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Federal Reserve Bank

D. M c T E E R , J R .

AND c h ie f e x e c u t iv e

o f f ic e r

February 28, 1995

7 5 26 5-5 90 6

Notice 95-22


The Chief Executive Officer of
each financial institution in the
Eleventh Federal Reserve District

Official Staff Commentary on Regulation DD
(Truth in Savings) and Slip-sheet Amendments to
Regulation O (Loans to Executive Officers, Directors,
and Principal Shareholders of Member Banks)
The Board of Governors of the Federal Reserve
System has issued the Official Staff Commentary on Regula­
tion DD (Truth in Savings) in pamphlet form and has pub­
lished amendments in slip-sheet form to Regulation O (Loans
to Executive Officers, Directors, and Principal Shareholders of
Member Banks).
The new pamphlet and slip sheet should be inserted
in your Regulations binder.
The new pamphlet and the slip sheet are enclosed.

For additional copies, bankers and others are encouraged to use one o f the following toll-free
numbers in contacting the Federal Reserve Bank o f Dallas: Dallas Office (800) 333-4460;
El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; H ouston Branch Intrastate
(800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (

For more information regarding Regulation DD,
please contact Eugene Coy at (214) 922-6201. For more infor­
mation regarding Regulation O, please contact Jane Ann
Schmoker at (214) 922-5101.
For additional copies of this Bank’s notice, the
pamphlet, or the slip sheet, please contact the Public Affairs
Department at (214) 922-5254.
Sincerely yours,

/f&V2J®. a /c. 7 ^

Board o f Governors o f the Federal Reserve System

Amendments to Regulation O
Loans to Executive Officers, Directors,
and Principal Shareholders of Member Banks
November 1994*
1. Effective July 19, 1994, section 215.2(d)
is amended as follows:
(d) D irector of a company or bank
means any director of the company or
bank, w hether or not receiving
compensation. * * *

2. E ffective July 19, 1994, section
215.4(d)(1) is amended as follows:
(d) Aggregate lending limit.
(1) General limit. A member bank
* * * outstanding extensions of credit
by that bank to all such insiders, * * *

3. E ffective July 19, 1994, section
215.4(e)(1) is amended as follows:
(e) Overdrafts.
(1) No member bank may pay an over­
draft of an executive officer or director
of the bank or executive officer or di­
rector of its affiliates’ * * *
' T h is p ro h ib itio n d o e s n o t a pp ly * * *. T h is p ro h i­
b itio n a ls o d o e s n ot a p p ly to the p a y m e n t b y a m e m ­
b e r b a n k o f an o v e rd r a f t o f a re la te d in te rest o f an
e x e c u tiv e officer, d ire c to r, o r p rin c ip al s h a re h o ld e r o f
th e m e m b e r b a n k o r e x e c u tiv e o ffic e r, d i re c to r , or
p rin c ip al s h a re h o ld e r o f its affiliates.

4. E ffective July 19, 1994. in section
215.5(b), the references to paragraph
(c)(3) are changed to read paragraph
(c)(4). ’

5. E ffective July 19, 1994, section
215.5(c)(4) is amended by adding the
* A c o m p le te R e g u la tio n O , a s a m e n d e d e ffe c tiv e
19. 1994, c o n s is ts o f —


th e r e g u la tio n p a m p h le t d a te d
front c o v e r) and
th is s lip sheet.

J u n e 1994


( se e insid e

word “unim paired" before the word

6. Effective December 19, 1991, section
106(E) is amended to read as follows:
(E) For purposes of this paragraph, the
term “extension of credit” shall have the
meaning prescribed by the Board pursuant
to section 22(h) of the Federal Reserve
Act (12 U.S.C. 375b), * * *

7. Effective December 19, 1991, section
106(F) is amended to read as follows:
(F)(i) Any bank which, and any institu­
tion-affiliated party (within the meaning
of section 3(u) of the Federal Deposit
Insurance Act) with respect to such
bank who, violates any provision of
this paragraph shall forfeit and pay a
civil penalty of not more than $5,000
for each day during which such viola­
tion continues.
(ii) Notwithstanding clause (i), any
bank which, and any institution-affiliated party (within the meaning of sec­
tion 3(u) of the Federal Deposit Insur­
ance Act) with respect to such bank
(I)(aa) commits any violation de­
scribed in clause (i);
(bb) recklessly engages in an un­
safe or unsound practice in con­
ducting the affairs of such bank; or
fee) breaches any fiduciary duty;
(II) which violation, practice, or
(aa) is part o f a pattern of
(bb) causes or is likely to cause

Regulation O
more than a minimal loss to such
bank; or
(cc) results in pecuniary gain or
other benefit to such party,
shall forfeit and pay a civil penalty of
not more than $25,000 for each day
during which such violation, practice,
or breach continues.
(iii) Notwithstanding clauses (i) and
(ii), any bank which, and any institu­
tion-affiliated party (within the meaning
of section 3(u) of the Federal Deposit
Insurance Act) with respect to such
bank who—
(I) knowingly—
(aa) commits any violation de­
scribed in clause (i);
(bb) engages in any unsafe or un­
sound practice in conducting the
affairs of such bank; or
(cc) breaches any fiduciary duty;
(II) knowingly or recklessly causes a
substantial loss to such bank or a
substantial pecuniary gain or other
benefit to such party by reason of
such violation, practice, or breach.
shall forfeit and pay a civil penalty in
an amount not to exceed the applicable
maximum amount determined under
clause (iv) for each day during which
such violation, practice, or breach
(iv) The maximum daily amount of any
civil penalty which may be assessed
pursuant to clause (iii) for any viola­
tion, practice, or breach described in
such clause is—
(I) in the case of any person other
than a bank, an amount to not exceed
$1,000,000; and
(II) in the case of a bank, an amount
not to exceed the lesser of—
(aa) $1,000,000; or
(bb) 1 percent of the total assets
of such bank.
(v) Any penalty imposed under clause
(i), (ii), or (iii) may be assessed and
(I) in the case of a national bank, by
the Comptroller of the Currency;
(II) in the case of a State member
bank, by the Board; and

in the case of an insured non­
member State bank, by the Federal
Deposit Insurance Corporation,
in the manner provided in subpara-J
graphs (E), (F), (G), and (I) of section
8(i)(2) of the Federal Deposit Insurance
Act for penalties imposed (under such
section) and any such assessment shall
be subject to the provisions of such
(vi) The bank or other person against
whom any penalty is assessed under
this subparagraph shall be afforded an
agency hearing if such bank or person
submits a request for such hearing
within 20 days after the issuance of the
notice of assessment. Section 8(h) of
the Federal Deposit Insurance Act shall
apply to any proceeding under this
(vii) All penalties collected under au­
thority of this subsection shall be de­
posited into the Treasury.
(viii) For purposes of this paragraph,
the term “violate” includes any action
(alone or with another or others) for or
toward causing, bringing about, partici­
pating in, counseling, or aiding or abet­
ting a violation.
(ix) The Comptroller of the Currency,
the Board, and the Federal Deposit In­
surance Corporation shall prescribe reg­
ulations establishing such procedures as
may be necessary to carry out this

8. Effective December 19, 1991, in section
106(G )(i)(l) and (2), the reference to
“each political ( umpaign committee" is
changed to read each political or cam­
paign committee".

