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Federal Reserve Bank
of Dallas

l l★K

April 13, 2001

DALLAS, TEXAS
75265-5906

Notice 01-33

TO: The Chief Executive Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District

SUBJECT
Interim Final Rules and Requests for
Public Comments on Amendments to Regulations
B (Equal Credit Opportunity), E (Electronic Fund Transfers),
M (Consumer Leasing), Z (Truth in Lending), and
DD (Truth in Savings)
DETAILS
The Board of Governors of the Federal Reserve System has adopted interim final
rules to establish uniform standards for the electronic delivery of federally mandated disclosures
under the following five consumer protection regulations:
•

B (Equal Credit Opportunity) – Docket No. R-1040;

•

E (Electronic Fund Transfers) – Docket No. R-1041;

•

M (Consumer Leasing) – Docket No. R-1042;

•

Z (Truth in Lending) – Docket No. R-1043; and

•

DD (Truth in Savings) – Docket No. R-1044.

The rules provide guidance on the timing and delivery of electronic disclosures to
ensure that applicants have adequate opportunity to access and retain required information.
Under the rules, financial institutions, creditors, lessors, and others may deliver disclosures
electronically if they obtain applicants’ consent in accordance with the Electronic Signatures in

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

-2-

Global and National Commerce Act. In addition, Regulations B, E, and Z have been revised to
allow financial institutions and creditors to provide disclosures in foreign languages.
The interim rules became effective March 30, 2001; however, to allow operational
changes, mandatory compliance has been delayed until October 1, 2001.
All five rules have been adopted as interim rules to allow commenters to present new
information or views not previously considered by the Board. The Board must receive comments
by June 1, 2001. Please address comments to Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington, DC
20551. Also, you may mail comments electronically to
mailto:regs.comments@federalreserve.gov. All comments should refer to the appropriate
docket number.
MORE INFORMATION
Copies of the Board’s notices as they appear in the Federal Register on pages 17322–
41, Vol. 66, No. 62, dated March 30, 2001, and pages 17779–804, Vol. 66, No. 65, dated April 4,
2001, are attached.
For more information, please contact Eugene Coy, Banking Supervision Department,
(214) 922-6201. For additional copies of this Bank’s notice, contact the Public Affairs
Department at (214) 922-5254 or access District Notices on our web site at
http://www.dallasfed.org/banking/notices/index.html.

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Federal Register / Vol. 66, No. 62 / Friday, March 30, 2001 / Rules and Regulations

FEDERAL RESERVE SYSTEM

ADDRESSES: Comments, which should
refer to Docket No. R–1042, may be
mailed to Ms. Jennifer J. Johnson,
Secretary, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551 or mailed electronically to
regs.comments@federalreserve.gov.
Comments addressed to Ms. Johnson
may also be delivered to the Board’s
mail room between 8:45 a.m. and 5:15
p.m. weekdays, and to the security
control room at all other times. The mail
room and the security control room,
both in the Board’s Eccles Building, are
accessible from the courtyard entrance
on 20th Street between Constitution
Avenue and C Street, NW. Comments
may be inspected in room MP–500 in
the Board’s Martin Building between 9
a.m. and 5 p.m., pursuant to the Board’s
Rules Regarding the Availability of
Information, 12 CFR part 261.
FOR FURTHER INFORMATION CONTACT: Jane
E. Ahrens, Senior Counsel, or David A.
Stein, Attorney, Division of Consumer
and Community Affairs, at (202) 452–
2412 or (202) 452–3667.
SUPPLEMENTARY INFORMATION:

12 CFR Part 213

I. Background

[Regulation M; Docket No. R–1042]

The Consumer Leasing Act (CLA), 15
U.S.C. 1667–1667e, was enacted into
law in 1976 as an amendment to the
Truth in Lending Act (TILA), 15 U.S.C.
1601 et seq. The CLA requires lessors to
provide lessees with uniform cost and
other disclosures about consumer lease
transactions. The act generally applies
to consumer leases of personal property
in which the contractual obligation does
not exceed $25,000 and has a term of
more than four months. An automobile
lease is the most common type of
consumer lease covered by the act. The
Board’s Regulation M (12 CFR part 213)
implements the act.
The CLA and Regulation M require
disclosures to be provided in writing,
presuming that lessors provide paper
documents. Under the Electronic
Signatures in Global and National
Commerce Act (E-Sign Act) (15 U.S.C.
7001 et seq.), however, electronic
documents and signatures have the
same validity as paper documents and
handwritten signatures.

Consumer Leasing
AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Interim rule; request for
comments.
SUMMARY: The Board is adopting an
interim rule amending Regulation M,
which implements the Consumer
Leasing Act, to establish a uniform
standard for the timing of the electronic
delivery of disclosures required by the
act and regulation. The rule provides
guidance on the timing and delivery of
electronic disclosures to ensure lessees
have adequate opportunity to access and
retain cost information when shopping
for a lease or becoming obligated for a
lease. (Similar rules are being adopted
under other consumer financial services
and fair lending regulations
administered by the Board.) Under the
rule, lessors may deliver disclosures
electronically if they obtain lessees’
affirmative consent in accordance with
the Electronic Signatures in Global and
National Commerce Act. The rule is
being adopted as an interim rule to
allow for additional public comment.
DATES: The interim rule is effective
March 30, 2001; however, to allow time
for any necessary operational changes,
the mandatory compliance date is
October 1, 2001. Comments must be
received by June 1, 2001.

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Board Proposals Regarding Electronic
Disclosures
Over the past few years, the Board has
published several interim rules and
proposals regarding the electronic
delivery of disclosures. In 1996, after a
comprehensive review of Regulation E
(Electronic Fund Transfers), the Board
proposed to amend the regulation to
permit financial institutions to provide

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Federal Register / Vol. 66, No. 62 / Friday, March 30, 2001 / Rules and Regulations
disclosures by sending them
electronically. (61 FR 19696, May 2,
1996) Based on comments received on
the 1996 proposal, on March 25, 1998,
the Board published an interim rule
permitting the electronic delivery of
disclosures under Regulation E (63 FR
14528) and similar proposals under
Regulation M (63 FR 14538), and other
financial services and fair lending
regulations administered by the Board.
The 1998 interim rule and proposed
rules were similar to the 1996 proposed
rule under Regulation E.
The 1998 proposals and interim rule
allowed depository institutions,
creditors, lessors, and others to provide
disclosures electronically if the
consumer agreed, with few other
requirements. For ease of reference, this
background section uses the terms
‘‘institutions’’ and ‘‘consumers.’’
Industry commenters generally
supported the Board’s 1998 proposals
and interim rule, but many of them
sought specific revisions and additional
guidance on how to comply with the
disclosure requirements in certain
transactions and circumstances. In
particular, they expressed concern that
the rule did not specify a uniform
method for establishing that an
‘‘agreement’’ was reached for sending
disclosures electronically. Consumer
advocates, on the other hand, generally
opposed the 1998 proposals and the
interim rule. They believed that
consumer protections in the proposals
were inadequate, especially in
connection with transactions that are
typically consummated in person (such
as automobile loans and leases, homesecured loans, and door-to-door credit
sales).
September 1999 Proposals
In response to comments received on
the 1998 proposals, the Board published
revised regulatory proposals in
September 1999 under Regulations B, E,
M, Z, and DD, (64 FR 49688, 49699,
49713, 49722 and 49740, respectively,
September 14, 1999) (collectively, the
‘‘1999 proposals’’), and an interim rule
under Regulation DD (64 FR 49846). The
interim rule under Regulation DD
allowed depository institutions to
deliver disclosures on periodic
statements electronically if the
consumer agrees.
Generally, the 1999 proposals
required institutions to use a
standardized form containing specific
information about the electronic
delivery of disclosures so that
consumers could make informed
decisions about whether to receive
disclosures electronically. If the
consumer affirmatively consented, most

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disclosures could be provided
electronically. To address concerns
about potential abuses, the 1999
proposals generally would have
required disclosures to be given in
paper form when consumers transacted
business in person. The proposals
contained rules for disclosures that are
made available to consumers at an
institution’s Internet web site
(governing, for example, how long
disclosures must remain posted at a web
site).
Comments on the September 1999
Proposals
The Board received letters
representing 115 commenters
expressing views on the revised
proposals. Industry commenters
generally supported the Board’s
approach of establishing federal rules
for a uniform method of obtaining
consumers’ consumer to the receipt of
electronic disclosures instead of
deferring to state law. Still, many sought
specific additional guidance and in
some cases wanted more flexibility.
They were concerned about the length
of time the proposals would have
required electronic disclosures to
remain available to a consumer at an
institution’s Internet web site or upon
request. In addition, they believed the
proposed rule requiring paper
disclosures for mortgage loans closed in
person was not sufficiently flexible.
Consumer advocates believed the 1999
proposals addressed many of their
concerns about the 1998 proposals.
Nevertheless, they urged the Board to
incorporate greater protections for
consumers, such as restricting the
delivery of electronic disclosures to
only those consumers who initiate
transactions electronically.
The Board also obtained views
through four focus groups with
individual consumers, conducted in the
Washington-Baltimore metropolitan
area. Participants reviewed and
commented on the format and content
of the proposed sample consent forms,
as well as on alternative revised forms.
Federal Legislation Addressing
Electronic Commerce
On June 30, 2000, the President
signed the E-Sign Act, which was
enacted to encourage the continued
expansion of electronic commerce. The
E-Sign Act generally provides that
electronic documents and signatures
have the same validity as paper
documents and handwritten signatures.
The act contains special rules for the
use of electronic disclosures in
consumer transactions. Consumer
disclosures may be provided in

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electronic form only if the consumer
affirmatively consents after receiving
certain information specified in the
statute.
The Board and other government
agencies are permitted to interpret the
E-Sign Act’s consumer consent
requirements within prescribed limits,
but may not impose additional
requirements for consumer consent. In
addition, agencies generally may not reimpose a requirement for using paper
disclosures in particular transactions,
such as those conducted in person.
The consumer consent provisions in
the E-Sign Act became effective October
1, 2000, and did not require
implementing regulations. Thus,
financial institutions are currently
permitted to use electronic disclosures
under Regulations B, E, M, Z and DD if
the consumer affirmatively consents in
the manner required by the E-Sign Act.
II. The Interim Rule
The Board is adopting an interim final
rule to establish uniform standards for
the electronic delivery of disclosures
required under Regulation M.
Consistent with the requirements of the
E-Sign Act, lessors must obtain lessee’s
affirmative consent to provide
disclosures electronically.
The interim rules also establish
uniform requirements for the timing and
delivery of electronic disclosures.
Disclosures may be sent by e-mail to an
electronic address designated by the
lessee, or they may be made available at
another location, such as an Internet
web site. If the disclosures are not sent
by e-mail, lessees must receive a notice
alerting them to the availability of the
disclosures. Disclosures posted on a
web site must be available for at least 90
days, to allow lessees adequate time to
access and retain the information. With
regard to the timing of electronic
disclosures, lessees are required to
access the disclosures before becoming
obligated on a lease. Under the interim
rule, lessors must make a good faith
attempt to redeliver electronic
disclosures that are returned
undelivered, using the address
information available in their files.
Similar rules are being adopted under
Regulations B, E, Z, and DD.
III. Request for Comment
Interim Rules
The interim rules include most of the
revisions that were part of the 1999
proposals and were not affected by the
E-Sign Act. The Board is adopting these
rules with some minor changes
discussed below. The rules are adopted
as interim rules, to allow commenters to

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present new information or views not
previously considered in the context of
the 1998 and 1999 proposals. Since the
Board’s 1999 proposals were issued,
more institutions have gained
experience in offering financial services
electronically. The Board believes that
additional comments, beyond those
previously considered in connection
with the Board’s earlier proposals,
might inform the Board whether any
developments in technology or industry
practices have occurred that warrant
further changes in the rules. The
comment period ends on June 1, 2001.
The Board expects to adopt final rules
on a permanent basis prior to October 1,
2001.
Interpreting E-Sign Provisions
Under section 104(b) of the E-Sign
Act, the Board and other government
agencies are permitted to interpret the
act, within prescribed limits. The Board
may issue rules that interpret how the
E-Sign Act’s consumer consent
requirements apply for purposes of the
laws administered by the Board. Also,
the Board may, by regulation, exempt a
particular category of disclosures from
the E-Sign Act’s consumer consent
requirements if it will eliminate a
substantial burden on electronic
commerce without creating material risk
for consumers.
The Board requests comment on
whether the Board should exercise its
authority under the E-Sign Act in future
rulemakings to interpret the consumer
consent provisions, or other provisions
of the act, as they affect the Board’s
consumer protection regulations.
Comment is requested on whether the
statutory provisions relating to
consumer consent are sufficient, or
whether additional guidance is needed.
For example, is interpretative guidance
needed concerning the statutory
requirement that lessees confirm their
consent electronically in a manner that
reasonably demonstrates they can access
information in the form to be used by
the lessor? Is clarification needed on the
effect of lessees withdrawing their
consent, or on requesting paper copies
of electronic disclosures? Lessors must
also inform lessees of changes in
hardware and software requirements if
the change creates a material risk that
the lessee will not be able to access or
retain the disclosure. The Board solicits
comment on whether regulatory
standards are needed for determining a
‘‘material risk’’ for purposes of
Regulation M and other financial
services and fair lending laws
administered by the Board, and if so
what standards should apply.

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Under section 104(d) of the E-Sign
Act, the Board is authorized to exempt
specific disclosures from the consumer
consent requirements of section 101(c)
of the E-Sign Act, if the exemption is
necessary to eliminate a substantial
burden on electronic commerce and will
not increase the material risk of harm to
consumers. The Board requests
comment on whether it should consider
exercising this exemption authority.
Study on Adapting Requirements to
Online Banking and Lending
The E-Sign Act eliminated legal
impediments to the use of electronic
records and signatures. The Board
requests comment on whether other
legislative or regulatory changes are
needed to adapt current requirements to
online banking and lending and
facilitate electronic delivery of
consumer financial services.
The comments may assist the Board
in future efforts to update the
regulations. The comments may also be
used in connection with a study
required under the Gramm-Leach-Bliley
Act of 1999. That act requires the
federal bank supervisory agencies to
conduct a study of banking regulations
that affect the electronic delivery of
financial services and to submit to the
Congress a report recommending any
legislative changes that are needed to
facilitate online banking and lending.
IV. Section-by-Section Analysis
Pursuant to its authority under
section 187 of the CLA, the Board
amends Regulation M to establish
uniform standards for the use of
electronic communication to provide
disclosures required by this regulation.
Electronic disclosures can effectively
reduce compliance costs without
adversely affecting consumer
protections. Leasing disclosures are
typically provided in the lease contract,
but disclosures can be provided in a
separate statement or in the lease
contract or other document evidencing
the lease. Leases are not typically be
consummated on-line, but consumers
are able to shop and apply for leases online. The purpose of the Regulation M
disclosures is to ensure that consumers
have meaningful information about
lease terms and to promote comparison
shopping. The use of electronic
communication may allow lessors to
provide Regulation M disclosures to
consumers earlier in the leasing process.
To the extent that a lessor may make
electronic disclosures available at its
Internet web site instead of providing
the disclosures directly to the lessee, the
Board finds that such an exception is
warranted, acting pursuant to its

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authority under section 105(a) of TILA.
Below is a section-by-section analysis of
the rules for providing disclosures by
electronic communication, including
references to changes in the official staff
commentary.
Section 213.3 General Disclosure
Requirements
3(a) General Requirements
Section 213.3(a)(5) is added to
provide a cross reference to rules
governing the electronic delivery of
disclosures in § 213.6.
Section 213.6 Electronic
Communication
6(a) Definition
As adopted, the definition of the term
‘‘electronic communication’’ remains
substantially unchanged from the 1999
proposals. Section 213.6(a) limits the
term to a message transmitted
electronically that can be displayed on
equipment as visual text; an example is
a message displayed on a personal
computer monitor screen. Thus, audioand voice-response telephone systems
are not included. Because the rule
permits the use of electronic
communication to satisfy the statutory
requirement for written disclosures that
must be clear and conspicuous, the
Board believes visual text is an essential
element of the definition.
Some commenters asked for
clarification that the definition was not
intended to preclude the use of devices
other than personal computers, which
also can display visual text. The
equipment on which the text message is
received is not limited to a personal
computer, provided the visual display
used to deliver the disclosures meets the
‘‘clear and conspicuous’’ format
requirement, discussed below.
6(b) General Rule
Effective October 1, 2000, the E-Sign
Act permits lessors to provide
disclosures using electronic
communication, if the lessor complies
with consumer consent requirements in
section 101(c). Under section 101(c) of
the E-Sign Act, lessors must provide
specific information about the electronic
delivery of disclosures before obtaining
the lessee’s affirmative consent to
receive electronic disclosures. The
consent requirements in the E-Sign Act
are similar but not identical to the
Board’s 1999 proposal. Accordingly,
§ 213.6(b) sets forth the general rule that
lessors subject to Regulation M may
provide disclosures electronically if the
lessor complies with section 101(c) of
the E-Sign Act.

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The E-Sign Act authorizes the use of
electronic disclosures. It does not affect
any requirement imposed under the
CLA other than a requirement that
disclosures be in paper form, and it does
not affect the content or timing of
disclosures. Electronic disclosures are
subject to the regulation’s format,
timing, and retainability rules and the
clear and conspicuous standard.
Comment 6(b)–1 contains this guidance.
Presenting Disclosures in a Clear and
Conspicuous Format
Electronic disclosures must be clear
and conspicuous as is the case for all
written disclosures under the CLA and
Regulation M. See § 213.3(a). A lessor
must provide electronic disclosures
using a clear and conspicuous format.
Also in accordance with the E-Sign Act:
(1) The lessor must disclose the
requirements for accessing and retaining
disclosures in that format; (2) the lessee
must demonstrate the ability to access
the information electronically and
affirmatively consent to electronic
delivery; and (3) the lessor must provide
the disclosures in accordance with the
specified requirements. Comment 6(b)–
2 contains this guidance.
Commenters asked about the use of
navigational tools with electronic
disclosures. For example, some believed
that such tools might be helpful in
directing consumers to related
information that explains the
terminology used in the disclosures.
Many Internet web sites use
navigational tools that are conspicuous
through the use of bold text, larger fonts,
different colors, underlining, or other
methods of highlighting. Such tools are
not per se prohibited so long as they are
not used in a manner that would violate
the clear and conspicuous standard.
Providing Timely Disclosures
Disclosures delivered electronically
must comply with existing timing
requirements under the CLA and
Regulation M. See § 213.3(a)(3).
Disclosures generally must be provided
before the lessee becomes obligated. For
example, if a lessor permits the lessee to
lease a vehicle on-line, the lessee must
be required to access the disclosures
required under § 213.4 before becoming
obligated. A link to the disclosures
satisfies the timing rule if the lessee
cannot bypass the disclosures before
becoming obligated. Or the disclosures
in this example must automatically
appear on the screen, even if multiple
screens are required to view the entire
disclosure. Comment 6(b)–3 contains
this guidance.
The CLA and Regulation M require
that disclosures be given to lessees. It is

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not sufficient for lessors to provide a
bypassable navigational tool that merely
gives lessees the option of receiving
disclosures. Such an approach reduces
the likelihood that lessees will notice
and receive the disclosures. The final
rule ensures that lessees see cost
disclosures provided electronically so
that they have the opportunity to read
them when shopping for a lease or
before becoming obligated for a lease.
Commenters on the various proposals
requested guidance regarding an
institution’s duty in cases where the
institution cannot provide timely
disclosures because automated
equipment controlled by the institution
malfunctions or otherwise fails to
operate properly. To the extent
applicable in connection with a lease
transaction, if a lessor controls the
equipment and disclosures are required
at that time, a lessor might not be liable
for failing to provide timely disclosures
if the defense in section 130(c) of TILA
is available.
Providing Disclosures in a Form the
Consumer May Keep
Under the CLA and Regulation M,
disclosures required to be in writing
also must be in a form the consumer can
retain. (See § 213.3(a).) Electronic
disclosures are subject to this
requirements. Comment 6(b)–4 contains
guidance on this requirement.
Lessees may communicate
electronically with lessors through a
variety of means and from various
locations. Depending on the location (at
home, at work, in a public place such
as a library), a lessee may not have the
ability at a given time to preserve CLA
disclosures presented on-screen. To
ensure that lessees have an adequate
opportunity to access and retain the
disclosures, the lessor also must send
them to the lessee’s designated e-mail
address or make them available at
another location, for example, on the
lessor’s Internet web site, where the
information may be retrieved at a later
date.
To the extent applicable in
connection with a lease transaction, if a
lessor controls the equipment providing
the electronic disclosures (for example,
a computer terminal located in the
lessor’s place of business) the lessor
must ensure that the lessee has the
opportunity to retain the required
information. Comment 6(b)–5 contains
guidance on this requirement.
6(c) When Consent is Required
Under the E-Sign Act, consumers
must affirmatively consent before they
receive electronic disclosures ‘‘relating
to a transaction’’ if the disclosures are

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required by law or regulation to be in
writing. Section 213.6(c) is added to
provide that disclosures required in
advertisements are not deemed to be
related to a transaction for purposes of
the E-Sign Act’s consumer consent
provision.
6(d) Address or Location to Receive
Electronic Communication
Consistent with the 1999 proposals,
the interim rule provides that lessors
may deliver electronic disclosures by
sending them to a lessee’s e-mail
address. Alternatively, the rule provides
that lessors may make the disclosures
available at another location such as an
Internet web site. If the lessor makes a
disclosure available at such a location,
the lessor effectively delivers the
disclosure by sending a notice alerting
the lessee when the disclosure can be
accessed and preserving the disclosure
at the location for at least 90 days. The
time period for keeping disclosures
available at a location such as a lessor’s
Internet web site under the interim rule
differs from the 1999 proposals, based
on commenters’ concerns as discussed
below.
6(d)(1)
For purposes of § 213.6(d), a lessee’s
electronic address is an e-mail address
that is not limited to receiving
communications transmitted solely by
the lessor. This guidance is contained in
comment 6(d)(1)–1.
6(d)(2)
As proposed, under § 226.36(d)(2)(ii)
of the interim rule, disclosures provided
at an Internet web site must remain
available for at least 90 days. The
requirement seeks to ensure that lessees
have adequate time to access and retain
a disclosure under a variety of
circumstances, such as when a lessee
may not be able for an extended period
of time to access the information due to
computer malfunctions, travel, or
illness. Comment 6(d)(2)–1 is added to
provide that during this period, the
actual disclosures must be available to
the lessee, but the lessor has discretion
to determine whether they should be
available at the same location for the
entire period.
Some commenters on the various
proposals believed the 90-day time
period is reasonable and feasible. About
an equal number of commenters
believed it was too burdensome and
costly; some of these commenters
suggested periods that ranged from 30 to
60 days.
The 1999 proposals provided that
after the 90-day time period, disclosures
would be available upon consumers’

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request, generally for 24 months, in the
same format as initially provided to the
consumer. The 24-month period is
consistent with a lessor’s duty to retain
records that evidence compliance.
Consumer advocates supported the
proposed retention period; some
recommended that disclosures should
be available upon request for the length
of the contractual relationship with the
consumer.
Industry commenters strongly
opposed the 24-month period. Many
believed that keeping copies of
electronic disclosures actually provided
to consumers for that period of time
would be costly and burdensome.
Moreover, industry commenters
believed that once a consumer has
accessed the disclosures, the consumer
rather than the lessor should have the
duty to retain them for future reference.
They also noted that under existing
record retention requirements
applicable to paper disclosures, a lessor
need only demonstrate compliance with
the rules, but need not retain copies of
the actual disclosure provided to
consumers.
The requirement for lessors to provide
duplicate disclosures upon request for
24 months has not been adopted. A
lessor’s duty to retain evidence of
compliance for 24 months remains
unchanged.
6(d)(3) Exception
Section 213.6(d)(3) is added to make
clear that the requirements of
paragraphs (i) and (ii) of § 213.6(d)(2) do
not apply to disclosures in lease
advertisements (§ 213.7).
6(e) Redelivery
Industry commenters on the 1998
proposal asked for clarification that
sending the electronic disclosures
complies with the regulation, and the
institutions are not required to confirm
that the consumer actually received
them. Consumer advocates asked that
institutions be required to verify the
delivery of disclosures by return receipt,
in the case of e-mail. In the 1999
proposals, the Board solicited comment
on the need for and the feasibility of
such a requirement.
Consumer advocates believe that email systems are not yet sufficiently
reliable, and that safeguards are
necessary to ensure that consumers
actually receive disclosures. Industry
commenters stated that a return receipt
requirement would be costly and
burdensome, and would require lessors
to monitor return receipts in every case
to determine that an individual
consumer received the disclosures.

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Section 101(c) of the E-Sign Act
requires that consumers consent
electronically, or confirm their consents
electronically, in a manner that
reasonably demonstrates that the
consumer can access the information
that the lessor will be providing. This
requirement seeks to verify at the outset
that the consumer is actually capable of
receiving the information in the
electronic format being used by the
lessor. After the consumer consents, the
E-Sign Act also requires lessors to notify
consumers of changes that materially
affect consumer’s ability to access
electronic disclosures.
The interim rule does not impose a
verification requirement because the
cost and burden associated with
verifying delivery of all disclosures
would not be warranted. When
electronic disclosures are returned
undelivered, however, § 213.6(e)
imposes a duty to attempt redelivery
(either electronically or to a postal
address) based on address information
in the lessor’s own files. Unlike paper
disclosures delivered by the postal
service, there generally is no commonlyaccepted mechanism for reporting a
change in e-mail or for forwarding email. Where a lessor actually knows that
the delivery of an electronic disclosure
did not take place, the lessor should
take reasonable steps to effectuate
delivery in some way. For example, if
an e-mail message to the lessee
(containing an alert notice or other
disclosure) is returned as undeliverable,
the redelivery requirement is satisfied if
the lessor sends the disclosure to a
different e-mail address or postal
address that the lessor has on file for the
lessee. Sending the disclosures a second
time to the same electronic address
would not be sufficient if the lessor has
a different address for the lessee on file.
Comment 6(e)–1 provides this guidance.
This redelivery requirement is limited
to situations where the electronic
communication cannot be delivered and
does not apply to situations where the
disclosure is delivered but, for example,
cannot be read by the lessee due to
technical problems with the lessee’s
software. A lessor’s duty to redeliver a
disclosure under § 213.6(e) does not
affect the timeliness of the disclosure.
Lessors comply with the timing
requirements of the regulation when a
disclosure is sent in a timely manner,
even though the disclosure is returned
undelivered and the lessor is required
under § 213.6(e) to take reasonable steps
to attempt redelivery.

