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FEDERAL R ESE R V E BANK OF DALLAS
Station K, Dallas, Texas 7 5 2 2 2

C i r c u l a r No. 84-53
April 11, 1984

TO:

All member banks and others concerned in the Eleventh
Federal Reserve D i s t r i c t

ATTENTION:

Chief Executive Of fic er

SUBJECT:

Policy statement concerning advertisements for time
deposits that pay more than one fixed rate and a
proposal to amend Regulation Q —
Interest
on
Deposits —
to incorporate the substance of the
policy statement into the regulation

SUMMARY:

The Board of Governors of the Federal Reserve System
issued
a
pol icy
statement on March 22, 1984
concerning the advertisement
of
m ul ti p le
rate
accounts.
The po licy statement addresses misleading
a d v e r t i s i n g which in d ic a te s a high r a t e of i n t e r e s t
f o r one period in large p r i n t while p r i n t i n g the
lower r a t e in much smaller type.
The
policy
statement also addresses a d v e r t i s i n g which r e f e r s to
IRA accounts as being t a x - f r e e or tax-exempt.
In a d d i t i o n , the Board is proposing to amend i t s
Regulation Q to incorporate the policy statement into
the r e g u l a t i o n .
I n t e r e s t e d p a r t i e s are i n vi te d to
submit comments to William W Wiles, S ec r et ar y, Board
.
of Governors of the Federal Reserve System, 20th
S t r e e t and C on s ti tu ti on
Avenue, N.W., Washington,
D.C., 20551.
Comments must be received by May 22,
1984 and should r e f e r to Docket No. R-0514.

ATTACHMENTS:

Board's
press
release,
pol icy
statement
and
Regulation Q proposal as submitted f o r p u b l i c a t i o n in
the Federal Register

MORE INFORMATION:

Legal Department, Extension 6171

ADDITIONAL COPIES:

Public A f f a i r s Department, Extension 6289

Banks and others are encouraged to use the follow ing incom ing W A T S numbers in contacting this Bank: 1-800-442-7140
(intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the extension referred to above.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

FEDERALRESERVEpressrelease
For immediate r e l e a s e

March 23, 1984

The Federal Reserve Board today issued

a policy statement concerning

advertisements f o r time d ep os its t h a t pay more than one fixed r a t e over the term
of th e account.
At the same time, the Board published f o r public comment a proposal to
amend i t s Regulation Q - - I n t e r e s t on D e p o s i t s - - t h a t would incor por ate the substance
of the policy statement int o the r e g u l a t i o n .
The policy statement provides t h a t advertisements for time de p os its t h a t
pay more than one fi xed i n t e r e s t r a t e should s e t

f o r t h , in equal s i z e t ype , each

r a t e of i n t e r e s t to be paid t o g e t h e r with the length
and the average e f f e c t i v e annual y i e l d for

of time each r a t e will

t h e e n t i r e term of the account.

be paid
F u rt h e r,

advertisements f o r de p o s i ts to be used in connection with Individual Retirement
Accounts (IRAs) should not r e f e r to such accounts as being t a x - f r e e or tax-exempt.
The Board's action was taken in response t o r ece nt advertisements where
an i n i t i a l high r a t e of i n t e r e s t appears in lar ge p r i n t while a lower r a t e to be
paid f o r th e predominant p a r t of th e account appears in much smaller ty p e .

The

Board expressed concern t h a t such advertisements are p o t e n t i a l l y misleading and
confusing t o d e p o s i t o r s .

The Board a n t i c i p a t e s t h a t the Federal Deposit Insurance

Corporation, th e Federal Home Loan Bank Board, and t h e Comptroller of t h e Currency
wi l l iss ue s i m i l a r policy statements in the near f u t u r e .
The Board also requested comment on a l t e r n a t i v e s to the policy st a te m e n t,
and ot he r a d v e r t i s i n g and d i s c lo s u r e is s u e s t h a t may warrant co n s i d er at i o n under
Regulation Q.

The Board requested comment by May 22,

1984.