9. Effective D ecember 19, 1991, section
106(H)(i) is amended to read as follows:
(i) the term “bank” includes a mutual
savings bank, a savings bank, and a sav­
ings association (as those terms are de­
fined in section 3 of the Federal Deposit
Insurance Act);

Regulation O
submits a request for such hearing
within 20 days after the issuance of the
notice of assessment. Section 8(h) of
the Federal Deposit Insurance Act shall
apply to any proceeding under this
(vii) All penalties collected ^under au­
thority of this subsection shall be de­
posited into the Treasury.
(viii) For purposes of this paragraph,
the term “ violate” includes any action
(alone or with another or others) for or
toward causing, bringing about, partici­
pating in, counseling, or aiding or abet­
ting a violation.
(ix) The Comptroller of the Currency,
the Board, and the Federal Deposit In­
surance Corporation shall prescribe reg­
ulations establishing such procedures as
may be necessary to carry out this

10. Effective December 19, 1991, in section
106(G )(i)(l) and (2), the reference to
“each political campaign committee" is
changed to read “each political or cam­
paign committee".

11. Effective December 19, 1991, section
106(H)(i) is amended to read as follows:
(i) the term “ bank” includes a mutual
savings bank, a savings bank, and a sav­
ings association (as those terms are de­
fined in section -3 of the Federal Deposit
Insurance Act);

Board of Governors of the Federal Reserve System

Official Staff Commentary
on Regulation DD
Truth in Savings
Effective August 3, 1994; compliance optional until February 6, 1995

Any inquiry relating to Regulation DD should be addressed to the Federal Reserve Bank of
the Federal Reserve District in which the inquiry arises.
October 1994



P age

Introduction .....................................................
Section 230.1—Authority, purpose,
coverage, and effect on state la w s ..........
Section 230.2—Definitions...........................
Section 230.3—General disclosure
Section 230.4—Account disclosures.............
Section 230.5—Subsequent disclosures . . . .
Section 230.6—Periodic-statement


Section 230.7—Payment of interest..........
Section 230.8—Advertising.........................
Section 230.9—Enforcement and record
Appendix A—Annual-percentage-yield
Appendix B—Model clauses and
sample forms.............................................


Official Staff C om m entary
on R egulation DD
Effective August 3, 1994; compliance optional until February 6, 1995

1. Official status. This commentary is the
means by which the Division of Consumer
and Community Affairs of the Federal Re­
serve Board issues official staff interpretations
of Regulation DD. Good-faith compliance
with this commentary affords protection from
liability under section 271(0 of the Truth in
Savings Act.

ii. deposit accounts opened as a condition of
obtaining a credit card
iii. accounts denominated in a foreign cur­
iv. individual retirement accounts (IRAs) and
simplified employee pension (SEP) ac­
v. payable on death (POD) or Totten trust
2. Other accounts. Examples of accounts not
subject to the regulation are—

SECTION 230.1— Authority, Purpose,
Coverage, and Effect on State Laws
1(c) Coverage
1. Foreign applicability. Regulation DD ap­
plies to all depository institutions, except
credit unions, that offer deposit accounts to
residents (including resident aliens) of any
state as defined in section 230.2(r). Accounts
held in an institution located in a state are
covered, even if funds are transferred periodi­
cally to a location outside the United States.
Accounts held in an institution located outside
the United States are not covered, even if held
by a U.S. resident.
2. Persons who advertise accounts. Persons
who advertise accounts are subject to the ad­
vertising rules. For example, if a deposit bro­
ker places an advertisement offering consum­
ers an interest in an account at a depository
institution, the advertising rules apply to the
advertisement, whether the account is to be
held by the broker or directly by the


mortgage escrow accounts for collecting
taxes and property insurance premiums
ii. accounts established to make periodic dis­
bursements on construction loans
iii. trust accounts opened by a trustee pursu­
ant to a formal written trust agreement
(not merely declarations of trust on a sig­
nature card such as a Totten trust or an
IRA and SEP account)
iv. accounts opened by an executor in the
name of a decedent’s estate
3. Other investments. The term “ account”
does not apply to all products of a depository
institution. Examples of products not covered

government securities
mutual funds
securities or obligations of a depository
v. contractual arrangements such as repur­
chase agreements, interest-rate swaps, and
banker’s acceptances

2(b) Advertisement
SECTION 230.2— Definitions
2(a) Account
1. Covered accounts. Examples of accounts
subject to the regulation are—

interest-bearing and noninterest-bearing

1. Covered messages. Advertisements include
commercial messages in visual, oral, or print
media that invite, offer, or otherwise announce
generally to prospective customers the availa­
bility of consumer accounts, such as—
i. telephone solicitations
ii. messages on automated teller machine
(ATM) screens

Regulation DD Official Staff Commentary

§ 230.2
iii. messages on a computer screen in an in­
stitution’s lobby (including any printout)
other than a screen viewed solely by the
institution’s employee
iv. messages in a newspaper, magazine, or
promotional flyer or on radio
v. messages that are provided along with in­
formation about the consumer’s existing
account and that promote another account
at the institution
2. Other messages. Examples of messages
that are not advertisements are—

rate sheets in a newspaper, periodical, or
trade journal (unless the depository institu­
tion, or a deposit broker offering accounts
at the institution, pays a fee for or other­
wise controls publication)
ii. in-person discussions with consumers
about the terms for a specific account
iii. information given to consumers about ex­
isting accounts, such as current rates re­
corded on a voice-response machine or
notices for automatically renewable time
accounts sent before renewal

may be given for a specific promotion. To il­
lustrate, assume an institution offers in Janu­
ary to give consumers an item valued at $7
for each calendar quarter during the year that
the average account balance in a negotiable
order of withdrawal (NOW) account exceeds
$10,000. The bonus rules are triggered, since
consumers are eligible under the promotion to
receive up to $28 during the year. However,
the bonus rules are not triggered if an item
valued at $7 is offered to consumers opening
a NOW account during the month of January,
even though in November the institution in­
troduces a new promotion that includes, for
example, an offer to existing NOW account
holders for an item valued at $8 for maintain­
ing an average balance of $5,000 for the
4. Waiver or reduction o f a fee or absorption
o f expenses. Bonuses do not include value that
consumers receive through the waiver or re­
duction of fees (even if the fees waived ex­
ceed $10) for banking-related services such as
the following—

2(f) Bonus
1. Examples. Bonuses include items of value,
other than interest, offered as incentives to
consumers, such as an offer to pay the final
installment deposit for a holiday club account.
Items that are not a bonus include discount
coupons for goods or services at restaurants or
2. De minimis rule. Items with a de minimis
value of $10 or less are not bonuses. Institu­
tions may rely on the valuation standard used
by the Internal Revenue Service to determine
if the value of the item is de minimis. Exam­
ples of items of de minimis value are—
i. disability insurance premiums valued at an
amount of $10 or less per year
ii. coffee mugs, T-shirts, or other merchandise
with a market value of $10 or less
3. Aggregation. In determining if an item val­
ued at $10 or less is a bonus, institutions must
aggregate per account per calendar year items
that may be given to consumers. In making
this determination, institutions aggregate per
account only the market value of items that

a safe deposit box rental fee for consum­
ers who open a new account
ii. fees for traveler’s checks for account
iii. discounts on interest rates charged for
loans at the institution

2(h) Consumer
1. Professional capacity. Examples of ac­
counts held by a natural person in a profes­
sional capacity for another are attorney-client
trust accounts and landlord-tenant security
2. Other accounts. Accounts not held in a
professional capacity include accounts held by
an individual for a child under the Uniform
Gifts to Minors Act.
3. Sole proprietors. Accounts held by individ­
uals as sole proprietors are not covered.
4. Retirement plans. IRAs and SEP accounts
are consumer accounts to the extent that funds
are invested in covered accounts. But Keogh
accounts are not subject to the regulation.
5. Unincorporated associations. An institution

§ 230.3

Regulation DD Official Staff Commentary
may rely on the declaration of the person rep­
resenting an unincorporated association as to
whether the account is held for a business or
nonbusiness purpose.

