997 Part 230—Truth in Savings (Regulation

order to extend the state availability sched- PART 230—TRUTH IN SAVINGS ule up to the Federal availability schedule. Once the deposit is held up to the Federal (REGULATION DD) availability limit under a state exception, the depositary bank may further extend the Sec. hold only if a Federal exception can be ap- 230.1 Authority, purpose, coverage, and ef- plied to the deposit. Any time a depositary fect on state laws. bank invokes an exception to extend a hold 230.2 Definitions. beyond the time periods otherwise permitted 230.3 General disclosure requirements. by law, it must give notice of the extended 230.4 Account disclosures. hold to its customer in accordance with 230.5 Subsequent disclosures. § 229.13(g) of Regulation CC. 230.6 Periodic statement disclosures. Business day/banking day. The definitions of 230.7 Payment of interest. business day and banking day in the Wis- 230.8 Advertising. consin statutes are preempted by the Regu- 230.9 Enforcement and record retention. lation CC definition of those terms. For de- 230.10 [Reserved] termining the permissible hold under the 230.11 Additional disclosure requirements Wisconsin schedules that supersede the Reg- for overdraft services. ulation CC schedule, deposits are considered APPENDIX A TO PART 230—ANNUAL PERCENT- available for withdrawal on the specified AGE YIELD CALCULATION number of business days following the bank- APPENDIX B TO PART 230—MODEL CLAUSES ing day of deposit. AND SAMPLE FORMS Wisconsin law considers funds to be depos- APPENDIX C TO PART 230—EFFECT ON STATE ited, for the purpose of determining when LAWS they must be made available for withdrawal, APPENDIX D TO PART 230—ISSUANCE OF STAFF when an item is ‘‘received at the proof and INTERPRETATIONS transit facility of the depository.’’ For the SUPPLEMENT I TO PART 230—OFFICIAL STAFF purposes of this preemption determination, INTERPRETATIONS funds are considered deposited under Wis- AUTHORITY: 12 U.S.C. 4301 et seq. consin law in accordance with the rules set forth in § 229.19(a) of Regulation CC. SOURCE: 57 FR 43376, Sept. 21, 1992, unless otherwise noted. Disclosures The Wisconsin statute does not require dis- § 230.1 Authority, purpose, coverage, and effect on state laws. closure of a bank’s funds availability policy. The state law does require, however, that a (a) Authority. This part, known as bank give notice to its customer if it extends Regulation DD, is issued by the Board the time within which funds will be available of Governors of the Federal Reserve for withdrawal due to the bank’s doubt as to System to implement the Truth in the collectibility of the item (Wisconsin Savings Act of 1991 (the act), contained Statutes sections 404.213(4m)(b); 215.136(2); in the Federal Deposit Insurance Cor- and 186.117(2)). poration Improvement Act of 1991 (12 Regulation CC preempts state disclosure U.S.C. 3201 et seq., Pub. L. 102–242, 105 requirements concerning funds availability Stat. 2236). Information-collection re- that relate to accounts that are inconsistent with the Federal requirements. The state requirements contained in this part have quirement is different from, and therefore been approved by the Office of Manage- inconsistent with, the Federal disclosure ment and Budget under the provisions rules (§ 229.20(c)(2)). Thus, the Wisconsin stat- of 44 U.S.C. 3501 et seq. and have been ute is preempted by Regulation CC to the ex- assigned OMB No. 7100–0271. tent that the state notice requirement ap- (b) Purpose. The purpose of this part plies to accounts as defined by Regulation is to enable consumers to make in- CC. The Wisconsin requirement would con- formed decisions about accounts at de- tinue to apply to accounts, such as savings pository institutions. This part re- and time accounts, not governed by the Reg- quires depository institutions to pro- ulation CC disclosure requirements. vide disclosures so that consumers can [53 FR 32356, Aug. 24, 1988, as amended at 53 make meaningful comparisons among FR 44328, Nov. 2, 1988; 53 FR 47524, Nov. 22, depository institutions. 1988; 53 FR 51748, Dec. 23, 1988; Reg. CC, 54 FR (c) Coverage. This part applies to de- 13838, Apr. 6, 1989; 55 FR 11358, Mar. 28, 1990; pository institutions except for credit 60 FR 51703, Oct. 3, 1995] unions. In addition, the advertising rules in § 230.8 of this part apply to any

997

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01007 Fmt 8010 Sfmt 8010 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR § 230.2 12 CFR Ch. II (1–1–11 Edition)

person who advertises an account of- cash, credit, merchandise, or any fered by a depository institution, in- equivalent) given or offered to a con- cluding deposit brokers. sumer during a year in exchange for (d) Effect on state laws. State law re- opening, maintaining, renewing, or in- quirements that are inconsistent with creasing an account balance. The term the requirements of the act and this does not include interest, other consid- part are preempted to the extent of the eration worth $10 or less given during a inconsistency. Additional information year, the waiver or reduction of a fee, on inconsistent state laws and the pro- or the absorption of expenses. cedures for requesting a preemption de- (g) Business day means a calendar day termination from the Board are set other than a Saturday, a Sunday, or forth in appendix C of this part. any of the legal public holidays speci- [57 FR 43376, Sept. 21, 1992, as amended at 74 fied in 5 U.S.C. 6103(a). FR 5593, Jan. 29, 2009] (h) Consumer means a natural person who holds an account primarily for § 230.2 Definitions. personal, family, or household pur- For purposes of this part, the fol- poses, or to whom such an account is lowing definitions apply: offered. The term does not include a (a) Account means a deposit account natural person who holds an account at a depository institution that is held for another in a professional capacity. by or offered to a consumer. It includes (i) Daily balance method means the ap- time, demand, savings, and negotiable plication of a daily periodic rate to the order of withdrawal accounts. For pur- full amount of principal in the account poses of the advertising requirements each day. in § 230.8 of this part, the term also in- (j) Depository institution and institu- cludes an account at a depository insti- tion mean an institution defined in sec- tution that is held by or on behalf of a tion 19(b)(1)(A)(i)-(vi) of the Federal deposit broker, if any interest in the Reserve Act (12 U.S.C. 461), except cred- account is held by or offered to a con- it unions defined in section sumer. 19(b)(1)(A)(iv). (b) Advertisement means a commercial (k) Deposit broker means any person message, appearing in any medium, who is a deposit broker as defined in that promotes directly or indirectly: section 29(g) of the Federal Deposit In- (1) The availability or terms of, or a surance Act (12 U.S.C. 1831f(g)). deposit in, a new account; and (2) For purposes of § 230.8(a) and (l) Fixed-rate account means an ac- § 230.11 of this part, the terms of, or a count for which the institution con- deposit in, a new or existing account. tracts to give at least 30 calendar days (c) Annual percentage yield means a advance written notice of decreases in percentage rate reflecting the total the interest rate. amount of interest paid on an account, (m) Grace period means a period fol- based on the interest rate and the fre- lowing the maturity of an automati- quency of compounding for a 365-day cally renewing time account during period and calculated according to the which the consumer may withdraw rules in appendix A of this part. funds without being assessed a penalty. (d) Average daily balance method (n) Interest means any payment to a means the application of a periodic consumer or to an account for the use rate to the average daily balance in the of funds in an account, calculated by account for the period. The average application of a periodic rate to the daily balance is determined by adding balance. The term does not include the the full amount of principal in the ac- payment of a bonus or other consider- count for each day of the period and di- ation worth $10 or less given during a viding that figure by the number of year, the waiver or reduction of a fee, days in the period. or the absorption of expenses. (e) Board means the Board of Gov- (o) Interest rate means the annual ernors of the Federal Reserve System. rate of interest paid on an account (f) Bonus means a premium, gift, which does not reflect compounding. award, or other consideration worth For the purposes of the account disclo- more than $10 (whether in the form of sures in § 230.4(b)(1)(i) of this part, the

998

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01008 Fmt 8010 Sfmt 8010 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Federal Reserve System § 230.3

interest rate may, but need not, be re- Electronic Signatures in Global and ferred to as the ‘‘annual percentage National Commerce Act (E-Sign Act) rate’’ in addition to being referred to as (15 U.S.C. 7001 et seq.). The disclosures the ‘‘interest rate.’’ required by §§ 230.4(a)(2) and 230.8 may (p) Passbook savings account means a be provided to the consumer in elec- savings account in which the consumer tronic form without regard to the con- retains a book or other document in sumer consent or other provisions of which the institution records trans- the E-Sign Act in the circumstances actions on the account. set forth in those sections. Disclosures (q) Periodic statement means a state- for each account offered by an institu- ment setting forth information about tion may be presented separately or an account (other than a time account combined with disclosures for the insti- or passbook savings account) that is tution’s other accounts, as long as it is provided to a consumer on a regular clear which disclosures are applicable basis four or more times a year. to the consumer’s account. (r) State means a state, the District (b) General. The disclosures shall re- of Columbia, the commonwealth of flect the terms of the legal obligation Puerto Rico, and any territory or pos- of the account agreement between the session of the United States. consumer and the depository institu- (s) Stepped-rate account means an action. Disclosures may be made in lan- count that has two or more interest guages other than English, provided rates that take effect in succeeding pe- the disclosures are available in English riods and are known when the account upon request. is opened. (c) Relation to Regulation E (12 CFR (t) Tiered-rate account means an ac- part 205). Disclosures required by and count that has two or more interest provided in accordance with the Elec- rates that are applicable to specified tronic Fund Transfer Act (15 U.S.C. balance levels. 1601) and its implementing Regulation (u) Time account means an account E (12 CFR part 205) that are also re- with a maturity of at least seven days quired by this part may be substituted in which the consumer generally does for the disclosures required by this not have a right to make withdrawals part. for six days after the account is (d) Multiple consumers. If an account opened, unless the deposit is subject to is held by more than one consumer, an early withdrawal penalty of at least disclosures may be made to any one of seven days’ interest on amounts with- the consumers. drawn. (e) Oral response to inquiries. In an (v) Variable-rate account means an ac- oral response to a consumer’s inquiry count in which the interest rate may about interest rates payable on its ac- change after the account is opened, un- counts, the depository institution shall less the institution contracts to give at state the annual percentage yield. The least 30 calendar days advance written interest rate may be stated in addition notice of rate decreases. to the annual percentage yield. No [57 FR 43376, Sept. 21, 1992, as amended at 58 other rate may be stated. FR 15081, Mar. 19, 1993; 59 FR 52658, Oct. 19, (f) Rounding and accuracy rules for 1994; 70 FR 29593, May 24, 2005] rates and yields—(1) Rounding. The annual percentage yield, the annual per- § 230.3 General disclosure require- centage yield earned, and the interest ments. rate shall be rounded to the nearest (a) Form. Depository institutions one-hundredth of one percentage point shall make the disclosures required by (.01%) and expressed to two decimal §§ 230.4 through 230.6 of this part, as ap- places. For account disclosures, the in- plicable, clearly and conspicuously, in terest rate may be expressed to more writing, and in a form the consumer than two decimal places. may keep. The disclosures required by (2) Accuracy. The annual percentage this part may be provided to the con- yield (and the annual percentage yield sumer in electronic form, subject to earned) will be considered accurate if compliance with the consumer consent not more that one-twentieth of one and other applicable provisions of the percentage point (.05%) above or below

999

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01009 Fmt 8010 Sfmt 8010 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR § 230.4 12 CFR Ch. II (1–1–11 Edition)

the annual percentage yield (and the (b) Content of account disclosures. Ac- annual percentage yield earned) deter- count disclosures shall include the fol- mined in accordance with the rules in lowing, as applicable: appendix A of this part. (1) Rate information—(i) Annual percentage yield and interest rate. The ‘‘an- [57 FR 43376, Sept. 21, 1992, as amended by Reg. DD, 66 FR 17802, Apr. 4, 2001; 72 FR 63483, nual percentage yield’’ and the ‘‘inter- Nov. 9, 2007] est rate,’’ using those terms, and for fixed-rate accounts the period of time § 230.4 Account disclosures. the interest rate will be in effect. (ii) Variable rates. For variable-rate (a) Delivery of account disclosures—(1) accounts: Account opening. (i) General. A deposi- (A) The fact that the interest rate tory institution shall provide account and annual percentage yield may disclosures to a consumer before an ac- change; count is opened or a service is provided, whichever is earlier. An institu- (B) How the interest rate is deter- tion is deemed to have provided a serv- mined; ice when a fee required to be disclosed (C) The frequency with which the in- is assessed. Except as provided in para- terest rate may change; and graph (a)(1)(ii) of this section, if the (D) Any limitation on the amount consumer is not present at the institu- the interest rate may change. tion when the account is opened or the (2) Compounding and crediting—(i) Fre- service is provided and has not already quency. The frequency with which in- received the disclosures, the institu- terest is compounded and credited. tion shall mail or deliver the disclo- (ii) Effect of closing an account. If con- sures no later than 10 business days sumers will forfeit interest if they after the account is opened or the serv- close the account before accrued inter- ice is provided, whichever is earlier. est is credited, a statement that inter- (ii) Timing of electronic disclosures. If a est will not be paid in such cases. consumer who is not present at the in- (3) Balance information—(i) Minimum stitution uses electronic means (for ex- balance requirements. Any minimum ample, an Internet Web site) to open an balance required to: account or request a service, the dis- (A) Open the account; closures required under paragraph (B) Avoid the imposition of a fee; or (a)(1) of this section must be provided (C) Obtain the annual percentage before the account is opened or the yield disclosed. service is provided. Except for the balance to open the ac- (2) Requests. (i) A depository institu- count, the disclosure shall state how tion shall provide account disclosures the balance is determined for these to a consumer upon request. If a con- purposes. sumer who is not present at the insti- (ii) Balance computation method. An tution makes a request, the institution explanation of the balance computa- shall mail or deliver the disclosures tion method specified in § 230.7 of this within a reasonable time after it re- part used to calculate interest on the ceives the request and may provide the account. disclosures in paper form, or electroni- (iii) When interest begins to accrue. A cally if the consumer agrees. statement of when interest begins to (ii) In providing disclosures upon re- accrue on noncash deposits. quest, the institution may: (4) Fees. The amount of any fee that (A) Specify an interest rate and an- may be imposed in connection with the nual percentage yield that were offered account (or an explanation of how the within the most recent seven calendar fee will be determined) and the condi- days; state that the rate and yield are tions under which the fee may be im- accurate as of an identified date; and posed. provide a telephone number consumers (5) Transaction limitations. Any limi- may call to obtain current rate infor- tations on the number or dollar mation. amount of withdrawals or deposits. (B) State the maturity of a time ac- (6) Features of time accounts. For time count as a term rather than a date. accounts:

1000

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01010 Fmt 8010 Sfmt 8010 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Federal Reserve System § 230.5

(i) Time requirements. The maturity (2) Alternative to notice. As an alter- date. native to the notice described in para- (ii) Early withdrawal penalties. A graph (c)(1) of this section, institutions statement that a penalty will or may may provide account disclosures to be imposed for early withdrawal, how consumers. The disclosures may be pro- it is calculated, and the conditions for vided either with a periodic statement its assessment. or separately, but must be sent no (iii) Withdrawal of interest prior to ma- later than when the periodic statement turity. If compounding occurs during described in paragraph (c)(1) is sent. the term and interest may be with- [57 FR 43376, Sept. 21, 1992, as amended at 58 drawn prior to maturity, a statement FR 15081, Mar. 19, 1993; Reg. DD, 60 FR 5130, that the annual percentage yield as- Jan. 26, 1995; 63 FR 40637, July 30, 1998; 66 FR sumes interest remains on deposit 17802, Apr. 4, 2001; 72 FR 63483, Nov. 9, 2007] until maturity and that a withdrawal will reduce earnings. For accounts with § 230.5 Subsequent disclosures. a stated maturity greater than one (a) Change in terms—(1) Advance notice year that do not compound interest on required. A depository institution shall an annual or more frequent basis, that give advance notice to affected con- require interest payouts at least annu- sumers of any change in a term re- ally, and that disclose an APY deter- quired to be disclosed under § 230.4(b) of mined in accordance with section E of this part if the change may reduce the appendix A of this part, a statement annual percentage yield or adversely that interest cannot remain on deposit affect the consumer. The notice shall and that payout of interest is manda- include the effective date of the tory. change. The notice shall be mailed or (iv) Renewal policies. A statement of delivered at least 30 calendar days be- whether or not the account will renew fore the effective date of the change. automatically at maturity. If it will, a (2) No notice required. No notice under statement of whether or not a grace pe- this section is required for: riod will be provided and, if so, the (i) Variable-rate changes. Changes in length of that period must be stated. If the interest rate and corresponding the account will not renew automati- changes in the annual percentage yield cally, a statement of whether interest in variable-rate accounts. will be paid after maturity if the con- (ii) Check printing fees. Changes in sumer does not renew the account fees assessed for check printing. must be stated. (iii) Short-term time accounts. Changes (7) Bonuses. The amount or type of in any term for time accounts with ma- any bonus, when the bonus will be pro- turities of one month or less. vided, and any minimum balance and (b) Notice before maturity for time ac- time requirements to obtain the bonus. counts longer than one month that renew (c) Notice to existing account holders— automatically. For time accounts with a (1) Notice of availability of disclosures. maturity longer than one month that Depository institutions shall provide a renew automatically at maturity, in- notice to consumers who receive peri- stitutions shall provide the disclosures odic statements and who hold existing described below before maturity. The accounts of the type offered by the in- disclosures shall be mailed or delivered stitution on June 21, 1993. The notice at least 30 calendar days before matu- shall be included on or with the first rity of the existing account. Alter- periodic statement sent on or after natively, the disclosures may be June 21, 1993 (or on or with the first mailed or delivered at least 20 calendar periodic statement for a statement days before the end of the grace period cycle beginning on or after that date). on the existing account, provided a The notice shall state that consumers grace period of at least five calendar may request account disclosures con- days is allowed. taining terms, fees, and rate informa- (1) Maturities of longer than one year. tion for their account. In responding to If the maturity is longer than one year, such a request, institutions shall pro- the institution shall provide account vide disclosures in accordance with disclosures set forth in § 230.4(b) of this paragraph (a)(2) of this section. part for the new account, along with

1001

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01011 Fmt 8010 Sfmt 8010 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR § 230.6 12 CFR Ch. II (1–1–11 Edition)

the date the existing account matures. that term, calculated according to the If the interest rate and annual percent- rules in appendix A of this part. age yield that will be paid for the new (2) Amount of interest. The dollar account are unknown when disclosures amount of interest earned during the are provided, the institution shall state statement period. that those rates have not yet been de- (3) Fees imposed. Fees required to be termined, the date when they will be disclosed under § 230.4(b)(4) of this part determined, and a telephone number that were debited to the account dur- consumers may call to obtain the in- ing the statement period. The fees terest rate and the annual percentage shall be itemized by type and dollar yield that will be paid for the new ac- amounts. Except as provided in count. § 230.11(a)(1) of this part, when fees of (2) Maturities of one year or less but the same type are imposed more than longer than one month. If the maturity once in a statement period, a deposi- is one year or less but longer than one tory institution may itemize each fee month, the institution shall either: separately or group the fees together (i) Provide disclosures as set forth in and disclose a total dollar amount for paragraph (b)(1) of this section; or all fees of that type. (ii) Disclose to the consumer: (4) Length of period. The total number (A) The date the existing account of days in the statement period, or the matures and the new maturity date if beginning and ending dates of the pe- the account is renewed; riod. (B) The interest rate and the annual (5) Aggregate fee disclosure. If applica- percentage yield for the new account if ble, the total overdraft and returned they are known (or that those rates item fees required to be disclosed by have not yet been determined, the date § 230.11(a). when they will be determined, and a (b) Special rule for average daily bal- telephone number the consumer may ance method. In making the disclosures call to obtain the interest rate and the described in paragraph (a) of this sec- annual percentage yield that will be tion, institutions that use the average paid for the new account); and daily balance method and that cal- (C) Any difference in the terms of the culate interest for a period other than new account as compared to the terms the statement period shall calculate required to be disclosed under § 230.4(b) and disclose the annual percentage of this part for the existing account. yield earned and amount of interest (c) Notice before maturity for time ac- earned based on that period rather counts longer than one year that do not than the statement period. The infor- renew automatically. For time accounts mation in paragraph (a)(4) of this sec- with a maturity longer than one year tion shall be stated for that period as that do not renew automatically at well as for the statement period. maturity, institutions shall disclose to consumers the maturity date and [Reg. DD 57 FR 43376, Sept. 21, 1992, as whether interest will be paid after ma- amended at 57 FR 46480, Oct. 9, 1992; 64 FR 49848, Sept. 14, 1999; 66 FR 17802, Apr. 4, 2001; turity. The disclosures shall be mailed 70 FR 29593, May 24, 2005; 75 FR 31676, June 4, or delivered at least 10 calendar days 2010] before maturity of the existing account. § 230.7 Payment of interest. [57 FR 43376, Sept. 21, 1992, as amended at 58 (a) Permissible methods—(1) Balance on FR 15081, Mar. 19, 1993; Reg. DD, 63 FR 52107, which interest is calculated. Institutions Sept. 29, 1998] shall calculate interest on the full amount of principal in an account for § 230.6 Periodic statement disclosures. each day by use of either the daily bal- (a) General rule. If a depository insti- ance method or the average daily bal- tution mails or delivers a periodic ance method. 1 statement, the statement shall include the following disclosures: 1 Institutions shall calculate interest by (1) Annual percentage yield earned. use of a daily rate of at least 1⁄365 of the in- The ‘‘annual percentage yield earned’’ terest rate. In a leap year a daily rate of 1⁄366 during the statement period, using of the interest rate may be used.

1002

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01012 Fmt 8010 Sfmt 8010 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Federal Reserve System § 230.8

(2) Determination of minimum balance may change after the account is to earn interest. An institution shall use opened. the same method to determine any (2) Time annual percentage yield is of- minimum balance required to earn in- fered. The period of time the annual terest as it uses to determine the bal- percentage yield will be offered, or a ance on which interest is calculated. statement that the annual percentage An institution may use an additional yield is accurate as of a specified date. method that is unequivocally bene- (3) Minimum balance. The minimum ficial to the consumer. balance required to obtain the adver- (b) Compounding and crediting policies. tised annual percentage yield. For This section does not require institu- tiered-rate accounts, the minimum bal- tions to compound or credit interest at ance required for each tier shall be any particular frequency. stated in close proximity and with (c) Date interest begins to accrue. In- equal prominence to the applicable an- terest shall begin to accrue not later nual percentage yield. than the business day specified for in- (4) Minimum opening deposit. The min- terest-bearing accounts in section 606 imum deposit required to open the ac- of the Expedited Funds Availability count, if it is greater than the min- Act (12 U.S.C. 4005 et seq.) and imple- imum balance necessary to obtain the menting Regulation CC (12 CFR part advertised annual percentage yield. 229). Interest shall accrue until the day (5) Effect of fees. A statement that funds are withdrawn. fees could reduce the earnings on the account. § 230.8 Advertising. (6) Features of time accounts. For time (a) Misleading or inaccurate advertise- accounts: ments. An advertisement shall not: (i) Time requirements. The term of the (1) Be misleading or inaccurate or account. misrepresent a depository institution’s (ii) Early withdrawal penalties: A deposit contract; or statement that a penalty will or may (2) Refer to or describe an account as be imposed for early withdrawal. ‘‘free’’ or ‘‘no cost’’ (or contain a similar (iii) Required interest payouts. For term) if any maintenance or activity noncompounding time accounts with a fee may be imposed on the account. stated maturity greater than one year The word ‘‘profit’’ shall not be used in that do not compound interest on an referring to interest paid on an ac- annual or more frequent basis, that re- count. quire interest payouts at least annu- (b) Permissible rates. If an advertise- ally, and that disclose an APY deter- ment states a rate of return, it shall mined in accordance with section E of state the rate as an ‘‘annual percentage appendix A of this part, a statement yield’’ using that term. (The abbrevia- that interest cannot remain on deposit tion ‘‘APY’’ may be used provided the and that payout of interest is manda- term ‘‘annual percentage yield’’ is stat- tory. ed at least once in the advertisement.) (d) Bonuses. Except as provided in The advertisement shall not state any paragraph (e) of this section, if a bonus other rate, except that the ‘‘interest is stated in an advertisement, the ad- rate,’’ using that term, may be stated vertisement shall state the following in conjunction with, but not more con- information, to the extent applicable, spicuously than, the annual percentage clearly and conspicuously: yield to which it relates. (1) The ‘‘annual percentage yield,’’ (c) When additional disclosures are re- using that term; quired. Except as provided in paragraph (2) The time requirement to obtain (e) of this section, if the annual per- the bonus; centage yield is stated in an advertise- (3) The minimum balance required to ment, the advertisement shall state obtain the bonus; the following information, to the ex- (4) The minimum balance required to tent applicable, clearly and conspicu- open the account, if it is greater than ously: the minimum balance necessary to ob- (1) Variable rates. For variable-rate tain the bonus; and accounts, a statement that the rate (5) When the bonus will be provided.

1003

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01013 Fmt 8010 Sfmt 8010 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR § 230.9 12 CFR Ch. II (1–1–11 Edition)

(e) Exemption for certain advertise- (c) Record retention. A depository in- ments—(1) Certain media. If an adver- stitution shall retain evidence of com- tisement is made through one of the pliance with this part for a minimum following media, it need not contain of two years after the date disclosures the information in paragraphs (c)(1), are required to be made or action is re- (c)(2), (c)(4), (c)(5), (c)(6)(ii), (d)(4), and quired to be taken. The administrative (d)(5) of this section: agencies responsible for enforcing this (i) Broadcast or electronic media, part may require depository institu- such as television or radio; tions under their jurisdiction to retain (ii) Outdoor media, such as bill- records for a longer period if necessary boards; or to carry out their enforcement respon- (iii) Telephone response machines. sibilities under section 270 of the act. (2) Indoor signs. (i) Signs inside the premises of a depository institution (or [57 FR 43376, Sept. 21, 1992, as amended by the premises of a deposit broker) are Reg. DD, 63 FR 52107, Sept. 29, 1998] not subject to paragraphs (b), (c), (d) or (e)(1) of this section. § 230.10 [Reserved] (ii) If a sign exempt by paragraph § 230.11 Additional disclosure require- (e)(2) of this section states a rate of re- ments for overdraft services. turn, it shall: (A) State the rate as an ‘‘annual per- (a) Disclosure of total fees on periodic centage yield,’’ using that term or the statements—(1) General. A depository in- term ‘‘APY.’’ The sign shall not state stitution must separately disclose on any other rate, except that the interest each periodic statement, as applicable: rate may be stated in conjunction with (i) The total dollar amount for all the annual percentage yield to which it fees or charges imposed on the account relates. for paying checks or other items when (B) Contain a statement advising there are insufficient or unavailable consumers to contact an employee for funds and the account becomes over- further information about applicable drawn, using the term ‘‘Total Overdraft fees and terms. Fees’’; and (f) Additional disclosures in connection (ii) The total dollar amount for all with the payment of overdrafts. Institu- fees or charges imposed on the account tions that promote the payment of for returning items unpaid. overdrafts in an advertisement shall (2) Totals required. The disclosures re- include in the advertisement the dis- quired by paragraph (a)(1) of this sec- closures required by § 230.11(b) of this tion must be provided for the state- part. ment period and for the calendar year- [57 FR 43376, Sept. 21, 1992, as amended at 58 to-date; FR 15081, Mar. 19, 1993; Reg. DD, 60 FR 5130, (3) Format requirements. The aggre- Jan. 26, 1995; Reg. DD, 63 FR 40638, July 30, gate fee disclosures required by para- 1998; Reg. DD, 63 FR 52107, Sept. 29, 1998; 70 graph (a) of this section must be dis- FR 29593, May 24, 2005] closed in close proximity to fees identi- § 230.9 Enforcement and record reten- fied under § 230.6(a)(3), using a format tion. substantially similar to Sample Form (a) Administrative enforcement. Section B–10 in appendix B to this part. 270 of the act contains the provisions (b) Advertising disclosures for overdraft relating to administrative sanctions services—(1) Disclosures. Except as pro- for failure to comply with the require- vided in paragraphs (b)(2),(b)(3), and ments of the act and this part. Compli- (b)(4) of this section, any advertise- ance is enforced by the agencies listed ment promoting the payment of over- in that section. drafts shall disclose in a clear and con- (b) Civil liability. Section 271 of the spicuous manner: Act contains the provisions relating to (i) The fee or fees for the payment of civil liability for failure to comply each overdraft; with the requirements of the act and (ii) The categories of transactions for this part; Section 271 is repealed effec- which a fee for paying an overdraft tive September 30, 2001. may be imposed;