The Board's policy statement and i t s no t i c e of proposed amendments to
Regulation Q are at t a c h e d .
-

Attachment

0

-

-

5

-

FEDERAL RESERVE

SYSTEM

REGULATION Q
[12 C.F.R.

Part

217]

I N T E R E S T ON D E P O S I T S
[Docket No.

R-0513]

A d v e r t i s i n g of M u l t i p l e Rate A c co un ts

AGENCY:

B o a r d of G o v e r n o r s of the Federal R e s er ve System.

ACTION:

P o l i c y statement.

SUMMARY:

The Boa rd

concerning
time

de p o s i t s

smal ler

that

r e ma in in g

a

period
lower

term

consumers.

in

of

the

size

in order

that

time

to

This

consumers

to

wil l

be

r e ga rd ed

time

that

is

st ate

ef fe c t i v e

can

in

for

the

misleading

as

to

rates

in type

m i s l ea di ng ,

and

of the av er ag e e f f e c t i v e annu al
for de po si ts

accounts

ac ti o n was

o f f e r e d on time deposits.

be

for

then

R e t i r e m e n t Ac co un ts

such

ma ke

and

for

Retirement

rate

sh o u l d st ate both

to be

institutions provide meaningful
assi st

initial

mo n t h s

sta te me nt

pr ac t i c e s

In di vid ual

an

advertisements

Ind iv id ua l

contributions

"tax-exem pt. "

not

a policy

advertisements

d e p os it

statement

In add iti on,

c o n n e c t i o n w it h
to

few

Such a d v e r t i s e m e n t s

include a c o n s p i c u o u s
yield.

type

a

rate

for

that

large
of

issued

advertising

i n v e s t m e nt s
be l i e v e s

st ate
a

misleading

as

Bo ar d

for

type

equa l

u se d

The

effective

of

potentially

de p o s i t s

Accounts.

of G o v e r n o r s has

taken

as
to

as su re

of

used

sh o u l d not

"tax-free"

and ac c u r a t e

comparisons

to be

that

refer

or
depository

information

interest

in

rates

and to
be i n g

E F F E C T I V E DATE:
FOR

FU R T H E R

Associate
Senior

Mar ch

22,

1984.

IN FO R M A T I O N

Gen er al

Cou ns el

CONTACT:

Counsel

Gil bert

(202-452-3625),

(202-452-3281),

Legal

issued

the

INFORMATION:

fo ll ow in g po li c y

for time dep os it s
accounts

The

to

be

that have split,

used

as

S.

Pilecki,

Board

Reserve

of

D.C.

20551.

Boar d

has

co n c e r n i n g ad ve rt i s e m e n t s

fixed

in ve stm ent s

Paul

Wa sh ing ton ,

Fe deral

stateme nt

or

Schwartz,

Division,

Gov e r n o r s of the Federal R e s e r ve System,
SUPPLEMENTARY

T.

for

interes t

rates and

Indivi dua l

for

Re t i r e m e n t

Accounts.
A D V E R T I S I N G OF M U L T I P L E RATE TIME D E PO SI TS AND
INDIVIDUAL RETIREMENT ACCOUNTS
(a)

The

fol low ing

or a c c ou nt s to be used as

i nv es tm ent s

Ac c ou nt s

to

ad ve r t i s i n g

(IRAs)

financ ia l

has

institution

st a t u t o r y

authority

other accounts.
15

come

pe r c e n t

in

the

reg ul at e

two

s t a n d a r d size,

to

type,

three

inch

the
to

re m a i n i n g
three

example,
the

two or

type.