2(j) Depository Institution and Institution
1. Foreign institutions. Branches of foreign
institutions located in the United States are
subject to the regulation if they offer deposit
accounts to consumers. Edge Act and agree­
ment corporations, and agencies of foreign in­
stitutions, are not depository institutions for
purposes of this regulation.

2(k) Deposit Broker
1. General. A deposit broker is a person who
is in the business of placing or facilitating the
placement of deposits in an institution, as de­
fined by the Federal Deposit Insurance Act
(12 USC 29(g)).

2(n) Interest
1. Relation to Regulation Q. While bonuses
are not interest for purposes of this regulation,
other regulations may treat them as the
equivalent of interest. For example, Regula­
tion Q identifies payments of cash or mer­
chandise that violate the prohibition against
paying interest on demand accounts. (See 12
CFR 217.2(d).)

2(p) Passbook Savings Account
1. Relation to Regulation E. Passbook savings
accounts include accounts accessed by
preauthorized electronic fund transfers to the
account (as defined in 12 CFR 205.2(j)), such
as an account that receives direct deposit of
Social Security payments. Accounts permitting
access by other electronic means are not pass­
book saving accounts and must comply with
the requirements of section 230.6 if statements
are sent four or more times a year.

2(q) Periodic Statement
1. Examples. Periodic statements do not
i. additional statements provided solely upon

ii. information provided by computer through
home banking services
iii. general service information such as a
quarterly newsletter or other correspon­
dence describing available services and

2(t) Tiered-Rate Account
1. Time accounts. Time accounts paying dif­
ferent rates based solely on the amount of the
initial deposit are not tiered-rate accounts.
2. Minimum-balance requirements. A require­
ment to maintain a minimum balance to earn
interest does not make an account a tiered-rate

2(u) Time Account
1. Club accounts. Although club accounts
typically have a maturity date, they are not
time accounts unless they also require a pen­
alty of at least seven days’ interest for with­
drawals during the first six days after the ac­
count is opened.
2. Relation to Regulation D. Regulation D
permits in limited circumstances the with­
drawal of funds without penalty during the
first six days after a time deposit is opened.
(See 12 CFR 204.2(c)(l)(i).) But the fact that
a consumer makes a withdrawal as permitted
by Regulation D does not disqualify the ac­
count from being a time account for purposes
of this regulation.

2(v) Variable-Rate Account
1. General. A certificate of deposit permitting
one or more rate adjustments prior to maturity
at the consumer’s option is a variable-rate

SECTION 230.3— General Disclosure
3(a) Form
1. Design requirements. Disclosures must be
presented in a format that allows consumers to
readily understand the terms of their account.
Institutions are not required to use a particular
type size or typeface, nor are institutions re3

§ 230.3
quired to state any term more conspicuously
than any other term. Disclosures may be
1. in any order
ii. in combination with other disclosures or
account terms
iii. in combination with disclosures for other
types of accounts, as long as it is clear to
consumers which disclosures apply to their
iv. on more than one page and on the front
and reverse sides
v. by using inserts to a document or filling in
vi. on more than one document, as long as
the documents are provided at the same
2. Consistent terminology. Institutions must
use consistent terminology to describe terms
or features required to be disclosed. For ex­
ample, if an institution describes a monthly
fee (regardless of account activity) as a
“ monthly service fee” in account-opening dis­
closures, the periodic statement and change-interm notices must use the same terminology
so that consumers can readily identify the fee.

3(b) General
1. Specificity o f legal obligation. Institutions
may refer to the calendar month or to roughly
equivalent intervals during a calendar year as
a “month.”

Regulation DD Official Staff Commentary
iii. an institution complying with the timing
rules of Regulation E discloses at the
same time fees for electronic services
(such as for balance inquiry fees at ATMs)
required to be disclosed by this regulation
but not by Regulation E
iv. an institution relies on Regulation E’s
rules regarding disclosure of limitations on
the frequency and amount of electronic
fund transfers, including security-related
exceptions. But any limitations on intrainstitutional transfers to or from the con­
sumer’s other accounts during a given
time period must be disclosed, even
though intra-institutional transfers are ex­
empt from Regulation E.

3(e) Oral Response to Inquiries
1. Application o f rule. Institutions are not re­
quired to provide rate information orally.
2. Relation to advertising. The advertising
rules do not cover an oral response to a ques­
tion about rates.
3. Existing accounts. This paragraph does not
apply to oral responses about rate information
for existing accounts. For example, if a con­
sumer holding a one-year certificate of deposit
(CD) requests interest rate information about
the CD during the term, the institution need
not disclose the annual percentage yield.

3(f) Rounding and Accuracy Rules for
Rates and Yields
(f)(1) Rounding

3(c) Relation to Regulation E
1. General rule. Compliance with Regulation
E (12 CFR 205) is deemed to satisfy the dis­
closure requirements of this regulation, such
as when—

an institution changes a term that triggers
a notice under Regulation E, and uses the
timing and disclosure rules of Regulation
E for sending change-in-term notices
ii. consumers add an ATM access feature to
an account, and the institution provides
disclosures pursuant to Regulation E, in­
cluding disclosure of fees (see 12 CFR

1. Permissible rounding. Examples of permis­
sible rounding are an annual percentage yield
calculated to be 5.644%, rounded down and
disclosed as 5.64%; 5.645% rounded up and
disclosed as 5.65%.

3(f)(2) Accuracy
I. Annual percentage yield and annual per­
centage yield earned. The tolerance for annual-percentage-yield and annual-percentageyield-earned calculations is designed to ac­
commodate inadvertent errors. Institutions
may not purposely incorporate the tolerance
into their calculation of yields.

§ 230.4

Regulation DD Official Staff Commentary

4(a) Delivery of Account Disclosures

reasonable time for responding to requests for
account information that consumers do not
make in person.

4(a)(1) Account Opening


1. New accounts. New account disclosures
must be provided when—

1. Recent rates. Institutions comply with this
paragraph if they disclose an interest rate and
annual percentage yield accurate within the
seven calendar days preceding the date they
send the disclosures.