1004

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01014 Fmt 8010 Sfmt 8010 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Federal Reserve System Pt. 230, App. A

(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 (b)(1)(iv) of this section are not re- (2) Communications about the payment quired in connection with any adver- of overdrafts not subject to additional ad- tisement made on an ATM screen or vertising disclosures. Paragraph (b)(1) of using a telephone 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 the Board’s described by § 230.8(e)(2) of this part, Regulation Z (12 CFR part 226); 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 the (v) An ATM receipt; Board’s Regulation Z (12 CFR part 226), (vi) An in-person discussion with a or a service to transfer funds from an- consumer; other account of the consumer. The in- (vii) Disclosures required by federal stitution may, at its option, disclose or other applicable law; additional account balances that in- (viii) Information included on a peri- clude such additional amounts, if the odic statement or a notice informing a institution prominently states that consumer about a specific overdrawn any such balance includes such addi- item or the amount the account is tional amounts and, if applicable, that overdrawn; additional amounts are not available (ix) A term in a deposit account for all transactions. agreement discussing the institution’s [70 FR 29593, May 24, 2005, as amended at 74 right to pay overdrafts; FR 5593, Jan. 29, 2009; 75 FR 31676, June 4, (x) A notice provided to a consumer, 2010] such as at an ATM, that completing a requested transaction may trigger a fee APPENDIX A TO PART 230—ANNUAL for overdrawing an account, or a gen- PERCENTAGE YIELD CALCULATION eral notice that items overdrawing an account may trigger a fee; The annual percentage yield measures the total amount of interest paid on an account (xi) Informational or educational ma- based on the interest rate and the frequency terials concerning the payment of over- of compounding. 1 The annual percentage drafts if the materials do not specifi- cally describe the institution’s over- 1 The annual percentage yield reflects only draft service; or interest and does not include the value of (xii) An opt-out or opt-in notice re- any bonus (or other consideration worth $10 garding the institution’s payment of Continued

1005

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01015 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Pt. 230, App. A 12 CFR Ch. II (1–1–11 Edition)

yield is expressed as an annualized rate, nual percentage yield formula (where ‘‘Inter- based on a 365-day year. 2 Part I of this ap- est’’ is divided by ‘‘Principal’’). pendix discusses the annual percentage yield The annual percentage yield is calculated calculations for account disclosures and ad- by use of the following general formula vertisements, while part II discusses annual (‘‘APY’’ is used for convenience in the for- percentage yield earned calculations for mulas): periodic statements. APY=100 [(1+Interest/Principal)(365/Days in term)¥1] Part I. Annual Percentage Yield for Account Disclosures and Advertising Purposes ‘‘Principal’’ is the amount of funds assumed to have been deposited at the beginning of In general, the annual percentage yield for account disclosures under §§ 230.4 and 230.5 the account. Interest is the total dollar amount of in- and for advertising under § 230.8 is an ‘‘ ’’ annualized rate that reflects the relationship terest earned on the Principal for the term between the amount of interest that would of the account. be earned by the consumer for the term of ‘‘Days in term’’ is the actual number of the account and the amount of principal days in the term of the account. When the used to calculate that interest. Special rules ‘‘days in term’’ is 365 (that is, where the stat- apply to accounts with tiered and stepped in- ed maturity is 365 days or where the account terest rates, and to certain time accounts does not have a stated maturity), the annual with a stated maturity greater than one percentage yield can be calculated by use of year. the following simple formula: APY=100 (Interest/Principal) A. GENERAL RULES Examples Except as provided in part I.E. of this appendix, the annual percentage yield shall be (1) If an institution pays $61.68 in interest calculated by the formula shown below. In- for a 365-day year on $1,000 deposited into a stitutions shall calculate the annual per- NOW account, using the general formula centage yield based on the actual number of above, the annual percentage yield is 6.17%: days in the term of the account. For ac- APY=100[(1+61.68/1,000) (365/365) ¥1] counts without a stated maturity date (such APY=6.17% as a typical savings or transaction account), Or, using the simple formula above (since, the calculation shall be based on an assumed as an account without a stated term, the term of 365 days. In determining the total in- term is deemed to be 365 days): terest figure to be used in the formula, insti- APY=100(61.68/1,000) tutions shall assume that all principal and APY=6.17% interest remain on deposit for the entire (2) If an institution pays $30.37 in interest term and that no other transactions (depos- on a $1,000 six-month certificate of deposit its or withdrawals) occur during the term. 3 (where the six-month period used by the in- For time accounts that are offered in mul- stitution contains 182 days), using the gen- tiples of months, institutions may base the eral formula above, the annual percentage number of days on either the actual number yield is 6.18%: of days during the applicable period, or the number of days that would occur for any ac- APY=100[(1+30.37/1,000) (365/182) ¥1] tual sequence of that many calendar months. APY=6.18% If institutions choose to use the latter rule, B. STEPPED-RATE ACCOUNTS (DIFFERENT they must use the same number of days to RATES APPLY IN SUCCEEDING PERIODS) calculate the dollar amount of interest earned on the account that is used in the an- For accounts with two or more interest rates applied in succeeding periods (where the rates are known at the time the account or less) that may be provided to the con- is opened), an institution shall assume each sumer to open, maintain, increase or renew interest rate is in effect for the length of an account. Interest or other earnings are time provided for in the deposit contract. not to be included in the annual percentage yield if such amounts are determined by cir- Examples cumstances that may or may not occur in the future. (1) If an institution offers a $1,000 6-month 2 Institutions may calculate the annual certificate of deposit on which it pays a 5% percentage yield based on a 365–day or a 366– interest rate, compounded daily, for the first day year in a leap year. three months (which contain 91 days), and a 3 This assumption shall not be used if an 5.5% interest rate, compounded daily, for the institution requires, as a condition of the ac- next three months (which contain 92 days), count, that consumers withdraw interest the total interest for six months is $26.68 during the term. In such a case, the interest and, using the general formula above, the an- (and annual percentage yield calculation) nual percentage yield is 5.39%: shall reflect that requirement. APY=100[(1+26.68/1,000) (365/183) ¥1]

1006

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01016 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Federal Reserve System Pt. 230, App. A

APY=5.39% For purposes of the examples discussed (2) If an institution offers a $1,000 two-year below, assume the following: certificate of deposit on which it pays a 6% interest rate, compounded daily, for the first Interest rate Deposit balance required to earn rate year, and a 6.5% interest rate, compounded (percent) daily, for the next year, the total interest for two years is $133.13, and, using the general 5.25 Up to but not exceeding $2,500. formula above, the annual percentage yield 5.50 Above $2,500 but not exceeding $15,000. is 6.45%: 5.75 Above $15,000. APY=100[(1+133.13/1,000) (365/730) ¥1] Tiering Method A. Under this method, an APY=6.45% institution pays on the full balance in the C. VARIABLE-RATE ACCOUNTS account the stated interest rate that cor- responds to the applicable deposit tier. For For variable-rate accounts without an in- example, if a consumer deposits $8,000, the troductory premium or discounted rate, an institution pays the 5.50% interest rate on institution must base the calculation only the entire $8,000. on the initial interest rate in effect when the When this method is used to determine in- account is opened (or advertised), and as- terest, only one annual percentage yield will sume that this rate will not change during apply to each tier. Within each tier, the an- the year. nual percentage yield will not vary with the Variable-rate accounts with an introduc- amount of principal assumed to have been tory premium (or discount) rate must be cal- deposited. culated like a stepped-rate account. Thus, an For the interest rates and deposit balances institution shall assume that: (1) The intro- assumed above, the institution will state ductory interest rate is in effect for the three annual percentage yields—one cor- length of time provided for in the deposit responding to each balance tier. Calculation contract; and (2) the variable interest rate of each annual percentage yield is similar for that would have been in effect when the ac- this type of account as for accounts with a count is opened or advertised (but for the in- single interest rate. Thus, the calculation is troductory rate) is in effect for the remain- based on the total amount of interest that der of the year. If the variable rate is tied to would be received by the consumer for each an index, the index-based rate in effect at tier of the account for a year and the prin- the time of disclosure must be used for the cipal assumed to have been deposited to earn remainder of the year. If the rate is not tied that amount of interest. to an index, the rate in effect for existing First tier. Assuming daily compounding, the consumers holding the same account (who institution will pay $53.90 in interest on a are not receiving the introductory interest $1,000 deposit. Using the general formula, for rate) must be used for the remainder of the the first tier, the annual percentage yield is year. 5.39%: For example, if an institution offers an ac- APY=100[(1+53.90/1,000) (365/365) ¥1] count on which it pays a 7% interest rate, compounded daily, for the first three months APY=5.39% (which, for example, contain 91 days), while Using the simple formula: the variable interest rate that would have APY=100(53.90/1,000) been in effect when the account was opened APY=5.39% was 5%, the total interest for a 365-day year Second tier. The institution will pay $452.29 for a $1,000 deposit is $56.52 (based on 91 days in interest on an $8,000 deposit. Thus, using at 7% followed by 274 days at 5%). Using the the simple formula, the annual percentage simple formula, the annual percentage yield yield for the second tier is 5.65%: is 5.65%: APY=100(452.29/8,000) APY=100(56.52/1,000) APY=5.65% APY=5.65% Third tier. The institution will pay $1,183.61 in interest on a $20,000 deposit. Thus, using D. TIERED-RATE ACCOUNTS (DIFFERENT RATES the simple formula, the annual percentage APPLY TO SPECIFIED BALANCE LEVELS) yield for the third tier is 5.92%: For accounts in which two or more inter- APY=100(1,183.61/20,000) est rates paid on the account are applicable APY=5.92% to specified balance levels, the institution Tiering Method B. Under this method, an must calculate the annual percentage yield institution pays the stated interest rate only in accordance with the method described on that portion of the balance within the below that it uses to calculate interest. In specified tier. For example, if a consumer de- all cases, an annual percentage yield (or a posits $8,000, the institution pays 5.25% on range of annual percentage yields, if appro- $2,500 and 5.50% on $5,500 (the difference be- priate) must be disclosed for each balance tween $8,000 and the first tier cut-off of tier. $2,500).