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Section 213.7

Advertising

7(b) Clear and Conspicuous Standard
7(b)(1) Amount Due at Lease Signing or
Delivery
Under § 213.7(b)(1), a lease
advertisement cannot refer to a
component of the total amount due
prior to or at consummation or by
delivery (except for the periodic
payment amount) more prominently
than the total amount due. In addition,
with the exception of the notice
required by § 213.4(s), the rate cannot be
more prominent than any other § 213.4
disclosure stated in the advertisement.
Comment 7(b)(1)–3 contains guidance
on how this rule applies in an electronic
advertisement.
7(b)(2) Advertisement of a Lease Rate
Under § 213.7(b)(2), a lessor that
advertises a percentage rate must
include a statement about the
limitations of the rate in close proximity
to the rate without any other intervening
language or symbols. Comment 7(b)(2)1 is revised to provide guidance on how
this rules applies in an electronic
advertisement.
7(c) Catalogs and Other Multi-Page
Advertisements; Electronic
Advertisements
Stating certain credit terms in an
advertisement for a lease triggers the
disclosure of additional terms. Section
213.7(c) permits lessors using a
multiple-page advertisement to state the
additional disclosures in a table or
schedule as long as the triggering lease
terms appearing anywhere else in the
advertisement refer to the page where
the table or schedule is printed. The
Board proposed to extend the multiplepage advertisement provisions to
electronic advertisements and provided
that lessors complied with § 213.7(c) if
the table or schedule with the additional
information is set forth clearly and
conspicuously and the triggering lease
terms appearing anywhere else in the
advertisement clearly refer to the page
or location where the table or schedule
begins. Comment 7(c)-2 is revised to
reflect this guidance.
Additional Issues
Document Integrity
The interim rule does not impose
document integrity standards.
Consumer advocates and others
expressed concerns that electronic
documents can be altered more easily
than paper documents. They say that
consumers’ ability to enforce rights
under the consumer protection laws
could be impaired, in some cases, if the

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authenticity of disclosures they retain
cannot be demonstrated.
Institutions are generally required to
retain evidence of compliance with the
Board’s consumer regulations.
Accordingly, the Board requested
comment on the feasibility of requiring
institutions to have systems in place
capable of detecting whether or not
information has been altered, or to use
independent certification authorities to
verify disclosure documents.
Consumer advocates strongly
supported document integrity
requirements (including the use of
certification authorities) that would
apply to all-electronic disclosures.
Signatures, notary seals, and verification
procedures such as recordation are used
to protect against alterations for
transactions memorialized in paper
form. Consumer advocates believe that
comparable verification procedures are
needed for electronic disclosures as
well.
Industry commenters opposed
mandatory document integrity
standards for electronic disclosures.
Because the technology in this area is
still evolving, they believe that
mandatory standards would be
premature. Others believe that imposing
document integrity standards or
requiring the use of certification
authorities would be costly to
implement.
The Board recognizes the concerns
about document integrity, but believes it
is not practicable at this time to impose
document integrity standards for
consumer disclosures or mandate the
use of independent certification
authorities. Effective methods may be
too costly. Other less costly methods
may deter alterations in some cases, but
would not necessarily ensure document
integrity.
Moreover, the issue of document
integrity affects electronic commerce
generally and is not unique to the
written disclosures required under the
consumer protection laws administered
by the Board. Section 104(b)(3) of the ESign Act authorizes federal or state
regulatory agencies to specify
performance standards to assure the
accuracy, record integrity, and
accessibility of records that are required
to be retained, but prohibits the agencies
from requiring the use of a particular
type of software or hardware in order to
comply with record retention
requirements. Technology is likely to
develop to protect electronic contracts
and other legal documents. Thus, it
seems premature for the Board to
specify any particular standards or
methods for consumer disclosure at this
time.

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V. Form of Comment Letters
Comment letters should refer to
Docket No. R–1042, and, when possible,
should use a standard typeface with a
font size of 10 or 12. This will enable
the Board to convert the text to
machine-readable form through
electronic scanning, and will facilitate
automated retrieval of comments for
review. Also, if accompanied by an
original document in paper form,
comments may be submitted on 31⁄2
inch computer diskettes in any IBMcompatible DOS-or Windows-based
format.
VI. Regulatory Flexibility Analysis
The Board has reviewed these interim
amendments to Regulation M, in
accordance with section 3(a) of the
Regulatory Flexibility Act (5 U.S.C.
604). Two of the three requirements of
a final regulatory flexibility analysis
under the Act are (1) a succinct
statement of the need for and the
objectives of the rule and (2) a summary
of the issues raised by the public
comments, the agency’s assessment of
those issues, and a statement of the
changes made in the final rule in
response to the comments. These two
areas are discussed above.
The third requirement of the analysis
is a description of significant
alternatives to the rule that would
minimize the rule’s economic impact on
small entities and reasons why the
alternatives were rejected. This interim
final rule is designed to provide lessors
with an alternative method of providing
disclosures; the rule will relieve
compliance burden by giving lessors
flexibility in providing disclosures
required by the regulation. Overall, the
costs of providing electronic disclosures
are not expected to have significant
impact on small entities. The
expectation is that providing electronic
disclosures may ultimately reduce the
costs associated with providing
disclosures.
VII. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320 Appendix A.1), the Board
reviewed the rule under the authority
delegated to the Board by the Office of
Management and Budget. The Federal
Reserve may not conduct or sponsor,
and an organization is not required to
respond to, this information collection
unless it displays a currently valid OMB
control number. The OMB control
number is 7100–0202.
The collection of information that is
revised by this rulemaking is found in
12 CFR Part 213.3, 213.4, 213.5, 213.7,

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213.8 and in Appendix A. This
information is mandatory (15 U.S.C.
1667 et seq.) to evidence compliance
with the requirements of the Regulation
M and the Consumer Leasing Act (CLA).
The respondents/recordkeepers are forprofit financial institutions, including
small businesses. Institutions are
required to retain records for twentyfour months. This regulation applies to
all types of depository institutions, not
just state member banks. However,
under Paperwork Reduction Act
regulations, the Federal Reserve
accounts for the burden of the
paperwork associated with the
regulation only for state member banks.
Other agencies account for the
paperwork burden on their respective
constituencies under this regulation.
The revisions provide that lessors
may deliver disclosures electronically
upon obtaining consumers’ affirmative
consent in accordance with the E-Sign
Act. The revisions provide guidance to
institutions on the timing and delivery
of electronic disclosures, to ensure that
consumers have adequate opportunity
to access and retain the information.
With respect to state member banks, it
is estimated that there are 310
respondent/recordkeepers and an
average frequency of 6,200 responses
per respondent each year. The current
annual burden is estimated to be 11,179
hours. No comments specifically
addressing the burden estimate were
received, therefore, the numbers remain
unchanged. There is estimated to be no
additional cost burden and no capital or
start up cost associated with the interim
final rule.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality under the Freedom of
Information Act.
The Board has a continuing interest in
the public’s opinions of the Federal
Reserve’s collections of information. At
any time, comments regarding the
burden estimate, or any other aspect of
this collection of information, including
suggestions for reducing the burden,
may be sent to: Secretary, Board of
Governors of the Federal Reserve
System, 20th and C Streets, NW.,
Washington, DC 20551; and to the
Office of Management and Budget,
Paperwork Reduction Project (7100–
0202), Washington, DC 20503.
VIII. Solicitation of Comments
Regarding the Use of ‘‘Plain Language’’
Section 722 of the Gramm-LeachBliley Act of 1999 requires the Board to
use ‘‘plain language’’ in all proposed
and final rules published after January

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1, 2000. The Board invites comments on
whether the interim rule is clearly
stated and effectively organized, and
how the Board might make the rule
easier to understand.
List of Subjects in 12 CFR Part 213
Advertising, Federal Reserve System,
Reporting and record keeping
requirements, Truth in lending.
For the reasons set forth in the
preamble, the Board amends Regulation
M, 12 CFR part 213, as set forth below:
PART 213—CONSUMER LEASING
(REGULATION M)
1. The authority citation for part 213
continues to read as follows:
Authority: 15 U.S.C. 1604; 1667f.

2. Section 213.3 is amended by
adding a new paragraph (a)(5) to read as
follows:
§ 213.3

General disclosure requirements.

(a) General requirements. * * *
(5) Electronic communication. For
rules governing the electronic delivery
of disclosures, including a definition of
electronic communication, see § 213.6.
3. Section 213.6 is added to read as
follows:
§ 213.6

Electronic communication.

(a) Definition. ‘‘Electronic
communication’’ means a message
transmitted electronically between a
lessor and a lessee in a format that
allows visual text to be displayed on
equipment, for example, a personal
computer monitor.
(b) General rule. In accordance with
the Electronic Signatures in Global and
National Commerce Act (the E-Sign Act)
(15 U.S.C. 7001 et seq.) and the rules of
this part, a lessor may provide by
electronic communication any
disclosure required by this part to be in
writing.
(c) When consent is required. Under
the E-Sign Act, a lessor is required to
obtain a lessee’s affirmative consent
when providing disclosures related to a
transaction. For purposes of this
requirement, the disclosures required
under § 213.7 are deemed not to be
related to a transaction.
(d) Address or location to receive
electronic communication. A lessor that
uses electronic communication to
provide disclosures required by this part
shall:
(1) Send the disclosure to the
consumer’s electronic address; or
(2) Make the disclosure available at
another location such as a web site; and
(i) Alert the lessee of the disclosure’s
availability by sending a notice to the
consumer’s electronic address (or to a

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postal address, at the lessor’s option).
The notice shall identify the transaction
involved and the address of the Internet
web site or other location where the
disclosure is available; and
(ii) Make the disclosure available for
at least 90 days from the date the
disclosure first becomes available or
from the date of the notice alerting the
lessee of the disclosure, whichever
comes later.
(3) Exceptions. A lessor need not
comply with paragraph (d)(2)(i) and (ii)
of this section for the disclosures
required under § 213.7.
(e) Redelivery. When a disclosure
provided by electronic communication
is returned to a lessor undelivered, the
lessor shall take reasonable steps to
attempt redelivery using information in
its files.
4. In Supplement I to Part 213, the
following amendments are made:
a. A new Section 213.6—Electronic
Communication is added.
b. In Section 213.7—Advertising,
under 7(b)(1) Amount due at Lease
Signing or Delivery, a new paragraph 3.
is added.
c. In Section 213.7—Advertising,
under 7(b)(2) Advertisement of a Lease
Rate, paragraph 1. is revised.
d. In Section 213.7—Advertising, the
heading 7(c) Catalogs and Multi-Page
advertisements is revised and paragraph
12 is redesignated as paragraph 2 and
revised.
The amendments read as follows:
Supplement I to Part 213 Official Staff
Commentary to Regulation M
*

*

*

*

*

Section 213.6—Electronic Communication
6(b) General rule
1. Relationship to the E-Sign Act. The ESign Act authorizes the use of electronic
disclosures. It does not affect any
requirement imposed under this part other
than a requirement that disclosures be in
paper form, and it does not affect the content
or timing of disclosures. Electronic
disclosures are subject to the regulation’s
format, timing, and retainability rules and the
clear and conspicuous standard. For
example, to satisfy the clear and conspicuous
standard for disclosures, electronic
disclosures must use visual text.
2. Clear and conspicuous standard. A
lessor must provide electronic disclosures
using a clear and conspicuous format. Also
in accordance with the E-Sign Act:
i. The lessor must disclose the
requirements for accessing and retaining
disclosures in that format;
ii. The lessee must demonstrate the ability
to access the information electronically and
affirmatively consent to electronic delivery;
and
iii. The lessor must provide the disclosures
in accordance with the specified
requirements.

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3. Timing and effective delivery. When a
lessor permits the lessee to consummate a
lease transaction on-line, the lessee must be
required to access the required disclosures
before becoming obligated. A link to the
disclosures satisfies the timing rule if the
lessee cannot bypass the disclosures before
becoming obligated. Or the disclosures in
this example must automatically appear on
screen, even if multiple screens are required
to view the entire disclosure. The lessor is
not required to confirm that the lessee has
read the disclosures.
4. Retainability of disclosures. A lessor
satisfies the requirement that disclosures be
in a form that the lessee may keep if
electronic disclosures are delivered in a
format that is capable of being retained (such
as by printing or storing electronically). The
format must also be consistent with the
information required to be provided under
section 101(c)(1)(C)(i) of the E-Sign Act (15
U.S.C. 7001(c)(1)(C)(i)) about the hardware
and software requirements for accessing and
retaining electronic disclosures.
5. Disclosures provided on lessor’s
equipment. To the extent applicable in
connection with a lease transaction, a lessor
that controls the equipment providing
electronic disclosures to lessees (for example,
a computer terminal in a lessor’s place of
business) must ensure that the equipment
satisfies the regulation’s requirements to
provide timely disclosures in a clear and
conspicuous format and in a form that the
lessee may keep. For example, if disclosures
are required at the time of an on-line
transaction, the disclosures must be sent to
the lessee’s e-mail address or must be made
available at another location such as the
lessor’s Internet web site, unless the lessor
provides a printer that automatically prints
the disclosures.
6(d) Address or Location to Receive
Electronic Communication
Paragraph 6(d)(1)
1. Electronic address. A lessee’s electronic
address is an e-mail address that is not
limited to receiving communications
transmitted solely by the lessor.
Paragraph 6(d)(2)
1. 90-day rule. The actual disclosures
provided to a lessee must be available for at
least 90-days, but the lessor had discretion to
determine whether they should be available
at the same location for the entire period.
6(e) Redelivery.
1. E-mail message returned as
undeliverable. If an e-mail message to the
lessee (containing an alert notice or other
disclosure) is returned as undeliverable, the
redelivery requirement is satisfied if, for
example, the lessor sends the disclosure to a
different e-mail address or postal address that
the lessor has on file for the lessee. Sending
the disclosures a second time to the same
electronic address is not sufficient if the
lessor has a different address for the lessee
on file.
Section 213.7—Advertising

*

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7(b)(1) Amount Due at Lease Signing or
Delivery

*

*

*

*

ACTION: Interim rule; request for
comments.

*

3. Electronic advertisements. For
advertisements using electronic
communication, to satisfy the prominence
rule in § 213.7(b)(1), both the triggering terms
and the required disclosures must appear in
the same location so that they can be viewed
simultaneously.
7(b)(2) Advertisement of a Lease Rate
1. Location of statement. The notice
required to accompany a percentage rate
stated in an advertisement must be placed in
close proximity to the rate without any other
intervening language or symbols. For
example, a lessor may not place an asterisk
next to the rate and place the notice
elsewhere in the advertisement. In addition,
with the exception of the notice required by
§ 213.4(s), the rate cannot be more prominent
than any other § 213.4 disclosure stated in
the advertisement. For advertisements using
electronic communication, to comply with
proximity rule in, both the rate and the
accompanying notice must appear in the
same location so that they can be viewed
simultaneously. The prominent rule in
§ 213.7(b)(2) is not met if the disclosures can
be viewed only by use of a link that connects
the consumer to the information appearing at
another location.
7(c) Catalogs or Other Multipage
Advertisements; Electronic Advertisements

SUMMARY: The Board is adopting an
interim final rule amending Regulation
Z, which implements the Truth in
Lending Act, to establish uniform
standards for the electronic delivery of
disclosures required by the act and
regulation. The rule provides guidance
on the timing and delivery of electronic
disclosures to ensure consumers have
adequate opportunity to access and
retain cost information when shopping
for credit or before becoming obligated
for an extension of credit. (Similar rules
are being adopted under other consumer
financial services and fair lending
regulations administered by the Board.)
Under the rule, creditors may deliver
disclosures electronically if they obtain
consumers’ affirmative consent in
accordance with the Electronic
Signatures in Global and National
Commerce Act. In addition, the
regulation is revised to allow creditors
to provide disclosures in foreign
languages. The rule is being adopted as
an interim rule to allow for additional
public comment.

*

DATES: The interim rule is effective
March 30, 2001; however, to allow time
for any necessary operational changes,
the mandatory compliance date is
October 1, 2001. Comments must be
received by June 1, 2001.

*

*

*

*

2. Cross references. A catalog or other
multiple-page advertisement or an electronic
advertisement is a single advertisement
(requiring only one set of lease disclosures)
if it contains a table, chart, or schedule with
the disclosures required under
§ 213.7(d)(2)(i) through (v). If one of the
triggering terms listed in § 213.7(d)(1)
appears in a catalog, or in a multiple-page or
electronic advertisement, it must clearly
direct the consumer to the page or location
where the table, chart, or schedule begins.
For example, in an electronic advertisement,
a term triggering additional disclosures may
be accompanied by a link that directly
connects the consumer to the additional
information (but see comments under
§ 213.7(b) about rules regarding the
prominence of disclosures).

*

*

*

*

*

By order of the Board of Governors of the
Federal Reserve System, March 23, 2001.
Robert deV. Frierson,
Associate Secretary of the Board.
[FR Doc. 01–7726 Filed 3–29–01; 8:45 am]
BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM
12 CFR Part 226
[Regulation Z; Docket No. R–1043]

Truth in Lending
AGENCY: Board of Governors of the
Federal Reserve System.

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Comments, which should
refer to Docket No. R–1043, may be
mailed to Ms. Jennifer J. Johnson,
Secretary, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551 or mailed electronically to
regs.comments@federalreserve.gov.
Comments addressed to Ms. Johnson
may also be delivered to the Board’s
mail room between 8:45 a.m. and 5:15
p.m. weekdays, and to the security
control room at all other times. The mail
room and the security control room,
both in the Board’s Eccles Building, are
accessible from the courtyard entrance
on 20th Street between Constitution
Avenue and C Street, NW. Comments
may be inspected in room MP–500 in
the Board’s Martin Building between
9:00 a.m. and 5:00 p.m., pursuant to the
Board’s Rules Regarding the Availability
of Information, 12 CFR part 261.
ADDRESSES:

FOR FURTHER INFORMATION CONTACT: Jane
E. Ahrens, Senior Counsel; Kathleen
Ryan, Senior Attorney; or Deborah J.
Stipick, Attorney; Division of Consumer
and Community Affairs, at (202) 452–
2412 or (202) 452–3667.

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SUPPLEMENTARY INFORMATION:

I. Background
The purpose of the Truth in Lending
Act (TILA), 15 U.S.C. 1601 et seq., is to
promote the informed use of consumer
credit by requiring disclosures about its
terms and cost. The Board’s Regulation
Z (12 CFR part 226) implements the act.
The act requires creditors to disclose the
cost of credit as a dollar amount (the
finance charge) and as an annual
percentage rate (the APR). Uniformity in
creditors’ disclosures is intended to
promote the informed use of credit and
assist in shopping for credit. TILA
requires additional disclosures for loans
secured by consumers’ homes and
permits consumers to rescind certain
transactions that involve their principal
dwellings.
TILA and Regulation Z require a
number of disclosures to be provided in
writing, presuming that creditors
provide paper documents. Under the
Electronic Signatures in Global and
National Commerce Act (the E-Sign
Act)(15 U.S.C. 7001 et seq.), however,
electronic documents and signatures
have the same validity as paper
documents and handwritten signatures.
Board Proposals Regarding Electronic
Disclosures
Over the past few years, the Board has
published several interim rules and
proposals regarding the electronic
delivery of disclosures. In 1996, after a
comprehensive review of Regulation E
(Electronic Fund Transfers), the Board
proposed to amend the regulation to
permit financial institutions to provide
disclosures by sending them
electronically (61 FR 19696, May 2,
1996). Based on comments received on
the 1996 proposal, on March 25,1998,
the Board published an interim rule
permitting the electronic delivery of
disclosures under Regulation E (63 FR
14528) and similar proposals under
Regulation Z (63 FR 14548) and other
financial services and fair lending
regulations administered by the Board.
The 1998 interim rule and proposed
rules were similar to the 1996 proposed
rule under Regulation E.
The 1998 proposals and interim rule
allowed depository institutions,
creditors, lessors, and others to provide
disclosures electronically if the
consumer agreed, with few other
requirements. For ease of reference, this
background section uses the terms
‘‘institutions’’ and ‘‘consumers.’’
Industry commenters generally
supported the Board’s 1998 proposals
and interim rule, but many of them
sought specific revisions and additional
guidance on how to comply with the

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disclosure requirements in certain
transactions and circumstances. In
particular, they expressed concern that
the rule did not specify a uniform
method for establishing that an
‘‘agreement’’ was reached for sending
disclosures electronically. Consumer
advocates, on the other hand, generally
opposed the 1998 proposals and the
interim rule. They believed that
consumer protections in the proposals
were inadequate, especially in
connection with transactions that are
typically consummated in person (such
as automobile loans and leases, homesecured loans, and door-to-door credit
sales).
September 1999 Proposals
In response to comments received on
the 1998 proposals, the Board published
revised regulatory proposals in
September 1999 under Regulations B, E,
M, Z, and DD (64 FR 49688, 49699,
49713, 49722 and 49740, respectively,
September 14, 1999) (collectively, the
‘‘1999 proposals’’), and an interim rule
under Regulation DD (64 FR 49846). The
interim rule under Regulation DD
allowed depository institutions to
deliver disclosures on periodic
statements electronically if the
consumer agrees.
Generally, the 1999 proposals
required institutions to use a
standardized form containing specific
information about the electronic
delivery of disclosures so that
consumers could make informed
decisions about whether to receive
disclosures electronically. If the
consumer affirmatively consented, most
disclosures could be provided
electronically. To address concerns
about potential abuses, the 1999
proposals generally would have
required disclosures to be given in
paper form when consumers transacted
business in person. The proposals
contained rules for disclosures that are
made available to consumers at an
institution’s Internet web site
(governing, for example, how long
disclosures must remain posted at a web
site).
Comments on the September 1999
Proposals
The Board received letters
representing 115 commenters
expressing views on the revised
proposals. Industry commenters
generally supported the Board’s
approach of establishing federal rules
for a uniform method of obtaining
consumers’ consent to the receipt of
electronic disclosures instead of
deferring to state law. Still, many sought
specific additional guidance and in

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some cases wanted more flexibility.
They were concerned about the length
of time the proposals would have
required electronic disclosures to
remain available to a consumer at an
institution’s Internet web site or upon
request. In addition, they believed the
proposed rule requiring paper
disclosures for mortgage loans closed in
person was not sufficiently flexible. In
addition, they believed the proposed
rule requiring paper disclosures for
mortgage loans closed in person was not
sufficiently flexible. Consumer
advocates believed the 1999 proposals
addressed many of their concerns about
the 1998 proposals. Nevertheless, they
urged the Board to incorporate greater
protections for consumers, such as
restricting the delivery of electronic
disclosures to only those consumers
who initiate transactions electronically.
The Board also obtained views
through four focus groups with
individual consumers, conducted in the
Washington-Baltimore metropolitan
area. Participants reviewed and
commented on the format and content
of the proposed sample consent forms,
as well as on alternative revised forms.
Federal Legislation Addressing
Electronic Commerce
On June 30, 2000, the President
signed the E-Sign Act, which was
enacted to encourage the continued
expansion of electronic commerce. The
E-Sign Act generally provides that
electronic documents and signatures
have the same validity as paper
documents and handwritten signatures.
The act contains special rules for the
use of electronic disclosures in
consumer transactions. Consumer
disclosures may be provided in
electronic form only if the consumer
affirmatively consents after receiving
certain information specified in the
statute.
The Board and other government
agencies are permitted to interpret the
E-Sign Act’s consumer consent
requirements within prescribed limits,
but may not impose additional
requirements for consumer consent. In
addition, agencies generally may not reimpose a requirement for using paper
disclosures in particular transactions,
such as those conducted in person.
The consumer consent provisions in
the E-Sign Act became effective October
1, 2000, and did not require
implementing regulations. Thus,
financial institutions are currently
permitted to use electronic disclosures
under Regulations B, E, M, Z and DD if
the consumer affirmatively consents in
the manner required by section 101(c) of
the E-Sign Act. Under section 101(c)(5)

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of the E-Sign Act, consumers who
consented prior to the effective date of
the act to receive electronic disclosures
as permitted by any law or regulation,
are not subject to the consent
requirements.
II. The Interim Rule
The Board is adopting an interim final
rule to establish uniform standards for
the electronic delivery of disclosures
required under Regulation Z. Consistent
with the requirements of the E-Sign Act,
creditors generally must obtain
consumer’s affirmative consent to
provide disclosures electronically.
The interim rules also establish
uniform requirements for the timing and
delivery of electronic disclosures.
Disclosures may be sent by e-mail to an
electronic address designated by the
consumer, or they may be made
available at another location, such as an
Internet web site. If the disclosures are
not sent by e-mail, consumers must
receive a notice alerting them to the
availability of the disclosures.
Disclosures posted on a web site must
be available for at least 90 days, to allow
consumers adequate time to access and
retain the information. With regard to
the timing of electronic disclosures, for
disclosures that must be provided before
the consumer becomes obligated for an
extension of credit, consumers are
required to access the disclosures before
becoming obligated. Under the interim
rule, institutions must make a good faith
attempt to redeliver electronic
disclosures that are returned
undelivered, using the address
information available in their files.
Similar rules are being adopted under
Regulations B, E, M, and DD.
III. Request for Comment
Interim Rules
The interim rules include most of the
revisions that were part of the 1999
proposals and were not affected by the
E-Sign Act. The Board is adopting these
rules with some minor changes
discussed below. The rules are adopted
as interim rules, to allow commenters to
present new information or views not
previously considered in the context of
the 1998 and 1999 proposals. Since the
Board’s 1999 proposals were issued,
more institutions have gained
experience in offering financial services
electronically. The Board believes that
additional comments, beyond those
previously considered in connection
with the Board’s earlier proposals,
might inform the Board whether any
developments in technology or industry
practices have occurred that warrant
further changes in the rules. The

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comment period ends on June 1, 2001.
The Board expects to adopt final rules
on a permanent basis prior to October 1,
2001.
Interpreting E-Sign Provisions
Under section 104(b) of the E-Sign
Act, the Board and other government
agencies are permitted to interpret the
act, within prescribed limits. The Board
may issue rules that interpret how the
E-Sign Act’s consumer consent
requirements apply for purposes of the
laws administered by the Board. Also,
the Board may, by regulation, exempt a
particular category of disclosures from
the E-Sign Act’s consumer consent
requirements if it will eliminate a
substantial burden on electronic
commerce without creating material risk
for consumers.
The Board requests comment on
whether the Board should exercise its
authority under the E-Sign Act in future
rulemakings to interpret the consumer
consent provisions or other provisions
of the act, as they affect the Board’s
consumer protection regulations.
Comment is requested on whether the
statutory provisions relating to
consumer consent are sufficient, or
whether additional guidance is needed.
For example, is interpretative guidance
needed concerning the statutory
requirement that consumers confirm
their consent electronically in a manner
that reasonably demonstrates they can
access information in the form to be
used by the creditor? Is clarification
needed on the effect of consumers’
withdrawing their consent, or on
requesting paper copies of electronic
disclosures? Institutions must also
inform consumers of changes in
hardware or software requirements if
the change creates a material risk that
the consumer will not be able to access
or retain the disclosure. The Board
solicits comment on whether regulatory
standards are needed for determining a
‘‘material risk’’ for purposes of
Regulation Z and other financial
services and fair lending laws
administered by the Board, and if so
what standards should apply.
Under section 104(d) of the E-Sign
Act, the Board is authorized to exempt
specific disclosures from the consumer
consent requirements of section 101(c)
of the E-Sign Act, if the exemption is
necessary to eliminate a substantial
burden on electronic commerce and will
not increase the material risk of harm to
consumers. The Board requests
comment on whether it should consider
exercising this exemption authority.