SECTION 230.4— Account Disclosures


a time account that does not automatically
roll over is renewed by a consumer
ii. a consumer changes a term for a renewa­
ble time account (see section 230.5(b)-5
regarding disclosure alternatives)
iii. an institution transfers funds from an ac­
count to open a new account not at the
consumer’s request, unless the institution
previously gave account disclosures and
any change-in-term notices for the new
iv. an institution accepts a deposit from a
consumer to an account that the institution
had deemed closed for the purpose of
treating accrued but uncredited interest as
forfeited interest (see section 230.7(b)-3)
2. Acquired accounts. New account disclo­
sures need not be given when an institution
acquires an account through an acquisition of
or merger with another institution (but see
section 230.5(a) regarding advance-notice re­
quirements if terms are changed).
4(a)(2) Requests

1. Term. Describing the maturity of a time ac­
count as “ 1 year” or “6 months,” for exam­
ple, illustrates a statement of the maturity of a
time account as a term rather than a date
(“January 10, 1995” ).

4(b) Content of Account Disclosures
4(b)(1) Rate Information
4(b)(l)(i) Annual Percentage Yield and
Interest Rate
1. Rate disclosures. In addition to the interest
rate and annual percentage yield, institutions
may disclose a periodic rate corresponding to
the interest rate. No other rate or yield (such
as “tax-effective yield” ) is permitted. If the
annual percentage yield is the same as the in­
terest rate, institutions may disclose a single
figure but must use both terms.

1. Inquiries versus requests. A response to an
oral inquiry (by telephone or in person) about
rates and yields or fees does not trigger the
duty to provide account disclosures. But when
consumers ask for written information about
an account (whether by telephone, in person,
or by other means), the institution must pro­
vide disclosures unless the account is no
longer offered to the public.

2. Fixed-rate accounts. For fixed-rate time ac­
counts paying the opening rate until maturity,
institutions may disclose the period of time
the interest rate will be in effect by stating the
maturity date. (See appendix B, B-7—Sample
Form.) For other fixed-rate accounts, institu­
tions may use a date (“This rate will be in
effect through May 4, 1995” ) or a period
(“This rate will be in effect for at least 30
days” ).

2. General requests. When responding to a
consumer’s general request for disclosures
about a type of account (a NOW account, for
example), an institution that offers several var­
iations may provide disclosures for any one of

3. Tiered-rate accounts. Each interest rate,
along with the corresponding annual percent­
age yield for each specified balance level (or
range of annual percentage yields, if appropri­
ate), must be disclosed for tiered-rate ac­
counts. (See appendix A, part I, paragraph D.)

3. Timing fo r response. Ten business days is a

4. Stepped-rate accounts. A single composite

§ 230.4
annual percentage yield must be disclosed for
stepped-rate accounts. (See appendix A, part I,
paragraph B.) The interest rates and the period
of time each will be in effect also must be
provided. When the initial rate offered for a
specified time on a variable-rate account is
higher or lower than the rate that would other­
wise be paid on the account, the calculation of
the annual percentage yield must be made as
if for a stepped-rate account. (See appendix A,
part I, paragraph C.)
4(b)(I)(ii) Variable Rates
1. Determining interest rates. To disclose how
the interest rate is determined, institutions
i. identify the index and specific margin, if
the interest rate is tied to an index
ii. state that rate changes are within the insti­
tution’s discretion, if the institution does
not tie changes to an index

Regulation DD Official Staff Commentary
4(b)(3) Balance Information
4(b)(3)(H) Balance-Computation Method
1. Methods and periods. Instititutions may use
different methods or periods to calculate mini­
mum balances for purposes of imposing a fee
(the daily balance for a calendar month, for
example) and accruing interest (the average
daily balance for a statement period, for ex­
ample). Each method and corresponding pe­
riod must be disclosed.
4(b)(3)(iii) When Interest Begins to Accrue
1. Additional information. Institutions may
disclose additional information such as the
time of day after which deposits are treated as
having been received the following business
day, and may use additional descriptive terms
such as “ ledger” or “collected” balances to
disclose when interest begins to accrue.
4(b)(4) Fees
1. Covered fees. The following are types of
fees that must be disclosed—


1. Frequency o f rate changes. An institution
reserving the right to change rates at its dis­
cretion must state the fact that rates may
change at any time.
1. Limitations. A floor or ceiling on rates or
on the amount the rate may decrease or in­
crease during any time period must be dis­
closed. Institutions need not disclose the ab­
sence of limitations on rate changes.
4(b)(2) Compounding and Crediting
4(b)(2)(H) Effect o f Closing an Account
1. Deeming an account closed. An institution
may, subject to state or other law, provide in
its deposit contracts the actions by consumers
that will be treated as closing the account and
that will result in the forfeiture of accrued but
uncredited interest. An example is the with­
drawal of all funds from the account prior to
the date that interest is credited.

maintenance fees, such as monthly service
ii. fees to open or to close an account
iii. fees related to deposits or withdrawals,
such as fees for use of the institution’s
iv. fees for special services, such as stop-payment fees, fees for balance inquiries or
verification of deposits, fees associated
with checks returned unpaid, and fees for
regularly sending to consumers checks that
otherwise would be held by the institution
2. Other fees. Institutions need not disclose
fees such as the following—
i. fees for services offered to account and
non-account holders alike, such as travel­
er’s checks and wire transfers (even if dif­
ferent amounts are charged to account and
non-account holders)
ii. incidental fees, such as fees associated
with state escheat laws, garnishment or at­
torney’s fees, and fees for photocopying
3. Amount o f fees. Institutions must state the
amount and conditions under which a fee may

§ 230.5

Regulation DD Official Staff Commentary
be imposed. Naming and describing the fee
(such as “$4.00 monthly service fee” ) will
typically satisfy these requirements.
4. Tied accounts. Institutions must state if
fees that may be assessed against an account
are tied to other accounts at the institution.
For example, if an institution ties the fees
payable on a NOW account to balances held
in the NOW account and a savings account,
the NOW account disclosures must state that
fact and explain how the fee is determined.

4(b)(5) Transaction Limitations
1. General rule. Examples of limitations on
the number or dollar amount of deposits or
withdrawals that institutions must disclose

limits on the number of checks that may
be written on an account within a given
time period
ii. limits on withdrawals or deposits during
the term of a time account
iii. limitations required by Regulation D on
the number of withdrawals permitted from
money market deposit accounts by check
to third parties each month. Institutions
need not disclose reservations of right to
require notices for withdrawals from ac­
counts required by federal or state law.

4(b)(6) Features o f Time Accounts

4(b)(6)(i) Time Requirements
1. “Callable” time accounts. In addition to
the maturity date, an institution must state the
date or the circumstances under which it may
redeem a time account at the institution’s op­
tion (a callable time account).

4(b)(6)(H) Early Withdrawal Penalties
1. General. The term “penalty” may but need
not be used to describe the loss of interest
that consumers may incur for early withdrawal
of funds from time accounts.
2. Examples. Examples of early withdrawal
penalties are—


monetary penalties, such as “$10.00” or
“ seven days’ interest plus accrued but un­
credited interest”
ii. adverse changes to terms such as a lower­
ing of the interest rate, annual percentage
yield, or compounding frequency for funds
remaining on deposit
iii. reclamation of bonuses
3. Relation to rules fo r IRAs or similar plans.
Penalties imposed by the Internal Revenue
Code for certain withdrawals from IRAs or
similar pension or savings plans are not early
withdrawal penalties for purposes of this
4. Disclosing penalties. Penalties may be
stated in months, whether institutions assess
the penalty using the actual number of days
during the period or using another method
such as a number of days that occurs in any
actual sequence of the total calendar months
involved. For example, stating “one month’s
interest” is permissible, whether the institution
assesses 30 days’ interest during the month of
April, or selects a time period between 28 and
31 days for calculating the interest for all
early withdrawals regardless of when the pen­
alty is assessed.
4(b)(6)(iv) Renewal Policies
1. Rollover time accounts. Institutions offering
a grace period on time accounts that automati­
cally renew need not state whether interest
will be paid if the funds are withdrawn during
the grace period.
2. Nonrollover time accounts. Institutions pay­
ing interest on funds following the maturity of
time accounts that do not renew automatically
need not state the rate (or annual percentage
yield) that may be paid. (See appendix B,
model clause B-l(h)(iv)(2).)