1007

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01017 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Pt. 230, App. A 12 CFR Ch. II (1–1–11 Edition)

The institution that computes interest in the third tier. For an assumed maximum bal- this manner must provide a range that shows ance amount of $100,000, interest would be the lowest and the highest annual percent- figured on $2,500 at 5.25% interest rate, plus age yields for each tier (other than for the interest on $12,500 at 5.50% interest rate, plus first tier, which, like the tiers in Method A, interest on $85,000 at 5.75% interest rate. For has the same annual percentage yield the high end of the third tier, therefore, the throughout). The low figure for an annual annual percentage yield, using the simple percentage yield range is calculated based on formula, is 5.87%. the total amount of interest earned for a APY=100 (5,871.79/100,000) year assuming the minimum principal re- APY=5.87% quired to earn the interest rate for that tier. The high figure for an annual percentage Thus, the annual percentage yield range yield range is based on the amount of inter- that would be stated for the third tier is est the institution would pay on the highest 5.61% to 5.87%. principal that could be deposited to earn If the assumed maximum balance amount that same interest rate. If the account does is $1,000,000 instead of $100,000, the institu- not have a limit on the maximum amount tion would use $985,000 rather than $85,000 in that can be deposited, the institution may the last calculation. In that case, for the assume any amount. high end of the third tier the annual percent- For the tiering structure assumed above, age yield, using the simple formula, is 5.91%: the institution would state a total of five an- APY=100 (59134.22/1,000,000) nual percentage yields—one figure for the APY=5.91% first tier and two figures stated as a range Thus, the annual percentage yield range for the other two tiers. that would be stated for the third tier is First tier. Assuming daily compounding, the 5.61% to 5.91%. institution would pay $53.90 in interest on a E. Time Accounts with a Stated Maturity $1,000 deposit. For this first tier, using the Greater than One Year that Pay Interest At simple formula, the annual percentage yield Least Annually is 5.39%: 1. For time accounts with a stated matu- APY=100(53.90/1,000) rity greater than one year that do not com- APY=5.39% pound interest on an annual or more fre- Second tier. For the second tier, the institu- quent basis, and that require the consumer tion would pay between $134.75 and $841.45 in to withdraw interest at least annually, the interest, based on assumed balances of annual percentage yield may be disclosed as $2,500.01 and $15,000, respectively. For equal to the interest rate. $2,500.01, interest would be figured on $2,500 at 5.25% interest rate plus interest on $.01 at Example 5.50%. For the low end of the second tier, therefore, the annual percentage yield is (1) If an institution offers a $1,000 two-year 5.39%, using the simple formula: certificate of deposit that does not compound and that pays out interest semi-annu- APY=100(134.75/2,500) ally by check or transfer at a 6.00% interest APY=5.39% rate, the annual percentage yield may be dis- For $15,000, interest is figured on $2,500 at closed as 6.00%. 5.25% interest rate plus interest on $12,500 at 5.50% interest rate. For the high end of the (2) For time accounts covered by this para- second tier, the annual percentage yield, graph that are also stepped-rate accounts, using the simple formula, is 5.61%: the annual percentage yield may be disclosed as equal to the composite interest rate. APY=100(841.45/15,000) APY=5.61% Example Thus, the annual percentage yield range for the second tier is 5.39% to 5.61%. (1) If an institution offers a $1,000 three- Third tier. For the third tier, the institu- year certificate of deposit that does not com- tion would pay $841.45 in interest on the low pound and that pays out interest annually by end of the third tier (a balance of $15,000.01). check or transfer at a 5.00% interest rate for For $15,000.01, interest would be figured on the first year, 6.00% interest rate for the sec- $2,500 at 5.25% interest rate, plus interest on ond year, and 7.00% interest rate for the $12,500 at 5.50% interest rate, plus interest on third year, the institution may compute the $.01 at 5.75% interest rate. For the low end of composite interest rate and APY as follows: the third tier, therefore, the annual percent- (a) Multiply each interest rate by the num- age yield (using the simple formula) is 5.61%: ber of days it will be in effect; APY=100 (841.45/15,000) (b) Add these figures together; and APY=5.61% (c) Divide by the total number of days in Since the institution does not limit the ac- the term. count balance, it may assume any maximum (2) Applied to the example, the products of amount for the purposes of computing the the interest rates and days the rates are in annual percentage yield for the high end of effect are (5.00%×365 days) 1825, (6.00%×365

1008

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01018 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Federal Reserve System Pt. 230, App. A

days) 2190, and (7.00%×365 days) 2555, respec- yield earned (using the formula above) is tively. The sum of these products, 6570, is di- 6.58%: vided by 1095, the total number of days in the APY Earned=100 [(1+5.25/1,000)(365/30)¥1] term. The composite interest rate and APY APY Earned=6.58% are both 6.00%. (2) Assume an institution calculates interest on the average daily balance for the cal- Part II. Annual Percentage Yield Earned for endar month and provides periodic state- Periodic Statements ments that cover the period from the 16th of The annual percentage yield earned for one month to the 15th of the next month. periodic statements under § 230.6(a) is an The account has a balance of $2,000 Sep- annualized rate that reflects the relationship tember 1 through September 15 and a balance between the amount of interest actually of $1,000 for the remaining 15 days of Sep- earned on the consumer’s account during the tember. The average daily balance for the statement period and the average daily bal- month of September is $1,500, which results ance in the account for the statement period. in $6.50 in interest earned for the month. The Pursuant to § 230.6(b), however, if an institu- annual percentage yield earned for the tion uses the average daily balance method month of September would be shown on the and calculates interest for a period other periodic statement covering September 16 than the statement period, the annual per- through October 15. The annual percentage centage yield earned shall reflect the rela- yield earned (using the formula above) is tionship between the amount of interest 5.40%: earned and the average daily balance in the APY Earned=100 [(6.50/1,500)(365/30)¥1] account for that other period. APY Earned=5.40% The annual percentage yield earned shall (3) Assume an institution calculates inter- be calculated by using the following for- est on the average daily balance for a quar- mulas (‘‘APY Earned’’ is used for convenience ter (for example, the calendar months of in the formulas): September through November), and provides A. General formula. monthly periodic statements covering cal- APY Earned=100 [(1+Interest earned/Bal- endar months. The account has a balance of ( ) ance) 365/Days in period ¥1] $1,000 throughout the 30 days of September, a ‘‘Balance’’ is the average daily balance in balance of $2,000 throughout the 31 days of the account for the period. October, and a balance of $3,000 throughout ‘‘Interest earned’’ is the actual amount of the 30 days of November. The average daily interest earned on the account for the pe- balance for the quarter is $2,000, which re- riod. sults in $21 in interest earned for the quar- ‘‘Days in period’’ is the actual number of ter. The annual percentage yield earned days for the period. would be shown on the periodic statement for November. The annual percentage yield Examples earned (using the formula above) is 4.28%: (1) Assume an institution calculates inter- APY Earned=100 [(1+21/2,000)(365/91)¥1] est for the statement period (and uses either APY Earned=4.28% the daily balance or the average daily bal- B. Special formula for use where periodic ance method), and the account has a balance statement is sent more often than the period for of $1,500 for 15 days and a balance of $500 for which interest is compounded. the remaining 15 days of a 30-day statement Institutions that use the daily balance period. The average daily balance for the pe- method to accrue interest and that issue riod is $1,000. The interest earned (under ei- periodic statements more often than the pe- ther balance computation method) is $5.25 riod for which interest is compounded shall during the period. The annual percentage use the following special formula:

⎪⎧ ⎡ (/)Interest earned Balance ⎤ ⎪⎫ APY Earned =+100⎨ ⎢ 1()Compounding ⎥ (/365 Compounding )− 1⎬ ⎩⎪ ⎣ Days in period ⎦ ⎭⎪

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

1009

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01019 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR EC27SE91.048 Pt. 230, App. B 12 CFR Ch. II (1–1–11 Edition)

$4.11 for the period, and the annual percentage yield earned (using the special formula above) is 5.00%:

⎧ ⎫ ⎡ (/,)4.111 000 ⎤ (/)365 365 APY Earned =+100⎨⎢ 1 ()365⎥ − 1⎬ ⎩⎣ 30 ⎦ ⎭

APY Earned=5.00% Frequency of Rate Changes [57 FR 43376, Sept. 21, 1992, as amended at 57 We may change the interest rate on your FR 46480, Oct. 9, 1992; 58 FR 15082, Mar. 19, account [every (time period)/at any time]. 1993; 60 FR 5130, Jan. 26, 1995; Reg. DD, 63 FR 40638, July 30, 1998] Limitations on Rate Changes The interest rate for your account will APPENDIX B TO PART 230—MODEL never change by more than ll% each (time CLAUSES AND SAMPLE FORMS period). The interest rate will never be [less/more] Table of contents than ll%. B–1—Model Clauses for Account Disclosures or (Section 230.4(b)) The interest rate will never [exceedll% B–2—Model Clauses for Change in Terms above/drop more than ll% below] the inter- (Section 230.5(a)) est rate initially disclosed to you. B–3—Model Clauses for Pre-Maturity Notices (iii) Stepped-rate accounts for Time Accounts (Section 230.5(b)(2) The initial interest rate for your account and 230.5(d)) is ll%. You will be paid this rate [for (time B–4—Sample Form (Multiple Accounts) period)/until (date)]. After that time, the in- B–5—Sample Form (Now Account) terest rate for your account will be ll%, B–6—Sample Form (Tiered Rate Money Mar- and you will be paid this rate [for (time pe- ket Account) riod)/until (date)]. The annual percentage B–7—Sample Form (Certificate of Deposit) yield for your account is ll%. B–8—Sample Form (Certificate of Deposit (iv) Tiered-rate accounts Advertisement) Tiering Method A B–9—Sample Form (Money Market Account Advertisement) • If your [daily balance/average daily bal- B–10—Sample Form (Aggregate Overdraft ance] is $ll or more, the interest rate paid and Returned Item Fees) on the entire balance in your account will be ll% with an annual percentage yield of B–1—MODEL CLAUSES FOR ACCOUNT ll%. DISCLOSURES • If your [daily balance/average daily balance] is more than $ll, but less than $ll, (a) Rate information the interest rate paid on the entire balance (i) Fixed-rate accounts in your account will be ll% with an annual The interest rate on your account is ll% percentage yield of ll%. with an annual percentage yield of ll%. • If your [daily balance/average daily bal- You will be paid this rate [for (time period)/ ance] is $ll or less, the interest rate paid until (date)/ for at least 30 calendar days]. on the entire balance will be ll% with an (ii) Variable-rate accounts annual percentage yield of ll%. The interest rate on your account is ll% with an annual percentage yield of ll%. Tiering Method B Your interest rate and annual percentage • An interest rate of ll% will be paid yield may change. only for that portion of your [daily balance/ average daily balance] that is greater than Determination of Rate $ll. The annual percentage yield for this The interest rate on your account is based tier will range from ll% to ll%, depend- on (name of index) [plus/minus a margin of ing on the balance in the account. • llll]. An interest rate of ll% will be paid only for that portion of your [daily balance/ or average daily balance] that is greater than At our discretion, we may change the in- $ll, but less than $ll. The annual per- terest rate on your account. centage yield for this tier will range from

1010

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01020 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR EC27SE91.049 Federal Reserve System Pt. 230, App. B

ll% to ll%, depending on the balance in Interest begins to accrue on the business the account. day you deposit noncash items (for example, • If your [daily balance/average daily bal- checks). ance] is $ll or less, the interest rate paid (f) Fees on the entire balance will be ll% with an The following fees may be assessed against annual percentage yield of ll%. your account: (b) Compounding and crediting lllllllllllllll$llll lllllllllllllll$llll (i) Frequency lllllllllllllll$llll Interest will be compounded [on a ll llll(conditions for imposing fee) $llll basis/every (time period)]. Interest will be lllllllllllllllll% of credited to your account [on a ll basis/ llll. every (time period)]. (g) Transaction limitations (ii) Effect of closing an account The minimum amount you may [withdraw/ If you close your account before interest is write a check for] is $lll. credited, you will not receive the accrued in- You may make llll [deposits into/with- terest. drawals from] your account each (time pe- (c) Minimum balance requirements riod). (i) To open the account You may not make [deposits into/withdrawals from] your account until the matu- You must deposit $lll to open this account. rity date. (ii) To avoid imposition of fees (h) Disclosures relating to time accounts (i) Time requirements A minimum balance fee of $lll will be Your account will mature on (date). imposed every (time period) if the balance in Your account will mature in (time period). the account falls below $lll any day of the (ii) Early withdrawal penalties (time period). We [will/may] impose a penalty if you A minimum balance fee of $ will be lll withdraw [any/all] of the [deposited funds/ imposed every (time period) if the average principal] before the maturity date. The fee daily balance for the (time period) falls imposed will equal lll days/week[s]/ below $ . The average daily balance is lll month[s] of interest. calculated by adding the principal in the account for each day of the period and dividing or that figure by the number of days in the pe- We [will/may] impose a penalty of $lll if riod. you withdraw [any/all] of the [deposited (iii) To obtain the annual percentage yield funds/principal] before the maturity date. disclosed If you withdraw some of your funds before You must maintain a minimum balance of maturity, the interest rate for the remaining $lll in the account each day to obtain the funds in your account will be lll% with disclosed annual percentage yield. an annual percentage yield of lll%. You must maintain a minimum average (iii) Withdrawal of interest prior to matu- daily balance of $lll to obtain the dis- rity closed annual percentage yield. The average The annual percentage yield assumes in- daily balance is calculated by adding the terest will remain on deposit until maturity. principal in the account for each day of the A withdrawal will reduce earnings. period and dividing that figure by the num- (iv) Renewal policies ber of days in the period. (1) Automatically renewable time accounts (d) Balance computation method This account will automatically renew at (i) Daily balance method maturity. We use the daily balance method to cal- You will have [lll calendar/business] culate the interest on your account. This days after the maturity date to withdraw method applies a daily periodic rate to the funds without penalty. principal in the account each day. or (ii) Average daily balance method There is no grace period following the ma- We use the average daily balance method turity of this account to withdraw funds to calculate interest on your account. This without penalty. method applies a periodic rate to the average (2) Non-automatically renewable time ac- daily balance in the account for the period. counts The average daily balance is calculated by This account will not renew automatically adding the principal in the account for each at maturity. If you do not renew the ac- day of the period and dividing that figure by count, your deposit will be placed in [an in- the number of days in the period. terest-bearing/a noninterest-bearing] ac- (e) Accrual of interest on noncash deposits count. Interest begins to accrue no later than the (v) Required interest distribution. business day we receive credit for the deposit This account requires the distribution of of noncash items (for example, checks). interest and does not allow interest to re- or main in the account.

1011

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01021 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Pt. 230, App. B 12 CFR Ch. II (1–1–11 Edition)

(i) Bonuses B–3—MODEL CLAUSES FOR PRE-MATURITY You will [be paid/receive] [$lll /(descrip- NOTICES FOR TIME ACCOUNTS tion of item)] as a bonus [when you open the (a) Automatically renewable time accounts account/on (date) lll]. with maturities of one year or less but You must maintain a minimum [daily bal- longer than one month ance/average daily balance] of $lll to ob- Your account will mature on (date). tain the bonus. If the account renews, the new maturity To earn the bonus, [$lll /your entire date will be (date). principal] must remain on deposit [for (time The interest rate for the renewed account period)/until (date)lll]. will be lll% with an annual percentage yield of lll%. B–2—MODEL CLAUSES FOR CHANGE IN TERMS or On (date), the cost of (type of fee) will in- The interest rate and annual percentage crease to $lll. yield have not yet been determined. They On (date), the interest rate on your ac- will be available on (date). Please call (phone count will decrease to lll% with an an- number) to learn the interest rate and annual percentage yield of lll%. nual percentage yield for your new account. On (date), the minimum [daily balance/av- (b) Non-automatically renewable time ac- erage daily balance] required to avoid impo- counts with maturities longer than one year Your account will mature on (date). sition of a fee will increase to $lll. If you do not renew the account, interest [will/will not] be paid after maturity.