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Study on Adapting Requirements to
Online Banking and Lending
The E-Sign Act eliminated legal
impediments to the use of electronic
records and signatures. The Board
requests comment on whether other
legislative or regulatory changes are
needed to adapt current requirements to
online banking and lending and
facilitate electronic delivery of
consumer financial services.
As an example, under Regulations Z
and DD, periodic statements inform
consumers about their account activity
over a period of time, typically monthly.
The beginning and ending dates of the
cycle determine costs and other
information that must be disclosed. In
addition, transmittal of the periodic
statement triggers important consumer
protections such as billing error
resolution procedures. Online banking,
however, can provide consumers with
up-to-date information about their
accounts on a continuing basis. Such
information is a helpful supplement
to—but does not comply as a substitute
for—periodic statements. Should the
rules for periodic statements be
modified for online banking, and if so,
how could the rules be crafted to
maintain for consumers (1) a
perspective of the cost and activity of an
account over time, and (2) protections
for resolving errors or liability for
unauthorized transactions.
The comments may assist the Board
in future efforts to update the
regulations. The comments may also be
used in connection with a study
required under the Gramm-Leach-Bliley
Act of 1999. That act requires the
federal bank supervisory agencies to
conduct a study of banking regulations
that affect the electronic delivery of
financial services and to submit to the
Congress a report recommending any
legislative changes that are needed to
facilitate online banking and lending.
IV. Section-by-Section Analysis
Pursuant to its authority under
section 105 of TILA, the Board amends
Regulation Z to establish uniform
standards for the use of electronic
communication to provide disclosures
required by this regulation. Electronic
disclosures can effectively reduce
compliance costs without adversely
affecting consumer protections. The
purpose of Regulation Z disclosures is
to ensure that consumers have
meaningful information about credit
terms and to promote comparison
shopping. The use of electronic
communication may allow creditors to
provide Regulation Z disclosures to the
consumer earlier in the lending process.

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17331

To the extent that a creditor may make
electronic disclosures available at its
Internet web site instead of providing
the disclosures directly to the consumer,
the Board finds that such an exception
is warranted, acting pursuant to its
authority under section 105(a) of TILA.
Below is a section-by-section analysis of
the rules for providing disclosures by
electronic communication, including
references to changes in the official staff
commentary.
Subpart B—Open-end Credit
Section 226.5 General Disclosure
Requirements
5(a) Form of Disclosures
Section 226.5(a)(5) is added to
provide a cross reference to rules
governing the electronic delivery of
disclosures in § 226.36.
5(b) Time of Disclosures
5(b)(2) Periodic Statements
Comment 5(b)(2)(ii)–3 is revised.
Under the current rules for open-end
plans, creditors may permit, but may
not require, consumers to pick up their
periodic statements in lieu of receiving
them automatically. In 1997, the staff
commentary was revised to clarify that
consumers who elect to pick up written
periodic statements might, instead,
receive copies of such statements by
electronic means (62 FR 10193, March
6, 1997). Consumers making that
election, however, would not waive
their right to also obtain written
periodic statements. Accordingly, the
comment did not specify the manner or
form of consumers’ consent to electronic
copies of their statement.
As discussed below, § 226.36(b) as
adopted sets forth the general rule that
a creditor subject to Regulation Z may
provide disclosures electronically only
if the creditor complies with section
101(c) of the E-Sign Act. This
requirement applies to electronic
statements provided in accordance with
comment 5(b)(2)(ii)–3, and the comment
has been revised accordingly.
Section 226.5a Credit and Charge Card
Applications and Solicitations
Regulation Z requires credit and
charge card issuers to provide cost
disclosures in certain applications and
solicitations to open card accounts.
5a(a) General Rules
5a(a)(2) Form of Disclosures
Regarding the timing of the § 226.5a
disclosures, the 1999 proposal stated
that for electronic card applications or
solicitations, the disclosures must
appear on the screen before the

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application or solicitation appears.
Under the final rule, a consumer must
be able in all cases to access the
disclosures at the time the blank
application or reply form is made
available by electronic communication,
such as on a card issuer’s Internet web
site. Card issuers have flexibility in
satisfying this requirement. For
example, if a link is not used, the
application or reply form must clearly
and conspicuously refer to the fact that
rate, fee and other cost information
either precedes or follows the
application or reply form. Alternatively,
card issuers may provide a link to
electronic disclosures as long as
consumers cannot bypass the
disclosures before submitting the
application or reply form. Or the
disclosures could automatically appear
on the screen when the application or
reply form appears. A card issuer need
not confirm that the consumer has read
the disclosures. As adopted, comment
5a(a)(2)–8 has been modified from the
1999 proposal to provide additional
guidance. Similar guidance is provided
for home-equity lines of credit and
adjustable rate mortgage (ARM) loans.
5a(b) Required Disclosures
5a(b)(1) Annual Percentage Rate
Section 226.5a(b)(1)(ii) is revised and
(iii) is added to address the accuracy of
the APR in connection with electronic
credit and charge card applications and
solicitations. Where terms are disclosed
in card applications and solicitations,
card issuers are required to disclose the
periodic rate that would apply,
expressed as an APR. For fixed rates,
card issuers are required to disclose the
APR currently available under the plan.
For variable rates, the APR disclosed in
a direct mail solicitation must be
accurate within 60 days before mailing;
in a take-one, within 30 days before
printing.
As part of the 1999 proposals, the
Board proposed a single standard for
APR accuracy in electronic disclosures:
for a variable-rate plan, the disclosed
APR would be deemed accurate if it is
one that was in effect within 30 days
before the disclosures are sent to the
consumer’s e-mail address. If
disclosures are made available at
another location such as the card
issuer’s Internet web site, the APR
would be one in effect within the last 30
days. Commenters generally supported
applying a uniform standard to both the
e-mail and web site posting methods of
providing applications or solicitations.
The final rule is adopted as proposed.

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5a(c) Direct-mail and Electronic
Applications and Solicitations

Section 226.5b Requirements for HomeEquity Plans

The format and content requirements
differ for cost disclosures in card
applications or solicitations sent in
direct mail campaigns and for those
made available to the general public
such as in ‘‘take-one’’ applications and
catalogs or magazines. Disclosures
accompanying direct mail applications
and solicitations must be presented in a
table. Disclosures in a take-one also may
be presented in a table with the same
content as for direct mail, but the act
and regulation permit two alternatives
for format and content: (1) A narrative
that describes how finance charges and
other charges are assessed, and (2) a
statement that costs are involved, along
with a toll-free telephone number to call
for further information.
With regard to the format and content
of disclosures, the Board’s 1999
proposals generally applied the same
rules to card applications and
solicitations made in the electronic
context as apply to paper-based
applications and solicitations. Card
issuers sending applications or
solicitations to a consumer’s e-mail
address would follow the direct mail
rules; applications or solicitations made
available to the general public would
follow the take-one rules. Commenters
generally supported the proposal.
The Board believes that in the context
of on-line credit shopping, consumers
would benefit from consistent
disclosures among credit card issuers,
whether consumers view an application
or solicitation from an e-mail address or
at another location such as a card
issuer’s web site. The option to
distribute paper-based take-ones
without cost information addresses, in
part, a concern that the disclosures may
become inaccurate with no practical
means to recall the take-ones. This
concern is not an issue for disclosures
posted on an Internet web site.
Requiring all card issuers to post a table
on web sites that have credit and charge
card applications or solicitation would
not be unduly burdensome. Pursuant to
the Board’s general authority under
section 105(a) to create exceptions to
carry out the purposes of the act and the
Board’s specific authority under section
127(c)(5) to modify disclosures to carry
out the purposes of the rules affecting
applications and solicitations,
§ 226.5a(c) is revised to apply the direct
mail rules to electronic credit and
charge card applications or solicitations.

5b(b) Time of Disclosures

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Comment 5b(b)–7 is added to provide
guidance on the timing of disclosures
for electronic applications for a homeequity line of credit (HELOC).
Regulation Z requires that disclosures
(including a brochure) be provided at
the time an application for a HELOC is
provided to a consumer. The disclosures
generically describe the creditor’s
HELOC product. In the September 1999
proposal, comment 5b(b)–7 stated that if
a HELOC application is made available
electronically, such as on a creditor’s
Internet web site, the disclosures must
appear before the application is
provided.
The final comment has been modified
to provide guidance similar to that given
for credit and charge card applications
and solicitations under § 226.5a and
ARM loans under § 226.19(b). In all
cases, a consumer must be able to access
the disclosures (including the brochure)
at the time the blank application or
reply form is made available by
electronic communication, such as on a
creditor’s Internet web site.
5b(c) Duties of Third Parties
Under § 226.5b(c), persons other than
the creditor that provide applications
for a HELOC must give the consumer a
brochure at the time the application is
given, and in some cases also provide
other disclosures. Section 226.5b(c)(2) is
added to clarify that such persons who
are required to comply with Regulation
Z may use electronic communication to
do so, as long as the requirements of
§ 226.36(b) are satisfied.
Section 226.15

Right of Rescission

15(b)(1) Notice of Right to Rescind
Section 226.15 provides that in
certain open-end plans secured by a
consumer’s principal dwelling, the
consumer has three business days to
rescind the transaction after becoming
obligated on the debt. Consumers with
an ownership interest in the dwelling
used as security must receive (1) cost
disclosures about the transaction, and
(2) two copies of a notice that explains
consumers’ rescission rights and how to
effect rescission, including a form the
consumer may use to notify the creditor
if the consumer decides to rescind the
transaction.
Section 226.15(b)(1) is revised to
permit a creditor to provide a single
rescission notice by electronic
communication to each consumer with
an ownership interest in the dwelling
who has affirmatively consented to

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electronic delivery of the notice.
Comment 15(b)–1 is revised to provide
guidance on electronic rescission
notices. Similar guidance is provided
under § 226.23 regarding rescission
notices for closed-end transactions.
Section 226.16

Advertising

16(c) Catalogs or Other Multiple-page
Advertisements; Electronic
Advertisements
Stating certain credit terms in an
advertisement for an open-end credit
plan triggers the disclosure of additional
terms. Section 226.16(c) permits
creditors using a multiple-page
advertisement to state the additional
disclosures in a table or schedule as
long as the triggering credit terms
appearing anywhere else in the
advertisement refer to the page where
the table or schedule is printed. Of the
few comments received on this
provision, commenters supported
expanding the use of a table or schedule
to electronic advertisements. Section
226.16(c) is revised to cover electronic
advertisements as proposed and a
conforming amendment in the staff
commentary is made to comment
16(c)(1)–1. Comment 16(c)(1)–2 is added
as proposed to provide guidance in
complying with the requirements of this
section for creditors using electronic
communication.
Subpart C—Closed-end Credit
Section 226.17
Requirements

General Disclosure

17(a) Form of Disclosures
Section 226.17(a)(3) is added to
provide a cross reference to rules
governing the electronic delivery of
disclosures in § 226.36.
17(g) Mail or Telephone Orders—Delay
in Disclosures
Section 226.17(g) allows creditors to
defer TILA disclosures when a
consumer makes a credit purchase or
requests credit by mail, telephone, or
any other written or ‘‘electronic
communication’’ without face-to-face or
direct solicitation by the creditor. The
deferral rule pre-dates online or Internet
banking; the term ‘‘electronic
communication’’ included credit
requests by telegraph transmissions and
facsimiles. The rationale underlying the
deferral is that creditors cannot provide
transaction-specific disclosures in
written form as required by the
regulation at the time of the consumer’s
purchase or request. In such cases,
creditors may delay providing
disclosures until the first payment due
date, provided certain information has

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been ‘‘made available in written form’’
before the consumer’s request.
The interim final rule provides as did
the 1999 proposal that creditors offering
loan products by electronic
communication (for example, those
offered on the Internet) may not delay
providing disclosures under § 226.17(g).
The difficulties in providing disclosures
for credit requests by mail or telephone
are not present for credit requests
received by e-mail or through the
Internet. Thus, specific disclosures must
be provided before transactions are
consummated using electronic
communication as defined in § 226.36.
The language has been revised from the
proposal to clarify that the deferral rule
in § 226.17(g) remains available to
creditors offering loan products by
facsimile machine (as well as mail and
telephone) without face-to-face or direct
telephone solicitation.
Section 226.19 Certain Residential
Mortgage and Variable-rate
Transactions
19(b) Certain Variable-rate Transactions
For certain loans with variable-rate
features (loans where the APR may
increase during the loan term) that are
secured by the consumer’s principal
dwelling, creditors must provide
consumers with a booklet and other
disclosures generically describing the
creditor’s product when an application
is given (or a nonrefundable fee is paid,
whichever occurs earlier). In the
September 1999 proposal, comment
19(b)–2 was revised to address the
timing for providing disclosures
required by § 226.19(b) when electronic
communication is used. The final rule
has been modified consistent with the
rules for providing disclosures with
applications and solicitations for credit
and charge cards under § 226.5a and
applications for home-equity lines of
credit under § 226.5b. In all cases, a
consumer must be able to access the
disclosures (including the brochure) at
the time the blank application is made
available by electronic communication,
such as on a creditor’s Internet web site.
Section 226.23

Right of Rescission

23(b)(1) Notice of Right to Rescind
Section 226.23 provides that in
certain transactions secured by a
consumer’s principal dwelling, the
consumer has three business days to
rescind the transaction after becoming
obligated on the debt. Consumers with
an ownership interest in the dwelling
used as security must receive (1) cost
disclosures about the transaction, and
(2) two copies of a notice that explains
consumers’ rescission rights and how to

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effect rescission, including a form the
consumer may use to notify the creditor
if the consumer decides to rescind the
transaction. Consistent with
amendments to § 226.15(b)(1) regarding
rescission notices provided
electronically for open-end credit plans,
§ 226.23(b)(1) is amended to permit a
creditor delivering rescission notices
electronically to send a single notice to
each consumer with an ownership
interest in the dwelling used as security
(rather than two notices). Comment
23(b)–1 is added to provide guidance on
electronic rescission notices.
Section 226.24 Advertising
Regulation Z prescribes certain
disclosures for closed-end loan
advertisements. Although the specific
requirements differ somewhat for
closed-end loans and open-end credit
plans, the revisions adopted by the
Board for closed-end loan
advertisements are substantially similar
to those discussed above for open-end
credit plans.
24(b) Advertisement of Rate of Finance
Charge
Section 226.24(b) permits creditors to
state a simple annual rate of interest or
periodic rate in addition to the APR, as
long as the rate is stated in conjunction
with, but not more conspicuously than,
the APR. Comment 24(b)–6 contains
guidance on how this rule applies to an
electronic advertisement.
24(d) Catalogs and Other Multiple-page
Advertisements; Electronic
Advertisements
Stating certain credit terms in an
advertisement for closed-end credit
triggers the disclosure of additional
terms. Section 226.24(d) permits
creditors using a multiple-page
advertisement to state the additional
disclosures in a table or schedule as
long as the triggering credit terms
appearing elsewhere in the
advertisement refer to the page where
the table or schedule is printed. Section
226.24(d) is revised to cover electronic
advertisements, as proposed, and a
conforming amendment is made to
comment 24(d)–2. Comment 24(d)–4 is
added as proposed to provide guidance
in complying with the requirements of
this section for creditors using
electronic communication.
Subpart D—Miscellaneous
Section 226.27 Language of
Disclosures
To provide consistency among the
regulations, § 226.27 is revised as
proposed to permit creditors to provide
disclosures in languages other than

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English as long as disclosures in English
are available to consumers who request
them.
Subpart E—Special Rules for Certain
Home Mortgage Transactions
Section 226.31

General Rules

31(b) Form of Disclosures
Section 226.31(b) is revised to provide
a cross reference to rules governing the
electronic delivery of disclosures in
§ 226.36.
Subpart F—Electronic Communication
Section 226.36 Requirements for
Electronic Communication
36(a) Definition
As adopted, the definition of the term
‘‘electronic communication’’ remains
substantially unchanged from the 1999
proposals. Section 226.36(a) limits the
term to a message transmitted
electronically that can be displayed on
equipment as visual text; an example is
a message displayed on a personal
computer monitor screen. Thus, audioand voice-response telephone systems
are not included. Because the rule
permits the use of electronic
communication to satisfy the statutory
requirement for written disclosures that
must be clear and conspicuous, the
Board believes visual text is an essential
element of the definition. Creditors that
accommodate vision-impaired
consumers by providing disclosures that
do not use visual text must also provide
disclosures using visual text.
Some commenters asked for
clarification that the definition was not
intended to preclude the use of devices
other than personal computers, which
also can display visual text. The
equipment on which the text message is
received is not limited to a personal
computer, provided the visual display
used to deliver the disclosures meets the
‘‘clear and conspicuous’’ format
requirement, discussed below.
36(b) General Rule
Effective October 1, 2000, the E-Sign
Act permits creditors to provide
disclosures using electronic
communication, if the creditor complies
with the consumer consent
requirements in Section 101(c). Under
section 101(c) of the E-Sign Act,
creditors must provide specific
information about the electronic
delivery of disclosures before obtaining
the consumer’s affirmative consent to
receive electronic disclosures. The
consent requirements in the E-Sign Act
are similar but not identical to the
Board’s 1999 proposal. Accordingly,
§ 226.36(b) sets forth the general rule

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that creditors subject to Regulation Z
may provide disclosures electronically
if the creditor complies with section
101(c) of the E-Sign Act.
The E-Sign Act authorizes the use of
electronic disclosures. It does not affect
any requirement imposed under TILA
other than a requirement that
disclosures be in paper form, and it does
not affect the content or timing of
disclosures. Electronic disclosures are
subject to the regulation’s format, timing
and retainability rules and the clear and
conspicuous standard. Comment 36(b)–
1 contains this guidance.
Presenting Disclosures in a Clear and
Conspicuous Format
Electronic disclosures must be clear
and conspicuous, as is the case for all
written disclosures under TILA and
Regulation Z. See §§ 226.5(a)(1),
226.17(a)(1), and 226.31(b). A creditor
must provide electronic disclosures
using a clear and conspicuous format.
Also, in accordance with the E-Sign Act:
(1) The creditor must disclose the
requirements for accessing and retaining
disclosures in that format; (2) the
consumer must demonstrate the ability
to access the information electronically
and affirmatively consent to electronic
delivery; and (3) the creditor must
provide the disclosures in accordance
with the specified requirements.
Comment 36(b)–2 contains this
guidance.
Commenters posed a few questions
about the applicability of the clear and
conspicuous standard to particular
situations. Some asked whether
electronic advertisements or other
unrelated promotional information may
appear on the same screen as mandatory
disclosures that are posted on an
Internet web site. Except to the extent
required by the regulation, disclosures
do not have to be provided separately
from other information. Advertisements
should not be integrated into the text of
the disclosure in a manner that violates
the clear and conspicuous standard.
Commenters also had questions about
the use of navigational tools with
electronic disclosures. For example,
some believed that such tools might be
helpful in directing consumers to
related information that explains the
terminology used in the disclosures.
Many Internet web sites use
navigational tools that are conspicuous
through the use of bold text, larger fonts,
different colors, underlining, or other
methods of highlighting. Such tools are
not per se prohibited so long as they are
not used in a manner that would violate
the clear and conspicuous standard.

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Providing Timely Disclosures
Disclosures delivered electronically
must comply with existing timing
requirements under TILA and
Regulation Z. See, for example,
§§ 226.5(b), 226.17(b), and 226.31(c).
Commenters on the Board’s 1999
proposals requested specific guidance
that an electronic disclosure would be
considered timely based on the time it
is sent by e-mail or posted on an
Internet web site, regardless of when the
consumer receives or reads the
disclosure.
Under the final rule, consistent with
rules for disclosures that are sent by
postal mail, disclosures provided by email are timely when they are sent by
the required time. Disclosures posted
periodically at an Internet web site are
timely if, by the required time, the
creditor both makes the disclosures
available at that location and, in
accordance with § 226.36(d)(2), sends a
notice alerting the consumer that the
disclosures have been posted. For
example, under § 226.9, creditors
offering open-end plans must provide a
change-in-terms notice to consumers at
least 15 days in advance of certain
changes. For a change-in-terms notice
posted on the Internet, a creditor must
both post the notice and notify
consumers of its availability at least 15
days in advance of the change.
Comment 36(b)–4 contains this
guidance.
Certain disclosures must be provided
before the consumer becomes obligated.
For example, when a creditor permits
the consumer to consummate a closedend transaction on-line, the consumer
must be required to access the
disclosures required under § 226.18
before becoming obligated. A link to the
disclosures satisfies the timing rule if
the consumer cannot bypass the
disclosures before becoming obligated.
Or, the disclosures in this example must
automatically appear on the screen,
even if multiple screens are required to
view the entire disclosure. Comment
36(b)–3 contains this guidance, as
proposed, but has been expanded to
provide the following additional
guidance.
For disclosures that are not required
to be segregated and thus may be
interspersed into the text of another
document, the creditor may satisfy the
requirement to provide the disclosures
if the document appears automatically
or via a nonbypassable link. For
example, when a creditor permits the
consumer to open a credit card account
and make a purchase immediately
thereafter, disclosures required under
§ 226.6 must be provided before the first

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Federal Register / Vol. 66, No. 62 / Friday, March 30, 2001 / Rules and Regulations
transaction. The consumer must be
required to access the disclosures (or the
document containing the disclosures
such as a credit card agreement) before
becoming obligated for the plan (or
before the first transaction).
Some industry commenters believed
that requiring disclosures to
automatically appear or be accessed by
the consumer is cumbersome and
unnecessary. Some commenters
suggested that the Board allow the
required disclosures to be accessible via
a clearly marked navigational tool; they
believe that once the tool is provided,
the disclosure should be deemed to
have been provided to the consumer.
TILA and Regulation Z require that
creditors provide or send disclosures to
consumers. It is not sufficient for
creditors to provide a bypassable
navigational tool that merely gives
consumers the option of receiving the
disclosures. Such an approach reduces
the likelihood that consumers will
notice and receive the disclosures. The
final rule ensures that consumers
actually see cost disclosures provided
electronically so that they have the
opportunity to read them when
shopping for credit or before becoming
obligated for an extension of credit, as
applicable.
Commenters on the various proposals
requested guidance regarding the
creditor’s duty in cases where a creditor
cannot provide timely disclosures
because an automated loan machine or
other automated equipment controlled
by the creditor malfunctions or
otherwise fails to operate properly.
Where the creditor controls the
equipment and disclosures are required
at that time, a creditor might not be
liable for failing to provide timely
disclosures if the defense in section
130(c) of TILA is available.
Providing Disclosures in a Form the
Consumer May Keep
Under TILA and Regulation Z, many
of the disclosures required to be in
writing must be in a form the consumer
can retain. Electronic disclosures are
subject to this requirement. Comment
36(b)–5 contains guidance on this
requirement.
Consumers may communicate
electronically with creditors through a
variety of means and from various
locations. Depending on the location (at
home, at work, in a public place such
as a library), a consumer may not have
the ability at a given time to preserve
TILA disclosures presented on-screen.
To ensure that consumers have an
adequate opportunity to access and
retain the disclosures, the creditor also
must send them to the consumer’s

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designated e-mail address or make them
available at another location, for
example, on the creditor’s Internet web
site, where the information may be
retrieved at a later date.
Where the creditor controls the
equipment providing the electronic
disclosures (for example, an automated
loan machine or computer terminal
located in the creditor’s lobby), the
creditor must ensure that the consumer
has the opportunity to retain the
required information. Comment 36(b)–6
contains guidance on this requirement.
36(c) When Consent is Required
Under the E-Sign Act, consumers
must affirmatively consent before they
receive electronic disclosures ‘‘relating
to a transaction’’ if the disclosures are
required by law or regulation to be in
writing. Section 226.36(c) is added to
provide that certain disclosures are not
deemed to be related to a transaction for
purposes of the E-Sign Act’s consumer
consent provision. These include
disclosures in connection with
advertisements (§ 226.16 and § 226.24),
credit and charge card applications and
solicitations (§ 226.5a), HELOC and
ARM loan applications (§ 226.5b and
§ 226.19(b)), and disclosures under
§ 226.17(g)(1)–(5). In some
circumstances, disclosures are available
to the general public, such as
advertisements and solicitations; in
other circumstances, consumers
receiving disclosures with a solicitation
for credit may not enter in the credit
transaction. Those entering into credit
transactions will ultimately receive
disclosures subject to the consent
requirements.
36(d) Address or Location to Receive
Electronic Communication
Consistent with the 1999 proposals,
the interim rule provides that creditors
may deliver electronic disclosures by
sending them to a consumer’s e-mail
address. Alternatively, the rule provides
that creditors may make the disclosures
available at another location such as an
Internet web site. If the creditor makes
a disclosure available at such a location,
the creditor effectively delivers the
disclosure by sending a notice alerting
the consumer when the disclosure can
be accessed and preserving the
disclosure at the location for at least 90
days. The time period for keeping
disclosures available at a location such
as a creditor’s Internet web site under
the interim rule differs from the 1999
proposals, based on commenters’
concerns as discussed below.