SECTION 230.5— Subsequent
5(a) Change in Terms
5(a)(1) Advance Notice Required
1. Form o f notice. Institutions may provide a

§ 230.5
change-in-term notice on or with a periodic
statement or in another mailing. If an institu­
tion provides notice through revised account
disclosures, the changed term must be high­
lighted in some manner. For example, institu­
tions may note that a particular fee has been
changed (also specifying the new amount) or
use an accompanying letter that refers to the
changed term.
2. Effective date. An example of language for
disclosing the effective date of a change is
“As of November 21, 1994.”
3. Terms that change upon the occurrence o f
an event. An institution offering terms that
will automatically change upon the occurrence
of a stated event need not send an advance
notice of the change provided the institution
fully describes the conditions of the change in
the account opening disclosures (and sends
any change-in-term notices regardless of
whether the changed term affects that con­
sumer’s account at that time).
4. Examples. Examples of changes not requir­
ing an advance change-in-terms notice are—
i. the termination of employment for consum­
ers for whom account maintenance or ac­
tivity fees were w aived during their
employment by the depository institution
ii. the expiration of one year in a promotion
described in the account opening disclo­
sures to “ waive $4.00 monthly service
charges for one year”
5(a)(2) No Notice Required
5(a)(2)(ii) Check-Printing Fees
1. Increase in fees. A notice is not required
for an increase in fees for printing checks (or
deposit and withdrawal) even if the institution
adds some amount to the price charged by the

5(b) Notice Before Maturity for Time
Accounts Longer Than One Month That
Renew Automatically
1. Maturity dates on nonbusiness days. In de­
termining the term of a time account, institu­
tions may disregard the fact that the term will
be extended beyond the disclosed number of

Regulation DD Official Staff Commentary
days because the disclosed maturity falls on a
nonbusiness day. For example, a holiday or
weekend may cause a “one-year” time ac­
count to extend beyond 365 days (or 366, in a
leap year) or a “one-month” time account to
extend beyond 31 days.
2. Disclosing when rates will be determined.
Ways to disclose when the annual percentage
yield will be available include the use of—
i. a specific date, such as “October 28”
ii. a date that is easily determinable, such as
“the Tuesday before the maturity date stat­
ed on this notice” or “as of the maturity
date stated on this notice”
3. Alternative timing rule. Under the alterna­
tive timing rule, an institution offering a 10day grace period would have to provide the
disclosures at least 10 days prior to the sched­
uled maturity date.
4. Club accounts. If consumers have agreed
to the transfer of payments from another ac­
count to a club time account for the next club
period, the institution must comply with the
requirements for automatically renewable time
accounts—even though consumers may with­
draw funds from the club account at the end
of the current club period.
5. Renewal o f a time account. In the case of a
change in terms that becomes effective if a
rollover tim e account is subsequently
i. If the change is initiated by the institution,
the disclosure requirements of this para­
graph apply. (Paragraph 230.5(a) applies if
the change becomes effective prior to the
maturity of the existing time account.)
ii. If the change is initiated by the consumer,
the account-opening disclosure require­
ments of section 230.4(b) apply. (If the no­
tice required by this paragraph has been
provided, institutions may give new ac­
count disclosures or disclosures highlight­
ing only the new term.)
6. Example. If a consumer receives a prema­
turity notice on a one-year time account and
requests a rollover to a six-month account,
the institution must provide either accountopening disclosures including the new matur-

§ 230.6

Regulation DD Official Staff Commentary
ity date or, if all other terms previously dis­
closed in the prematurity notice remain the
same, only the new maturity date.
5(b)(1) Maturities o f Longer Than One Year
I. Highlighting changed terms. Institutions
need not highlight terms that changed since
the last account disclosures were provided.

5(c) Notice for Time Accounts One
Month or Less That Renew
1. Providing disclosures within a reasonable
time. Generally, 10 calendar days after an ac­
count renews is a reasonable time for provid­
ing disclosures. For time accounts shorter than
10 days, disclosures should be given prior to
the next renewal date. For example, if a time
account automatically renews every 7 days,
disclosures about an account that renews on
Wednesday, December 7, 1994, should be
given prior to Wednesday, December 14.

5(d) Notice Before Maturity for Time
Accounts Longer Than One Year
ThatDo Not Renew Automatically


1. Subsequent account. When funds are trans­
ferred following maturity of a nonrollover
time account, institutions need not provide account disclosures unless a new account is

SECTION 230.6— Periodic-Statement

the interim statement need not comply with
this section unless it states interest or rate in­
formation. (See 12 CFR 205.9(b).)
3. Combined statements. Institutions may pro­
vide information about an account (such as an
MMDA) on the periodic statement for another
account (such as a NOW account) without
triggering the disclosures required by this sec­
tion, as long as—
i. the information is limited to the account
number, the type of account, or balance in­
formation, and
ii. the institution also provides a periodic
statement complying with this section for
each account.
4. Other information. Additional information
that may be given on or with a periodic state­
ment includes—

interest rates and corresponding periodic
rates applied to balances during the state­
ment period
ii. the dollar amount of interest earned yearto-date
iii. bonuses paid (or any de minimis consider­
ation of $10 or less)
iv. fees for products such as safe deposit

6(a)(1) Annual Percentage Yield Earned
1. Ledger and collected balances. Institutions
that accrue interest using the collected-balance
method may use either the ledger or the col­
lected balance in determining the annual per­
centage yield earned.

6(a) General Rule
1. General. Institutions are not required to
provide periodic statements. If they do pro­
vide statements, disclosures need only be fur­
nished to the extent applicable. For example,
if no interest is earned for a statement period,
institutions need not state that fact. Or, institu­
tions may disclose “$0” interest earned and
“0% ” annual percentage yield earned.

6(a)(2) Amount o f Interest

2. Regulation E interim statements. When an
institution provides regular quarterly state­
ments, and in addition provides a monthly in­
terim statement to comply with Regulation E,

i. “interest paid,” to describe interest that
has been credited
ii. “interest accrued” or “ interest earned,” to
indicate that interest is not yet credited.

1. Accrued interest. Institutions must state the
amount of interest that accrued during the
statement period, even if was not not credited.
2. Terminology. In disclosing interest earned
for the period, institutions must use the term
“ interest” or terminology such as—


§ 230.6
3. Closed accounts. If consumers close an ac­
count between crediting periods and forfeit ac­
crued interest, the institution may not show
any figures for interest earned or annual per­
centage yield earned for the period (other than
zero, at the institution’s option).