1012

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01022 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Federal Reserve System Pt. 230, App. B

1013

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01023 Fmt 8010 Sfmt 8006 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR EC27SE91.050 Pt. 230, App. B 12 CFR Ch. II (1–1–11 Edition)

1014

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01024 Fmt 8010 Sfmt 8006 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR EC27SE91.051 Federal Reserve System Pt. 230, App. B

1015

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01025 Fmt 8010 Sfmt 8006 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR EC27SE91.052 Pt. 230, App. B 12 CFR Ch. II (1–1–11 Edition)

1016

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01026 Fmt 8010 Sfmt 8006 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR EC27SE91.053 Federal Reserve System Pt. 230, App. B

1017

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01027 Fmt 8010 Sfmt 8006 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR EC27SE91.054 Pt. 230, App. B 12 CFR Ch. II (1–1–11 Edition)

1018

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01028 Fmt 8010 Sfmt 8006 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR EC27SE91.055 Federal Reserve System Pt. 230, App. B

1019

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01029 Fmt 8010 Sfmt 8006 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR EC27SE91.056 Pt. 230, App. B 12 CFR Ch. II (1–1–11 Edition)

1020

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01030 Fmt 8010 Sfmt 8006 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR EC27SE91.057 Federal Reserve System Pt. 230, App. B

[57 FR 43376, Sept. 21, 1992, as amended at 57 FR 46480, Oct. 9, 1992; Reg. DD, 60 FR 5131, Jan. 26, 1995; 74 FR 5593, Jan. 29, 2009; 74 FR 17768, Apr. 17, 2009]

1021

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01031 Fmt 8010 Sfmt 8026 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR EC27SE91.058 ER17AP09.009 Pt. 230, App. C 12 CFR Ch. II (1–1–11 Edition)

APPENDIX C TO PART 230—EFFECT ON act. Except in unusual circumstances, inter- STATE LAWS pretations will not be issued separately but will be incorporated in an official com- (a) Inconsistent Requirements mentary to this part, which will be amended State law requirements that are incon- periodically. No staff interpretations will be sistent with the requirements of the act and issued approving depository institutions’ this part are preempted to the extent of the forms, statements, or calculation tools or inconsistency. A state law is inconsistent if methods. it requires a depository institution to make disclosures or take actions that contradict SUPPLEMENT I TO PART 230—OFFICIAL the requirements of the federal law. A state STAFF INTERPRETATIONS law is also contradictory if it requires the INTRODUCTION use of the same term to represent a different amount or a different meaning than the fed- 1. Official status. This commentary is the eral law, requires the use of a term different means by which the Division of Consumer from that required in the federal law to de- and Community Affairs of the Federal Re- scribe the same item, or permits a method of serve Board issues official staff interpreta- calculating interest on an account different tions of Regulation DD. Good faith compli- from that required in the federal law. ance with this commentary affords protection from liability under section 271(f) of the (b) Preemption Determinations Truth in Savings Act. A depository institution, state, or other in- Section 230.1 Authority, purpose, coverage, terested party may request the Board to de- and effect on state laws termine whether a state law requirement is (c) Coverage inconsistent with the federal requirements. 1. Foreign applicability. Regulation DD ap- A request for a determination shall be in plies to all depository institutions, except writing and addressed to the Secretary, credit unions, that offer deposit accounts to Board of Governors of the Federal Reserve residents (including resident aliens) of any System, Washington, DC 20551. Notice that state as defined in § 230.2(r). Accounts held in the Board intends to make a determination an institution located in a state are covered, (either on request or on its own motion) will even if funds are transferred periodically to be published in the FEDERAL REGISTER, with a location outside the United States. Ac- an opportunity for public comment unless the Board finds that notice and opportunity counts held in an institution located outside for comment would be impracticable, unnec- the United States are not covered, even if essary, or contrary to the public interest and held by a U.S. resident. publishes its reasons for such decision. No- 2. Persons who advertise accounts. Persons tice of a final determination will be pub- who advertise accounts are subject to the advertising rules. For example, if a deposit lished in the FEDERAL REGISTER and furnished to the party who made the request broker places an advertisement offering con- and to the appropriate state official. sumers an interest in an account at a depository institution, the advertising rules apply (c) Effect of Preemption Determinations to the advertisement, whether the account is to be held by the broker or directly by the After the Board determines that a state consumer. law is inconsistent, a depository institution may not make disclosures using the incon- Section 230.2 Definitions sistent term or take actions relying on the (a) Account inconsistent law. 1. Covered accounts. Examples of accounts subject to the regulation are: (d) Reversal of Determination i. Interest-bearing and noninterest-bearing The Board reserves the right to reverse a accounts determination for any reason bearing on the ii. Deposit accounts opened as a condition coverage or effect of state or federal law. No- of obtaining a credit card tice of reversal of a determination will be iii. Accounts denominated in a foreign cur- published in the FEDERAL REGISTER and a rency copy furnished to the appropriate state offi- iv. Individual retirement accounts (IRAs) cial. and simplified employee pension (SEP) accounts APPENDIX D TO PART 230—ISSUANCE OF v. Payable on death (POD) or ‘‘Totten STAFF INTERPRETATIONS trust’’ accounts 2. Other accounts. Examples of accounts not Officials in the Board’s Division of Con- subject to the regulation are: sumer and Community Affairs are authorized i. Mortgage escrow accounts for collecting to issue official staff interpretations of this taxes and property insurance premiums part. These interpretations provide the pro- ii. Accounts established to make periodic tections afforded under section 271(f) of the disbursements on construction loans

1022

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01032 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Federal Reserve System Pt. 230, Supp. I

iii. Trust accounts opened by a trustee pur- clude discount coupons for goods or services suant to a formal written trust agreement at restaurants or stores. (not merely declarations of trust on a signa- 2. De minimis rule. Items with a de minimis ture card such as a ‘‘Totten trust,’’ or an IRA value of $10 or less are not bonuses. Institu- and SEP account) tions may rely on the valuation standard iv. Accounts opened by an executor in the used by the Internal Revenue Service to de- name of a decedent’s estate termine if the value of the item is de minimis. 3. Other investments. The term ‘‘account’’ Examples of items of de minimis value are: does not apply to all products of a depository i. Disability insurance premiums valued at institution. Examples of products not cov- an amount of $10 or less per year ered are: ii. Coffee mugs, T-shirts or other merchan- i. Government securities dise with a market value of $10 or less ii. Mutual funds 3. Aggregation. In determining if an item iii. Annuities valued at $10 or less is a bonus, institutions iv. Securities or obligations of a depository must aggregate per account per calendar institution year items that may be given to consumers. v. Contractual arrangements such as re- In making this determination, institutions purchase agreements, interest rate swaps, aggregate per account only the market value and bankers acceptances of items that may be given for a specific pro- (b) Advertisement motion. To illustrate, assume an institution 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 § 230.8(b) of this part 1. Professional capacity. Examples of ac- through § 230.8(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. But 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

1023

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01033 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Pt. 230, Supp. I 12 CFR Ch. II (1–1–11 Edition)

1. Foreign institutions. Branches of foreign (v) Variable-rate account institutions located in the United States are 1. General. A certificate of deposit permit- subject to the regulation if they offer deposit ting one or more rate adjustments prior to accounts to consumers. Edge Act and Agree- maturity at the consumer’s option is a vari- ment corporations, and agencies of foreign able-rate account. institutions, are not depository institutions Section 230.3 General disclosure require- for purposes of this regulation. (k) Deposit broker ments 1. General. A deposit broker is a person who (a) Form is in the business of placing or facilitating 1. Design requirements. Disclosures must be the placement of deposits in an institution, presented in a format that allows consumers as defined by the Federal Deposit Insurance to readily understand the terms of their ac- Act (12 U.S.C. 29(g)). count. Institutions are not required to use a (n) Interest particular type size or typeface, nor are in- 1. Relation to Regulation Q. While bonuses stitutions required to state any term more are not interest for purposes of this regula- conspicuously than any other term. Disclo- tion, other regulations may treat them as sures may be made: the equivalent of interest. For example, Reg- i. In any order ulation Q identifies payments of cash or mer- ii. In combination with other disclosures chandise that violate the prohibition against or account terms paying interest on demand accounts. (See 12 iii. In combination with disclosures for CFR § 217.2(d).) other types of accounts, as long as it is clear (p) Passbook savings account to consumers which disclosures apply to 1. Relation to Regulation E. Passbook sav- their account ings accounts include accounts accessed by iv. On more than one page and on the front preauthorized electronic fund transfers to and reverse sides the account (as defined in 12 CFR § 205.2(j)), v. By using inserts to a document or filling such as an account that receives direct de- in blanks posit of social security payments. Accounts vi. On more than one document, as long as permitting access by other electronic means the documents are provided at the same time are not ‘‘passbook saving accounts’’ and must 2. Consistent terminology. Institutions must comply with the requirements of § 230.6 if use consistent terminology to describe terms statements are sent four or more times a or features required to be disclosed. For ex- year. ample, if an institution describes a monthly (q) Periodic statement fee (regardless of account activity) as a 1. Examples. Periodic statements do not in- ‘‘monthly service fee’’ in account-opening dis- clude: closures, the periodic statement and change- i. Additional statements provided solely in-term notices must use the same termi- upon request nology so that consumers can readily iden- ii. General service information such as a tify the fee. quarterly newsletter or other correspondence (b) General describing available services and products 1. Specificity of legal obligation. Institutions (t) Tiered-rate account may refer to the calendar month or to rough- 1. Time accounts. Time accounts paying dif- ly equivalent intervals during a calendar ferent rates based solely on the amount of year as a ‘‘month.’’ the initial deposit are not tiered-rate ac- (c) Relation to Regulation E counts. 1. General rule. Compliance with Regula- 2. Minimum balance requirements. A require- tion E (12 CFR part 205) is deemed to satisfy ment to maintain a minimum balance to the disclosure requirements of this regula- earn interest does not make an account a tion, such as when: tiered-rate account. i. An institution changes a term that trig- (u) Time account gers a notice under Regulation E, and uses 1. Club accounts. Although club accounts the timing and disclosure rules of Regulation typically have a maturity date, they are not E for sending change-in-term notices time accounts unless they also require a pen- ii. Consumers add an ATM access feature alty of at least seven days’ interest for with- to an account, and the institution provides drawals during the first six days after the ac- disclosures pursuant to Regulation E, includ- count is opened. ing disclosure of fees (See 12 CFR § 205.7.) 2. Relation to Regulation D. Regulation D iii. An institution complying with the tim- permits in limited circumstances the with- ing rules of Regulation E discloses at the drawal of funds without penalty during the same time fees for electronic services (such first six days after a ‘‘time deposit’’ is opened. as for balance inquiry fees at ATMs) required (See 12 CFR § 204.2(c)(1)(i).) But the fact that to be disclosed by this regulation but not by a consumer makes a withdrawal as per- Regulation E mitted by Regulation D does not disqualify iv. An institution relies on Regulation E’s the account from being a time account for rules regarding disclosure of limitations on purposes of this regulation. the frequency and amount of electronic fund

1024

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01034 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Federal Reserve System Pt. 230, Supp. I

transfers, including security-related excep- 1. Inquiries versus requests. A response to an tions. But any limitations on ‘‘intra-institu- oral inquiry (by telephone or in person) tional transfers’’ to or from the consumer’s about rates and yields or fees does not trig- other accounts during a given time period ger the duty to provide account disclosures. must be disclosed, even though intra-institu- But when consumers ask for written infor- tional transfers are exempt from Regulation mation about an account (whether by tele- E. phone, in person, or by other means), the in- (e) Oral response to inquiries stitution must provide disclosures unless the 1. Application of rule. Institutions are not account is no longer offered to the public. required to provide rate information orally. 2. General requests. When responding to a 2. Relation to advertising. The advertising consumer’s general request for disclosures rules do not cover an oral response to a ques- about a type of account (a NOW account, for tion about rates. example), an institution that offers several 3. Existing accounts. This paragraph does variations may provide disclosures for any not apply to oral responses about rate infor- one of them. mation for existing accounts. For example, if 3. Timing for response. Ten business days is a consumer holding a one-year certificate of a reasonable time for responding to requests deposit (CD) requests interest rate informa- for account information that consumers do tion about the CD during the term, the insti- not make in person, including requests made tution need not disclose the annual percent- by electronic means (such as by electronic age yield. mail). (f) Rounding and accuracy rules for rates and 4. Use of electronic means. If a consumer who is not present at the institution makes a re- yields quest for account disclosures, including a re- (f)(1) Rounding quest made by telephone, e-mail, 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 e-mail 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 § 230.4(a)(2) in elec- not purposely incorporate the tolerance into tronic form. their calculation of yields. (a)(2)(ii)(A) Section 230.4 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: (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 exam- ii. A consumer changes a term for a renew- ple, illustrates a statement of the maturity able time account (see § 230.5(b)–5 regarding of a time account as a term rather than a disclosure alternatives) date (‘‘January 10, 1995’’). iii. An institution transfers funds from an (b) Content of account disclosures account to open a new account not at the (b)(1) Rate information consumer’s request, unless the institution (b)(1)(i) Annual percentage yield and interest previously gave account disclosures and any rate change-in-term notices for the new account 1. Rate disclosures. In addition to the inter- iv. An institution accepts a deposit from a est rate and annual percentage yield, institu- consumer to an account that the institution tions may disclose a periodic rate cor- had deemed closed for the purpose of treat- responding to the interest rate. No other ing accrued but uncredited interest as for- rate or yield (such as ‘‘tax effective yield’’) is feited interest (see § 230.7(b)–3) permitted. If the annual percentage yield is 2. Acquired accounts. New account disclo- the same as the interest rate, institutions sures need not be given when an institution may disclose a single figure but must use acquires an account through an acquisition both terms. of or merger with another institution (but 2. Fixed-rate accounts. For fixed-rate time see § 230.5(a) regarding advance notice re- accounts paying the opening rate until ma- quirements if terms are changed). turity, institutions may disclose the period (a)(2) Requests of time the interest rate will be in effect by (a)(2)(i) stating the maturity date. (See appendix B,