10.5

ac c o u n t

higher

is

the

or

11

rate

sta te d

interest rate.

to be

percent.
in b ol d

spe ci fi c
de po sit s

in

smaller,

state

that

three mo nt hs

or

perhaps,

us ua ll y

the

rate

hence or

of the term of the account.

term of the account,

years,

for

federal

d i s p la y a rate of,

the a d v e r t i s e m e n t s

three m o n t h s

the

wi t h

advertising

paid only through a fixed date two or
the first

of

ag en cie s

The a d v e r t i s e m e n t s

for

Individual Re ti re m e n t

a t te nt io n

r e g u la t o r y

to

for

pr a c t i c e

whic h

paid

will

ty pi c a l l y will
be

in some

cases,

type

a size

of

mu ch
the

maturity

similar

to

for
For

be

lower,

is

two

for
of
the

dep osi ts

-

(b)
misleading

The Board
and

Regulation Q
bank
on

are

(12

-

believes

in

C FR

7

that

violation

such

of

§§ 217.6(g)),

se ct io n

w hi ch

shall not make any a d v e r t i s e m e n t
de p o s i ts

that

mi s r e p r e s e n t s
display
that

of

will

is

its

a

dep os it

rate

apply

for

the

is c o n f u s i n g

deposit

contract.

e f f e ct iv e
from the
ad v i s e d

i n f o rm at io n
yield

the

me mb e r

of

banks

that

the

m i s l e ad in g,
1 2-411.1
f

st ates

a v e ra ge

and

it
an

b e c au se

the

r e g ard s
annual

effective

paid

that

than

the

the

the

te rm

the

any

rate

of

do

of

not

annu al

in str ume nt

an nual

misrepresentative

membe r

regard,

(The staf f of the Board

that

a

or

ad v e r t i s e m e n t s

of

of

rate
the

and m i s r e p r e s e n t a t i v e of the

such

life

of

are

inte res t

In this

part

to c o n s u m er s

rates stated.

time de posit
excess

over

to

larger type

predominant

Moreover,

that

mi s l e a d i n g

contracts.

to d e po si t o r s

217.6(g)

st ate s

rel ated

or

in s u b s t a n t i a l l y

acc ount

meaningful

in ac cur ate

advertisements

ave rag e

will
has

differ

previously

advertisement

of

simpl e

y ie ld

their

as

give

for

a

int ere st

in

inaccurate,

de po si t

contracts.

Federal Re s e r v e R e g u l a t o r y S e r v i c e .)
(c)(1)

than

one

each

rate

Advertisements

rate
to

advertisement
st a te me nt

ispaid

as

effective.

would

be paid

on

not
the

for
be

This

ad v an ce

what

the

acc ou nt

will

be

the

length

a p p li es
rates
and

b)

of

a c c ou nt

for

to a c c o u n t s

the

in itial

as

is st at ed

which

wh ere

a)

thr oug hou t
rate

to be

w he re

more

misleading

together with

time

to be p aid

de po sit s

rega rde d

in type of equal size
to

time

in

the

the

a co nsp icu ous

each
it

if

is

rate
known

life

p ai d

of

is
in
the

is higher

-

than

subsequent

rates.

incl ud e a c o n s p i c u o u s
yield

for

in

8

-

ad dition,

st a t e m e n t

the d e p o s i t w h i c h

of

such

advertisements

the av er ag e

a s su me s

must

eff ec ti ve annual

compounding

of

interes t

at

least annually.
(2)
rate that

For

conspicuous

such

su bj ect

is d e t e r m i n e d by an

m ay be ad ve rtised;
a

ac c o u n t s

however,

statement

rate applies ,

be d e t e r m i n e d

for

and

index,

to

a

the

va ri ab le

initial

the ad ve r t i s e m e n t

as

to

(ii)

(i)

the

interest
also

period

time

must

for

the me t h o d by w hi ch

future pe r i o ds

and

the

interest
rate

include
which

the rates

time pe ri o d

for

will
wh ich

such rates will apply.
(3)

For

acc oun ts

to be fo l l o w e d by a v a r i a b l e
the

rem ain der

determining

of

the

the

ter m

variable

that

an

initial

fixed

rate

rate d e t e r m i n e d by an index during
of

rate

same size as the fixed rate.
wh i c h the initial

offer

the

account,

shall

be

the

st at ed

in addition,

in

the

fixed rate and s ub se qu en t

me th od
type

of
of

the

time peri ods

rates

for

ap ply must be

c o n s p i c u o u s l y stated.
(d)

It

advertisements
Contributions
fe deral

to
to,

income

Ac co rd in gl y,
"tax-free"

or

refer
and

taxes

such

to

is

al so

an

IRA

e a r n in gs
rather

as

on,
than

advertisements

"ta x-exempt,"

misleading
a

IRAS

or other

ta x - f r e e
are

exemp t

should

and

not

in ac cur ate

investment.

de f e r r e d
from
use

from

taxes.
the

similar

language.