6(a)(3) Fees Imposed
1. General. Periodic statements must state
fees disclosed under section 230.4(b) that
were debited to the account during the state­
ment period, even if assessed for an earlier
2. Itemizing fees by type. In itemizing fees
imposed more than once in the period, institu­
tions may group fees if they are the same
type. But the description must make clear that
the dollar figure represents more than a single
fee, for example, “total fees for checks writ­
ten this period.” Examples of fees that may
not be grouped together are—

monthly maintenance and excess-activity
ii. “transfer” fees, if different dollar amounts
are imposed— such as $.50 for deposits
and $1.00 for withdrawals
iii. fees for electronic fund transfers and fees
for other services, such as balance-inquiry
or maintenance fees
3. Identifying fees. Statement details must en­
able consumers to identify the specific fee.
For example—
i. Institutions may use a code to identify a
particular fee if the code is explained on
the periodic statement or in documents ac­
companying the statement.
ii. Institutions using debit slips may disclose
the date the fee was debited on the period­
ic statement and show the amount and type
of fee on the dated debit slip.
4. Relation to Regulation E. Disclosure of
fees in compliance with Regulation E com­
plies with this section for fees related to elec­
tronic fund transfers (for example, totaling all
electronic funds transfer fees in a single

Regulation DD Official Staff Commentary
6(a)(4) Length o f Period
1. General. Institutions providing the begin­
ning and ending dates of the period must
make clear whether both dates are included in
the period.
2. Opening or closing an account midcycle. If
an account is opened or closed during the pe­
riod for which a statement is sent, institutions
must calculate the annual percentage yield
earned based on account balances for each
day the account was open.

6(b) Special Rule for Average-DailyBalance Method
1. M onthly statements and quarterly com­
pounding. This rule applies, for example,
when an institution calculates interest on a
quarterly average daily balance and sends
monthly statements. In this case, the first two
monthly statements would omit annual-per­
centage-yield-earned and interest-earned
figures; the third monthly statement would re­
flect the interest earned and the annual per­
centage yield earned for the entire quarter.
2. Length o f the period. Institutions must dis­
close the length of both the interest-calculation period and the statement period. For ex­
ample, a statement could disclose a statement
period of April 16 through May 15 and fur­
ther state that “the interest earned and the an­
nual percentage yield earned are based on
your average daily balance for the period
April 1 through April 30.”
3. Quarterly statements and monthly com­
pounding. Institutions that use the averagedaily-balance method to calculate interest on a
monthly basis and that send statements on a
quarterly basis may disclose a single interest
(and annual-percentage-yield-earned) figure.
Alternatively, an institution may disclose three
interest and three annual-percentage-yieldearned figures, one for each month in the
quarter, as long as the institution states the
number of days (or beginning and ending
dates) in the interest period if different from
the statement period.

Regulation DD Official Staff Commentary

§ 230.7

SECTION 230.7— Payment of Interest

ii. following the maturity of nonrollover time
iii. when the maturity date falls on a holiday,
and consumers must wait until the next
business day to obtain the funds

7(a)(1) Permissible Methods
1. Prohibited calculation methods. Calculation
methods that do not comply with the require­
ment to pay interest on the full amount of
principal in the account each day include—

paying interest on the balance in the ac­
count at the end of the period (the “ending-balance” method)
ii. paying interest for the period based on the
lowest balance in the account for any day
in that period (the “ low-balance” method)
iii. paying interest on a percentage of the bal­
ance, excluding the amount set aside for
reserve requirements (the “investable-balance” method)
2. Use o f 365-day basis. Institutions may ap­
ply a daily periodic rate greater than
1/365 of the interest rate— such as 1/360 of
the interest rate—as long as it is applied 365
days a year.


3. Periodic interest payments. An institution
can pay interest each day on the account and
still make uniform interest payments. For ex­
ample, for a one-year certificate of deposit an
institution could make monthly interest pay­
ments equal to 1/12 of the amount of interest
that will be earned for a 365-day period (or
11 uniform monthly payments— each equal to
roughly 1/12 of the total amount of inter­
est— and one payment that accounts for the
remainder of the total amount of interest
earned for the period).
4. Leap year. Institutions
rate of 1/366 or 1/365 of
366 days in a leap year,
earn interest for February

may apply a daily
the interest rate for
if the account will

5. Maturity o f time accounts. Institutions are
not required to pay interest after time accounts
mature. (See 12 CFR 217, the Board’s Regu­
lation Q, for limitations on duration of interest
payments.) Examples include—
i. during a grace period offered for an auto­
matically renewable time account, if con­
sumers decide during that period not to
renew the account

6. Dormant accounts. Institutions must pay
interest on funds in an account, even if inac­
tivity or the infrequency of transactions would
permit the institution to consider the account
to be “ inactive” or “dormant” (or similar sta­
tus) as defined by state or other law or the
account contract.
7(a)(2) Determination o f Minimum Balance
to Earn Interest
1. Daily-balance accounts. Institutions that re­
quire a minimum balance may choose not to
pay interest for days when the balance drops
below the required minimum, if they use the
daily-balance method to calculate interest.
2. Average-daily-balance accounts. Institu­
tions that require a minimum balance may
choose not to pay interest for the period in
which the balance drops below the required
minimum, if they use the average-daily-balance method to calculate interest.
3. Beneficial method. Institutions may not re­
quire that consumers maintain both a mini­
mum daily balance and a minimum average
daily balance to earn interest, such as by re­
quiring consumers to maintain a $500 daily
balance and a prescribed average daily bal­
ance (whether higher or lower). But an institu­
tion could offer a minimum balance to earn
interest that includes an additional method that
is “ unequivocally beneficial” to consumers
such as the following: An institution using the
daily-balance method to calculate interest and
requiring a $500 minimum daily balance
could offer to pay interest on the account for
those days the minimum balance is not met as
long as the consumer maintains an average
daily balance throughout the month of $400.
4. Paying on fu ll balance. Institutions must
pay interest on the full balance in the account
that meets the required minimum balance. For
example, if $300 is the minimum daily bal­
ance required to earn interest, and a consumer
deposits $500, the institution must pay the

§ 230.7
stated interest rate on the full $500 and not
just on $200.
5. Negative balances prohibited. Institutions
must treat a negative account balance as zero
to determine—
i. the daily or average daily balance on
which interest will be paid
ii. whether any minimum balance to earn in­
terest is met
6. Club accounts. Institutions offering club
accounts (such as a “holiday” or “vacation”
club) cannot impose a minimum-balance re­
quirement for interest based on the total num­
ber or dollar amount of payments required
under the club plan. For example, if a plan
calls for $10 weekly payments for 50 weeks,
the institution cannot set a $500 “ minimum
balance” and then pay interest only if the
consumer has made all 50 payments.
7. Minimum balances not affecting interest.
Institutions may use the daily-balance, average-daily-balance, or any other computation
method to calculate minimum-balance require­
ments not involving the payment of inter­
est— such as to compute minimum balances
for assessing fees.