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36(d)(1)
For purposes of § 226.36(d), a
consumer’s electronic address is an email address that is not limited to
receiving communications transmitted
solely by the creditor, as proposed. This
guidance is contained in comment
36(d)(1)–1.
An electronic address would not
include systems that permit
communication only between the
consumer and the creditor, for example,
home-banking programs that allow
consumers to communicate directly
with a creditor on-line with the use of
a computer and modem. These systems,
like a creditor’s web site accessed via
the Internet, give consumers access to
information about their accounts at a
location controlled by the creditor. In
both cases, the creditor determines how
long account information will be
available to the consumer. Consumers
who receive disclosures at their e-mail
address, however, may choose when to
review, and for how long to retain,
account information. Consumers who
receive disclosures by contacting a
creditor’s site need to be alerted when
the information is first available in order
to ensure that they have the opportunity
to access the information before it is
removed. Thus, disclosures provided
using systems such as home-banking
programs are treated in the same
manner as disclosures made available at
an Internet web site, and a notice
alerting the consumer when disclosures
are posted must be sent, by e-mail or to
a postal address, at the creditor’s option.
36(d)(2)
Under § 226.36(d)(2)(i) of the interim
rule, for disclosures made available at
an Internet web site, a notice alerting
the consumer when disclosures are
posted must be sent by e-mail (or to a
postal address, at the creditor’s option).
Section 226.36(d)(2)(i) requires that the
alert notice identify the account
involved and the address or other
location where the disclosure is
available. Comment 36(d)(2)–1 provides
guidance on the level of detail required
in identifying the account.
As proposed, under § 226.36(d)(2)(ii)
of the interim rule, disclosures provided
at an Internet web site must remain
available for at least 90 days. The
requirement seeks to ensure that
consumers have adequate time to access
and retain a disclosure under a variety
of circumstances, such as when a
consumer may not be able for an
extended period of time to access the
information due to computer
malfunctions, travel, or illness. Making
the periodic statement for 90 days also

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Federal Register / Vol. 66, No. 62 / Friday, March 30, 2001 / Rules and Regulations

ensures that it will be available for a
sufficient time in most cases to allow
alleged errors to be resolved under the
procedures in Regulation Z. The 90-day
period is uniform for all disclosures, for
ease of compliance. Comment 36(d)(2)–
2 is added to provide that during this
period, the actual disclosures must be
available to the consumer, but the
creditor has discretion to determine
whether they should be available at the
same location for the entire period.
Some industry commenters believed
the 90-day time period is reasonable and
feasible. About an equal number of
commenters believed it was too
burdensome and costly; some of these
commenters suggested periods that
ranged from 30 to 60 days.
The 1999 proposals provided that
after the 90-day time period, disclosures
would be available upon consumers’
request, generally for 24 months, in the
same format as initially provided to the
consumer. The 24-month period is
consistent with a creditor’s duty to
retain records that evidence compliance.
Consumer advocates supported the
proposed retention period; some
recommended that disclosures should
be available upon request for the length
of the contractual relationship with the
consumer.
Industry commenters strongly
opposed the 24-month period. Many
believed that keeping copies of
electronic disclosures actually provided
to consumers for that period of time
would be costly and burdensome.
Moreover, industry commenters
believed that once a consumer has
accessed the disclosures, the consumer
rather than the creditor should have the
duty to retain them for future reference.
They also noted that under existing
record retention requirements
applicable to paper disclosures, a
creditor need only demonstrate
compliance with the rules, but need not
retain copies of the actual disclosures
provided to consumers.
The requirement for creditors to
provide duplicate disclosures upon
request for 24 months has not been
adopted. A creditor’s duty to retain
evidence of compliance for 24 months
remains unchanged.
36(d)(3) Exceptions
Section 226.36(d)(3) is added to make
clear that the requirements of
paragraphs (i) and (ii) of § 226.36(d)(2)
do not apply to disclosures in credit and
charge card applications and
solicitations mailed or otherwise
distributed to the general public
(§ 226.5a), certain credit advertisements
(§§ 226.16 and .24), cost information for
representative transactions made

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available to consumers or to the public
(§ 226.17(g)), or disclosures for certain
home-secured credit (§§ 226.5b and
19(b)).
36(e) Redelivery
Industry commenters on the 1998
proposal asked for clarification that
sending the electronic disclosures
complies with the regulation, and that
institutions are not required to confirm
that the consumer actually received
them. Consumer advocates asked that
institutions be required to verify the
delivery of disclosures by return receipt,
in the case of e-mail. In the 1999
proposals, the Board solicited comment
on the need for and the feasibility of
such a requirement.
Consumer advocates believe that email systems are not yet sufficiently
reliable, and that safeguards are
necessary to ensure that consumers
actually receive disclosures. Industry
commenters stated that a return receipt
requirement would be costly and
burdensome, and would require
creditors to monitor return receipts in
every case to determine that individual
consumers received the disclosures.
Section 101(c) of the E-Sign Act
requires that consumers consent
electronically, or confirm their consents
electronically, in a manner that
reasonably demonstrates that the
consumer can access the information
that the creditor will be providing. This
requirement seeks to verify at the outset
that the consumer is actually capable of
receiving the information in the
electronic format being used by the
creditor. After the consumer consents,
the E-Sign Act also requires creditors to
notify consumers of changes that
materially affect consumers’ ability to
access electronic disclosures.
The interim rule does not impose a
verification requirement because the
cost and burden associated with
verifying delivery of all disclosures
would not be warranted. When
electronic disclosures are returned
undelivered, however, § 226.36(e)
imposes a duty to attempt redelivery
(either electronically or to a postal
address) based on address information
in the institution’s own files. Unlike
paper disclosures delivered by the
postal service, there generally is no
commonly-accepted mechanism for
reporting a change in electronic address
or for forwarding e-mail. Where a
creditor actually knows that the delivery
of an electronic disclosure did not take
place, the creditor should take
reasonable steps to effectuate delivery in
some way. For example, if an e-mail
message to the consumer (containing an
alert notice or other disclosure) is

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returned as undeliverable, the
redelivery requirement is satisfied if the
creditor sends the disclosure to a
different e-mail address or postal
address that the creditor has on file.
Sending the disclosures a second time
to the same electronic address would
not be sufficient if the institution has a
different address for the consumer on
file. Comment 36(e)–1 provides this
guidance.
This redelivery requirement is limited
to situations where the electronic
communication cannot be delivered and
does not apply to situations where the
disclosure is delivered but, for example,
cannot be read by the consumer due to
technical problems with the consumer’s
software. A creditor’s duty to redeliver
a disclosure under § 226.36(e) does not
affect the timeliness of the disclosure.
Creditors comply with the timing
requirements of the regulation when a
disclosure is initially sent in a timely
manner, even though the disclosure is
returned undelivered and the creditor is
required under § 226.36(e) to take
reasonable steps to attempt redelivery.
36(f) Electronic Signatures
The E-Sign Act provides that
electronic signatures have the same
validity as handwritten signatures.
Section 106 of the act defines an
electronic signature. Section 226.36(f) is
added to incorporate the E-Sign Act’s
definition of electronic signature into
the regulation. To comply with the ESign Act, an electronic signature must
be executed or adopted by a consumer
with the intent to sign the record.
Accordingly, regardless of the
technology used to meet this
requirement, the process must evidence
the consumer’s identity. Comment
36(f)–1 provides this guidance.
Additional Issues
Document Integrity
The interim rule does not impose
document integrity standards.
Consumer advocates and others
expressed concerns that electronic
documents can be altered more easily
than paper documents. They say that
consumers’ ability to enforce rights
under the consumer protection laws
could be impaired, in some cases, if the
authenticity of disclosures they retain
cannot be demonstrated.
Institutions are generally required to
retain evidence of compliance with the
Board’s consumer regulations.
Accordingly, the Board requested
comment on the feasibility of requiring
institutions to have systems in place
capable of detecting whether or not
information has been altered, or to use

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independent certification authorities to
verify disclosure documents.
Consumer advocates strongly
supported document integrity
requirements (including the use of
certification authorities) that would
apply to all-electronic disclosures.
Signatures, notary seals, and verification
procedures such as recordation are used
to protect against alterations for
transactions memorialized in paper
form. Consumer advocates believe that
comparable verification procedures are
needed for electronic disclosures as
well.
Industry commenters opposed
mandatory document integrity
standards for electronic disclosures.
Because the technology in this area is
still evolving, they believe that
mandatory standards would be
premature. Others believe that imposing
document integrity standards or
requiring the use of certification
authorities would be costly to
implement.
The Board recognizes the concerns
about document integrity, but believes it
is not practicable at this time to impose
document integrity standards for
consumer disclosures or mandate the
use of independent certification
authorities. Effective methods may be
too costly. Other less costly methods
may deter alterations in some cases, but
would not necessarily ensure document
integrity.
Moreover, the issue of document
integrity affects electronic commerce
generally and is not unique to the
written disclosures required under the
consumer protection laws administered
by the Board. Section 104(b)(3) of the ESign Act authorizes federal or state
regulatory agencies to specify
performance standards to assure the
accuracy, record integrity, and
accessibility of records that are required
to be retained, but prohibits the agencies
from requiring the use of a particular
type of software or hardware in order to
comply with record retention
requirements. Technology is likely to
develop to protect electronic contracts
and other legal documents. Thus, it
seems premature for the Board to
specify any particular standards or
methods for consumer disclosure at this
time.
V. Form of Comment Letters
Comment letters should refer to
Docket No. R–1043, and, when possible,
should use a standard typeface with a
font size of 10 or 12. This will enable
the Board to convert the text to
machine-readable form through
electronic scanning, and will facilitate
automated retrieval of comments for

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review. Also, if accompanied by an
original document in paper form,
comments may be submitted on 31⁄2
inch computer diskettes in any IBMcompatible DOS- or Windows-based
format.
VI. Regulatory Flexibility Analysis
The Board has reviewed these interim
amendments to Regulation Z, in
accordance with section 3(a) of the
Regulatory Flexibility Act (5 U.S.C.
604). Two of the three requirements of
a final regulatory flexibility analysis
under the Act are (1) a succinct
statement of the need for and the
objectives of the rule and (2) a summary
of the issues raised by the public
comments, the agency’s assessment of
those issues, and a statement of the
changes made in the final rule in
response to the comments. These two
areas are discussed above.
The third requirement of the analysis
is a description of significant
alternatives to the rule that would
minimize the rule’s economic impact on
small entities and reasons why the
alternatives were rejected. This interim
final rule is designed to provide
creditors with an alternative method of
providing disclosures; the rule will
relieve compliance burden by giving
creditors flexibility in providing
disclosures required by the regulation.
Overall, the costs of providing
electronic disclosures are not expected
to have significant impact on small
entities. The expectation is that
providing electronic disclosures may
ultimately reduce the costs associated
with providing disclosures.
VII. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320 Appendix A.1), the Board
reviewed the rule under the authority
delegated to the Board by the Office of
Management and Budget. The Federal
Reserve may not conduct or sponsor,
and an organization is not required to
respond to, this information collection
unless it displays a currently valid OMB
control number. The OMB control
number is 7100–0199.
The collection of information that is
revised by this rulemaking is found in
12 CFR Part 226 and in Appendices F,
G, H, J, K, and L. This information is
mandatory (15 U.S.C. 1601 et seq.) to
evidence compliance with the
requirements of the Regulation Z and
the Truth in Lending Act (TILA). The
respondents/recordkeepers are for-profit
financial institutions, including small
businesses. Institutions are required to
retain records for twenty-four months.
This regulation applies to all types of

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17337

creditors, not just state member banks.
However, under Paperwork Reduction
Act regulations, the Federal Reserve
accounts for the burden of the
paperwork associated with the
regulation only for state member banks.
Other agencies account for the
paperwork burden on their respective
constituencies under this regulation.
The revisions provide that creditors
may deliver disclosures electronically
upon obtaining consumers’ affirmative
consent in accordance with the E-Sign
Act. The revisions also provide
guidance to institutions on the timing
and delivery of electronic disclosures, to
ensure that consumers have adequate
opportunity to access and retain the
information.
With respect to state member banks,
it is estimated that there are 1000
respondent/recordkeepers and an
average frequency of 136,294 responses
per respondent each year. The current
annual burden is estimated to be
1,886,392 hours. No comments
specifically addressing the burden
estimate were received, therefore, the
numbers remain unchanged. There is
estimated to be no additional cost
burden and no capital or start up cost
associated with the interim final rule.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality arises under the
Freedom of Information Act.
The Board has a continuing interest in
the public’s opinions of the Federal
Reserve’s collections of information. At
any time, comments regarding the
burden estimate, or any other aspect of
this collection of information, including
suggestions for reducing the burden,
may be sent to: Secretary, Board of
Governors of the Federal Reserve
System, 20th and C Streets, NW.,
Washington, DC 20551; and to the
Office of Management and Budget,
Paperwork Reduction Project (7100–
0199), Washington, DC 20503.
VIII. Solicitation of Comments
Regarding the Use of ‘‘Plain Language’’
Section 722 of the Gramm-LeachBliley Act of 1999 requires the Board to
use ‘‘plain language’’ in all proposed
and final rules published after January
1, 2000. The Board invites comments on
whether the interim rule is clearly
stated and effectively organized, and
how the Board might make the rule
easier to understand.
List of Subjects in 12 CFR Part 226
Advertising, Federal Reserve System,
Mortgages, Reporting and recordkeeping
requirements, Truth in lending.

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For the reasons set forth in the
preamble, the Board amends Regulation
Z, 12 CFR part 226, as set forth below:
PART 226—TRUTH IN LENDING
(REGULATION Z)
1. The authority citation for part 226
continues to read as follows:
Authority: 12 U.S.C. 3806; 15 U.S.C. 1604
and 1637(c)(5).

Subpart B—Open-End Credit
2. Section 226.5 is amended by
adding a new paragraph (a)(5) as
follows:
§ 226.5

General disclosure requirements.

(a) Form of disclosures. * * *
(5) Electronic communication. For
rules governing the electronic delivery
of disclosures, including the definition
of electronic communication, see
§ 226.36.
*
*
*
*
*
3. Section 226.5a is amended by
revising paragraph (b)(1)(ii), adding a
new paragraph (b)(1)(iii), and revising
paragraph (c) as follows:
§ 226.5a Credit and charge card
applications and solicitations.

*

*
*
*
*
(b) Required disclosures. * * *
(1) Annual percentage rate. * * *
(ii) When variable rate disclosures are
provided under paragraph (c) of this
section, an annual percentage rate
disclosure is accurate if the rate was in
effect within 60 days before mailing the
disclosures. When variable rate
disclosures are provided under
paragraph (e) of this section, an annual
percentage rate disclosure is accurate if
the rate was in effect within 30 days
before printing the disclosures.
Disclosures provided by electronic
communication are subject to paragraph
(b)(1)(iii) of this section.
(iii) When variable rate disclosures
are provided by electronic
communication, an annual percentage
rate disclosure is accurate if the rate was
in effect within 30 days before mailing
the disclosures to a consumer’s
electronic mail address. If disclosures
are made available at another location
such as the card issuer’s Internet web
site, the annual percentage rate must be
one in effect within the last 30 days.
*
*
*
*
*
(c) Direct-mail and electronic
applications and solicitations. The card
issuer shall disclose the applicable
items in paragraph (b) of this section on
or with an application or solicitation
that is mailed to consumers or provided
by electronic communication.
*
*
*
*
*

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4. Section 226.5b is amended by
redesignating paragraph (c) as paragraph
(c)(1), adding a heading for paragraph
(c)(1), and adding a new paragraph (c)(2)
as follows:

higher-priced property or services
offered.
*
*
*
*
*

§ 226.5b
plans.

7. Section 226.17 is amended by:
a. Adding a new paragraph (a)(3); and
b. Revising the introductory text in
paragraph (g).

Requirements for home-equity

*

*
*
*
*
(c) Duties of third parties. (1) General.
***
(2) Electronic communication.
Persons other than the creditor that are
required to comply with paragraphs (d)
and (e) of this section may use
electronic communication in
accordance with the requirements of
§ 226.36, as applicable.
*
*
*
*
*
5. Section 226.15 is amended by
revising the first sentence of the
introductory text of paragraph (b) as
follows:
§ 226.15

Right of rescission.

*

*
*
*
*
(b) Notice of right to rescind. In any
transaction or occurrence subject to
rescission, a creditor shall deliver two
copies of the notice of the right to
rescind to each consumer entitled to
rescind (one copy to each if the notice
is delivered by electronic
communication as provided in
§ 226.36(b)). * * *
*
*
*
*
*
6. Section 226.16 is amended by
revising paragraph (c) as follows:
§ 226.16

Advertising.

*

*
*
*
*
(c) Catalogs or other multiple-page
advertisements; electronic
advertisements. (1) If a catalog or other
multiple-page advertisement, or an
advertisement using electronic
communication, gives information in a
table or schedule in sufficient detail to
permit determination of the disclosures
required by paragraph (b) of this section,
it shall be considered a single
advertisement if:
(i) The table or schedule is clearly and
conspicuously set forth; and
(ii) Any statement of terms set forth in
§ 226.6 appearing anywhere else in the
catalog or advertisement clearly refers to
the page or location where the table or
schedule begins.
(2) A catalog or other multiple-page
advertisement or an advertisement using
electronic communication complies
with this paragraph if the table or
schedule of terms includes all
appropriate disclosures for a
representative scale of amounts up to
the level of the more commonly sold

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Subpart C—Closed-End Credit

§ 226.17

General disclosure requirements.

(a) Form of disclosures. * * *
(3) Electronic communication. For
rules governing the electronic delivery
of disclosures, including a definition of
electronic communication, see § 226.36.
*
*
*
*
*
(g) Mail or telephone orders—delay in
disclosures. If a creditor receives a
purchase order or a request for an
extension of credit by mail, telephone,
or facsimile machine without face-toface or direct telephone solicitation, the
creditor may delay the disclosures until
the due date of the first payment, if the
following information for representative
amounts or ranges of credit is made
available in written form to the
consumer or to the public before the
actual purchase order or request:
*
*
*
*
*
8. Section 226.23 is amended by
revising the first sentence of paragraph
(b)(1) as follows:
§ 226.23

Right of rescission.

*

*
*
*
*
(b)(1) Notice of right to rescind. In a
transaction subject to rescission, a
creditor shall deliver two copies of the
notice of the right to rescind to each
consumer entitled to rescind (one copy
to each if the notice is delivered by
electronic communication as provided
in § 226.36(b)). * * *
*
*
*
*
*
9. Section 226.24 is amended by
revising paragraph (d) as follows:
§ 226.24

Advertising.

*

*
*
*
*
(d) Catalogs or other multiple-page
advertisements; electronic
advertisements. (1) If a catalog or other
multiple-page advertisement, or an
advertisement using electronic
communication, gives information in a
table or schedule in sufficient detail to
permit determination of the disclosures
required by paragraph (c)(2) of this
section, it shall be considered a single
advertisement if:
(i) The table or schedule is clearly and
conspicuously set forth; and
(ii) Any statement of terms of the
credit terms in paragraph (c)(1) of this
section appearing anywhere else in the

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Federal Register / Vol. 66, No. 62 / Friday, March 30, 2001 / Rules and Regulations
catalog or advertisement clearly refers to
the page or location where the table or
schedule begins.
(2) A catalog or other multiple-page
advertisement or an advertisement using
electronic communication complies
with paragraph (c)(2) of this section if
the table or schedule of terms includes
all appropriate disclosures for a
representative scale of amounts up to
the level of the more commonly sold
higher-priced property or services
offered.
Subpart D—Miscellaneous
10. Section 226.27 is revised to read
as follows:
§ 226.27

Language of disclosures.

Disclosures required by this
regulation may be made in a language
other than English, provided that the
disclosures are made available in
English upon the consumer’s request.
This requirement for providing English
disclosures on request does not apply to
advertisements subject to §§ 226.16 and
226.24.
Subpart E—Special Rules for Certain
Home Mortgage Transactions
11. Section 226.31 is amended by
revising paragraph (b) to read as follows:
§ 226.31

General rules.

*

*
*
*
*
(b) Form of disclosures. (1) General.
The creditor shall make the disclosures
required by this subpart clearly and
conspicuously in writing, in a form that
the consumer may keep.
(2) Electronic communication. For
rules governing the electronic delivery
of disclosures, including a definition of
electronic communication, see § 226.36.
*
*
*
*
*
§ 226.35

[Reserved]

12. Add and reserve a new § 226.35.
13. Add a new subpart F to part 226
to read as follows:
Subpart F—Electronic Communication
§ 226.36 Requirements for electronic
communication.

(a) Definition. ‘‘Electronic
communication’’ means a message
transmitted electronically between a
creditor and a consumer in a format that
allows visual text to be displayed on
equipment, for example, a personal
computer monitor.
(b) General rule. In accordance with
the Electronic Signatures in Global and
National Commerce Act (the E-Sign Act)
(15 U.S.C. 7001 et seq.) and the rules of
this part, a creditor may provide by

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electronic communication any
disclosure required by this part to be in
writing.
(c) When consent is required. Under
the E-Sign Act, a creditor is required to
obtain a consumer’s affirmative consent
when providing disclosures related to a
transaction. For purposes of this
requirement, the disclosures required
under §§ 226.5a, 226.5b(d) and
226.5b(e), 226.16, 226.17(g)(1) through
(5), 226.19(b) and 226.24 are deemed
not to be related to a transaction.
(d) Address or location to receive
electronic communication. A creditor
that uses electronic communication to
provide disclosures required by this part
shall:
(1) Send the disclosure to the
consumer’s electronic address; or
(2) Make the disclosure available at
another location such as an Internet web
site; and
(i) Alert the consumer of the
disclosure’s availability by sending a
notice to the consumer’s electronic
address (or to a postal address, at the
creditor’s option). The notice shall
identify the account involved and the
address of the Internet web site or other
location where the disclosure is
available; and
(ii) Make the disclosure available for
at least 90 days from the date the
disclosure first becomes available or
from the date of the notice alerting the
consumer of the disclosure, whichever
comes later.
(3) Exceptions. A creditor need not
comply with paragraphs (d)(2)(i) and (ii)
of this section for the disclosures
required under §§ 226.5a, 226.5b(d) and
226.5b(e), 226.16, 226.17(g)(1) through
(5), 226.19(b) and 226.24.
(e) Redelivery. When a disclosure
provided by electronic communication
is returned to a creditor undelivered, the
creditor shall take reasonable steps to
attempt redelivery using information in
its files.
(f) Electronic signatures. An electronic
signature as defined under the E-Sign
satisfies any requirement under this part
for a consumer’s signature or initials.
14. In Supplement I to Part 226, the
following amendments are made:
a. In Section 226.5—General
Disclosure Requirements, under
Paragraph 5(b)(2)(ii), paragraph 3. is
revised.
b. In Section 226.5a—Credit and
Charge Card Applications and
Solicitations, under 5a(a)(2) Form of
Disclosures, a new paragraph 8. is
added.
c. In Section 226.5b—Requirements
for Home Equity Plans, under 5b(b)
Time of Disclosures, a new paragraph 7.
is added.

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d. In Section 226.15—Right of
Rescission, under 15(b) Notice of Right
to Rescind., two new sentences are
added at the end of paragraph 1.
e. In Section 226.16—Advertising, the
heading 16(c) Catalogs and Multiplepage Advertisements is revised and
under Paragraph 16(c)(1)., paragraph 1.
is revised and a new paragraph 2. is
added.
f. In Section 226.19—Certain
Residential Mortgage and Variable-Rate
Transactions, under 19(b) Certain
variable-rate transactions., paragraph 2.
is revised.
g. In Section 226.23—Right of
Rescission, under 23(b) Notice of Right
to Rescind., two new sentences are
added at the end of paragraph 1.
h. In Section 226.24—Advertising,
under 24(b) Advertisement of rate of
finance charge, a new paragraph 6. is
added.
i. In Section 226.24—Advertising, the
heading 24(d) Catalogs and multiplepage advertisements is revised and
under 24(d), paragraph 2. is revised and
a new paragraph 4. is added.
j. A new Subpart F is added to
Supplement I.
The amendments read as follows:
Supplement I to Part 226— Official Staff
Interpretations

*

*

*

*

*

Subpart B—Open-End Credit
Section 226.5—General Disclosure
Requirements
*

*

*

*

*

(b)(2) Periodic Statements

*

*

*

*

*

Paragraph 5(b)(2)(ii)

*

*

*

*

*

3. Calling for periodic statements. When
the consumer initiates a request, the creditor
may permit, but may not require, consumers
to pick up their periodic statements. If the
consumer wishes to pick up the statement
and the plan has a free-ride period, the
statement must be made available in
accordance with the 14-day rule. If the
consumer wishes to receive the statement by
electronic communication, the creditor must
comply with the consumer consent
requirements as provided in § 226.36(b).