1025

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01035 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Pt. 230, Supp. I 12 CFR Ch. II (1–1–11 Edition)

B–7—Sample Form.) For other fixed-rate ac- 1. Additional information. Institutions may counts, institutions may use a date (‘‘This disclose additional information such as the rate will be in effect through May 4, 1995’’) or time of day after which deposits are treated a period (‘‘This rate will be in effect for at as having been received the following busi- least 30 days’’). ness day, and may use additional descriptive 3. Tiered-rate accounts. Each interest rate, terms such as ‘‘ledger’’ or ‘‘collected’’ balances along with the corresponding annual per- to disclose when interest begins to accrue. centage yield for each specified balance level (b)(4) Fees (or range of annual percentage yields, if ap- 1. Covered fees. The following are types of propriate), must be disclosed for tiered-rate fees that must be disclosed: accounts. (See appendix A, Part I, Paragraph i. Maintenance fees, such as monthly serv- D.) ice fees 4. Stepped-rate accounts. A single composite ii. Fees to open or to close an account annual percentage yield must be disclosed iii. Fees related to deposits or withdrawals, for stepped-rate accounts. (See appendix A, such as fees for use of the institution’s ATMs Part I, Paragraph B.) The interest rates and iv. Fees for special services, such as stop- the period of time each will be in effect also payment fees, fees for balance inquiries or must be provided. When the initial rate of- verification of deposits, fees associated with fered for a specified time on a variable-rate checks returned unpaid, and fees for regu- account is higher or lower than the rate that larly sending to consumers checks that oth- would otherwise be paid on the account, the erwise would be held by the institution calculation of the annual percentage yield 2. Other fees. Institutions need not disclose must be made as if for a stepped-rate ac- fees such as the following: count. (See appendix A, part I, Paragraph C.) i. Fees for services offered to account and (b)(1)(ii) Variable rates nonaccount holders alike, such as travelers (b)(1)(ii)(B) checks and wire transfers (even if different 1. Determining interest rates. To disclose how amounts are charged to account and non- the interest rate is determined, institutions account holders) must: ii. Incidental fees, such as fees associated i. Identify the index and specific margin, if with state escheat laws, garnishment or at- the interest rate is tied to an index torneys fees, and fees for photocopying ii. State that rate changes are within the 3. Amount of fees. Institutions must state institution’s discretion, if the institution the amount and conditions under which a fee does not tie changes to an index may be imposed. Naming and describing the (b)(1)(ii)(C) fee (such as $4.00 monthly service fee ) will 1. Frequency of rate changes. An institution ‘‘ ’’ typically satisfy these requirements. reserving the right to change rates at its dis- 4. Tied-accounts. Institutions must state if cretion must state the fact that rates may fees that may be assessed against an account change at any time. are tied to other accounts at the institution. (b)(1)(ii)(D) 1. Limitations. A floor or ceiling on rates or For example, if an institution ties the fees on the amount the rate may decrease or in- payable on a NOW account to balances held crease during any time period must be dis- in the NOW account and a savings account, closed. Institutions need not disclose the ab- the NOW account disclosures must state that sence of limitations on rate changes. fact and explain how the fee is determined. (b)(2) Compounding and crediting 5. Fees for overdrawing an account. Under (b)(2)(ii) Effect of closing an account § 230.4(b)(4) of this part, institutions must 1. Deeming an account closed. An institution disclose the conditions under which a fee may, subject to state or other law, provide in may be imposed. In satisfying this require- its deposit contracts the actions by con- ment institutions must specify the cat- sumers that will be treated as closing the ac- egories of transactions for which an over- count and that will result in the forfeiture of draft fee may be imposed. An exhaustive list accrued but uncredited interest. An example of transactions is not required. It is suffi- is the withdrawal of all funds from the ac- cient for an institution to state that the fee count prior to the date that interest is cred- applies to overdrafts ‘‘created by check, in- ited. person withdrawal, ATM withdrawal, or (b)(3) Balance information other electronic means,’’ as applicable. Dis- (b)(3)(ii) Balance computation method closing a fee ‘‘for overdraft items’’ would not 1. Methods and periods. Institutions may be sufficient. use different methods or periods to calculate (b)(5) Transaction limitations minimum balances for purposes of imposing 1. General rule. Examples of limitations on a fee (the daily balance for a calendar the number or dollar amount of deposits or month, for example) and accruing interest withdrawals that institutions must disclose (the average daily balance for a statement are: period, for example). Each method and cor- i. Limits on the number of checks that responding period must be disclosed. may be written on an account within a given (b)(3)(iii) When interest begins to accrue time period

1026

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01036 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Federal Reserve System Pt. 230, Supp. I

ii. Limits on withdrawals or deposits dur- 1. Form of notice. Institutions may provide ing the term of a time account a change-in-term notice on or with a periodic iii. Limitations required by Regulation D statement or in another mailing. If an insti- on the number of withdrawals permitted tution provides notice through revised ac- from money market deposit accounts by count disclosures, the changed term must be check to third parties each month. Institu- highlighted in some manner. For example, tions need not disclose reservations of right institutions may note that a particular fee to require notices for withdrawals from ac- has been changed (also specifying the new counts required by federal or state law. amount) or use an accompanying letter that (b)(6) Features of time accounts refers to the changed term. (b)(6)(i) Time requirements 2. Effective date. An example of language 1. ‘‘Callable’’ time accounts. In addition to for disclosing the effective date of a change the maturity date, an institution must state is ‘‘As of November 21, 1994.’’ the date or the circumstances under which it 3. Terms that change upon the occurrence of may redeem a time account at the institu- an event. An institution offering terms that 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 regulation. 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 the termining the term of a time account, insti- institution assesses 30 days’ interest during tutions may disregard the fact that the term the month of April, or selects a time period will be extended beyond the disclosed num- between 28 and 31 days for calculating the in- ber of days because the disclosed maturity terest for all early withdrawals regardless of falls on a nonbusiness day. For example, a 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 ac- ing a grace period on time accounts that count 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 230.5 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.

1027

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01037 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Pt. 230, Supp. I 12 CFR Ch. II (1–1–11 Edition)

4. Club accounts. If consumers have agreed ply with this section unless it states interest to the transfer of payments from another ac- or rate information. (See 12 CFR § 205.9(b).) count to a club time account for the next 3. Combined statements. Institutions may club period, the institution must comply provide information about an account (such with the requirements for automatically re- as an MMDA) on the periodic statement for newable time accounts—even though con- another account (such as a NOW account) sumers may withdraw funds from the club without triggering the disclosures required account at the end of the current club pe- by this section, as long as: riod. i. The information is limited to the ac- 5. Renewal of a time account. In the case of count number, the type of account, or bal- a change in terms that becomes effective if a ance information, and rollover time account is subsequently re- ii. The institution also provides a periodic newed: statement complying with this section for i. If the change is initiated by the institu- each account. tion, the disclosure requirements of this 4. Other information. Additional informa- paragraph apply. (Paragraph 230.5(a) applies tion that may be given on or with a periodic if the change becomes effective prior to the statement includes: maturity of the existing time account.) i. Interest rates and corresponding periodic ii. If the change is initiated by the con- rates applied to balances during the state- sumer, the account opening disclosure re- ment period quirements of § 230.4(b) apply. (If the notice ii. The dollar amount of interest earned required by this paragraph has been pro- year-to-date vided, institutions may give new account iii. Bonuses paid (or any de minimis con- disclosures or disclosures highlighting only sideration of $10 or less) the new term.) iv. Fees for products such as safe deposit 6. Example. If a consumer receives a pre- boxes maturity notice on a one-year time account (a)(1) Annual percentage yield earned and requests a rollover to a six-month ac- 1. Ledger and collected balances. Institutions count, the institution must provide either that accrue interest using the collected bal- account opening disclosures including the ance method may use either the ledger or new maturity date or, if all other terms pre- the collected balance in determining the an- viously disclosed in the prematurity notice nual percentage yield earned. remain the same, only the new maturity (a)(2) Amount of interest date. 1. Accrued interest. Institutions must state (b)(1) Maturities of longer than one year the amount of interest that accrued during 1. Highlighting changed terms. Institutions the statement period, even if it was not cred- need not highlight terms that changed since ited. the last account disclosures were provided. 2. Terminology. In disclosing interest (c) Notice for time accounts one month or less earned for the period, institutions must use that renew automatically the term ‘‘interest’’ or terminology such as: (d) Notice before maturity for time accounts i. ‘‘Interest paid,’’ to describe interest that longer than one year that do not renew auto- has been credited matically ii. ‘‘Interest accrued’’ or ‘‘interest earned,’’ 1. Subsequent account. When funds are to indicate that interest is not yet credited transferred following maturity of a nonroll- 3. Closed accounts. If consumers close an ac- over time account, institutions need not pro- count between crediting periods and forfeits vide account disclosures unless a new ac- accrued interest, the institution may not count is established. show any figures for interest earned or annual percentage yield earned for the period Section 230.6 Periodic statement disclo- (other than zero, at the institution’s option). sures (a)(3) Fees imposed (a) General rule 1. General. Periodic statements must state 1. General. Institutions are not required to fees disclosed under § 230.4(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 ex- 2. Itemizing fees by type. In itemizing fees ample, if no interest is earned for a state- imposed more than once in the period, insti- ment period, institutions need not state that tutions may group fees if they are the same fact. Or, institutions may disclose ‘‘$0’’ inter- type. (See § 230.11(a)(1) of this part regarding est earned and ‘‘0%’’ annual percentage yield certain fees that are required to be grouped.) earned. When fees of the same type are grouped to- 2. Regulation E interim statements. When an gether, the description must make clear that institution provides regular quarterly state- the dollar figure represents more than a sin- ments, and in addition provides a monthly gle fee, for example, ‘‘total fees for checks interim statement to comply with Regula- written this period.’’ Examples of fees that tion E, the interim statement need not com- may not be grouped together are—

1028

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01038 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Federal Reserve System Pt. 230, Supp. I

i. Monthly maintenance and excess-activ- earned) figure. Alternatively, an institution ity fees may disclose three interest and three annual ii. ‘‘transfer’’ fees, if different dollar percentage yield earned figures, one for each amounts are imposed’’ such as $.50 for depos- month in the quarter, as long as the institu- its and $1.00 for withdrawals tion states the number of days (or beginning iii. fees for electronic fund transfers and and ending dates) in the interest period if fees for other services, such as balance-in- different from the statement period. quiry or maintenance fees Section 230.7 Payment of interest iv. fees for paying overdrafts and fees for returning checks or other items unpaid (a)(1) Permissible methods 1. Prohibited calculation methods. Calcula- 3. Identifying fees. Statement details must tion methods that do not comply with the enable consumers to identify the specific fee. requirement to pay interest on the full For example: amount of principal in the account each day i. Institutions may use a code to identify a include: particular fee if the code is explained on the i. Paying interest on the balance in the ac- periodic statement or in documents accom- count at the end of the period (the ‘‘ending panying the statement. balance’’ method) ii. Institutions using debit slips may dis- ii. Paying interest for the period based on close the date the fee was debited on the the lowest balance in the account for any periodic statement and show the amount and day in that period (the ‘‘low balance’’ meth- type of fee on the dated debit slip. od) 4. Relation to Regulation E. Disclosure of iii. Paying interest on a percentage of the fees in compliance with Regulation E com- balance, excluding the amount set aside for plies with this section for fees related to reserve requirements (the ‘‘investable bal- electronic fund transfers (for example, total- ance’’ method) ing all electronic funds transfer fees in a sin- 2. Use of 365-day basis. Institutions may gle figure). apply a daily periodic rate greater than 1/365 (a)(4) Length of period of the interest rate—such as 1/360 of the in- 1. General. Institutions providing the be- terest rate—as long as it is applied 365 days ginning and ending dates of the period must a year. make clear whether both dates are included 3. Periodic interest payments. An institution in the period. can pay interest each day on the account and 2. Opening or closing an account mid-cycle. If still make uniform interest payments. For an account is opened or closed during the pe- example, for a one-year certificate of deposit riod for which a statement is sent, institu- an institution could make monthly interest tions must calculate the annual percentage payments equal to 1/12 of the amount of in- yield earned based on account balances for terest that will be earned for a 365-day period each day the account was open. (or 11 uniform monthly payments—each (b) Special rule for average daily balance meth- equal to roughly 1/12 of the total amount of od interest—and one payment that accounts for 1. Monthly statements and quarterly the remainder of the total amount of inter- compounding. This rule applies, for example, est earned for the period). when an institution calculates interest on a 4. Leap year. Institutions may apply a daily quarterly average daily balance and sends rate of 1/366 or 1/365 of the interest rate for monthly statements. In this case, the first 366 days in a leap year, if the account will two monthly statements would omit annual earn interest for February 29. percentage yield earned and interest earned 5. Maturity of time accounts. Institutions figures; the third monthly statement would are not required to pay interest after time reflect the interest earned and the annual accounts mature. (See 12 CFR part 217, the percentage yield earned for the entire quar- Board’s Regulation Q, for limitations on du- ter. ration of interest payments.) Examples in- 2. Length of the period. Institutions must clude: disclose the length of both the interest cal- i. During a grace period offered for an culation period and the statement period. automatically renewable time account, if For example, a statement could disclose a consumers decide during that period not to statement period of April 16 through May 15 renew the account and further state that ‘‘the interest earned ii. Following the maturity of nonrollover and the annual percentage yield earned are time accounts based on your average daily balance for the iii. When the maturity date falls on a holi- period April 1 through April 30.’’ day, and consumers must wait until the next 3. Quarterly statements and monthly business day to obtain the funds compounding. Institutions that use the aver- 6. Dormant accounts. Institutions must pay age daily balance method to calculate inter- interest on funds in an account, even if inac- est on a monthly basis and that send state- tivity or the infrequency of transactions ments on a quarterly basis may disclose a would permit the institution to consider the single interest (and annual percentage yield account to be ‘‘inactive’’ or ‘‘dormant’’ (or