7(b) Compounding and Crediting
1. General. Institutions choosing to compound
interest may compound or credit interest annu­
ally, semi-annually, quarterly, monthly, daily,
continuously, or on any other basis.
2. Withdrawals prior to crediting date. If con­
sumers withdraw funds (without closing the
account) prior to a scheduled crediting date,
institutions may delay paying the accrued in­
terest on the withdrawn amount until the
scheduled credited date, but may not avoid
paying interest.
3. Closed accounts. Subject to state or other
law, an institution may choose not to pay ac­
crued interest if consumers close an account
prior to the date accrued interest is credited,
as long as the institution has disclosed that

Regulation DD Official Staff Commentary

7(c) Date Interest Begins to Accrue
1. Relation to Regulation CC. Institutions
may rely on the Expedited Funds Availability
Act (EFAA) and Regulation CC (12 CFR 229)
to determine, for example, when a deposit is
considered made for purposes of interest ac­
crual, or when interest need not be paid on
funds because deposited check is later re­
turned unpaid.
2. Ledger and collected balances. Institutions
may calculate interest by using a ledger- or
collected-balance method, as long as the cred­
iting requirements of the EFAA are met (12
CFR 229.14).
3. Withdrawal o f principal. Institutions must
accrue interest on funds until the funds are
withdrawn from the account. For example, if a
check is debited to an account on a Tuesday,
the institution must accrue interest on those
funds through Monday.

SECTION 230.8— Advertising
8(a) Misleading or Inaccurate
1. General. All advertisements are subject to
the rule against misleading or inaccurate ad­
vertisements, even though the disclosures ap­
plicable to various media differ.
2. Indoor signs. An indoor sign advertising an
annual percentage yield is not misleading or
inaccurate when—
i. for a tiered-rate account, it also provides
the lower dollar amount of the tier corre­
sponding to the advertised annual percent­
age yield
ii. for a time account, it also provides the
term required to obtain the advertised an­
nual percentage yield
3. Fees affecting “ e e ” accounts. For pur­
poses of determining whether an account can
be advertised as “free” or “no cost,” mainte­
nance and activity fees include—
i. any fee imposed when a minimum-balance
requirement is not met, or when consum­
ers exceed a specified number of transac­

§ 230.8

Regulation DD Official Staff Commentary
ii. transaction and service fees that consum­
ers reasonably expect to be imposed on a
regular basis
iii. a flat fee, such as a monthly service fee
iv. fees imposed to deposit, withdraw, or
transfer funds, including per-check or pertransaction charges (for example, $.25 for
each withdrawal, whether by check or in
4. Other fees. Examples of fees that are not
maintenance or activity fees include—

fees not required to be disclosed under
section 230.4(b)(4)
check-printing fees
balance-inquiry fees
stop-payment fees and fees associated with
checks returned unpaid
fees assessed against a dormant account
fees for ATM or electronic transfer ser­
vices (such as preauthorized transfers or
home banking services) not required to
obtain an account

5. Similar terms. An advertisement may not
use the term “fees waived” if a maintenance
or activity fee may be imposed because it is
similar to the terms “ free” or “no cost.”


6. Specific account services. Institutions may
advertise a specific account service or feature
as free if no fee is imposed for that service or
feature. For example, institutions offering an
account that is free of deposit or withdrawal
fees could advertise that fact, as long as the
advertisement does not mislead consumers by
implying that the account is free and that no
other fee (a monthly service fee, for example)
may be charged.
7. Free fo r limited time. If an account (or a
specific account service) is free only for a
limited period of time— for example, for one
year following the account opening—the ac­
count (or service) may be advertised as free if
the time period is also stated.
8. Conditions not related to deposit accounts.
Institutions may advertise accounts as “free”
for consumers meeting conditions not related
to deposit accounts, such as the consumer’s
age. For example, institutions may advertise a
NOW account as “ free for persons over 65
years old,” even though a maintenance or ac­

tivity fee is assessed on accounts held by con­
sumers 65 or younger.

8(b) Permissible Rates
1. Tiered-rate accounts. An advertisement for
a tiered-rate account that states an annual per­
centage yield must also state the annual per­
centage yield for each tier, along with corre­
sponding minimum-balance requirements. Any
interest rates stated must appear in conjunc­
tion with the applicable annual percentage
yields for each tier.
2. Stepped-rate accounts. An advertisement
that states an interest rate for a stepped-rate
account must state all the interest rates and
the time period that each rate is in effect.
3. Representative examples. An advertisement
that states an annual percentage yield for a
given type of account (such as a time account
for a specified term) need not state the annual
percentage yield applicable to other time ac­
counts offered by the institution or indicate
that other maturity terms are available. In an
advertisement stating that rates for an account
may vary depending on the amount of the ini­
tial deposit or the term of a time account, in­
stitutions need not list each balance level and
term offered. Instead, the advertisem ent
i. Provide a representative example of the an­
nual percentage yields offered, clearly de­
scribed as such. For exam ple, if an
institution offers a $25 bonus on all time
accounts and the annual percentage yield
will vary depending on the term selected,
the institution may provide a disclosure of
the annual percentage yield as follows:
“ For example, our six-month certificate of
deposit currently pays a 3.15% annual per­
centage yield.”
ii. Indicate that various rates are available,
such as by stating short-term and longerterm maturities along with the applicable
annual percentage yields: “We offer certifi­
cates of deposit with annual percentage
yields that depend on the maturity you
choose. For example, our one-month CD
earns a 2.75% APY. Or, earn a 5.25%
APY for a three-year CD.”

§ 230.8

8(c) When Additional Disclosures Are
1. Trigger terms. The following are examples
of information stated in advertisements that
are not “trigger” terms:

Regulation DD Official Staff Commentary
may use a phrase such as, “The maturity date
of this club account is November 15; its term
varies depending on when the account is
8(c)(6)(ii) Early Withdrawal Penalties


“One-, three-, and five-year CDs avail­
ii. “ Bonus rates available”
iii. “ 1% over our current rates,” so long as
the rates are not determinable from the ad­
8(c)(2) Time Annual Percentage Yield Is
1. Specified date. If an advertisement dis­
closes an annual percentage yield as of a
specified date, that date must be recent in re­
lation to the publication or broadcast fre­
quency of the media used, taking into account
the particular circumstances or production
deadlines involved. For example, the printing
date of a brochure printed once for a deposit
account promotion that will be in effect for
six months would be considered “ recent,”
even though rates change during the sixmonth period. Rates published in a daily
newspaper or on television must reflect rates
offered shortly before (or on) the date the
rates are published or broadcast.
2. Reference to date o f publication. An adver­
tisement may refer to the annual percentage
yield as being accurate as of the date of publi­
cation, if the date is on the publication itself.
For instance, an advertisement in a periodical
may state that a rate is “current through the
date of this issue,” if the periodical shows the
8(c)(5) Effect o f Fees
1. Scope. This requirement applies only to
maintenance or activity fees described in para­
graph 8(a).
8(c)(6) Features o f Time Accounts
8(c)(6)(i) Time Requirements
1. Club accounts. If a club account has a ma­
turity date but the term may vary depending
on when the account is opened, institutions

1. Discretionary penalties. Institutions impos­
ing early withdrawal penalties on a case-bycase basis may disclose that they “ may”
(rather than “ will” ) impose a penalty if such
a disclosure accurately describes the account

8(d) Bonuses
1. General reference to “bonus. ” General
statements such as “bonus checking” or “get
a bonus when you open a checking account”
do not trigger the bonus disclosures.