*

*

*

*

*

Section 226.5a—Credit and Charge Card
Applications and Solicitations

*

*

*

*

*

5a(a) General Rules
5a(a)(2) Form of Disclosures

*

*

*

*

*

8. Timing of disclosures for electronic
applications or solicitations. In all cases, a
consumer must be able to access the
disclosures at the time the blank application

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Federal Register / Vol. 66, No. 62 / Friday, March 30, 2001 / Rules and Regulations

or reply form is made available by electronic
communication, such as on a card issuer’s
Internet web site. Card issuers have
flexibility in satisfying this requirement. For
example, if a link is not used, the application
or reply form must clearly and conspicuously
refer to the fact that rate, fee, and other cost
information either precedes or follows the
application or reply form. Alternatively, card
issuers may provide a link to electronic
disclosures on or with the application (or
reply form) as long as consumers cannot
bypass the disclosures before submitting the
application or reply form. Or the disclosures
could automatically appear on the screen
when the application or reply form appears.
A card issuer need not confirm that the
consumer has read the disclosures.

*

*

*

*

*

*

*

*

*

*

*

*

*

*

*

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*

15(b) Notice of Right to Rescind
1. Who receives notice. * * * If e-mail is
used, the creditor complies with
§ 226.15(b)(1) if one notice is sent to each coowner. Each co-owner must consent to
receive electronic disclosures and each must
designate an electronic address for receiving
the disclosure.

*

*

*

*

*

Section 226.16—Advertising

*

*

*

*

*

16(c) Catalogs or Other Multiple-page
Advertisements; Electronic Advertisements

*

*

*

*

*

Paragraph 16(c)(1)
1. General. Section 226.16(c)(1) permits
creditors to put credit information together in
one place in a catalog or other multiple-page
advertisement or an electronic advertisement.
The rule applies only if the advertisement

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*

*

*

Section 226.15—Right of Rescission

*

*

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Jkt 194001

*

*

*

*

*
*

2. Timing. A creditor must give the
disclosures required under this section at the
time an application form is provided or
before the consumer pays a nonrefundable
fee, whichever is earlier.
i. Intermediary agent or broker. In cases
where a creditor receives a written
application through an intermediary agent or
broker, however, footnote 45b provides a
substitute timing rule requiring the creditor
to deliver the disclosures or place them in
the mail not later than three business days
after the creditor receives the consumer’s
written application. (See comment 19(b)–3
for guidance in determining whether or not
the transaction involves an intermediary
agent or broker.) This three-day rule also
applies where the creditor takes an
application over the telephone.
ii. Telephone request. In cases where the
consumer merely requests an application
over the telephone, the creditor must include
the early disclosures required under this
section with the application that is sent to
the consumer.
iii. Mail solicitations. In cases where the
creditor solicits applications through the
mail, the creditor must also send the
disclosures required under this section if an
application form is included with the
solicitation.
iv. Conversion. In cases where an open-end
credit account will convert to a closed-end
transaction subject to this section under a
written agreement with the consumer,
disclosures under this section may be given
at the time of conversion. (See the
commentary to § 226.20(a) for information on
the timing requirements for § 226.19(b)(2)
disclosures when a variable-rate feature is
later added to a transaction.)
v. Electronic applications. In all cases, a
consumer must be able to access the
disclosures (including the brochure) at the
time the blank application form is made
available by electronic communication, such
as on a creditor’s Internet web site. Creditors
have flexibility in satisfying this requirement.
For example, if a link is not used, the
application form must clearly and
conspicuously refer the consumer to the fact

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that rate, fee, and other cost information
either precedes or follows the application or
reply form. Alternatively, creditors may
provide a link to electronic disclosures as
long as consumers cannot bypass the
disclosure before submitting the application
form. Or the disclosures could automatically
appear on the screen when the application
form appears. A creditor need not confirm
that the consumer has read the disclosures or
brochure.

*

*

*

*

*

Section 226.23—Right of Rescission

*

19(b) Certain Variable-rate Transactions

7. Applications available by electronic
communication. In all cases, a consumer
must be able to access the disclosures
(including the brochure) at the time the blank
application or reply form is made available
by electronic communication, such as on a
creditor’s Internet web site. Creditors have
flexibility in satisfying this requirement. For
example, if a link is not used, the application
or reply form must clearly and conspicuously
refer the consumer to the fact that rate, fee,
and other cost information either precedes or
follows the application or reply form.
Alternatively, creditors may provide a link to
electronic disclosures as long as consumers
cannot bypass the disclosures before
submitting the application or reply form. Or
the disclosures could automatically appear
on the screen when the application or reply
form appears. A creditor need not confirm
that the consumer has read the disclosures or
brochure.

*

*

Subpart C Closed—End Credit

*

*

5b(b) Time of Disclosures

*

*

Section 226.19—Certain Residential
Mortgage and Variable-Rate Transactions

Section 226.5b—Requirements for HomeEquity Plans

*

contains one or more of the triggering terms
from § 226.16(b).
2. Electronic communication. If an
advertisement using electronic
communication contains the table or
schedule permitted under § 226.16(c)(1), any
statement of terms set forth in § 226.6
appearing anywhere else in the
advertisement must clearly direct the
consumer to the location where the table or
schedule begins. For example, a term
triggering additional disclosures may be
accompanied by a link that directly takes the
consumer to the additional information.

*

*

*

*

23(b) Notice of right to rescind
1. Who receives notice. * * * If e-mail is
used, the creditor complies with
§ 226.23(b)(1) if one notice is sent to each coowner. Each co-owner must consent to
receive electronic disclosures and each must
designate an electronic address for receiving
the disclosure.

*

*

*

*

*

Section 226.24—Advertising

*

*

*

*

*

24(b) Advertisement of Rate of Finance
Charge

*

*

*

*

*

6. Electronic communication. A simple
annual rate or periodic rate that is applied to
an unpaid balance may be stated only if it is
provided in conjunction with an annual
percentage rate. In an advertisement using
electronic communication, the consumer
must be able to view both rates
simultaneously. This requirement is not
satisfied if the consumer can view annual
percentage rate only by use of a link that
takes the consumer to information appearing
at another location.

*

*

*

*

*

24(d) Catalogs or Other Multiple-page
Advertisements; Electronic Advertisements

*

*

*

*

*

2. General. Section 226.24(d) permits
creditors to put credit information together in
one place in a catalog or other multiple-page
advertisement, or in an electronic
advertisement. The rule applies only if the
advertisement contains one or more of the
triggering terms from § 226.24(c)(1). A list of
different annual percentage rates applicable
to different balances, for example, does not
trigger further disclosures under
§ 226.24(c)(2) and so is not covered by
§ 226.24(d).

*

*

*

*

*

4. Electronic communication. If an
advertisement using electronic
communication contains the table or
schedule permitted under § 226.24(d)(1), any
statement of terms set forth in § 226.24(c)(1)
appearing anywhere else in the
advertisement must clearly direct the
consumer to the location where the table or
schedule begins. For example, a term
triggering additional disclosures may be
accompanied by a link that directly takes the
consumer to the additional information (but
see comment 24(b)–6).

*

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Federal Register / Vol. 66, No. 62 / Friday, March 30, 2001 / Rules and Regulations
Subpart F—Electronic Communication
Section 226.36—Requirements for
Electronic Communication
36(b) General Rule
1. Relationship to the E-Sign Act. The ESign Act authorizes the use of electronic
disclosures. It does not affect any
requirement imposed under this part other
than a requirement that disclosures be in
paper form, and it does not affect the content
or timing of disclosures. Electronic
disclosures are subject to the regulation’s
format, timing, and retainability rules and the
clear and conspicuous standard. For
example, to satisfy the clear and conspicuous
standard for disclosures, electronic
disclosures must use visual text.
2. Clear and conspicuous standard. A
creditor must provide electronic disclosures
using a clear and conspicuous format. Also,
in accordance with the E-Sign Act:
i. The creditor must disclose the
requirements for accessing and retaining
disclosures in that format;
ii. The consumer must demonstrate the
ability to access the information
electronically and affirmatively consent to
electronic delivery; and
iii. The creditor must provide the
disclosures in accordance with the specified
requirements.
3. Timing and effective delivery when a
consumer becomes obligated on-line.
i. When a creditor permits the consumer to
consummate a closed-end transaction online, the consumer must be required to access
the disclosures required under § 226.18
before becoming obligated. A link to the
disclosures satisfies the timing rule if the
consumer cannot bypass the disclosures
before becoming obligated. Or the disclosures
in this example must automatically appear
on the screen, even if multiple screens are
required to view the entire disclosure. The
creditor is not required to confirm that the
consumer has read the disclosures.
ii. For disclosures that are not required to
be segregated and thus may be interspersed
into the text of another document, the
creditor may satisfy the requirement to
provide the disclosures if the document
appears automatically or via a nonbypassable
link. For example, when a creditor permits
the consumer to open a credit card account
and make a purchase immediately thereafter,
disclosures required under § 226.6 must be
provided before the first transaction. The
consumer must be required to access the
disclosures (or the document containing the
disclosures such as a credit card agreement)
before becoming obligated for the plan (or
before the first transaction). The creditor is
not required to confirm that the consumer
has read the disclosures.
4. Timing and effective delivery for
disclosures provided periodically.
Disclosures provided by e-mail are timely
based on when the disclosures are sent.
Disclosures posted at an Internet web site
such as periodic statements, or change-interms and other notices, are timely when the
creditor has both made the disclosures
available and sent a notice alerting consumer
that the disclosures have been posted. For

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example, under § 226.9, creditors offering
open-end plans must provide a change-interms notice to consumers at least 15 days in
advance of certain changes. For a change-interms notice posted on the Internet, a creditor
must both post the notice and notify
consumers of its availability at least 15 days
in advance of the change.
5. Retainability of disclosures. Creditors
satisfy the requirement that disclosures be in
a form that the consumer may keep if
electronic disclosures are delivered in a
format that is capable of being retained (such
as by printing or storing electronically). The
format must also be consistent with the
information required to be provided under
section 101(c)(1)(C)(i) of the E-Sign Act (15
U.S.C. 7001(c)(1)(C)(i)) about the hardware
and software requirements for accessing and
retaining electronic disclosures.
6. Disclosures provided on creditor’s
equipment. A creditor that controls the
equipment providing electronic disclosures
to consumers (for example, a computer
terminal in a creditor’s lobby or an
automated loan machine at a public kiosk)
must ensure that the equipment satisfies the
regulation’s requirements to provide timely
disclosures in a clear and conspicuous format
and in a form that the consumer may keep.
For example, if disclosures are required at
the time of an on-line transaction, the
disclosures must be sent to the consumer’s email address or must be made available at
another location such as the creditor’s
Internet web site, unless the creditor
provides a printer that automatically prints
the disclosures.
36(d) Address or Location to Receive
Electronic Communication

not sufficient if the creditor has a different
address for the consumer on file.
36(f) Electronic Signatures
1. Relationship to E-Sign Act. The E-Sign
Act provides that electronic signatures have
the same validity as handwritten signatures.
Section 106 of the E-Sign Act (15 U.S.C.
7006) defines an electronic signature. To
comply with the E-Sign Act, an electronic
signature must be executed or adopted by a
consumer with the intent to sign the record.
Regardless of the technology used to meet
this requirement, the process must evidence
the consumer’s identity.
By order of the Board of Governors of the
Federal Reserve System, March 23, 2001.
Robert deV. Frierson,
Associate Secretary of the Board.
[FR Doc. 01–7727 Filed 3–29–01; 8:45 am]
BILLING CODE 6210–01–P

Paragraph 36(d)(1)
1. Electronic address. A consumer’s
electronic address is an e-mail address that
is not limited to receiving communications
transmitted solely by the creditor.
Paragraph 36(d)(2)
1. Identifying account involved. A creditor
may identify a specific account in a variety
of ways and is not required to identify an
account by reference to the account number.
For example, where the consumer has only
one credit card account, and no confusion
would result, the card issuer may refer to
‘‘your credit card account.’’ If the consumer
has two credit card accounts, the card issuer
may, for example, differentiate accounts
based on the card program or by using a
truncated account number.
2. 90-day rule. The actual disclosures
provided to consumer must be available for
at least 90 days, but the creditor has
discretion to determine whether they should
be available at the same location for the
entire period.
36(e) Redelivery
1. E-mail returned as undeliverable. If an
e-mail to the consumer (containing an alert
notice or other disclosure) is returned as
undeliverable, the redelivery requirement is
satisfied if, for example, the creditor sends
the disclosure to a different e-mail address or
postal address that the creditor has on file for
the consumer. Sending the disclosures a
second time to the same electronic address is

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Federal Register / Vol. 66, No. 65 / Wednesday, April 4, 2001 / Rules and Regulations

p.m. weekdays, and to the security
control room at all other times. The mail
room and the security control room,
both in the Board’s Eccles Building, are
accessible from the courtyard entrance
on 20th Street between Constitution
Avenue and C Street, N.W. Comments
may be inspected in room MP–500 in
the Board’s Martin Building between
9:00 a.m. and 5:00 p.m., pursuant to the
Board’s Rules Regarding the Availability
of Information, 12 CFR part 261.
FOR FURTHER INFORMATION CONTACT:
Natalie E. Taylor or John C. Wood,
Counsel, or Minh–Duc Le, Attorney,
Division of Consumer and Community
Affairs, at (202) 452–2412 or (202) 452–
3667.
SUPPLEMENTARY INFORMATION:

FEDERAL RESERVE SYSTEM
12 CFR Part 202
[Regulation B; Docket No. R–1040]

Equal Credit Opportunity
AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Interim rule; request for
comments.
SUMMARY: The Board is adopting an
interim final rule amending Regulation
B, which implements the Equal Credit
Opportunity Act, to establish uniform
standards for the electronic delivery of
disclosures required by the act and
regulation. The rule provides guidance
on the timing and delivery of electronic
disclosures to ensure that applicants
have adequate opportunity to access and
retain required information. (Similar
rules are being adopted under other
consumer financial services regulations
administered by the Board.) Under the
rule, creditors may deliver disclosures
electronically if they obtain applicants’
affirmative consent in accordance with
the Electronic Signatures in Global and
National Commerce Act. In addition, the
regulation is revised to allow creditors
to provide disclosures in foreign
languages. The rule is being adopted as
an interim rule to allow for additional
public comment.
DATES: The interim rule is effective
March 30, 2001; however, to allow time
for any necessary operational changes,
the mandatory compliance date is
October 1, 2001. Comments must be
received by June 1, 2001.
ADDRESSES: Comments, which should
refer to Docket No. R–1040, may be
mailed to Ms. Jennifer J. Johnson,
Secretary, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue, N.W.,
Washington, D.C. 20551 or mailed
electronically to
regs.comments@federalreserve.gov.
Comments addressed to Ms. Johnson
may also be delivered to the Board’s
mail room between 8:45 a.m. and 5:15

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I. Background
The Equal Credit Opportunity Act
(ECOA), 15 U.S.C. 1691 et seq., makes
it unlawful for creditors to discriminate
in any aspect of a credit transaction on
the basis of sex, race, color, religion,
national origin, marital status, age
(provided the applicant has the capacity
to contract), because all or part of an
applicant’s income derives from public
assistance, or because an applicant has
in good faith exercised any right under
the Consumer Credit Protection Act.
The Board’s Regulation B (12 CFR part
202) implements the act.
The ECOA and Regulation B require
that some disclosures be provided in
writing, presuming that creditors
provide paper documents. Under the
Electronic Signatures in Global and
National Commerce Act (E-Sign Act),
however, electronic documents and
signatures have the same validity as
paper documents and handwritten
signatures.
Board Proposals Regarding Electronic
Disclosures
Over the past few years, the Board has
published several interim rules and
proposals regarding the electronic
delivery of disclosures. In 1996, after a
comprehensive review of Regulation E
(Electronic Fund Transfers), the Board
proposed to amend the regulation to
permit financial institutions to provide
disclosures by sending them
electronically (61 FR 19696, May 2,
1996). Based on comments received on
the 1996 proposal, on March 25, 1998,
the Board published an interim rule
permitting the electronic delivery of

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disclosures under Regulation E (63 FR
14528) and similar proposals under
Regulation B (63 FR 14552) and other
financial services regulations
administered by the Board. The 1998
interim rule and proposed rules were
similar to the 1996 proposed rule under
Regulation E.
The 1998 proposals and interim rule
allowed depository institutions,
creditors, lessors, and others to provide
disclosures electronically if the
consumer agreed, with few other
requirements. For ease of reference, this
background section uses the terms
‘‘institutions’’ and ‘‘consumers.’’
Industry commenters generally
supported the Board’s 1998 proposals
and interim rule, but many of them
sought specific revisions and additional
guidance on how to comply with the
disclosure requirements in certain
transactions and circumstances. In
particular, they expressed concern that
the rule did not specify a uniform
method for establishing that an
‘‘agreement’’ was reached for sending
disclosures electronically. Consumer
advocates, on the other hand, generally
opposed the 1998 proposals and the
interim rule. They believed that
consumer protections in the proposals
were inadequate, especially in
connection with transactions that are
typically consummated in person (such
as automobile loans and leases, homesecured loans, and door-to-door credit
sales).
September 1999 Proposals
In response to comments received on
the 1998 proposals, the Board published
revised regulatory proposals in
September 1999 under Regulations B, E,
M, Z, and DD (64 FR 49688, 49699,
49713, 49722 and 49740, respectively,
September 14, 1999) (collectively, the
‘‘1999 proposals’’), and an interim rule
under Regulation DD (64 FR 49846). The
interim rule under Regulation DD
allowed depository institutions to
deliver disclosures on periodic
statements electronically if the
consumer agrees.
Generally, the 1999 proposals
required institutions to use a
standardized form containing specific
information about the electronic
delivery of disclosures so that
consumers could make informed
decisions about whether to receive
disclosures electronically. If the

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consumer affirmatively consented, most
disclosures could be provided
electronically. To address concerns
about potential abuses, the 1999
proposals generally would have
required disclosures to be given in
paper form when consumers transacted
business in person. The proposals
contained rules for disclosures that are
made available to consumers at an
institution’s Internet web site
(governing, for example, how long
disclosures must remain posted at a web
site).
Comments on the September 1999
proposals—The Board received letters
representing 115 commenters
expressing views on the revised
proposals. Industry commenters
generally supported the Board s
approach of establishing federal rules
for a uniform method of obtaining
consumers consent to the receipt of
electronic disclosures instead of
deferring to state law. Still, many sought
specific additional guidance and in
some cases wanted more flexibility.
They were concerned about the length
of time the proposals would have
required electronic disclosures to
remain available to a consumer at an
institution’s Internet web site or upon
request. In addition, they believed the
proposed rule requiring paper
disclosures for mortgage loans closed in
person was not sufficiently flexible.
Consumer advocates believed the 1999
proposals addressed many of their
concerns about the 1998 proposals.
Nevertheless, they urged the Board to
incorporate greater protections for
consumers, such as restricting the
delivery of electronic disclosures to
only those consumers who initiate
transactions electronically.
The Board also obtained views
through four focus groups with
individual consumers, conducted in the
Washington–Baltimore metropolitan
area. Participants reviewed and
commented on the format and content
of the proposed sample consent forms,
as well as on alternative revised forms.
Federal Legislation Addressing
Electronic Commerce
On June 30, 2000, the President
signed the E-Sign Act, which was
enacted to encourage the continued
expansion of electronic commerce. The
E-Sign Act generally provides that
electronic documents and signatures
have the same validity as paper
documents and handwritten signatures.
The act contains special rules for the
use of electronic disclosures in
consumer transactions. Consumer
disclosures may be provided in
electronic form only if the consumer

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affirmatively consents after receiving
certain information specified in the
statute.
The Board and other government
agencies are permitted to interpret the
E-Sign Act’s consumer consent
requirements within prescribed limits,
but may not impose additional
requirements for consumer consent. In
addition, agencies generally may not reimpose a requirement for using paper
disclosures in particular transactions,
such as those conducted in person.
The consumer consent provisions in
the E-Sign Act became effective October
1, 2000, and did not require
implementing regulations. Thus,
financial institutions are currently
permitted to use electronic disclosures
under Regulations B, E, M, Z and DD if
the consumer affirmatively consents in
the manner required by section 101(c) of
the E-Sign Act. Under section 101(c)(5)
of the E-Sign Act, consumers who
consented prior to the effective date of
the act to receive electronic disclosures
as permitted by any law or regulation,
are not subject to the consent
requirements.
II. The Interim Rule
The Board is adopting an interim final
rule to establish uniform standards for
the electronic delivery of disclosures
required under Regulation B. Consistent
with the requirements of the E-Sign Act,
creditors generally must obtain
applicants’ affirmative consent to
provide disclosures electronically.
The interim rules also establish
uniform requirements for the timing and
delivery of electronic disclosures.
Disclosures may be sent by e-mail to an
electronic address designated by the
applicant, or they may be made
available at another location, such as an
Internet web site. If the disclosures are
not sent by e-mail, applicants must
receive a notice alerting them to the
availability of the disclosures.
Disclosures posted on a web site must
be available for at least 90 days, to allow
applicants adequate time to access and
retain the information. With regard to
the timing of electronic disclosures, for
disclosures that must be provided at
application, applicants are required to
access the disclosures before submitting
the application. Under the interim rule,
creditors must make a good faith
attempt to redeliver electronic
disclosures that are returned
undelivered, using the address
information available in their files.
Similar rules are being adopted under
Regulations E, M, Z, and DD.

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III. Request for Comment
The interim rules include most of the
revisions that were part of the 1999
proposals and were not affected by the
E-Sign Act. The Board is adopting these
rules with some minor changes
discussed below. The rules are adopted
as interim rules, to allow commenters to
present new information or views not
previously considered in the context of
the 1998 and 1999 proposals. Since the
Board’s 1999 proposals were issued,
more institutions have gained
experience in offering financial services
electronically. The Board believes that
additional comments, beyond those
previously considered in connection
with the Board’s earlier proposals,
might inform the Board whether any
developments in technology or industry
practices have occurred that warrant
further changes in the rules. The
comment period ends on June 1, 2001.
The Board expects to adopt final rules
on a permanent basis prior to October 1,
2001.
Interpreting E-Sign Provisions
Under section 104(b) of the E-Sign
Act, the Board and other government
agencies are permitted to interpret the
act, within prescribed limits. The Board
may issue rules that interpret how the
E-Sign Act’s consumer consent
requirements apply for purposes of the
laws administered by the Board. Also,
the Board may, by regulation, exempt a
particular category of disclosures from
the E-Sign Act’s consumer consent
requirements if it will eliminate a
substantial burden on electronic
commerce without creating material risk
for consumers.
The Board requests comment on
whether the Board should exercise its
authority under the E-Sign Act in future
rulemakings to interpret the consumer
consent provisions or other provisions
of the act, as they affect the Board’s
consumer protection regulations.
Comment is requested on whether the
statutory provisions relating to
consumer consent are sufficient, or
whether additional guidance is needed.
For example, is interpretative guidance
needed concerning the statutory
requirement that applicants confirm
their consent electronically in a manner
that reasonably demonstrates they can
access information in the form to be
used by the creditor? Is clarification
needed on the effect of applicants
withdrawing their consent, or on
requesting paper copies of electronic
disclosures? Creditors must also inform
applicants of changes in hardware or
software requirements if the change
creates a material risk that the applicant

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will not be able to access or retain the
disclosure. The Board solicits comment
on whether regulatory standards are
needed for determining a ‘‘material
risk’’ for purposes of Regulation B and
financial services laws administered by
the Board, and if so what standards
should apply.
Under section 104(d) of the E-Sign
Act, the Board is authorized to exempt
specific disclosures from the consumer
consent requirements of section 101(c)
of the E-Sign Act, if the exemption is
necessary to eliminate a substantial
burden on electronic commerce and will
not increase the material risk of harm to
consumers. The Board requests
comment on whether it should consider
exercising this exemption authority.
Study on Adapting Requirements to
Online Banking and Lending
The E-Sign Act eliminated legal
impediments to the use of electronic
records and signatures. The Board
requests comment on whether other
legislative or regulatory changes are
needed to adapt current requirements to
online banking and lending and
facilitate electronic delivery of
consumer financial services.
The comments may assist the Board
in future efforts to update the
regulations. The comments may also be
used in connection with a study
required under the Gramm-Leach-Bliley
Act of 1999. That act requires the
federal bank supervisory agencies to
conduct a study of banking regulations
that affect the electronic delivery of
financial services and to submit to the
Congress a report recommending any
legislative changes that are needed to
facilitate online banking and lending.
IV. Section-by-Section Analysis
Pursuant to its authority under
section 703 of the ECOA, the Board
amends Regulation B to establish
uniform standards for the use of
electronic communication to provide
disclosures required by this regulation.
Electronic disclosures can effectively
reduce compliance costs without
adversely affecting consumer
protections. To the extent that a creditor
may make electronic disclosures
available at its Internet web site instead
of providing the disclosures directly to
the applicant, the Board finds that such
an exception is warranted, acting
pursuant to its authority under section
703(a)(1) of the ECOA. Below is a
section-by-section analysis of the rules
for providing disclosures by electronic
communication, including references to
changes in the official staff commentary.

