 2006 D33001 Rev.4/06

Truth In Savings / NCUA Part 707

Quiz/Study Guide

1. When opening a joint share account, should the account disclosures be given to each joint member, or is it sufficient to give the disclosures to one of the members? ______

2. Name the five different points in the life cycle of a deposit account where TIS imposes special disclosure requirements. ______

3. The initial account disclosures must include eight categories of information. List four of those categories. ______4. Define the term “dividends.” ______

5. What TISA disclosure is required in all oral rate disclosures, account disclosures, and advertisements for deposit accounts? ______

6. TIS defines the exact form the dividend rate must be in for all disclosures and advertisements. What is that form? ______

7. Explain the difference between the Annual Percentage Yield (APY) and the Annual Percentage Yield Earned (APYE). ______

8. List the two methods of dividend calculation allowed by TIS and briefly describe how each one works. ______

9. The dividend nonpayment rules outline four instances when credit unions are not required to pay dividends. List three of them. ______

10. Does NCUA mandate a particular frequency for compounding and crediting dividends? ______

11. If your credit union provides TIS account disclosures electronically, the member must first provide their affirmative consent to receive electronic disclosures. Before the credit union accepts that consent, the member must receive a written disclosure containing specific information. What two pieces of information must be included in that disclosure? ______

12. If members can open accounts online, at what point in that process must they receive the TIS account disclosures? ______

13. Name the four major items TIS requires on periodic statements. ______

14. When is a change in terms notice required? ______

15. If an advertisement mentions an APY, what other disclosures must be shown clearly and conspicuously? ______

16. When opening a term share account, what is the correct APY and dividend rate that must be quoted to the member? ______

17. There are four types of balance disclosures that must be included in the account disclosures. One of those is the minimum balance required to open the account, avoid a fee, and obtain the disclosed APY. What are the other three required balance disclosures? ______

18. All credit unions must disclose on periodic statements a total dollar amount for all ______and ______fees imposed on a member’s account for the ______and ______. 19. What does NCUA’s Part 707 prohibit the credit union from displaying on an ATM screen, website, or telephone response system? ______

Truth In Savings/NCUA Part 707

Answer Key

1. The account disclosures can be given to any one of the accountholders. (Page 1-8)

2. Preaccount opening, account opening, periodic statements, changes in account terms and account maturity, and advertising. (Page 1-2)

3. Initial account disclosures should include: (1) APY and dividend rate, (2) compounding and crediting policies, (3) balance information, (4) fees, (5) transaction limitations, (6) nature of dividends, (7) features of term share accounts, and 8) bonuses. (Pages 1-10 to 1-13)

4. Dividends — declared or prospective earnings on a member’s shares in a credit union to be paid to a member or a member’s account excluding bonuses, extraordinary dividends, or similar incentives. (Page 1-4)

5. The “annual percentage yield.” (Page 1-5)

6. It must be rounded to the nearest basis point (.01) and disclosed to two decimal places (4.55%). (Page 1-5)

7. Annual Percentage Yield (APY) — the percentage rate reflecting the total amount of dividends paid on an account based on the dividend rate and the frequency of compounding for a 365-day period for share and share draft accounts or for the term of the account for term share accounts. The APY assumes the principal amount remains in the account for 365 days or the term of the account. (Page 1-5)

Annual Percentage Yield Earned (APYE) — reflects the total amount of dividends actually earned for the dividend or statement period as a percent of the actual average daily balance in the account. The APYE is affected by additions and withdrawals during the period and is required for periodic statements only. (Page 1-5)

8. Daily balance method — a daily periodic rate is applied to the exact daily balance in the account for each day. (Page 1-6)

Average daily balance method — the balance for each day is added together, this figure is divided by the number of days in the period, and the periodic rate is applied to this figure. (Page 1-6)

9. During the grace period of a rollover term share account, after maturity for a nonrollover term share account, funds remaining in a closed account, and the time period during which checks are returned unpaid. (Pages 1-7)

10. No, they only require that the frequency be stated in the account disclosures. (Page 1-7)

11. The disclosure must inform members of their rights as they relate to electronic disclosures and provide the hardware and software requirements for accessing and retaining the disclosures. (Page 1-25)

12. The member must be required to access the account disclosure before the account is opened or the services are provided, whichever is earlier. (Page 1-9)

13. The Annual Percentage Yield Earned, the amount of dividends/interest earned, any fees imposed, and the number of days in the period. (Pages 1-14)

14. Affected members must be sent a change in terms notice whenever there will be a change in any terms required in the initial TISA account disclosure if that change may reduce the APY or adversely affect the member. The notice must be mailed 30 days before the change goes into effect. (Page 1-19)

15. Variable rate accounts — the fact that the rate may change after the account is opened.

Time the APY is available — 1) for dividend-bearing accounts except term share accounts, a statement that the APY is accurate as of the last dividend declaration date or that the disclosed prospective APY is accurate or 2) for interest-bearing accounts and dividend-bearing term share accounts, the period the APY is offered for that account or a statement that the APY is accurate as of a specified date.

Minimum balance required to obtain the advertised APY.

Minimum opening deposit if it is greater than the minimum balance necessary to obtain the advertised APY.

Effect of fees — a statement that “fees could reduce earnings if maintenance or activity fees could be imposed that would reduce earnings.

Features of term share accounts — the term of the account and a statement that a penalty will or may be imposed for early withdrawal. (Page 1-22 to 1-23)

16. The rate and the APY that is being offered that day must be disclosed to the member. (Page 1-10)

17. The other balance disclosures are: 1) the balance computation method used to figure dividends, 2) an explanation of how the minimum balance is determined, and 3) the membership share par value. (Page 1-11)

18. All credit unions must disclose on periodic statements a total dollar amount for all overdraft fees and returned item (NSF) fees imposed on a member’s account for the statement period and for the calendar year-to-date. (Page 1-16)

19. When displaying available balance information on an ATM screen, website or telephone response system, NCUA’s Part 707 prohibits a credit union from including any additional amounts that may be provided through overdraft protection plans, lines of credit, or through transfers from other accounts. (Page 1-18)