1029

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01039 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Pt. 230, Supp. I 12 CFR Ch. II (1–1–11 Edition)

similar status) as defined by state or other (b) Compounding and crediting policies law or the account contract. 1. General. Institutions choosing to com- (a)(2) Determination of minimum balance to pound interest may compound or credit in- earn interest terest annually, semi-annually, quarterly, 1. Daily balance accounts. Institutions that monthly, daily, continuously, or on any require a minimum balance may choose not other basis. to pay interest for days when the balance 2. Withdrawals prior to crediting date. If con- drops below the required minimum, if they sumers withdraw funds (without closing the 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 (12 tution could offer a minimum balance to CFR part 229) to determine, for example, earn interest that includes an additional when a deposit is considered made for pur- method that is ‘‘unequivocally beneficial’’ to poses of interest accrual, or when interest consumers such as the following: An institu- need not be paid on funds because a depos- tion using the daily balance method to cal- ited check is later returned unpaid. culate interest and requiring a $500 min- 2. Ledger and collected balances. Institutions imum daily balance could offer to pay inter- may calculate interest by using a ‘‘ledger’’ or est on the account for those days the min- ‘‘collected’’ balance method, as long as the imum balance is not met as long as con- crediting requirements of the EFAA are met sumers maintain an average daily balance (12 CFR 229.14). throughout the month of $400. 3. Withdrawal of principal. Institutions 4. Paying on full balance. Institutions must must accrue interest on funds until the funds pay interest on the full balance in the ac- are withdrawn from the account. For exam- count that meets the required minimum bal- ple, if a check is debited to an account on a ance. For example, if $300 is the minimum Tuesday, the institution must accrue inter- daily balance required to earn interest, and a est on those funds through Monday. consumer deposits $500, the institution must pay the stated interest rate on the full $500 Section 230.8 Advertising and not just on $200. (a) Misleading or inaccurate advertisements 5. Negative balances prohibited. Institutions 1. General. All advertisements are subject must treat a negative account balance as to the rule against misleading or inaccurate zero to determine: advertisements, even though the disclosures i. The daily or average daily balance on applicable to various media differ. which interest will be paid 2. Indoor signs. An indoor sign advertising ii. Whether any minimum balance to earn an annual percentage yield is not misleading interest is met or inaccurate when: 6. Club accounts. Institutions offering club i. For a tiered-rate account, it also pro- accounts (such as a ‘‘holiday’’ or ‘‘vacation’’ vides the lower dollar amount of the tier cor- club) cannot impose a minimum balance re- responding to the advertised annual percent- quirement for interest based on the total age yield number or dollar amount of payments re- ii. For a time account, it also provides the quired under the club plan. For example, if a term required to obtain the advertised an- plan calls for $10 weekly payments for 50 nual percentage yield weeks, the institution cannot set a $500 3. Fees affecting ‘‘free’’ accounts. For pur- ‘‘minimum balance’’ and then pay interest poses of determining whether an account can only if the consumer has made all 50 pay- be advertised as ‘‘free’’ or ‘‘no cost,’’ mainte- ments. nance and activity fees include: 7. Minimum balances not affecting interest. i. Any fee imposed when a minimum bal- Institutions may use the daily balance, aver- ance requirement is not met, or when con- age daily balance, or any other computation sumers exceed a specified number of trans- method to calculate minimum balance re- actions quirements not involving the payment of in- ii. Transaction and service fees that con- terest—such as to compute minimum bal- sumers reasonably expect to be imposed on a ances for assessing fees. regular basis

1030

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01040 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Federal Reserve System Pt. 230, Supp. I

iii. A flat fee, such as a monthly service fee ii. Representing that the institution will iv. Fees imposed to deposit, withdraw, or honor all checks or authorize payment of all transfer funds, including per-check or per- transactions that overdraw an account, with transaction charges (for example, $.25 for or without a specified dollar limit, when the each withdrawal, whether by check or in per- institution retains discretion at any time son) not to honor checks or authorize trans- 4. Other fees. Examples of fees that are not actions. maintenance or activity fees include: iii. Representing that consumers with an i. Fees not required to be disclosed under overdrawn account are allowed to maintain a § 230.4(b)(4) negative balance when the terms of the ac- ii. Check printing fees count’s overdraft service require consumers iii. Balance inquiry fees promptly to return the deposit account to a iv. Stop-payment fees and fees associated positive balance. with checks returned unpaid iv. Describing an institution’s overdraft v. Fees assessed against a dormant account 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.’’ 6. Specific account services. Institutions may advertisement that also uses the word ‘‘free’’ advertise a specific account service or fea- or ‘‘no cost’’ (or a similar term) to describe ture as free if no fee is imposed for that serv- the account, unless the advertisement clear- ice or feature. For example, institutions of- ly and conspicuously indicates that there is fering an account that is free of deposit or a cost associated with the service. If the fee withdrawal fees could advertise that fact, as is a maintenance or activity fee under long as the advertisement does not mislead § 230.8(a)(2) of this part, however, an adver- consumers by implying that the account is tisement may not describe the account as free and that no other fee (a monthly service ‘‘free’’ or ‘‘no cost’’ (or contain a similar term) fee, for example) may be charged. even if the fee is disclosed in the advertise- 7. Free for limited time. If an account (or a ment. specific account service) is free only for a 11. Additional disclosures in connection with limited period of time—for example, for one the payment of overdrafts. The rule in year following the account opening—the ac- § 230.3(a), providing that disclosures required count (or service) may be advertised as free by § 230.8 may be provided to the consumer in if the time period is also stated. electronic form without regard to E-Sign Act 8. Conditions not related to deposit accounts. requirements, applies to the disclosures de- Institutions may advertise accounts as ‘‘free’’ scribed in § 230.11(b), which are incorporated for consumers meeting conditions not re- by reference in § 230.8(f). lated to deposit accounts, such as the con- (b) Permissible rates sumer’s age. For example, institutions may 1. Tiered-rate accounts. An advertisement advertise a NOW account as ‘‘free for persons for a tiered-rate account that states an an- over 65 years old,’’ even though a mainte- nual percentage yield must also state the an- nance or activity fee is assessed on accounts nual percentage yield for each tier, along held by consumers 65 or younger. with corresponding minimum balance re- 9. Electronic advertising. If an electronic ad- quirements. Any interest rates stated must vertisement (such as an advertisement ap- appear in conjunction with the applicable pearing on an Internet Web site) displays a annual percentage yields for each tier. triggering term (such as a bonus or annual 2. Stepped-rate accounts. An advertisement percentage yield) the advertisement must that states an interest rate for a stepped- clearly refer the consumer to the location rate account must state all the interest where the additional required information rates and the time period that each rate is in begins. For example, an advertisement that effect. includes a bonus or annual percentage yield 3. Representative examples. An advertise- may be accompanied by a link that directly ment that states an annual percentage yield takes the consumer to the additional infor- for a given type of account (such as a time mation. account for a specified term) need not state 10. Examples. Examples of advertisements the annual percentage yield applicable to that would ordinarily be misleading, inac- other time accounts offered by the institu- curate, or misrepresent the deposit contract tion or indicate that other maturity terms are: are available. In an advertisement stating i. Representing an overdraft service as a that rates for an account may vary depend- ‘‘line of credit,’’ unless the service is subject ing on the amount of the initial deposit or to the Board’s Regulation Z, 12 CFR part 226. the term of a time account, institutions need

1031

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01041 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Pt. 230, Supp. I 12 CFR Ch. II (1–1–11 Edition)

not list each balance level and term offered. (c)(6)(ii) Early withdrawal penalties Instead, the advertisement may: 1. Discretionary penalties. Institutions im- i. Provide a representative example of the posing early withdrawal penalties on a case- annual percentage yields offered, clearly de- by-case basis may disclose that they ‘‘may’’ scribed as such. For example, if an institu- (rather than ‘‘will’’) impose a penalty if such tion offers a $25 bonus on all time accounts a disclosure accurately describes the account and the annual percentage yield will vary de- terms. pending on the term selected, the institution (d) Bonuses may provide a disclosure of the annual per- 1. General reference to ‘‘bonus.’’ General centage yield as follows: ‘‘For example, our 6- statements such as ‘‘bonus checking’’ or ‘‘get month certificate of deposit currently pays a a bonus when you open a checking account’’ 3.15% annual percentage yield.’’ do not trigger the bonus disclosures. ii. Indicate that various rates are avail- (e) Exemption for certain advertisements able, such as by stating short-term and (e)(1) Certain media longer-term maturities along with the appli- (e)(1)(i) cable annual percentage yields: ‘‘We offer 1. Internet advertisements. The exemption certificates of deposit with annual percent- for advertisements made through broadcast age yields that depend on the maturity you or electronic media does not extend to adver- choose. For example, our one-month CD tisements posted on the Internet or sent by earns a 2.75% APY. Or, earn a 5.25% APY for e-mail. a three-year CD.’’ (e)(1)(iii) (c) When additional disclosures are required 1. Tiered-rate accounts. Solicitations for a 1. Trigger terms. The following are examples tiered-rate account made through telephone of information stated in advertisements that response machines must provide the annual are not trigger terms: ‘‘ ’’ percentage yields and the balance require- i. ‘‘One, three, and five year CDs available’’ ments applicable to each tier. ii. ‘‘Bonus rates available’’ (e)(2) Indoor signs iii. ‘‘1% over our current rates,’’ so long as (e)(2)(i) the rates are not determinable from the ad- 1. General. Indoor signs include advertise- vertisement (2) Time annual percentage yield is offered ments displayed on computer screens, ban- 1. Specified date. If an advertisement dis- ners, preprinted posters, and chalk or peg closes an annual percentage yield as of a boards. Any advertisement inside the prem- specified date, that date must be recent in ises that can be retained by a consumer relation to the publication or broadcast fre- (such as a brochure or a printout from a quency of the media used, taking into ac- computer) is not an indoor sign. count the particular circumstances or pro- Section 230.9 Enforcement and record reten- duction deadlines involved. For example, the tion printing date of a brochure printed once for a deposit account promotion that will be in (c) Record retention effect for six months would be considered 1. Evidence of required actions. Institutions comply with the regulation by dem- ‘‘recent,’’ even though rates change during the six-month period. Rates published in a onstrating that they have done the fol- daily newspaper or on television must reflect lowing: rates offered shortly before (or on) the date i. Established and maintained procedures the rates are published or broadcast. for paying interest and providing timely dis- 2. Reference to date of publication. An adver- closures as required by the regulation, and tisement may refer to the annual percentage ii. Retained sample disclosures for each yield as being accurate as of the date of pub- type of account offered to consumers, such lication, if the date is on the publication as account-opening disclosures, copies of ad- itself. For instance, an advertisement in a vertisements, and change-in-term notices; periodical may state that a rate is ‘‘current and information regarding the interest rates through the date of this issue,’’ if the peri- and annual percentage yields offered. odical shows the date. 2. Methods of retaining evidence. Institu- (c)(5) Effect of fees tions must be able to reconstruct the re- 1. Scope. This requirement applies only to quired disclosures or other actions. They maintenance or activity fees described in need not keep disclosures or other business paragraph 8(a). records in hard copy. Records evidencing (c)(6) Features of time accounts compliance may be retained on microfilm, (c)(6)(i) Time requirements microfiche, or by other methods that repro- 1. Club accounts. If a club account has a duce records accurately (including computer maturity date but the term may vary de- files). pending on when the account is opened, in- 3. Payment of interest. Institutions must re- stitutions may use a phrase such as: ‘‘The tain sufficient rate and balance information maturity date of this club account is Novem- to permit the verification of interest paid on ber 15; its term varies depending on when the an account, including the payment of inter- account is opened.’’ est on the full principal balance.