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Section 202.4

General Rules

4(b) Foreign Language Disclosures
To provide consistency among the
regulations, as proposed, § 202.4(b)
permits creditors to provide disclosures
in languages other than English as long
as disclosures in English are available to
applicants who request them.
Section 202.9

Notifications

9(h) Duties of Third Parties
Under § 202.9(g), when an application
for credit is submitted through a third
party to more than one creditor and no
credit is offered (or the applicant does
not expressly accept or use any credit
offered) each creditor taking adverse
action must provide the notice required
by § 202.9(a), but may do so through a
third party. Third parties may use
electronic communication to provide
required disclosures, provided the
requirements of § 202.17 are satisfied.
This guidance is provided in new
§ 202.9(h).
Section 202.17 Requirements for
Electronic Communication
17(a) Definition
As adopted, the definition of the term
‘‘electronic communication’’ remains
substantially unchanged from the 1999
proposals. Section 202.17(a) limits the
term to a message transmitted
electronically that can be displayed on
equipment as visual text; an example is
a message displayed on a personal
computer monitor screen. Thus, audioand voice-response telephone systems
are not included. Creditors that
accommodate vision-impaired
applicants by providing disclosures that
do not use visual text must also provide
disclosures using visual text.
Some commenters asked for
clarification that the definition was not
intended to preclude the use of devices
other than personal computers, which
also can display visual text. The
equipment on which the text message is
received is not limited to a personal
computer, provided the visual display
used to deliver the disclosures meets the
‘‘clear and conspicuous’’ format
requirement, discussed below.
17(b) General Rule
Effective October 1, 2000, the E-Sign
Act permits creditors to provide
disclosures using electronic
communication, if the creditor complies
with the consumer consent
requirements in section 101(c). Under
section 101(c) of the E-Sign Act,
creditors must provide specific
information about the electronic
delivery of disclosures before obtaining

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the consumer’s affirmative consent to
receive electronic disclosures. The
consent requirements in the E-Sign Act
are similar but not identical to the
Board’s 1999 proposal. Section
202.17(b) sets forth the general rule that
creditors subject to Regulation B may
provide disclosures electronically if the
creditor complies with section 101(c) of
the E-Sign Act. Pursuant to the Board’s
authority under section 703(a) of the
ECOA, § 202.17(b) applies to consumer
and business credit applicants.
The E-Sign Act authorizes the use of
electronic disclosures. It does not affect
any requirement imposed under the
ECOA other than a requirement that
disclosures be in paper form, and it does
not affect the content or timing of
disclosures. Electronic disclosures are
subject to the regulation’s format, timing
and retainability rules and the clear and
conspicuous standard. Comment 17(b)–
1 contains this guidance.
Presenting Disclosures in a Clear and
Conspicuous Format
The interim final rule imposes a new
clear and conspicuous standard for
electronic disclosures under Regulation
B. See § 202.17(b). (As part of a
comprehensive review of Regulation B,
the Board proposed in August 1999 to
apply the standard to all disclosures
required to be in writing (64 FR 44581,
August 16, 1999).) Commenters
generally supported the standard; most
believed a consistent standard should
apply to all of the regulations.
A creditor must provide electronic
disclosures using a clear and
conspicuous format. Also, in accordance
with the E-Sign Act: (1) The creditor
must disclose the requirements for
accessing and retaining disclosures in
that format; (2) the applicant must
demonstrate the ability to access the
information electronically and
affirmatively consent to electronic
delivery; and (3) the applicant must
provide the disclosures in accordance
with the specified requirements.
Comment 17(b)–2 contains this
guidance.
Commenters posed a few questions
about the applicability of the clear and
conspicuous standard to particular
situations. Some asked whether
electronic advertisements or other
unrelated promotional information may
appear on the same screen as mandatory
disclosures that are posted on an
Internet web site. Except to the extent
required by the regulation, disclosures
do not have to be provided separately
from other information. Advertisements
should not be integrated into the text of
the disclosure in a manner that violates
the clear and conspicuous standard.

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Commenters also had questions about
the use of navigational tools with
electronic disclosures. For example,
some believed that such tools might be
helpful in directing consumers to
related information that explains the
terminology used in the disclosures.
Many Internet web sites use
navigational tools that are conspicuous
through the use of bold text, larger fonts,
different colors, underlining, or other
methods of highlighting. Such tools are
not per se prohibited so long as they are
not used in a manner that would violate
the clear and conspicuous standard.
Providing Timely Disclosures
Disclosures delivered electronically
must comply with existing timing
requirements under the ECOA and
Regulation B. See, for example,
§§ 202.5a, 202.9, and 202.13.
Commenters on the Board’s 1999
proposals requested specific guidance
that an electronic disclosure would be
considered timely based on the time it
is sent by e-mail or posted on an
Internet web site, regardless of when the
consumer receives or reads the
disclosure.
Under the interim final rule,
consistent with rules for disclosures that
are sent by postal mail, disclosures
provided by e-mail are timely when
they are sent by the required time.
Disclosures posted at an Internet web
site are timely if, by the required time,
the creditor both makes the disclosures
available at that location and, in
accordance with § 202.17(d)(2), sends a
notice alerting the applicant that the
disclosures have been posted. For
example, under § 202.9, a creditor must
provide a notice of action taken within
30 days of receiving a completed
application. For an adverse action
notice posted on the Internet, a creditor
must both post the notice and notify the
applicant of its availability within 30
days of receiving the completed
application. Comment 17(b)–3(ii)
contains this guidance.
Certain disclosures must be provided
at the time of application. For example,
if the creditor’s procedures permit the
applicant to apply for a mortgage loan
on-line, the applicant must be required
to access the disclosures required under
§ 202.13 before submitting the
application. A link to the disclosures
satisfies the timing rule if the applicant
cannot bypass the disclosures before
submitting the application. Or, the
disclosures in this example must
automatically appear on the screen,
even if multiple screens are required to
view the entire disclosure. Comment
17(b)–3 contains this guidance, as
proposed, but has been expanded.

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The on-line mortgage loan example
was used in the supplementary
information of the September 1999
proposed rule to illustrate the timing
requirements. Some commenters
expressed concern that the example
required creditors to provide in
writing—on the application—the
information required by § 202.13. These
commenters asked the Board to clarify
that the information required by
§ 202.13(a) may be requested separately
after the creditor begins processing the
application.
Regulation B currently requires a
creditor that receives an application for
a mortgage loan, where the credit will
be secured by the dwelling, to request
‘‘as part of the application’’ certain
applicant characteristic information. See
§ 202.13(a). The official staff
commentary further provides that a
creditor may collect the § 202.13(a)
information on the application form
itself or on a separate form that refers to
the application. See comment 13(b)–1.
Thus, while § 202.13(a) requires
creditors to collect the required
information prior to submission of an
application, a creditor need not request
the information on the application itself.
Accordingly, for a dwelling-secured
mortgage loan taken over the Internet,
the creditor need not include the
request on the actual application. A link
to the disclosure satisfies the rule if the
applicant cannot bypass the disclosure
before submitting the application. Or,
the information must automatically
appear on the screen. In addition, while
the disclosure required by § 202.13(c)
may be provided orally or in writing, for
a mortgage loan taken over the Internet
the disclosure would have to appear on
the screen—although not on the
application form itself—or be accessed
before the application is submitted to
the creditor.
Some commenters asked the Board to
clarify whether there is a requirement to
request monitoring information for
mortgage loan applications taken over
the Internet. The Regulation B
commentary currently provides that for
purposes of the requirements of
§ 202.13(a), a creditor may treat an
application taken through an electronic
medium without video capability as a
telephone or mail application. Where
applications are taken by telephone, a
creditor is not required to request
applicant characteristic information;
where taken by mail, the information
must be requested, but the creditor is
not required to make a special request
if the applicant did not provide the
information. See comment 13(b)–3(i)(A),
(B). (Creditors should note, however,
that in the August 1999 review of

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Regulation B, the Board proposed to
require creditors to treat applications
taken through an electronic medium
without video capability as taken by
mail (64 FR 44581).)
Some industry commenters believed
that requiring disclosures to
automatically appear or be accessed by
the applicant is cumbersome and
unnecessary. Some commenters
suggested that the Board allow the
required disclosures to be accessible via
a clearly marked navigational tool; they
believe that once the tool is provided,
the disclosure should be deemed to
have been provided to the applicant.
The ECOA and Regulation B require
that disclosures be provided to
applicants. It is not sufficient for
creditors to provide a bypassable
navigational tool that merely gives
applicants the option of receiving the
disclosures. Such an approach reduces
the likelihood that applicants will
notice and receive the disclosures. The
interim final rule ensures that
applicants actually see disclosures
provided electronically so that they
have the opportunity to read the
disclosures in a timely fashion.
Commenters on the various proposals
requested guidance regarding the
creditor’s duty in cases where a creditor
cannot provide timely disclosures
because an automated loan machine or
other automated equipment controlled
by the creditor malfunctions or
otherwise fails to operate properly.
Where the creditor controls the
equipment and disclosures are required
at that time, a creditor might not be
liable for failing to provide timely
disclosures if the defense in § 202.14(c)
of Regulation B is available.
Providing Disclosures in a Form the
Consumer May Keep
With one exception
(§ 202.9(a)(3)(i)(B), regarding business
credit), retainability is a new standard
for disclosures under Regulation B. (In
August 1999, the Board requested
comment on whether a retainability
standard should apply to all disclosures
and information required by Regulation
B to be in writing (64 FR 44581).)
Electronic disclosures required to be in
writing are subject to this requirement.
Comment 17(b)–4 contains guidance on
this requirement.
Applicants may communicate
electronically with creditors through a
variety of means and from various
locations. Depending on the location (at
home, at work, in a public place such
as a library), an applicant may not have
the ability at a given time to preserve
ECOA disclosures presented on-screen.
To ensure that applicants have an

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adequate opportunity to access and
retain the disclosures, the creditor also
must send them to the applicant’s
designated e-mail address or make them
available at another location, for
example, on the creditor’s Internet web
site, where the information may be
retrieved at a later date.
Where the creditor controls the
equipment providing the electronic
disclosures (for example, an automated
loan machine or computer terminal
located in the creditor’s lobby), the
creditor must ensure that the applicant
has the opportunity to retain the
required information. Comment 17(b)–5
contains guidance on this requirement.
17(c) When Consent Is Required
Under the E-Sign Act, consumers
must affirmatively consent before they
receive electronic disclosures ‘‘relating
to a transaction’’ if the disclosures are
required by law or regulation to be in
writing. Under Regulation B, the
consent requirement has been expanded
to include both consumer and business
applicants. Some disclosures required to
be in writing may be included on or
with an application provided to
applicants for certain credit regardless
of whether the applicant applies for the
loan (§§ 202.5a(a)(2)(i) (notice of right to
copy of appraisal), 202.9(a)(3)(i)(B)
(notice of right to a statement of
reasons), and 202.13(a) (request for
monitoring information)). Section
202.17(c) is added to make clear that an
applicant’s affirmative consent is not
required before creditors use electronic
communication to provide these
disclosures on or with an application.
17(d) Address or Location To Receive
Electronic Communication
Consistent with the 1999 proposals,
the interim rule provides that creditors
may deliver electronic disclosures by
sending them to an applicant’s e-mail
address. Alternatively, the rule provides
that creditors may make the disclosures
available at another location such as an
Internet web site. If the creditor makes
a disclosure available at such a location,
the creditor effectively delivers the
disclosure by sending a notice alerting
the applicant when the disclosure can
be accessed and making the disclosure
available for at least 90 days. The time
period for keeping disclosures available
at a location such as a creditor’s Internet
web site under the interim rule differs
from the 1999 proposals, based on
commenters’ concerns as discussed
below.
17(d)(1)
For purposes of § 202.17(d), an
applicant’s electronic address is an e-

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mail address that is not limited to
receiving communication transmitted
solely by the creditor, as proposed. This
guidance is contained in comment
17(d)(1)–1.
An electronic address would not
include systems that permit
communication only between the
consumer and the creditor, for example,
home-banking programs that allow
consumers to communicate directly
with a creditor on-line with the use of
a computer and modem. Thus,
disclosures provided using systems
such as home-banking programs are
treated in the same manner as
disclosures made available at an
Internet web site, and a notice alerting
the applicant when disclosures are
posted must be sent by e-mail, or to a
postal address, at the creditor’s option.
17(d)(2)
Under § 202.17(d)(2)(i) of the interim
rule, for disclosures made available at
an Internet web site, a notice alerting
the applicant when disclosures are
posted must be sent by e-mail (or to a
postal address, at the creditor’s option).
Section 202.17(d)(2)(i) requires that the
alert notice identify the account
involved and the address or other
location where the disclosure is
available. Comment 17(d)(2)–1 provides
guidance on the level of detail required
in identifying the account.
As proposed, under § 202.17(d)(2)(ii)
of the interim rule, disclosures provided
at an Internet web site must remain
available for at least 90 days. The
requirement seeks to ensure that
applicants have adequate time to access
and retain a disclosure under a variety
of circumstances, such as when an
applicant may not be able for an
extended period of time to access the
information due to computer
malfunctions, travel, or illness. The 90day period is uniform for all
disclosures, for ease of compliance.
Comment 17(d)(2)–2 is added to provide
that during this period, the actual
disclosures must be available to the
applicant, but the creditor has
discretion to determine whether they
should be available at the same location
for the entire period.
Some industry commenters believed
the 90-day time period is reasonable and
feasible. About an equal number of
commenters believed it was too
burdensome and costly; some of these
commenters suggested periods that
ranged from 30 to 60 days.
The Regulation B proposal provided
that after the 90-day time period,
disclosures would be available upon
applicants’ request, for 25 months, in
the same format as initially provided to

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the applicant. The 25-month period is
consistent with a creditor’s duty to
retain records that evidence their
compliance. Consumer advocates
supported the proposed retention
period; some recommended that
disclosures should be available upon
request for the length of the contractual
relationship with the applicant.
Industry commenters strongly
opposed the 25-month period. Many
believed that keeping copies of
electronic disclosures actually provided
to applicants for that period of time
would be costly and burdensome.
Moreover, industry commenters
believed that once an applicant has
accessed the disclosures, the applicant
rather than the creditor should have the
duty to retain them for future reference.
They also noted that under existing
record retention requirements
applicable to paper disclosures, a
creditor need only demonstrate
compliance with the rules, but need not
retain copies of the actual disclosures
provided to applicants.
The requirement for creditors to
provide duplicate disclosures upon
request for 25 months has not been
adopted. A creditor’s duty to retain
evidence of compliance for 25 months
remains unchanged.
17(d)(3) Exceptions
Section 202.17(d)(3) is added to make
clear that the requirements of
paragraphs (i) and (ii) of § 202.17(d)(2)
do not apply to the disclosure required
under § 202.13(a).
17(e) Redelivery
Industry commenters on the 1998
proposal asked for clarification that
sending the electronic disclosures
complies with the regulation, and that
institutions are not required to confirm
that the consumer actually received
them. Consumer advocates asked that
institutions be required to verify the
delivery of disclosures by return receipt,
in the case of e-mail. In the 1999
proposals, the Board solicited comment
on the need for and the feasibility of
such a requirement.
Consumer advocates believe that email systems are not yet sufficiently
reliable, and that safeguards are
necessary to ensure that consumers
actually receive disclosures. Industry
commenters stated that a return receipt
requirement would be costly and
burdensome, and would require
creditors to monitor return receipts in
every case to determine that individual
consumers received the disclosures.
Section 101(c) of the E-Sign Act
requires that consumers consent
electronically, or confirm their consent

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electronically, in a manner that
reasonably demonstrates that the
consumer can access the information
that the creditor will be providing. This
requirement seeks to verify at the outset
that the consumer is actually capable of
receiving the information in the
electronic format being used by the
creditor. After the consumer consents,
the E-Sign Act also requires creditors to
notify consumers of changes that
materially affect consumers’ ability to
access electronic disclosures.
The interim rule does not impose a
verification requirement because the
cost and burden associated with
verifying delivery of disclosures would
not be warranted. When electronic
disclosures are returned undelivered,
however, § 202.17(e) imposes a duty to
attempt redelivery (either electronically
or to a postal address) based on address
information in the creditor’s own files.
Unlike paper disclosures delivered by
postal service, there generally is no
commonly-accepted mechanism for
reporting a change in electronic address
or for forwarding e-mail. Where a
creditor actually knows that the delivery
of an electronic disclosure did not take
place, the creditor should take
reasonable steps to effectuate delivery in
some way. For example, if an e-mail
message to the applicant (containing an
alert notice or other disclosure) is
returned as undeliverable, the
redelivery requirement is satisfied if the
creditor sends the disclosure to a
different e-mail address or postal
address that the creditor has on file.
Sending the disclosures a second time
to the same electronic address would
not be sufficient if the creditor has a
different address for the applicant on
file. Comment 17(e)–1 provides this
guidance.
This redelivery requirement is limited
to situations where the electronic
communication cannot be delivered and
does not apply to situations where the
disclosure is delivered but, for example,
cannot be read by the applicant due to
technical problems with the applicant’s
software. A creditor’s duty to redeliver
a disclosure under § 202.17(e) does not
affect the timeliness of the disclosure.
Creditors comply with the timing
requirements of the regulation when a
disclosure is initially sent in a timely
manner, even though the disclosure is
returned undelivered and the creditor is
required under § 202.17(e) to take
reasonable steps to attempt redelivery.
17(f) Electronic Signatures
The E-Sign Act provides that
electronic signatures have the same
validity as handwritten signatures.
Section 106 of the act defines an

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electronic signature. Section 202.17(f) is
added to incorporate the E-Sign Act’s
definition of electronic signature into
the regulation. To comply with the ESign Act, an electronic signature must
be executed or adopted by an applicant
with the intent to sign the record.
Accordingly, regardless of the
technology used to meet this
requirement, the process must evidence
the applicant’s identity. Comment 17(f)–
1 provides this guidance.
Additional Issues
Document Integrity
The interim rule does not impose
document integrity standards.
Consumer advocates and others
expressed concerns that electronic
documents can be altered more easily
than paper documents. They say that
consumers’ ability to enforce rights
under the consumer protection laws
could be impaired, in some cases, if the
authenticity of disclosures they retain
cannot be demonstrated.
Institutions are generally required to
retain evidence of compliance with the
Board’s consumer regulations.
Accordingly, the Board requested
comment on the feasibility of requiring
institutions to have systems in place
capable of detecting whether or not
information has been altered, or to use
independent certification authorities to
verify disclosure documents.
Consumer advocates strongly
supported document integrity
requirements (including the use of
certification authorities) that would
apply to all-electronic disclosures.
Signatures, notary seals, and verification
procedures such as recordation are used
to protect against alterations for
transactions memorialized in paper
form. Consumer advocates believe that
comparable verification procedures are
needed for electronic disclosures as
well.
Industry commenters opposed
mandatory document integrity
standards for electronic disclosures.
Because the technology in this area is
still evolving, they believe that
mandatory standards would be
premature. Others believe that imposing
document integrity standards or
requiring the use of certification
authorities would be costly to
implement.
The Board recognizes the concerns
about document integrity, but believes it
is not practicable at this time to impose
document integrity standards for
consumer disclosures or mandate the
use of independent certification
authorities. Effective methods may be
too costly. Other less costly methods

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may deter alterations in some cases, but
would not necessarily ensure document
integrity.
Moreover, the issue of document
integrity affects electronic commerce
generally and is not unique to the
written disclosures required under the
consumer protection laws administered
by the Board. Section 104(b)(3) of the ESign Act authorizes federal or state
regulatory agencies to specify
performance standards to assure the
accuracy, record integrity, and
accessibility of records that are required
to be retained, but prohibits the agencies
from requiring the use of a particular
type of software or hardware in order to
comply with record retention
requirements. Technology is likely to
develop to protect electronic contracts
and other legal documents. Thus, it
seems premature for the Board to
specify any particular standards or
methods for consumer disclosure at this
time.
V. Form of Comment Letters
Comment letters should refer to
Docket No. R–1040, and, when possible,
should use a standard typeface with a
font size of 10 or 12. This will enable
the Board to convert the text to
machine-readable form through
electronic scanning, and will facilitate
automated retrieval of comments for
review. Also, if accompanied by an
original document in paper form,
comments may be submitted on 31⁄2
inch computer diskettes in any IBMcompatible DOS- or Windows-based
format.
VI. Regulatory Flexibility Analysis
The Board has reviewed these interim
amendments to Regulation B, in
accordance with section 3(a) of the
Regulatory Flexibility Act (5 U.SC. 604).
Two of the three requirements of a final
regulatory flexibility analysis under the
Act are (1) a succinct statement of the
need for and the objectives of the rule
and (2) a summary of the issues raised
by the public comments, the agency’s
assessment of those issues, and a
statement of the changes made in the
final rule in response to the comments.
These two areas are discussed above.
The third requirement of the analysis
is a description of significant
alternatives to the rule that would
minimize the rule’s economic impact on
small entities and reasons why the
alternatives were rejected. This interim
final rule is designed to provide
creditors with an alternative method of
providing disclosures; the rule will
relieve compliance burden by giving
creditors flexibility in providing
disclosures required by the regulation.

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Federal Register / Vol. 66, No. 65 / Wednesday, April 4, 2001 / Rules and Regulations
Overall, the costs of providing
electronic disclosures are not expected
to have significant impact on small
entities. The expectation is that
providing electronic disclosures may
ultimately reduce the costs associated
with providing disclosures.
VII. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320 Appendix A.1), the Board
reviewed the rule under the authority
delegated to the Board by the Office of
Management and Budget. The Federal
Reserve may not conduct or sponsor,
and an organization is not required to
respond to, this information collection
unless it displays a currently valid OMB
control number. The OMB control
number is 7100–0201.
The collection of information that is
revised by this rulemaking is found in
12 CFR Part 202. This information is
mandatory (15 U.S.C. 1691 et seq.) to
evidence compliance with the
requirements of Regulation B and the
Equal Credit Opportunity Act (ECOA).
The respondents/recordkeepers are
creditors. Creditors are required to
retain records for twenty-five months
(12 months for business credit). This
regulation applies to all types of
creditors, not just state member banks.
However, under Paperwork Reduction
Act regulations, the Federal Reserve
accounts for the burden of the
paperwork associated with the
regulation only for state member banks.
Other agencies account for the
paperwork burden on their respective
constituencies under this regulation.
The revisions provide that creditors
may deliver disclosures electronically
upon obtaining applicants’ affirmative
consent in accordance with the E-Sign
Act. The revisions also provide
guidance to creditors on the timing and
delivery of electronic disclosures, to
ensure that applicants have adequate
opportunity to access and retain the
information.
With respect to state member banks,
it is estimated that there are 1000
respondent/recordkeepers and an
average frequency of 4,767 responses
per respondent each year. The current
annual burden is estimated to be
125,678 hours. No comments
specifically addressing the burden
estimate were received, therefore, the
numbers remain unchanged. There is
estimated to be no additional cost
burden and no capital or start up cost
associated with the interim final rule.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of

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confidentiality arises under the
Freedom of Information Act.
The Board has a continuing interest in
the public’s opinions of the Federal
Reserve’s collections of information. At
any time, comments regarding the
burden estimate, or any other aspect of
this collection of information, including
suggestions for reducing the burden,
may be sent to: Secretary, Board of
Governors of the Federal Reserve
System, 20th and C Streets, N.W.,
Washington, DC 20551; and to the
Office of Management and Budget,
Paperwork Reduction Project (7100–
0200), Washington, DC 20503.
VIII. Solicitation of Comments
Regarding the Use of ‘‘Plain Language’’
Section 722 of the Gramm-LeachBliley Act of 1999 requires the Board to
use ‘‘plain language’’ in all proposed
and final rules published after January
1, 2000. The Board invites comment on
whether the interim rule is clearly
stated and effectively organized, and
how the Board might make the rule
easier to understand.
List of Subjects in 12 CFR Part 202
Aged, Banks, banking, Civil rights,
Credit, Federal Reserve System, Marital
status discrimination, Penalties,
Religious discrimination, Reporting and
recordkeeping requirements, Sex
discrimination.
For the reasons set forth in the
preamble, the Board amends Regulation
B, 12 CFR part 202, as set forth below:
PART 202—EQUAL CREDIT
OPPORTUNITY (REGULATION B)
1. The authority citation for part 202
continues to read as follows:
Authority: 15 U.S.C. 1691–1691f.

2. Section 202.4 is revised as follows:
§ 202.4

General rules.

(a) Rule prohibiting discrimination. A
creditor shall not discriminate against
an applicant on a prohibited basis
regarding any aspect of a credit
transaction.
(b) Foreign language disclosures.
Disclosures may be made in languages
other than English, provided they are
available in English upon request.
3. Section 202.9 is amended by
adding a new paragraph (h) to read as
follows:
§ 202.9

Notifications.

*

*
*
*
*
(h) Duties of third parties. A third
party may use electronic
communication in accordance with the
requirements of § 202.17, as applicable,

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17785

to comply with the requirements of
paragraph (g) of this section on behalf of
a creditor.
§ 202.16

[Added and reserved]

4. Add and reserve § 202.16.
5. Add a new § 202.17 to read as
follows:
§ 202.17 Requirements for electronic
communication.