8(e) Exemption for Certain
8(e)(1) Certain Media
1. Tiered-rate accounts. Solicitations for a
tiered-rate account made through telephone re­
sponse machines must provide the annual per­
centage yields and the balance requirements
applicable to each tier.
8(e)(2) Indoor Signs
1. General. Indoor signs include advertise­
ments displayed on computer screens, banners,
preprinted posters, and chalk or peg boards.
Any advertisement inside the premises that
can be retained by a consumer (such as a bro­
chure or a printout from a computer) is not an
indoor sign.
2. Consumers outside the premises. Advertise­
ments may be “ indoor signs” even though
they may be viewed by consumers from
outside. An example is a banner, in an institu­
tion’s glass-enclosed branch office, that is lo­
cated behind a teller facing customers but is
readable by passersby.

Appendix A

Regulation DD Official Staff Commentary

SECTION 230.9— Enforcement and
Record Retention
9(c) Record Retention
I. Evidence o f required actions. Institutions
comply with the regulation by demonstrating
that they have done the following:
1. established and maintained procedures for
paying interest and providing timely disclo­
sures as required by the regulation, and
ii. retained sample disclosures for each type
of account offered to consumers, such as
account-opening disclosures, copies of ad­
vertisements, and change-in-term notices;
and information regarding the interest rates
and annual percentage yields offered.

Part II. Annual Percentage Yield Earned
for Periodic Statements
1. Balance method. The interest figure used in
the calculation of the annual percentage yield
earned may be derived from the daily-balance
method or the average-daily-balance method.
The balance used in the formula for the an­
nual percentage yield earned is the sum of the
balances for each day in the period divided by
the number of days in the period.
2. Negative balances prohibited. Institutions
must treat a negative account balance as zero
to determine the balance on which the annual
percentage yield earned is calculated. (See
commentary to section 230.7(a)(2).)
A. General Formula

2. Methods o f retaining evidence. Institutions
must be able to reconstruct the required dis­
closures or other actions. They need not keep
disclosures or other business records in hard
copy. Records evidencing compliance may be
retained on microfilm, microfiche, or by other
methods that reproduce records accurately (in­
cluding computer files).
3. Payment o f interest. Institutions must retain
sufficient rate and balance information to per­
mit the verification of interest paid on an ac­
count, including the payment of interest on
the full principal balance.

APPENDIX A— Annual-Percentage-Yield
Part I. Annual Percentage Yield for
Account Disclosures and Advertising
1. Rounding fo r calculations. The following
are examples of permissible rounding for cal­
culating interest and the annual percentage

the daily rate applied to a balance carried
to five or more decimal places
ii. the daily interest earned carried to five or
more decimal places

1. Accrued but uncredited interest. To calcu­
late the annual percentage yield earned, ac­
crued but uncredited interest—
1. may not be included in the balance for
statements issued at the same time or less
frequently than the account’s compounding
and crediting frequency. For example, if
monthly statements are sent for an account
that compounds interest daily and credits
interest monthly, the balance may not be
increased each day to reflect the effect of
daily compounding.
ii. must be included in the balance for suc­
ceeding statements if a statement is issued
more frequently than compounded interest
is credited on an account. For example, if
monthly statements are sent for an account
that compounds interest daily and credits
interest quarterly, the balance for the sec­
ond monthly statement would include inter­
est that had accrued for the prior month.
2. Rounding. The interest-earned figure used
to calculate the annual percentage yield earned
must be rounded to two decimals and reflect
the amount actually paid. For example, if the
interest earned for a statement period is
$20,074 and the institution pays the consumer
$20.07, the institution must use $20.07 (not
$20,074) to calculate the annual percentage
yield earned. For accounts paying interest
based on the daily-balance method that com­
pound and credit interest quarterly, and send

Appendix A
monthly statements, the institution may, but
need not, round accrued interest to two
decimals for calculating the annual percentage
yield earned on the first two monthly state­
ments issued during the quarter. However, on
the quarterly statement the interest-earned fig­
ure must reflect the amount actually paid.
B. Special Formula fo r Use Where Periodic
Statement Is Sent More Often Than the
Period fo r Which Interest Is Compounded
1. Statements triggered by Regulation E. Insti­
tutions may, but need not, use this formula to
calculate the annual percentage yield earned
for accounts that receive quarterly statements
and are subject to Regulation E’s rule calling
for monthly statements when an electronic
fund transfer has occurred. They may do so
even though no monthly statement was issued
during a specific quarter. But institutions must
use this formula for accounts that compound
and credit interest quarterly and receive
monthly statements that, while triggered by
Regulation E, comply with the provisions of
section 230.6.
2. Days in compounding period. Institutions
using the special annual-percentage-yieldearned formula must use the actual number of
days in the compounding period.

APPENDIX B— Model Clauses and
Sample Forms
1. Modifications. Institutions that modify the
model clauses will be deemed in compliance
as long as they do not delete required infor­
mation or rearrange the format in a way that
affects the substance or clarity o f the
2. Format. Institutions may use inserts to a
document (see sample form B-4) or fill in
blanks (see sample forms B-5, B-6, and B-7,
which use underlining to indicate terms that
have been filled in) to show current rates,
fees, or other terms.
3. Disclosures fo r opening accounts. The
sample forms illustrate the information that
must be provided to consumers when an ac­
count is opened, as required by section

Regulation DD Official Staff Commentary
230.4(a)(1). (See section 230.4(a)(2), which
states the requirements for disclosing the an­
nual percentage yield, the interest rate, and the
maturity of a time account in responding to a
consumer’s request.)
4. Compliance with Regulation E. Institutions
may satisfy certain requirements under Regu­
lation DD with disclosures that meet the re­
quirements of Regulation E. (See section
230.3(c).) For disclosures covered by both this
regulation and Regulation E (such as the
amount of fees for ATM usage), institutions
should consult appendix A to Regulation E
for appropriate model clauses.
5. Duplicate disclosures. If a requirement
such as a minimum balance applies to more
than one account term (to obtain a bonus and
determine the annual percentage yield, for ex­
ample), institutions need not repeat the re­
quirement for each term, as long as it is clear
which terms the requirement applies to.
6. Sample form s. The sample forms (B-4
through B-8) serve a purpose different from
the model clauses. They illustrate ways of
adapting the model clauses to specific ac­
counts. The clauses shown relate only to the
specific transactions described.

B-l Model Clauses for Account
B-I(h) Disclosures Relating to Time Accounts
1. Maturity. The disclosure in clause (h)(i)
stating a specific date may be used in all
cases. The statement describing a time period
is appropriate only when providing disclosures
in response to a consumer’s request.

B-2 Model Clauses for Change in
1. General. The second clause, describing a
future decrease in the interest rate and annual
percentage yield, applies to fixed-rate accounts

B-4 Sample Form (Multiple Accounts)
1. Rate-sheet insert. In the rate-sheet insert,
the calculations of the annual percentage yield
for the three-month and six-month certificates

Regulation DD Official Staff Commentary
are based on 92 days and 181 days respec­
tively. All calculations in the insert assume
daily compounding.

B-6 Sample Form (Tiered-Rate Money
Market Account)
1. General. Sample form B-6 uses tiering
method A (discussed in appendix A and

Appendix B
clause (a)(iv)) to calculate interest. It gives a
narrative description of a tiered-rate account;
institutions may use different formats (for ex­
ample, a chart similar to the one in sample
form B-4), as long as all required information
for each tier is clearly presented. The form
does not contain a separate disclosure of the
minimum balance required to obtain the an­
nual percentage yield; the tiered-rate disclo­
sure provides that information.


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