1032

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01042 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Federal Reserve System Pt. 230, Supp. I

Section 230.10 Electronic Communication ment period, because the fee was not as- [Reserved] sessed in the February statement period. If Section 230.11 Additional disclosures re- an institution assesses and then waives and garding 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 § 230.11(a)(1) of this part do not in- if the institution assesses and waives the fee clude 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 § 230.11(a)(1) of this under a service subject to the Board’s Regu- part. lation Z (12 CFR part 226). See also comment (a)(3) Time period covered by disclosures 11(c)–2. Under § 230.11(a)(1)(i), the disclosure 1. Periodic statement disclosures. The disclo- must describe the total dollar amount for all sures under section 230.11(a) must be in- fees or charges imposed on the account for cluded on periodic statements provided by an the statement period and calendar year-to- institution starting the first statement pe- date for paying overdrafts using the term riod that begins after January 1, 2010. For ex- ‘‘Total Overdraft Fees.’’ This requirement ap- ample, if a consumer’s statement period plies notwithstanding comment 3(a)–2. typically closes on the 15th of each month, 3. Fees for returning items unpaid. The total an institution must provide the disclosures dollar amount for all fees for returning items required by § 230.11(a)(1) on subsequent peri- unpaid must include all fees charged to the odic statements for that consumer beginning account for dishonoring or returning checks with the statement reflecting the period or other items drawn on the account. The in- from January 16, 2010 to February 15, 2010. stitution must disclose separate totals for the statement period and for the calendar (b) Advertising Disclosures in Connection With year-to-date. Fees imposed when deposited Overdraft Services items are returned are not included. Institu- tions may use terminology such as ‘‘returned 1. Examples of institutions promoting the pay- item fee’’ or ‘‘NSF fee’’ to describe fees for re- ment of overdrafts. A depository institution turning items unpaid. would be required to include the advertising 4. Waived fees. In some cases, an institution disclosures in § 230.11(b)(1) of this part if the may provide a statement for the current pe- institution: riod reflecting that fees imposed during a i. Promotes the institution’s policy or previous period were waived and credited to practice of paying overdrafts (unless the the account. Institutions may, but are not service would be subject to the Board’s Regu- required to, reflect the adjustment in the lation Z (12 CFR part 226)). This includes ad- total for the calendar year-to-date and in the vertisements using print media such as applicable statement period. For example, if newspapers or brochures, telephone solicita- an institution assesses a fee in January and tions, electronic mail, or messages posted on refunds the fee in February, the institution an Internet site. (But see § 230.11(b)(2) of this could disclose a year-to-date total reflecting part for communications that are not sub- the amount credited, but it should not affect ject to the additional advertising disclo- the total disclosed for the February state- sures);

1033

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01043 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Pt. 230, Supp. I 12 CFR Ch. II (1–1–11 Edition)

ii. Includes a message on a periodic state- overdrafts will be paid is discretionary and ment informing the consumer of an overdraft we reserve the right not to pay. For example, 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 ad- ing on the overdraft limit, is promoting an vertised account-related service is an over- overdraft service. draft service subject to the requirements of iii. Discloses an overdraft limit or includes § 230.11(b)(1) of this part, institutions must the dollar amount of an overdraft limit in a disclose the fee or fees for the payment of balance disclosed on an automated system, each overdraft, not merely that a cost is as- such as a telephone response machine, ATM sociated with the overdraft service, as well screen or the institution’s Internet site. as other required information. Compliance (See, however, § 230.11(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 § 230.11(b)(1) of this part do not in- 1. Balance that does not include additional clude a service providing for the transfer of amounts. For purposes of the balance disclo- funds from another deposit account of the sure requirement in § 230.11(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. must disclose a balance that excludes any 3. Electronic media. The exception for adver- funds that the institution may provide to tisements made through broadcast or elec- cover an overdraft pursuant to a discre- tronic media, such as television or radio, tionary overdraft service, that will be paid does not apply to advertisements posted on by the institution under a service subject to an institution’s Internet site, on an ATM the Board’s Regulation Z (12 CFR part 226), screen, provided on telephone response ma- or that will be transferred from another ac- chines, or sent by electronic mail. count held individually or jointly by a con- 4. Fees. The fees that must be disclosed sumer. The balance may, but need not, in- under § 230.11(b)(1) of this part include per- clude funds that are deposited in the con- item fees as well as interest charges, daily or sumer’s account, such as from a check, that other periodic fees, and fees charged for are not yet made available for withdrawal in maintaining an account in overdraft status, accordance with the funds availability rules whether the overdraft is by check or by under the Board’s Regulation CC (12 CFR other means. The fees also include fees part 229). In addition, the balance may, but charged when there are insufficient funds be- need not, include funds that are held by the cause previously deposited funds are subject institution to satisfy a prior obligation of to a hold or are uncollected. The fees do not the consumer (for example, to cover a hold include fees for transferring funds from an- for an ATM or debit card transaction that other account to avoid an overdraft, or fees has been authorized but for which the bank charged when the institution has previously has not settled). agreed in writing to pay items that overdraw 2. Retail sweep programs. In a retail sweep the account and the service is subject to the program, an institution establishes two le- Board’s Regulation Z, 12 CFR part 226. gally distinct subaccounts, a transaction 5. Categories of transactions. An exhaustive subaccount and a savings subaccount, which list of transactions is not required. Dis- together make up the consumer’s account. closing that a fee may be imposed for cov- The institution allocates and transfers funds ering overdrafts ‘‘created by check, in-person between the two subaccounts in order to withdrawal, ATM withdrawal, or other elec- maximize the balance in the savings account tronic means’ would satisfy the require- while complying with the monthly limita- ments of § 230.11(b)(1)(ii) of this part where tions on transfers out of savings accounts the fee may be imposed in these cir- under the Board’s Regulation D, 12 CFR cumstances. See comment 4(b)(4)–5 of this 204.2(d)(2). Retail sweep programs are gen- part. erally not established for the purpose of cov- 6. Time period to repay. If a depository insti- ering overdrafts. Rather, institutions typi- tution reserves the right to require a con- cally establish retail sweep programs by sumer to pay an overdraft immediately or on agreement with the consumer, in order for demand instead of affording consumers a the institution to minimize its transaction specific time period to establish a positive account reserve requirements and, in some balance in the account, an institution may cases, to provide a higher interest rate than comply with § 230.11(b)(1)(iii) of this part by the consumer would earn on a transaction disclosing this fact. account alone. Section 230.11(c) does not re- 7. Circumstances for nonpayment. An institu- quire an institution to exclude from the con- tion must describe the circumstances under sumer’s balance funds that may be trans- which it will not pay an overdraft. It is suffi- ferred from another account pursuant to a cient to state, as applicable: ‘‘Whether your retail sweep program that is established for

1034

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01044 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Federal Reserve System Pt. 230, Supp. I

such purposes and that has the following plies whether the balance is disclosed on the characteristics: ATM screen or on a paper receipt. i. The account involved complies with the Board’s Regulation D, 12 CFR 204.2(d)(2), APPENDIX A TO PART 230—ANNUAL ii. The consumer does not have direct ac- PERCENTAGE YIELD CALCULATION cess to the non-transaction subaccount that Part I. Annual Percentage Yield for Account is part of the retail sweep program, and Disclosures and Advertising Purposes iii. The consumer’s periodic statements show the account balance as the combined 1. Rounding for calculations. The following balance in the subaccounts. are examples of permissible rounding for cal- 3. Additional balance. The institution may culating interest and the annual percentage disclose additional balances supplemented by yield: funds that may be provided by the institu- i. The daily rate applied to a balance car- tion to cover an overdraft, whether pursuant ried to five or more decimal places to a discretionary overdraft service, a serv- ii. The daily interest earned carried to five ice subject to the Board’s Regulation Z (12 or more decimal places CFR part 226), or a service that transfers funds from another account held individually Part II. Annual Percentage Yield Earned for or jointly by the consumer, so long as the in- Periodic Statements stitution prominently states that any addi- 1. Balance method. The interest figure used tional balance includes these additional in the calculation of the annual percentage overdraft amounts. The institution may not yield earned may be derived from the daily simply state, for instance, that the second balance method or the average daily balance balance is the consumer’s ‘‘available bal- method. The balance used in the formula for ance,’’ or contains ‘‘available funds.’’ Rather, the annual percentage yield earned is the the institution should provide enough infor- sum of the balances for each day in the pe- mation to convey that the second balance in- riod divided by the number of days in the pe- cludes these amounts. For example, the in- riod. stitution may state that the balance in- 2. Negative balances prohibited. Institutions cludes ‘‘overdraft funds.’’ Where a consumer must treat a negative account balance as has not opted into, or as applicable, has zero to determine the balance on which the opted out of the institution’s discretionary annual percentage yield earned is calculated. overdraft service, any additional balance dis- (See commentary to § 230.7(a)(2).) closed should not include funds that otherwise might be available under that service. A. General Formula Where a consumer has not opted into, or as applicable, has opted out of, the institution’s 1. Accrued but uncredited interest. To cal- discretionary overdraft service for some, but culate the annual percentage yield earned, not all transactions (e.g., the consumer has accrued but uncredited interest: not opted into overdraft services for ATM i. May not be included in the balance for and one-time debit card transactions), an in- statements issued at the same time or less stitution that includes these additional over- frequently than the account’s compounding draft funds in the second balance should con- and crediting frequency. For example, if vey that the overdraft funds are not avail- monthly statements are sent for an account able for all transactions. For example, the that compounds interest daily and credits in- institution could state that overdraft funds terest monthly, the balance may not be in- are not available for ATM and one-time (or creased each day to reflect the effect of daily everyday) debit card transactions. Similarly, compounding. if funds are not available for all transactions ii. Must be included in the balance for suc- pursuant to a service subject to the Board’s ceeding statements if a statement is issued Regulation Z (12 CFR part 226) or a service more frequently than compounded interest is that transfers funds from another account, a credited on an account. For example, if second balance that includes such funds monthly statements are sent for an account should also indicate this fact. that compounds interest daily and credits in- 4. Automated systems. The balance disclo- terest quarterly, the balance for the second sure requirement in § 230.11(c) applies to any monthly statement would include interest automated system through which the con- that had accrued for the prior month. sumer requests a balance, including, but not 2. Rounding. The interest earned figure limited to, a telephone response system, the used to calculate the annual percentage institution’s Internet site, or an ATM. The yield earned must be rounded to two deci- requirement applies whether the institution mals and reflect the amount actually paid. discloses a balance through an ATM owned For example, if the interest earned for a or operated by the institution or through an statement period is $20.074 and the institu- ATM not owned or operated by the institution pays the consumer $20.07, the institution (including an ATM operated by a non- tion must use $20.07 (not $20.074) to calculate depository institution). If the balance is ob- the annual percentage yield earned. For ac- tained at an ATM, the requirement also ap- counts paying interest based on the daily

1035

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01045 Fmt 8010 Sfmt 8002 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR Pt. 230, Supp. I 12 CFR Ch. II (1–1–11 Edition)

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 B. Special Formula for Use Where Periodic through B–8) serve a purpose different from Statement is Sent More Often Than the Period the model clauses. They illustrate ways of for Which Interest is Compounded adapting the model clauses to specific accounts. The clauses shown relate only to the 1. Statements triggered by Regulation E. In- specific transactions described. stitutions may, but need not, use this formula to calculate the annual percentage B–1 Model Clauses for Account 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 monthly statement was issued during a spe- cases. The statement describing a time pe- cific quarter. But institutions must use this riod is appropriate only when providing dis- formula for accounts that compound and closures in response to a consumer’s request. 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 § 230.6. future decrease in the interest rate and an- 2. Days in compounding period. Institutions nual percentage yield, applies to fixed-rate using the special annual percentage yield accounts only. earned formula must use the actual number of days in the compounding period. B–4 Sample Form (Multiple Accounts)

APPENDIX B TO PART 230—MODEL CLAUSES 1. Rate sheet insert. In the rate sheet insert, AND SAMPLE FORMS the calculations of the annual percentage yield for the three-month and six-month cer- 1. Modifications. Institutions that modify tificates are based on 92 days and 181 days re- the model clauses will be deemed in compli- spectively. All calculations in the insert as- ance as long as they do not delete required sume daily compounding. information or rearrange the format in a way that affects the substance or clarity of B–6 Sample Form (Tiered-Rate Money Market the disclosures. Account) 2. Format. Institutions may use inserts to a document (see Sample Form B–4) or fill-in 1. General. Sample Form B–6 uses Tiering blanks (see Sample Forms B–5, B–6 and B–7, Method A (discussed in appendix A and which use underlining to indicate terms that Clause (a)(iv)) to calculate interest. It gives have been filled in) to show current rates, a narrative description of a tiered-rate ac- fees, or other terms. count; institutions may use different for- 3. Disclosures for opening accounts. The sam- mats (for example, a chart similar to the one ple forms illustrate the information that in Sample Form B–4), as long as all required must be provided to consumers when an ac- information for each tier is clearly pre- count is opened, as required by § 230.4(a)(1). sented. The form does not contain a separate (See § 230.4(a)(2), which states the require- disclosure of the minimum balance required ments for disclosing the annual percentage to obtain the annual percentage yield; the yield, the interest rate, and the maturity of tiered-rate disclosure provides that informa- a time account in responding to a con- tion. sumer’s request.) 4. Compliance with Regulation E. Institu- [Reg. DD, 59 FR 40221, Aug. 8, 1994, as amend- tions may satisfy certain requirements ed at 59 FR 52658, Oct. 19, 1994; 63 FR 52107, under Regulation DD with disclosures that Sept. 29, 1998; 66 FR 17803, Apr. 4, 2001; 70 FR meet the requirements of Regulation E. (See 29594, May 24, 2005; 72 FR 63484, Nov. 9, 2007; § 230.3(c).) For disclosures covered by both 74 FR 5594, Jan. 29, 2009; 75 FR 31676, June 4, this regulation and Regulation E (such as 2010] the amount of fees for ATM usage, institutions should consult appendix A to Regula- tion E for appropriate model clauses.

1036

VerDate Mar<15>2010 13:49 Mar 02, 2011 Jkt 223037 PO 00000 Frm 01046 Fmt 8010 Sfmt 8010 Y:\SGML\223037.XXX 223037 WReier-Aviles on DSKGBLS3C1PROD with CFR