By order of the Board of Govern ors ,

Ma rch 22,

terms

1984.

(signed) William W. Wiles

W i l l i a m W. Wi le s
S e c r e t a r y of the Board

for

-

9

-

F E D E R A L R E S E R V E SY STE M
REGULATION Q
[12 C.F.R.

Part

217]

I N T E R E S T ON D E P O S I T S
[Docket No.

R-0514]

A d v e r t i s i n g of Int ere st on Deposits

AGENCY:

B o ar d of G o v e r n o r s of the Federal Rese rve System.

ACTION:

P r o p o s e d rulemaking.

SUMMARY:

The

on De p o s i t s

Board

is

proposing

to i n c o r p o r a t e

its

a d v e r t i s i n g of s p li t

Retirement

A c c ou nt

advertising
intere st
on

methods

rate

othe r

time

of

and

the

to

removal

The Bo ard
disclosure

views,

ar g u m e n t s

or

parties

B o ar d of

Street

Constitution

comments
5:15

8:45 a.m.

p.m.

may

be

are

concerning

Secretary,
and

and

cl ar if y
of

is also

22,

pe rm i s s i b l e

federal

that

1984,

Individual

deposit

req ue st in g

issues

G o v er no rs

of

Av enue,

delivered
m a y be

and 5:15 p.m.,

except

the Bo ar d' s R u le s

in vi ted

the

Co mm en ts

§ 2 6 1 . 6 ( a ) ).

of Marc h

dep osi ts

C o m m e n t s must be r e c e i v e d by May 22,
I n t e re st ed

and

R e g u l a t i o n Q — Interest

may

comments

wa rr ant

under R e g u l a t i o n Q.

ADDRESS:

such

view

and

rate

deposits

limitations.

advertising

consideration
DATES:

in

amend

Po li c y Sta tem ent

co n c e r n i n g

("IRA")

to

N.W.,
to

Federal

ro o m

Re ser ve

B-2223
in

pr ov id ed

R e g a r d i n g A v a i l a b i l i t y of

written

to W i l l i a m W.

W a s h in gto n,

i n s p ec ted
as

to submit

pro pos al

the

1984.

Wiles,

System,

D.C.

between

room

data,

20th

20551,
8:45

B-1122

a.m.

betw een

in se c t i o n 261.6(a)
Inf or ma ti on

or

of

(12 C.F.R.

10

-

FOR

FURTHER

General

IN FO R M A T I O N

Counsel

-

CONTACT:

(202/452-3625);

Senior

Attorney

(202/452-2418),

Board of G o v e r n o rs

SUPPLEMENTARY
Section

and

INFORMATION:

rules

sa vings

co d i f i e d
Interest

on

re g u la ti on
interest

the

g o v e rn in g

In s t i tu ti on s

Federal

be

at

The

ce il in gs

12

in

resulting

Deregulation

D e p o s i t o r y I ns ti tu ti on s

is

Act

banks.

Board

warranted

Board

R e s er ve

The

C.F.R.

System,

of

under

§ 371b)

interest

on

to
time

reg ul at io n

§ 2 17 .6 — A d v e r t i s i n g

view

that

of

from

Deregulation

U.S.C.

cu rr ent

believes

Committee

au t h o r i z e d

(12

ad ve r t i s e m e n t

by mem be r

Deposits.

rate

the

R e se rve

the

Regulation Q

may

The

Federal

d e p os it s

in

of

Counsel

20551.

19 (j ) of

pr e s c r i b e

A s so ci at e

Pilecki,

Legal

D.C.

Schwartz,

S.

or

Wa s h i ng to n,

T.

Boutilier,

M.