(a) Definition. Electronic
communication means a message
transmitted electronically between a
creditor and an applicant in a format
that allows visual text to be displayed
on equipment, for example, a personal
computer monitor.
(b) General rule. In accordance with
the Electronic Signatures in Global and
National Commerce Act (the E-Sign Act)
(15 U.S.C. 7001 et seq.) and the rules of
this part, a creditor may provide by
electronic communication any
disclosure required by this part to be in
writing. Disclosures provided by
electronic communication must be
provided in a clear and conspicuous
manner and in a form the applicant may
retain.
(c) When consent is required. For
disclosures required by this part to be in
writing, a creditor shall obtain an
applicant’s affirmative consent in
accordance with the requirements of the
E-Sign Act. Disclosures under
§§ 202.5a(a)(2)(i), 202.9(a)(3)(i)(B), and
202.13(a) are not subject to this
requirement if provided on or with the
application.
(d) Address or location to receive
electronic communication. A creditor
that uses electronic communication to
provide disclosures required by this part
shall:
(1) Send the disclosure to the
applicant’s electronic address; or
(2) Make the disclosure available at
another location such as an Internet web
site; and
(i) Alert the applicant of the
disclosure’s availability by sending a
notice to the applicant’s electronic
address (or to a postal address, at the
creditor’s option). The notice shall
identify the account involved and the
address of the Internet web site or other
location where the disclosure is
available; and
(ii) Make the disclosure available for
at least 90 days from the date the
disclosure first becomes available or
from the date of the notice alerting the
applicant of the disclosure, whichever
comes later.
(3) Exceptions. A creditor need not
comply with paragraph (d)(2)(i) and (ii)
of this section for the disclosure
required by § 202.13(a).

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(e) Redelivery. When a disclosure
provided by electronic communication
is returned to a creditor undelivered, the
creditor shall take reasonable steps to
attempt redelivery using information in
its files.
(f) Electronic signatures. An electronic
signature as defined under the E-Sign
Act satisfies any requirement under this
part for an applicant’s signature or
initials.
6. In Supplement I to Part 202, a new
Section 202.16 is added and reserved
and a new Section 202.17 is added to
read as follows:
*
*
*
*
*
Supplement I to Part 202—Official Staff
Interpretations

*

*

*

*

*

Section 202.16—[Reserved]
Section 202.17—Electronic Communication
(b) General Rule
1. Relationship to the E-Sign Act. The ESign Act authorizes the use of electronic
disclosures. It does not affect any
requirement imposed under this part other
than a provision that requires disclosures to
be in paper form, and it does not affect the
content or timing of disclosures. Electronic
disclosures are subject to the regulation’s
format, timing, and retainability rules and the
clear and conspicuous standard. For
example, to satisfy the clear and conspicuous
standard for disclosures, electronic
disclosures must use visual text. The clear
and conspicuous and retainability
requirements apply to all disclosures
provided electronically—those expressly
required by the act and regulation to be in
writing, and those provided in writing where
the creditor has the option to give the
disclosure orally or in writing.
2. Clear and conspicuous standard. A
creditor must provide electronic disclosures
using a clear and conspicuous format. Also,
in accordance with the E-Sign Act:
i. The creditor must disclose the
requirements for accessing and retaining
disclosures in that format;
ii. The applicant must demonstrate the
ability to access the information
electronically and affirmatively consent to
electronic delivery; and
iii. The creditor must provide the
disclosures in accordance with the specified
requirements.
3. Timing and effective delivery.
i. When an applicant applies for credit online. When a creditor permits an applicant to
apply for credit on-line, the applicant must
be required to access the disclosures required
at application before submitting the
application. A link to the disclosures satisfies
the timing rule if the applicant cannot bypass
the disclosures before submitting the
application. Or the disclosures must
automatically appear on the screen, even if
multiple screens are required to view all of
the information. The creditor is not required
to confirm that the applicant has read the
disclosures.

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ii. Appraisals and adverse action.
Disclosures provided by e-mail are timely
based on when the disclosures are sent.
Disclosures posted at an Internet web site,
such as adverse action notices or copies of
appraisals, are timely when the creditor has
both made the disclosures available and sent
a notice alerting the applicant that the
disclosures have been posted. For example,
under § 202.9, a creditor must provide a
notice of action taken within 30 days of
receiving a completed application. For an
adverse action notice posted on the Internet,
a creditor must post the notice and notify the
applicant of its availability within 30 days of
receiving the applicant’s completed
application.
4. Retainability of disclosures. Creditors
satisfy the requirement that disclosures be in
a form that the applicant may keep if
electronic disclosures are delivered in a
format that is capable of being retained (such
as by printing or storing electronically). The
format must also be consistent with the
information required to be provided under
section 101(c)(1)(C)(i) of the E-Sign Act (15
U.S.C. 7001(c)(1)(C)(i)) about the hardware
and software requirements for accessing and
retaining electronic disclosures.
5. Disclosures provided on creditor’s
equipment. A creditor that controls the
equipment providing electronic disclosures
to applicants (for example, a computer
terminal in a creditor’s lobby or an
automated loan machine at a public kiosk)
must ensure that the equipment satisfies the
regulation’s requirements to provide timely
disclosures in a clear and conspicuous format
and in a form that the applicant may keep.
For example, if disclosures are required at
the time of an on-line application, the
disclosures must be sent to the applicant’s email address or must be made available at
another location such as the creditor’s
Internet web site, unless the creditor
provides a printer that automatically prints
the disclosures.
17(d) Address or Location To Receive
Electronic Communication
Paragraph 17(d)(1)
1. Electronic address. An applicant’s
electronic address is an e-mail address that
is not limited to receiving communication
transmitted solely by the creditor.
Paragraph 17(d)(2)
1. Identifying account involved. A creditor
may identify a specific account in a variety
of ways and is not required to identify an
account by reference to the account number.
For example, where the applicant has only
one credit card account, and no confusion
would result, the creditor may refer to ‘‘your
credit card account.’’ If the applicant has two
credit card accounts, the creditor may, for
example, differentiate accounts based on the
card program or by using a truncated account
number.
2. 90-day rule. The actual disclosures
provided to an applicant must be available
for at least 90 days, but the creditor has
discretion to determine whether they should
be available at the same location for the
entire period.

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17(e) Redelivery
1. E-mail returned as undeliverable. If an
e-mail to the applicant (containing an alert
notice or other disclosure) is returned as
undeliverable, the redelivery requirement is
satisfied if, for example, the creditor sends
the disclosure to a different e-mail address or
postal address that the creditor has on file for
the applicant. Sending the disclosures a
second time to the same electronic address is
not sufficient if the creditor has a different
address for the applicant on file.
17(f) Electronic Signatures
1. Relationship to the E-Sign Act. The ESign Act provides that electronic signatures
have the same validity as handwritten
signatures. Section 106 of the E-Sign Act (15
U.S.C. 7006) defines an electronic signature.
To comply with the E-Sign Act, an electronic
signature must be executed or adopted by an
applicant with the intent to sign the record.
Accordingly, regardless of the technology
used to meet this requirement, the process
must evidence the applicant’s identity.
By order of the Board of Governors of the
Federal Reserve System, March 29, 2001.
Robert deV. Frierson,
Associate Secretary of the Board.
[FR Doc. 01–8150 Filed 4–3–01; 8:45 am]
BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM
12 CFR Part 205
[Regulation E; Docket No. R–1041]

Electronic Fund Transfers
AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Interim Rule; request for
comments.
SUMMARY: The Board is adopting an
interim final rule amending Regulation
E, which implements the Electronic
Fund Transfer Act, to establish uniform
standards for the electronic delivery of
disclosures required by the act and
regulation. The rule provides guidance
on the timing and delivery of electronic
disclosures to ensure consumers have
adequate opportunity to access and
retain information when shopping for
electronic fund transfer services.
(Similar rules are being adopted under
other consumer financial services and
fair lending regulations administered by
the Board.) Under the rule, financial
institutions may deliver disclosures
electronically if they obtain consumers’
affirmative consent in accordance with
the Electronic Signatures in Global and
National Commerce Act. Consistent
with that act, an interim rule issued
previously, regarding the electronic
delivery of disclosures upon consumers’
agreement, is withdrawn. In addition,
the regulation is revised to allow

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Federal Register / Vol. 66, No. 65 / Wednesday, April 4, 2001 / Rules and Regulations
financial institutions to provide
disclosures in foreign languages, and to
make technical changes to the model
error resolution notices. The rule is
being adopted as an interim rule to
allow for additional public comment.
DATES: This rule is effective March 30,
2001; however, to allow time for any
necessary operational changes, the
mandatory compliance date is October
1, 2001. Comments must be received by
June 1, 2001.
ADDRESSES: Comments, which should
refer to Docket No. R–1041, may be
mailed to Ms. Jennifer J. Johnson,
Secretary, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue, N.W.,
Washington, D.C. 20551 or mailed
electronically to
regs.comments@federalreserve.gov.
Comments addressed to Ms. Johnson
may also be delivered to the Board’s
mail room between 8:45 a.m. and 5:15
p.m. weekdays, and to the security
control room at all other times. The mail
room and the security control room,
both in the Board’s Eccles Building, are
accessible from the courtyard entrance
on 20th Street between Constitution
Avenue and C Street, N.W. Comments
may be inspected in room MP–500 in
the Board’s Martin Building between
9:00 a.m. and 5:00 p.m., pursuant to the
Board’s Rules Regarding the Availability
of Information, 12 CFR part 261.
FOR FURTHER INFORMATION CONTACT: John
C. Wood, Counsel, or Natalie E. Taylor,
Counsel, Division of Consumer and
Community Affairs, at (202) 452–2412
or (202) 452–3667.
SUPPLEMENTARY INFORMATION:
I. Background
The Electronic Fund Transfer Act
(EFTA), 15 U.S.C. 1693 et seq., provides
a basic framework establishing the
rights, liabilities, and responsibilities of
participants in electronic fund transfer
(EFT) systems. The Board’s Regulation E
(12 CFR part 205) implements the act.
Types of transfers covered by the act
and regulation include transfers
initiated through an automated teller
machine (ATM), point-of-sale terminal,
automated clearinghouse, telephone
bill-payment plan, or remote banking
program. The act and regulation require
disclosure of terms and conditions of an
EFT service; documentation of EFTs by
means of terminal receipts and periodic
account statements; limitations on
consumer liability for unauthorized
transfers; procedures for error
resolution; and certain rights related to
preauthorized EFTs.
EFTA and Regulation E require a
number of disclosures to be provided in

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writing, presuming that financial
institutions provide paper documents.
Under the Electronic Signatures in
Global and National Commerce Act (the
E-Sign Act) (15 U.S.C. 7001 et seq.),
however, electronic documents and
signatures have the same validity as
paper documents and handwritten
signatures.
Board Proposals Regarding Electronic
Disclosures
Over the past few years, the Board has
published several interim rules and
proposals regarding the electronic
delivery of disclosures. In 1996, after a
comprehensive review of Regulation E
(Electronic Fund Transfers), the Board
proposed to amend the regulation to
permit financial institutions to provide
disclosures by sending them
electronically (61 FR 19696, May 2,
1996). Based on comments received on
the 1996 proposal, on March 25, 1998,
the Board published an interim rule
under Regulation E permitting the
electronic delivery of disclosures (63 FR
14528) and similar proposals under
Regulation Z (63 FR 14548) and other
financial services and fair lending
regulations administered by the Board.
The 1998 interim rule and proposed
rules were similar to the 1996 proposed
rule under Regulation E.
The 1998 proposals and interim rule
allowed depository institutions,
financial institutions, creditors, lessors,
and others to provide disclosures
electronically if the consumer agrees,
with few other requirements. (For ease
of reference, this background section
uses the terms ‘‘institutions’’ and
‘‘consumers.’’)
Industry commenters generally
supported the Board’s 1998 proposals
and interim rule, but many of them
sought specific revisions and additional
guidance on how to comply with the
disclosure requirements in certain
transactions and circumstances. In
particular, they expressed concern that
the rule did not specify a uniform
method for establishing that an
‘‘agreement’’ was reached for sending
disclosures electronically. Consumer
advocates, on the other hand, generally
opposed the 1998 proposals and the
interim rule. They believed that
consumer protections in the proposals
were inadequate, especially in
connection with transactions that are
typically consummated in person (such
as automobile loans and leases, homesecured loans, and door-to-door credit
sales).
September 1999 Proposals
In response to comments received on
the 1998 proposals and interim rule, the

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Board published revised regulatory
proposals in September 1999 under
Regulations B, E, M, Z, and DD (64 FR
49688, 49699, 49713, 49722 and 49740,
respectively, September 14, 1999)
(collectively, the ‘‘1999 proposals’’), and
an interim rule under Regulation DD (64
FR 49846). The interim rule under
Regulation DD allowed depository
institutions to deliver disclosures on
periodic statements electronically if the
consumer agrees.
Generally, the 1999 proposals
required institutions to use a
standardized form containing specific
information about the electronic
delivery of disclosures so that
consumers could make informed
decisions about whether to receive
disclosures electronically. If the
consumer affirmatively consented, most
disclosures could be provided
electronically. To address concerns
about potential abuses, the 1999
proposals generally would have
required disclosures to be given in
paper form when consumers transacted
business in person. The proposals
contained rules for disclosures that are
made available to consumers at an
institution’s Internet web site
(governing, for example, how long
disclosures must remain posted at a web
site).
Comments on the September 1999
proposals—The Board received letters
representing 115 commenters
expressing views on the revised
proposals. Industry commenters
generally supported the Board’s
approach of establishing federal rules
for a uniform method of obtaining
consumers’ consent to the receipt of
electronic disclosures instead of
deferring to state law. Still, many sought
specific additional guidance and in
some cases wanted more flexibility.
They were concerned about the length
of time the proposals would have
required electronic disclosures to
remain available to a consumer at an
institution’s Internet web site or upon
request. In addition, they believed the
proposed rule requiring paper
disclosures for in-person transactions
was not sufficiently flexible. Consumer
advocates believed the 1999 proposals
addressed many of their concerns about
the 1998 proposals. Nevertheless, they
urged the Board to incorporate greater
protections for consumers, such as
restricting the delivery of electronic
disclosures to only those consumers
who initiate transactions electronically.
The Board also obtained views
through four focus groups with
individual consumers, conducted in the
Washington-Baltimore metropolitan
area. Participants reviewed and

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commented on the format and content
of the proposed sample consent forms,
as well as on alternative revised forms.
Federal Legislation Addressing
Electronic Commerce
On June 30, 2000, the President
signed the E-Sign Act, which was
enacted to encourage the continued
expansion of electronic commerce. The
E-Sign Act generally provides that
electronic documents and signatures
have the same validity as paper
documents and handwritten signatures.
The act contains special rules for the
use of electronic disclosures in
consumer transactions. Consumer
disclosures may be provided in
electronic form only if the consumer
affirmatively consents after receiving
certain information specified in the
statute.
The Board and other government
agencies are permitted to interpret the
E-Sign Act’s consumer consent
requirements within prescribed limits,
but may not impose additional
requirements for consumer consent. In
addition, agencies generally may not reimpose a requirement for using paper
disclosures in particular transactions,
such as those conducted in person.
The consumer consent provisions in
the E-Sign Act became effective October
1, 2000, and did not require
implementing regulations. Thus,
financial institutions are currently
permitted to use electronic disclosures
under Regulations B, E, M, Z and DD if
the consumer affirmatively consents in
the manner required by section 101(c) of
the E-Sign Act. Under section 101(c)(5)
of the E-Sign Act, consumers who
consented prior to the effective date of
the act to receive electronic disclosures
as permitted by any law or regulation
are not subject to the consent
requirements.
II. The Interim Rule
The Board is adopting an interim final
rule to establish uniform standards for
the electronic delivery of disclosures
required under Regulation E. Consistent
with the requirements of the E-Sign Act,
financial institutions generally must
obtain consumers’ affirmative consent to
provide disclosures electronically.
The interim rules also establish
uniform requirements for the timing and
delivery of electronic disclosures.
Disclosures may be sent by e-mail to an
electronic address designated by the
consumer, or they may be made
available at another location, such as an
Internet web site. If the disclosures are
not sent by e-mail, consumers must
receive a notice alerting them to the
availability of the disclosures.

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Disclosures posted on a web site must
be available for at least 90 days, to allow
consumers adequate time to access and
retain the information. With regard to
the timing of electronic disclosures, for
disclosures that must be provided at the
time the consumer contracts for an
electronic fund transfer service (or
before the first transfer), consumers are
required to access the disclosures before
contracting or making the first transfer.
Under the interim rule, institutions
must make a good faith attempt to
redeliver electronic disclosures that are
returned undelivered, using the address
information available in their files.
Similar rules are being adopted under
Regulations B, M, Z, and DD.
III. Request for Comment
Interim Rules
The interim rules include most of the
revisions that were part of the 1999
proposals and were not affected by the
E-Sign Act. The Board is adopting these
rules with some minor changes
discussed below. The rules are adopted
as interim rules, to allow commenters to
present new information or views not
previously considered in the context of
the 1998 and 1999 proposals. Since the
Board’s 1999 proposals were issued,
more institutions have gained
experience in offering financial services
electronically. The Board believes that
additional comments, beyond those
previously considered in connection
with the Board’s earlier proposals,
might inform the Board whether any
developments in technology or industry
practices have occurred that warrant
further changes in the rules. The
comment period ends on June 1, 2001.
The Board expects to adopt final rules
on a permanent basis prior to October 1,
2001.
Interpreting E-Sign Provisions
Under section 104(b) of the E-Sign
Act, the Board and other government
agencies are permitted to interpret the
act, within prescribed limits. The Board
may issue rules that interpret how the
E-Sign Act’s consumer consent
requirements apply for purposes of the
laws administered by the Board. Also,
the Board may, by regulation, exempt a
particular category of disclosures from
the E-Sign Act’s consumer consent
requirements if it will eliminate a
substantial burden on electronic
commerce without creating material risk
for consumers.
The Board requests comment on
whether the Board should exercise its
authority under the E-Sign Act in future
rulemakings to interpret the consumer
consent provisions or other provisions

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of the act, as they affect the Board’s
consumer protection regulations.
Comment is requested on whether the
statutory provisions relating to
consumer consent are sufficient, or
whether additional guidance is needed.
For example, is interpretative guidance
needed concerning the statutory
requirement that consumers confirm
their consent electronically in a manner
that reasonably demonstrates they can
access information in the form to be
used by the financial institution? Is
clarification needed on the effect of
consumers’ withdrawing their consent,
or on requesting paper copies of
electronic disclosures? Institutions must
also inform consumers of changes in
hardware or software requirements if
the change creates a material risk that
the consumer will not be able to access
or retain the disclosure. The Board
solicits comment on whether regulatory
standards are needed for determining a
‘‘material risk’’ for purposes of
Regulation E and other financial
services and fair lending laws
administered by the Board, and if so
what standards should apply.
Under section 104(d) of the E-Sign
Act, the Board is authorized to exempt
specific disclosures from the consumer
consent requirements of section 101(c)
of the E-Sign Act, if the exemption is
necessary to eliminate a substantial
burden on electronic commerce and will
not increase the material risk of harm to
consumers. The Board requests
comment on whether it should consider
exercising this exemption authority.
Study on Adapting Requirements to
Online Banking and Lending
The E-Sign Act eliminated legal
impediments to the use of electronic
records and signatures. The Board
requests comment on whether other
legislative or regulatory changes are
needed to adapt current requirements to
online banking and lending and
facilitate electronic delivery of
consumer financial services.
As an example, under Regulations E,
Z, and DD, periodic statements inform
consumers about their account activity
over a period of time, typically monthly.
The beginning and ending dates of the
cycle determine account balances and
other information that must be
disclosed. In addition, transmittal of the
periodic statement triggers important
consumer protections such as error
resolution procedures. Online banking,
however, can provide consumers with
up-to-date information about their
accounts on a continuing basis. Such
information is a helpful supplement
to—but does not comply as a substitute
for—periodic statements. Should the

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rules for periodic statements be
modified for online banking, and if so,
how could the rules be crafted to
maintain for consumers (1) a
perspective of the activity of an account
over time, and (2) protections for
resolving errors or liability for
unauthorized transactions?
The comments may assist the Board
in future efforts to update the
regulations. The comments may also be
used in connection with a study
required under the Gramm-Leach-Bliley
Act of 1999. That act requires the
federal bank supervisory agencies to
conduct a study of banking regulations
that affect the electronic delivery of
financial services and to submit to the
Congress a report recommending any
legislative changes that are needed to
facilitate online banking and lending.
IV. Section-by-Section Analysis
Pursuant to its authority under
section 904 of the EFTA, the Board
amends Regulation E to establish
uniform standards for the use of
electronic communication to provide
disclosures required by this regulation.
Electronic disclosures can effectively
reduce compliance costs without
adversely affecting consumer
protections. To the extent that a
financial institution may make
electronic disclosures available at its
Internet web site instead of providing
the disclosures directly to the consumer,
the Board finds that such an exception
is warranted, acting pursuant to its
authority under section 904(c) of the
EFTA. Below is a section-by-section
analysis of the rules for providing
disclosures by electronic
communication, including references to
changes in the official staff commentary.

or form of consumers’ consent to
electronic statements.
Effective October 1, 2000, the E-Sign
Act permits institutions to provide
disclosures to consumers using
electronic communication, if the
institution complies with Section 101(c)
of that act. Section 101(c) of the E-Sign
Act requires institutions to provide
specific information about the electronic
delivery of disclosures and obtain the
consumer’s affirmative consent to
receive electronic disclosures. As
discussed below, § 205.17 is being
adopted to set forth the general rule that
institutions subject to Regulation E may
provide disclosures electronically only
if the institution complies with Section
101(c) of the E-Sign Act. The 1998
interim rule is withdrawn accordingly,
and § 205.4(c) is amended to provide a
cross reference to new § 205.17, to ease
compliance.
Section 205.17 Requirements for
Electronic Communication
17(a) Definition

To provide consistency among the
regulations, the guidance currently
contained in comment 4(a)–2,
permitting financial institutions to
provide disclosures in languages other
than English (as long as disclosures in
English are available to consumers who
request them) is set forth in new
§ 205.4(a)(2).

As adopted, the definition of the term
‘‘electronic communication’’ remains
substantially unchanged from the 1999
proposals. Section 205.17(a) limits the
term to a message transmitted
electronically that can be displayed on
equipment as visual text; an example is
a message displayed on a personal
computer monitor screen. Thus, audioand voice-response telephone systems
are not included. Because the rule
permits the use of electronic
communication to satisfy the statutory
requirement for written disclosures that
must be clear and readily
understandable, the Board believes
visual text is an essential element of the
definition. Institutions that
accommodate vision-impaired
consumers by providing disclosures that
do not use visual text must also provide
disclosures using visual text.
Some commenters asked for
clarification that the definition was not
intended to preclude the use of devices
other than personal computers, which
also can display visual text. The
equipment on which the text message is
received is not limited to a personal
computer, provided the visual display
used to deliver the disclosures meets the
‘‘clear and readily understandable’’
format requirement, discussed below.

4(c) Electronic Communication

17(b) General Rule

Section 205.4(c) was adopted by the
Board in March 1998 as an interim rule
allowing the electronic delivery of
disclosures required under Regulation
E, if the consumer agrees. The 1998
interim rule did not specify the manner

Effective October 1, 2000, the E-Sign
Act permits financial institutions to
provide disclosures using electronic
communication, if the financial
institution complies with the consumer
consent requirements in Section 101(c).