Paul

(202/452-3281);
Division,

Ela in e

Gi lb ert

the

actions
("DIDC")

Act of

re vi sio ns

of

the

this
of

Dep os it or y

p u r su an t

1980

of

to

deregulation

is

(Title

to

the

II of

Pub.

L. 96-221).
The DIDC has
interest

rate

deregulated
in

has

to a

accounts,
accounts.
re ce iv in g

ce il in gs

that

envir on me nt ,

f r ee do m
led

s u b s t a n t i a l l y de re g u l a t e d

structuring
vast

making

depository

time

diversity
it

more

Cons eq ue nt ly ,
meaningful

previously

and
in

terms

the

issue

in fo r m a t i o n

in

acc ou nt s has b e c o m e mo r e important.

of

In
have

deposits.

and

for

li mi tat ion s

existed.

in sti tut ion s

savings

difficult

the

c o n d it io ns

the

cons ume r

wh et her

This

this
greater
fre edom

on

deposit

to

com pare

cu st o m e r s

advertisements

for

on

are

deposit

-

In

re co g n i t i o n

advertis in g,
St a te me nt

on

March

concerning

pa rt icular,

the

of

22,

the

the

Federal

will

Home

the

type

an

mont hs

Board

Loan

and

effective
to

for

equal

type

that

sta te

Such

in

order

not

should

and

to

not

ass ur e

that

Board

March

22,

as

amendment

an

com me nt s

to
for
to

and

proposals

in

pr ac t i c e s

for

a

to

be

ass is t

provide s
in

of

that

can

a

to

few

will

rates

mi sl ead ing .
used

large

be

be mi s l e a d i n g

bo th

in

In

ac co un ts

This

p r o vi de

co ns ume rs

in

con ne ct io n

such

terms.

i n s t it ut io ns

Deposit

pe ri od
rate

that

Currency,

st ate

state
as

the

Sta te me nt

a lower

sho ul d

of

that

for

si milar

to

Po lic y

accounts,

Federal

Po li cy

contributions

ac ti on

as
was

mea ni ng fu l
to

make

interest rates bein g offered.
that

C.F.R.

the
be

pri nc ip le s

i n c o r p o ra te d

§ 217.6.

on the p r o p o s e d amend me nt ,

alternative

the

rega rde d

or other

p r o po se s

12

the

de p o s i t s

1984 P o l i c y Statem en t
to

and

type

be

a

of

The Bo ard a n t i c i p a t e s

e f fe c t i v e

depository

i n f o rm at io n

c o m p a r i s o n s of d e p os it
The

rate

term of the deposit

refer

"tax-exempt"

accurate

is

advertisements

with

taken

split

advertisements

in sma ll er

advertisements

"tax-free,"

a d o pt ed

advertising

IRAs.

Board,

that

addition,
IRAs

for

the r e m ai ni ng

consumers.

of

misleading

In summary,

rate

then

Board

advertising

Bank

be li e v e s

initial

the

i mp or ta nc e

be take n by the C om pt ro ll er

Insurance Corporation.
that

in cr eas ed

1984,

potentially

act io ns

-

this

de pos it s used as inves tm en ts
similar

11

that w o u l d

The

and also

a c h ie ve

set

forth

in

its

into Re g u l a t i o n Q,

Boar d

is

req ues tin g

is i nt er es te d

the goals

of

the

in any
Policy

-

S t a t em en t.
other

In

advertising

deregulation
provisions
remo va l

of

disclosure

of

of

and

-

B o ard

of

rate

Regulation Q
rate

ceilings,

should

inaccurate,

misleading,

(12

§ 217.6(g)).

C.F.R.

that

elements

Regulation Q

relating

specific

issues

be

ceilings.

the m a t e r i a l

m a t te r,

re qu est s

disclosure

a framew or k of de p o s i t

solicitations

re qu ir e

the

interest

in t e r e s t

establishes

g e ne ra l

addition,

12

to
or

a r i si ng
and

Currently,

types

of depo sit

paid

any
on

provisions
of

from

to

the

e x i st in g

ref lect

the

the

re gu lat ion

a d v e r t i s i n g rules ai med at

misrepresentative
Oth er

re ga rdi ng

w h e th er

modified

p ro hi bi ts

in te res t

com me nt s

full

instruments.

As

advertisements

or

de po si ts
of
of

inf or ma ti on

that

depo sit
the

are

con tra cts

reg ul at io n

appear

a

in

advert i s e m e n t s :
(a)

interest rates m ust be st ate d in terms of the
ann ua l
rate
of
si mpl e
interest,
and
a d v e r t i s e m e n t s that d i s p l a y an e f f e c t i v e annual
y i e l d b a s e d on c o m p o u n d i n g must state the annual
rate of s i m p l e i n te res t and the basis
of
c o m p o u n d i n g (12 C.F.R. § 217.6(a) and (b));

(b)

no intere st rate can be a d v e r t i s e d that states a
yi e l d b a s e d on a p e r i o d of m o r e than one year in
order to e n s u r e that e f f e c t i v e yie ld s are not
a r t i f i c i a l l y i n f l a t e d (12 C.F.R. § 217.6(c));

(c)

if an a d v e r t i s e d rate is pa ya bl e onl y on a
d e p os it that m e e t s a s p e c i f ic time or amount
re qu ir em en t, such r e q u ir e m e n t s must be stated
c l e a r l y and c o n s p i c u o u s l y (12 C.F.R. § 217.6(d));

(d)

a d v e r t i s e m e n t s for time de po si ts must state that
inte re st p e n a l t i e s a p p l y in the event of ea rly
w i t h d r a w a l (12 C.F.R. § 217.6(e));

(e)

me mb e r bank s are r e q u i r e d to inform cu st o m e r s at
the time that an ac c o u n t is op en ed as to the
m e t h o d that w i l l be used in c o m p u t i n g and pay in g
interes t on the account, in cl ud in g a ny p r ov is io n
for n o n p a y m e n t of int er es t (12 C.F.R. S 217.148).

-

The

Fe deral

De p o s it

Fe deral Home Loan Bank

advertising

and

individu al s.
on

ch a n g e s

is

Boa rd hav e

cou ld

to re flect

deposi ts .

Such com me nt s

method

of

average
simple

the

advertising

requiring

that

rates

effective

made

to

re moval
could,

floating
for

or

yield

may

example,

rules

for

harm ful

in comments

cei lin gs

di sc uss

in

on

the proper

interest

than

to

a dv er ti si ng

rate

stat ed

rather

be

ex i s t i n g

interest

be

the

on exi sti ng

i nt er es te d

v a ri ab le

d e po si ts

annual

is

the

for

identical

co mm ent s

that

of

and

jur isdictions.

rec ei vi ng

the B o ard

be

provisions

vi rt u a l l y

practices

In addition,

Corporation

re s p e c ti ve

in t e r e st ed

disclosure

that

-

In su ran ce

i n s t i t u t i o n s su b j e c t to their
The B o ar d

13

rates,

terms

req ui ri ng

of

or

the

that

the

rate be used.

R e g u l a t o r y F l e x i b i l i t y An a l y s i s
The
seg.)

re qu ire s

proposal
v ie w

Regulatory

on small

that

r ep or ti ng
p ro p o s a l

the

the
or
is

Flexibility

Board

to

request

in this

wo u l d

r e co r d k e e p i n g
to

conside r

entities.

p r o p o sa l

not

Statement.

co mm ent

S u gg es te d

wh en c o m me nt s are analyzed.
to

co m m e r c i a l

System.

It

is

banks
not

whic h

(5
the

on

impose

any

it

is

an y

that

of

the

the

pu rp os e

will

et

this
Board's

add it io na l

to the Boa rd' s

me mb er s

§ 601
of

alternatives

The pr o p o s e d

anticipated

impact

The

al t e r n a t i v e s

are

U.S.C.

regard,

r e qu ire men ts.

pu bl i c b e l i e v e s ma y be p r e f e r a b l e
P ol i c y

Act

of

that

this
the

March 22,
be

1984

con si de re d

rule wo uld ap ply only
the

Federal

pro po sa l

will

Re se rv e
have

a

14

-

n e g a t i v e impact on
to a t t r a c t

-

the a b i l i t y of small

deposits,

and

the

pr op osa l

depository

sho ul d

in sti tut ion s

be ne fi t

co ns ume rs

in their eff or ts to obt ai n the mos t f a vo ra bl e de po si t terms.
List of Su b j e c t s in 12 C.F.R.
Adv er t i s i n g ,

Part 217

Banks,

banking;

Fed eral

Re se rv e

System;

Fo r e i g n banking.
Pu r s u a n t
Fe de ra l
amend

Reserve

section

re v i s i n g

to

Act

authority

(12

217.6

of

paragraph

subparagraph

its

S 371b)

Regulation Q

(a),

(g)(1)

U.S.C.

under

and

and

by

se ct io n 1 9 ( j ) of

the

(12

Bo ar d

C.F.R.

r e d e s i gn at in g

adding

a

ne w

the

pro po se s

to

Part 217)

pa ra g r a p h

su b p a r a g r a p h

by

(g)

(g)(2)

as
as

follows:
§ 217.6 —

A D V E R T I S I N G OF IN TE RES T O N DE PO SI TS
*

(a)

*

*

*

Rate of i n t e r e s t .
(1)

interest

the an nua l rate of simple
ad v e r t i s e d

*

that

is

in

rates

shall

interest.

excess

of

be

st ate d

in

terms

In no c as e shall

the

rate

be i n g

of

a rate be

pai d

on

the

deposit.
(2)(i)
mo re

than one rate

the ac co un t
statement

as

in

is paid m ust

type

to

Advertisements

of

the

equal

length

e f f e c t i v e a nd a c o n s p i c u o u s
an nu al

yield

for

the

inter es t at least annually.

time

which

for
of

d e p os it s

wh er e

rate

to be

with

a co ns pi cuo us

together

s t at em en t

deposit

time

state each

size
of

for

wh i c h

each

the a v e ra ge

ass ume s

paid

rate

on

is

e f fe ct iv e

compounding

of

This ap pl ies to a c c o u n t s wh ere

15

-

(A)
be paid

th ro ug ho ut

-

it is known

in ad va nce what

the

rates

to

the life of the account will be and,
(B)

the

initial

rate

For

ac cou nts

to be

paid

is

higher

than s u b s e q u e n t rates.
(ii)
intere st

rate

that

interest

rate

may

must

also

include

is
be

d e t e rm i n e d

by

advertised;

a c o n s p ic uo us

rate

pe r i o d

will

be

determined

to be

during

future

For

acc oun ts

followed by a va r i a bl e

the remainder

determining

the
as

(B)

va ri abl e

the

initial

ad ve rt is em en t

to

(A)

the

time

the me th od by which

pe ri ods

and

that offer
rate

an

the

the va r i a b l e

rate

shall

be

initial

de t e r m i n e d

of the term of the account,

same size as the fixed rate.
w h ic h

for

a

index,

st at eme nt
and

to

time

for which such rate will apply.
(iii)

rate

an

however,

p e r i o d for whi ch such rate applies,
the

sub ject

stated

In addition,

an

index

the me th od

in

the

the initial fixed rate and su b s e q ue nt

by

fixed

type

of

the

time per iods

rates

of

for

apply must be

c o n s p i c u o u s l y stated.
*

(g)

*

*

advertisements
as

language)

*

A c c u r a c y of a d v e r t i s i n g .
(2)

("IRA")

*

a

to

It
refer

"tax-free,"

investment.

an

is

In dividual

"tax

exempt"

C o n t r i b u t i on s

to,

(1)

* * *

misleading
Retirement

and

in ac cur ate

Account

(or

other

similar

and

ear ni ng s

on,

IRAs

for

-

16

-

are deferred from federal income taxes rather than exempt from
taxes.
*

By order

*

*

*

*

of the Board of Governors

of the

Federal

Reserve System, March 22, 1984.
(signed) William W. Wiles

William W. Wiles
Secretary of the Board


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102