Section 205.4 General Disclosure
Requirements; Jointly Offered Services
4(a) Form of Disclosures
4(a)(2) Foreign Language Disclosures

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Under section 101(c) of the E-Sign Act,
financial institutions must provide
specific information about the electronic
delivery of disclosures before obtaining
the consumer’s affirmative consent to
receive electronic disclosures. The
consent requirements in the E-Sign Act
are similar but not identical to the
Board’s 1999 proposal. Accordingly,
§ 205.17(b) sets forth the general rule
that financial institutions subject to
Regulation E may provide disclosures
electronically if the financial institution
complies with section 101(c) of the ESign Act.
The E-Sign Act authorizes the use of
electronic disclosures. The act does not
affect any requirement imposed under
EFTA other than a provision that
requires disclosures to be in paper form,
and the act does not affect the content
or timing of disclosures. Electronic
disclosures are subject to the
regulation’s format, timing and
retainability rules and the clear and
readily understandable standard.
Comment 17(b)–1 contains this
guidance.
Presenting Disclosures in a Clear and
Readily Understandable Format
Electronic disclosures must be clear
and readily understandable, as is the
case for all written disclosures under
EFTA and Regulation E. See § 205.4(a).
A financial institution must provide
electronic disclosures using a clear and
readily understandable format. Also, in
accordance with the E-Sign Act: (1) The
institution must disclose the
requirements for accessing and retaining
disclosures in that format; (2) the
consumer must demonstrate the ability
to access the information electronically
and affirmatively consent to electronic
delivery; and (3) the institution must
provide the disclosures in accordance
with the specified requirements.
Comment 17(b)–2 contains this
guidance.
Commenters posed a few questions
about the applicability of the clear and
readily understandable standard to
particular situations. Some asked
whether electronic advertisements or
other unrelated promotional
information may appear on the same
screen as mandatory disclosures that are
posted on an Internet web site. Except
to the extent required by the regulation,
disclosures do not have to be provided
separately from other information.
Advertisements should not be integrated
into the text of the disclosure in a
manner that violates the clear and
readily understandable standard.
Commenters also had questions about
the use of navigational tools with
electronic disclosures. For example,

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some believed that such tools might be
helpful in directing consumers to
related information that explains the
terminology used in the disclosures.
Many Internet web sites use
navigational tools that are conspicuous
through the use of bold text, larger fonts,
different colors, underlining, or other
methods of highlighting. Such tools are
not per se prohibited so long as they are
not used in a manner that would violate
the clear and readily understandable
standard.
Providing Timely Disclosures
Disclosures delivered electronically
must comply with existing timing
requirements under EFTA and
Regulation E. See, for example,
§§ 205.7(a), 205.8(a)(1), and 205.9(b).
Commenters on the Board’s 1999
proposals requested specific guidance
that an electronic disclosure would be
considered timely based on the time it
is sent by e-mail or posted on an
Internet web site, regardless of when the
consumer receives or reads the
disclosure.
Under the final rule, consistent with
rules for disclosures that are sent by
postal mail, disclosures provided by email are timely when they are sent by
the required time. Disclosures posted
periodically at an Internet web site are
timely if, by the required time, the
financial institution both makes the
disclosures available at that location
and, in accordance with § 205.17(c)(2),
sends a notice alerting the consumer
that the disclosures have been posted.
For example, under § 205.8(a), financial
institutions offering accounts with EFT
services must provide a change-in-terms
notice at least 21 days in advance of
certain changes. For a change-in-terms
notice posted on the Internet, an
institution must both post the notice
and notify consumers of its availability
at least 21 days in advance of the
change. Comment 17(b)–4 contains this
guidance.
Certain disclosures must be provided
before the consumer contracts for an
EFT service, or before the first electronic
fund transfer. Because the disclosures
are not required to be segregated and
may be interspersed into the text of
another document, the institution may
satisfy the requirement to provide the
disclosures if the document appears
automatically or via a nonbypassable
link. For example, when the financial
institution permits the consumer to
open an account on-line and initiate an
EFT transaction immediately thereafter,
the consumer must be required to access
the disclosures (or the document
containing the disclosures such as a
checking account agreement) required

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under § 205.7 before the first
transaction. A link to the disclosures
satisfies the timing rule if the consumer
cannot bypass the disclosures before
contracting or making the first transfer.
Or, the disclosures in this example must
automatically appear on the screen,
even if multiple screens are required to
view the entire disclosure. Comment
17(b)–3 contains this guidance.
Some industry commenters believed
that requiring disclosures to
automatically appear or be accessed by
the consumer is cumbersome and
unnecessary. Some commenters
suggested that the Board allow the
required disclosures to be accessible via
a clearly marked navigational tool; they
believe that once the tool is provided,
the disclosure should be deemed to
have been provided to the consumer.
EFTA and Regulation E require that
financial institutions provide, send, or
deliver disclosures to consumers. It is
not sufficient for institutions to provide
a bypassable navigational tool that
merely gives consumers the option of
receiving the disclosures. Such an
approach reduces the likelihood that
consumers will notice and receive the
disclosures. The final rule ensures that
consumers actually see disclosures
provided electronically so that they
have the opportunity to read them
before entering into an agreement for
EFT services.
Commenters requested guidance
regarding the financial institution’s duty
in cases where an institution cannot
provide timely disclosures because an
electronic terminal or other automated
equipment controlled by the institution
malfunctions or otherwise fails to
operate properly. Where the institution
controls the equipment and disclosures
are required at that time, an institution
might not be liable for failing to provide
timely disclosures if the defense in
section 915(c) of EFTA is available.
Providing Disclosures in a Form the
Consumer May Keep
Under EFTA and Regulation E, many
of the disclosures required to be in
writing must be in a form the consumer
can retain. Electronic disclosures are
subject to this requirement. Comment
17(b)–5 contains this guidance on this
requirement.
Consumers may communicate
electronically with financial institutions
through a variety of means and from
various locations. Depending on the
location (at home, at work, in a public
place such as a library), a consumer may
not have the ability at a given time to
preserve EFTA disclosures presented
on-screen. To ensure that consumers
have an adequate opportunity to access

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and retain the disclosures, the financial
institution also must send them to the
consumer’s designated e-mail address or
make them available at another location,
for example, on the financial
institution’s Internet web site, where the
information may be retrieved at a later
date.
Where the financial institution
controls the equipment providing the
electronic disclosures (for example, an
automated teller machine or computer
terminal located in the financial
institution’s lobby), the financial
institution must ensure that the
consumer has the opportunity to retain
the required information. Comment
17(b)–6 contains guidance on this
requirement.
17(c) Address or Location To Receive
Electronic Communication
Consistent with the 1999 proposals,
the interim rule provides that financial
institutions may deliver electronic
disclosures by sending them to a
consumer’s e-mail address.
Alternatively, the rule provides that
financial institutions may make the
disclosures available at another location
such as an Internet web site. If the
financial institution makes a disclosure
available at such a location, the
financial institution effectively delivers
the disclosure by sending a notice
alerting the consumer when the
disclosure can be accessed, and making
the disclosure available for at least 90
days. The time period for keeping
disclosures available at a location such
as an institution’s Internet web site
under the interim rule differs from the
1999 proposals, based on commenters’
concerns as discussed below.
17(c)(1)
For purposes of § 205.17(c), a
consumer’s electronic address is an email address that is not limited to
receiving communications transmitted
solely by the financial institution, as
proposed. This guidance is contained in
comment 17(c)(1)–1. An electronic
address would not include systems that
permit communication only between
the consumer and the financial
institution, for example, home-banking
programs that allow consumers to
communicate directly with a financial
institution on-line with the use of a
computer and modem. These systems,
like a financial institution’s web site
accessed via the Internet, give
consumers access to information about
their accounts at a location controlled
by the institution. In both cases, the
institution determines how long account
information will be available to the
consumer. Consumers who receive

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disclosures at their e-mail address,
however, may choose when to review,
and for how long to retain, account
information. Consumers who receive
disclosures by contacting a financial
institution’s site need to be alerted
when the information is first available
in order to ensure that they have the
opportunity to access the information
before it is removed. Thus, disclosures
provided using systems such as homebanking programs are treated in the
same manner as disclosures made
available at an Internet web site, and a
notice alerting the consumer when
disclosures are posted must be sent, by
e-mail or to a postal address, at the
financial institution’s option.
17(c)(2)
Under § 205.17(c)(2)(i) of the interim
rule, for disclosures made available at
an Internet web site, a notice alerting
the consumer when disclosures are
posted must be sent by e-mail (or to a
postal address, at the institution’s
option). Section 205.17(c)(2)(i) requires
that the alert notice identify the account
involved and the address or other
location where the disclosure is
available. Comment 17(c)(2)–1 provides
guidance on the level of detail required
in identifying the account.
As proposed, under § 205.17(c)(2)(ii)
of the interim rule, disclosures provided
at an Internet web site must remain
available for at least 90 days. The
requirement seeks to ensure that
consumers have adequate time to access
and retain a disclosure under a variety
of circumstances, such as when a
consumer may not be able for an
extended period of time to access the
information due to computer
malfunctions, travel, or illness. Making
the periodic statement disclosure
available for 90 days also ensures that
it will be available a sufficient time in
most cases to allow alleged errors to be
resolved under the procedures in
Regulation E. The 90-day period is
uniform for all disclosures, for ease of
compliance. Comment 17(c)(2)–2 is
added to provide that during this
period, the actual disclosures must be
available to the consumer, but the
financial institution has discretion to
determine whether they should be
available at the same location for the
entire period.
Some industry commenters believed
the 90-day time period was reasonable
and feasible. About an equal number of
commenters believed it was too
burdensome and costly; some of these
commenters suggested periods that
ranged from 30 to 60 days.
The 1999 proposals provided that
after the 90-day time period, disclosures

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would be available upon consumers’
request, generally for 24 months, in the
same format as initially provided to the
consumer. The 24-month period is
consistent with a financial institution’s
duty to retain records that evidence
compliance. Consumer advocates
supported the proposed retention
period; some recommended that
disclosures should be available upon
request for the length of the contractual
relationship with the consumer.
Industry commenters strongly
opposed the 24-month period. Many
believed that keeping copies of
electronic disclosures actually provided
to consumers for that period of time
would be costly and burdensome.
Moreover, industry commenters
believed that once a consumer has
accessed the disclosures, the consumer
rather than the financial institution
should have the duty to retain them for
future reference. They also noted that
under existing record retention
requirements applicable to paper
disclosures, a financial institution need
only demonstrate compliance with the
rules, but need not retain copies of the
actual disclosures provided to
consumers.
The requirement for financial
institutions to provide duplicate
disclosures upon request for 24 months
has not been adopted. A financial
institution’s duty to retain evidence of
compliance for 24 months remains
unchanged.
17(d) Redelivery
Industry commenters on the 1998
proposal asked for clarification that
sending the electronic disclosures
complies with the regulation, and that
institutions are not required to confirm
that the consumer actually received
them. Consumer advocates asked that
institutions be required to verify the
delivery of disclosures by return receipt,
in the case of e-mail. In the 1999
proposals, the Board solicited comment
on the need for and the feasibility of
such a requirement.
Consumer advocates believe that email systems are not yet sufficiently
reliable, and that safeguards are
necessary to ensure that consumers
actually receive disclosures. Industry
commenters stated that a return receipt
requirement would be costly and
burdensome, and would require
financial institutions to monitor return
receipts in every case to determine that
individual consumers received the
disclosures.
Section 101(c) of the E-Sign Act
requires that consumers consent
electronically, or confirm their consents
electronically, in a manner that

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reasonably demonstrates they can access
the information that the financial
institution will be providing. This
requirement seeks to verify at the outset
that the consumer is actually capable of
receiving the information in the
electronic format being used by the
institution. After the consumer
consents, the E-Sign Act also requires
institutions to notify consumers of
changes that materially affect
consumers’ ability to access electronic
disclosures.
The interim rule does not impose a
verification requirement because the
cost and burden associated with
verifying delivery of all disclosures
would not be warranted. When
electronic disclosures are returned
undelivered, however, § 205.17(d)
imposes a duty to attempt redelivery
(either electronically or to a postal
address) based on address information
in the institution’s own files. Unlike
paper disclosures delivered by the
postal service, there generally is no
commonly-accepted mechanism for
reporting a change in electronic address
or for forwarding e-mail. Where an
institution actually knows that the
delivery of an electronic disclosure did
not take place, the institution should
take reasonable steps to effectuate
delivery in some way. For example, if
an e-mail message to the consumer
(containing an alert notice or other
disclosure) is returned as undeliverable,
the redelivery requirement is satisfied if
the institution sends the disclosure to a
different e-mail address or postal
address that the institution has on file.
Sending the disclosures a second time
to the same electronic address would
not be sufficient if the institution has a
different address for the consumer on
file. Comment 17(d)–1 provides this
guidance.
This redelivery requirement is limited
to situations where the electronic
communication cannot be delivered and
does not apply to situations where the
disclosure is delivered but, for example,
cannot be read by the consumer due to
technical problems with the consumer’s
software. A financial institution’s duty
to redeliver a disclosure under
§ 205.17(d) does not affect the
timeliness of the disclosure. Financial
institutions comply with the timing
requirements of the regulation when a
disclosure is initially sent in a timely
manner, even though the disclosure is
returned undelivered and the financial
institution is required under § 205.17(d)
to take reasonable steps to attempt
redelivery.

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17(e) Persons Other Than Financial
Institutions
Certain provisions of Regulation E
apply to entities that are not financial
institutions. For example, where
preauthorized electronic fund transfers
from a consumer’s account are recurring
but will vary in amount each time,
advance written notice is required; the
notice may be given by the designated
payee instead of the financial
institution. The rule clarifies that
entities other than a financial institution
that are required to comply with
Regulation E may use electronic
communication to do so, provided the
requirements of § 205.17(b) are satisfied.
See § 205.17(e) and comment 17(e)–1.
Additional Issues
1. Document Integrity
The interim rule does not impose
document integrity standards.
Consumer advocates and others
expressed concerns that electronic
documents can be altered more easily
than paper documents. They say that
consumers’ ability to enforce rights
under the consumer protection laws
could be impaired, in some cases, if the
authenticity of disclosures they retain
cannot be demonstrated.
Institutions are generally required to
retain evidence of compliance with the
Board’s consumer regulations.
Accordingly, the Board requested
comment on the feasibility of requiring
institutions to have systems in place
capable of detecting whether or not
information has been altered, or to use
independent certification authorities to
verify disclosure documents.
Consumer advocates strongly
supported document integrity
requirements (including the use of
certification authorities) that would
apply to all-electronic disclosures.
Signatures, notary seals, and verification
procedures such as recordation are used
to protect against alterations for
transactions memorialized in paper
form. Consumer advocates believe that
comparable verification procedures are
needed for electronic disclosures as
well.
Industry commenters opposed
mandatory document integrity
standards for electronic disclosures.
Because the technology in this area is
still evolving, they believe that
mandatory standards would be
premature. Others believe that imposing
document integrity standards or
requiring the use of certification
authorities would be costly to
implement.
The Board recognizes the concerns
about document integrity, but believes it

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is not practicable at this time to impose
document integrity standards for
consumer disclosures or mandate the
use of independent certification
authorities. Effective methods may be
too costly. Other less costly methods
may deter alterations in some cases, but
would not necessarily ensure document
integrity.
Moreover, the issue of document
integrity affects electronic commerce
generally and is not unique to the
written disclosures required under the
consumer protection laws administered
by the Board. Section 104(b)(3) of the ESign Act authorizes federal or state
regulatory agencies to specify
performance standards to assure the
accuracy, record integrity, and
accessibility of records that are required
to be retained, but prohibits the agencies
from requiring the use of a particular
type of software or hardware in order to
comply with record retention
requirements. Technology is likely to
develop to protect electronic contracts
and other legal documents. Thus, it
seems premature for the Board to
specify any particular standards or
methods for consumer disclosure at this
time.
2. Technical Amendments to Error
Resolution Notices
Model error resolution notices
contained in Appendix A (Forms A–3
and A–5) have been revised to conform
with amendments to § 205.11
addressing time periods for
investigating alleged errors involving
new accounts and point-of-sale and
foreign-initiated transactions (63 FR
52115, September 29, 1998), and to
make other technical changes.
V. Form of Comment Letters
Comment letters should refer to
Docket No. R–1041, and, when possible,
should use a standard typeface with a
font size of 10 or 12. This will enable
the Board to convert the text to
machine-readable form through
electronic scanning, and will facilitate
automated retrieval of comments for
review. Also, if accompanied by an
original document in paper form,
comments may be submitted on 31⁄2
inch computer diskettes in any IBMcompatible DOS- or Windows-based
format.
VI. Regulatory Flexibility Analysis
The Board has reviewed these interim
amendments to Regulation E, in
accordance with section 3(a) of the
Regulatory Flexibility Act (5 U.S.C.
604). Two of the three requirements of
a final regulatory flexibility analysis
under the Act are (1) a succinct

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statement of the need for and the
objectives of the rule and (2) a summary
of the issues raised by the public
comments, the agency’s assessment of
those issues, and a statement of the
changes made in the final rule in
response to the comments. These two
areas are discussed above.
The third requirement of the analysis
is a description of significant
alternatives to the rule that would
minimize the rule’s economic impact on
small entities and reasons why the
alternatives were rejected. This interim
final rule is designed to provide
financial institutions with an alternative
method of providing disclosures; the
rule will relieve compliance burden by
giving financial institutions flexibility
in providing disclosures required by the
regulation. Overall, the costs of
providing electronic disclosures are not
expected to have significant impact on
small entities. The expectation is that
providing electronic disclosures may
ultimately reduce the costs associated
with providing disclosures.
VII. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320 Appendix A.1), the Board
reviewed the rule under the authority
delegated to the Board by the Office of
Management and Budget. The Federal
Reserve may not conduct or sponsor,
and an organization is not required to
respond to, this information collection
unless it displays a currently valid OMB
control number. The OMB control
number is 7100–0200.
The collection of information that is
revised by this rulemaking is found in
12 CFR Part 205 and in Appendix A.
This information is mandatory (15
U.S.C. 1693 et seq.) to evidence
compliance with the requirements of the
Regulation E and the Electronic Fund
Transfer Act (EFTA). The respondents/
recordkeepers are for-profit financial
institutions, including small businesses.
Institutions are required to retain
records for twenty-four months. This
regulation applies to all types of
financial institutions, not just state
member banks. However, under
Paperwork Reduction Act regulations,
the Federal Reserve accounts for the
burden of the paperwork associated
with the regulation only for state
member banks. Other agencies account
for the paperwork burden on their
respective constituencies under this
regulation.
The revisions provide that financial
institutions may deliver disclosures
electronically upon obtaining
consumers’ affirmative consent in
accordance with the E-Sign Act. The

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Federal Register / Vol. 66, No. 65 / Wednesday, April 4, 2001 / Rules and Regulations
revisions provide guidance to
institutions on the timing and delivery
of electronic disclosures, to ensure that
consumers have adequate opportunity
to access and retain the information.
With respect to state member banks,
it is estimated that there are 954
respondent/recordkeepers and an
average frequency of 85,808 responses
per respondent each year. The current
annual burden is estimated to be
518,857 hours. No comments
specifically addressing the burden
estimate were received, therefore, the
numbers remain unchanged. There is
estimated to be no additional cost
burden and no capital or start up cost
associated with the interim final rule.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality arises under the
Freedom of Information Act.
The Board has a continuing interest in
the public’s opinions of the Federal
Reserve’s collections of information. At
any time, comments regarding the
burden estimate, or any other aspect of
this collection of information, including
suggestions for reducing the burden,
may be sent to: Secretary, Board of
Governors of the Federal Reserve
System, 20th and C Streets, N.W.,
Washington, DC 20551; and to the
Office of Management and Budget,
Paperwork Reduction Project (7100–
0200), Washington, DC 20503.
VIII. Solicitation of Comments
Regarding the Use of ‘‘Plain Language’’
Section 722 of the Gramm-LeachBliley Act of 1999 requires the Board to
use ‘‘plain language’’ in all proposed
and final rules published after January
1, 2000. The Board invites comments on
whether the interim rule is clearly
stated and effectively organized, and
how the Board might make the rule
easier to understand.
List of Subjects in 12 CFR Part 205
Banks, banking, Consumer protection,
Electronic fund transfers, Reporting and
record keeping requirements.
For the reasons set forth in the
preamble, the Board amends Regulation
E, 12 CFR part 205, as set forth below:
PART 205 ELECTRONIC FUND
TRANSFERS (REGULATION E)
1. The authority citation for part 205
continues to read as follows:
Authority: 15 U.S.C. 1693–1693r.

2. Section 205.4 is amended by
redesignating paragraph (a) as paragraph
(a)(1), adding a new paragraph (a)(2),
and revising paragraph (c), as follows:

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§ 205.4 General disclosure requirements;
jointly offered services.

(a)(1) Form of disclosures. * * *
(2) Foreign language disclosures.
Disclosures required under this part
may be made in a language other than
English, provided that the disclosures
are made available in English upon the
consumer’s request.
*
*
*
*
*
(c) Electronic communication. For
rules governing the electronic delivery
of disclosures, including the definition
of electronic communication, see
§ 205.17.
*
*
*
*
*
3. Add a new § 205.17 to read as
follows:
§ 205.17 Requirements for electronic
communication.

(a) Definition. Electronic
communication means a message
transmitted electronically between a
financial institution and a consumer in
a format that allows visual text to be
displayed on equipment, for example, a
personal computer monitor.
(b) General rule. In accordance with
the Electronic Signatures in Global and
National Commerce Act (the E-Sign
Act), 15 U.S.C. 7001 et seq., and the
rules of this part, a financial institution
may provide by electronic
communication any disclosure required
by this part to be in writing.
(c) Address or location to receive
electronic communication. A financial
institution that uses electronic
communication to provide disclosures
required by this part shall:
(1) Send the disclosure to the
consumer’s electronic address; or
(2) Make the disclosure available at
another location such as an Internet web
site; and
(i) Alert the consumer of the
disclosure’s availability by sending a
notice to the consumer’s electronic
address (or to a postal address, at the
financial institution’s option). The
notice shall identify the account
involved and the address of the Internet
web site or other location where the
disclosure is available; and
(ii) Make the disclosure available for
at least 90 days from the date the
disclosure first becomes available or
from the date of the notice alerting the
consumer of the disclosure, whichever
comes later.
(d) Redelivery. When a disclosure
provided by electronic communication
is returned to a financial institution
undelivered, the financial institution
shall take reasonable steps to attempt
redelivery using information in its files.
(e) Persons other than financial
institutions. Persons other than a

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17793

financial institution that are required to
comply with this part may use
electronic communication in
accordance with the requirements of
§ 205.17, as applicable.
4. Appendix A to Part 205 is amended
by revising Model Forms A–3 and A–5,
to read as follows:
Appendix A To Part 205—Model
Disclosure Clauses and Forms
*

*

*

*

*

A–3—Model Forms for Error Resolution
Notice (§§ 205.7(b)(10) and 205.8(b))
(a) Initial and annual error resolution
notice (§§ 205.7(b)(10) and 205.8(b)).
In Case of Errors or Questions About Your
Electronic Transfers Telephone us at [insert
telephone number] Write us at [insert
address] [or E-mail us at [insert electronic
mail address]] as soon as you can, if you
think your statement or receipt is wrong or
if you need more information about a transfer
listed on the statement or receipt. We must
hear from you no later than 60 days after we
sent the FIRST statement on which the
problem or error appeared.
(1) Tell us your name and account number
(if any).
(2) Describe the error or the transfer you
are unsure about, and explain as clearly as
you can why you believe it is an error or why
you need more information.
(3) Tell us the dollar amount of the
suspected error.
If you tell us orally, we may require that
you send us your complaint or question in
writing within 10 business days.
We will determine whether an error
occurred within 10 business days after we
hear from you and will correct any error
promptly. If we need more time, however, we
may take up to 45 days to investigate your
complaint or question. If we decide to do
this, we will credit your account within 10
business days for the amount you think is in
error, so that you will have the use of the
money during the time it takes us to
complete our investigation. If we ask you to
put your complaint or question in writing
and we do not receive it within 10 business
days, we may not credit your account.
For errors involving new accounts, pointof-sale, or foreign-initiated transactions, we
may take up to 90 days to investigate your
complaint or question. For new accounts, we
may take up to 20 business days to credit
your account for the amount you think is in
error.
We will tell you the results within three
business days after completing our
investigation. If we decide that there was no
error, we will send you a written
explanation. You may ask for copies of the
documents that we used in our investigation.
(b) Error resolution notice on periodic
statements (§ 205.8(b)).

*

*

*

*

*

A–5—Model Forms for Government
Agencies (§ 205.15(d)(1) and (2))
(a) Disclosure by government agencies of
information about obtaining account

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Federal Register / Vol. 66, No. 65 / Wednesday, April 4, 2001 / Rules and Regulations

balances and account histories
(§ 205.15(d)(1)(i) and (ii)).
You may obtain information about the
amount of benefits you have remaining by
calling [telephone number]. That information
is also available [on the receipt you get when
you make a transfer with your card at (an
ATM)(a POS terminal)][when you make a
balance inquiry at an ATM][when you make
a balance inquiry at specified locations].
You also have the right to receive a written
summary of transactions for the 60 days
preceding your request by calling [telephone
number]. [Optional: Or you may request the
summary by contacting your caseworker.]
(b) Disclosure of error resolution
procedures for government agencies that do
not provide periodic statements
(§ 205.15(d)(1)(iii) and (d)(2)).
In Case of Errors or Questions About Your
Electronic Transfers Telephone us at
[telephone number] Write us at [insert
address] [or E-mail us at [insert electronic
mail address]] as soon as you can, if you
think an error has occurred in your
[EBT][agency’s name for program] account.
We must hear from you no later than 60 days
after you learn of the error. You will need to
tell us:
• Your name and [case] [file] number.
• Why you believe there is an error, and
the dollar amount involved.
• Approximately when the error took
place.
If you tell us orally, we may require that you
send us your complaint or question in
writing within 10 business days.
We will determine whether an error
occurred within 10 business days after we
hear from you and will correct any error
promptly. If we need more time, however, we
may take up to 45 days to investigate your
complaint or question. If we decide to do
this, we will credit your account within 10
business days for the amount you think is in
error, so that you will have the use of the
money during the time it takes us to
complete our investigation. If we ask you to
put your complaint or question in writing
and we do not receive it within 10 business
days, we may not credit your account.
For errors involving new accounts, pointof-sale, or foreign-initiated transactions, we
may take up to 90 days to investigate your
complaint or question. For new accounts, we
may take up to 20 business days to credit
your account for the amount you think is in
error.
We will tell you the results within three
business days after completing our
investigation. If we decide that there was no
error, we will send you a written
explanation. You may ask for copies of the
documents that we used in our investigation.
If you need more information about our
error resolution procedures, call us at
[telephone number][the telephone number
shown above].

5. In Supplement I to Part 205, a new
Section 205.17 is added, to read as
follows:
Supplement I to Part 205—Official Staff
Interpretations

*

*

*

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*

*

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Section 205.17—Requirements for Electronic
Communication
17(b) General Rule
1. Relationship to the E-Sign Act. The ESign Act authorizes the use of electronic
disclosures. It does not affect any
requirement imposed under this part other
than a provision that requires disclosures to
be in paper form, and it does not affect the
content or timing of disclosures. Electronic
disclosures are subject to the regulation’s
format, timing, and retainability rules and the
clear and readily understandable standard.
For example, to satisfy the clear and readily
understandable standard for disclosures,
electronic disclosures must use visual text.
2. Clear and readily understandable
standard. A financial institution must
provide electronic disclosures using a clear
and readily understandable format. Also, in
accordance with the E-Sign Act:
i. The institution must disclose the
requirements for accessing and retaining
disclosures in that format;
ii. The consumer must demonstrate the
ability to access the information
electronically and affirmatively consent to
electronic delivery; and
iii. The institution must provide the
disclosures in accordance with the specified
requirements.
3. Timing and effective delivery when a
consumer signs up for an EFT service on-line.
When a consumer contracts for an EFT
service on the Internet and will be able
immediately to initiate a fund transfer, a
financial institution satisfies the timing
requirements under this part if, at the time
the consumer contracts for the service or
before the first transfer is made, the
disclosures automatically appear on the
screen, even if multiple screens are required
to view the entire disclosure. Or a financial
institution may provide a link to electronic
disclosures, as long as consumers cannot
bypass the link and they are required to
access the disclosures before initiating the
first transfer. The institution is not required
to confirm that the consumer has read the
disclosures.
4. Timing and effective delivery for
disclosures provided periodically.
Disclosures provided by e-mail are timely
based on when the disclosures are sent.
Disclosures posted at an Internet web site,
such as periodic statements or change-interms and other notices, are timely when the
financial institution has both made the
disclosures available and sent a notice
alerting the consumer that the disclosures
have been posted. For example, under
§ 205.8(a), institution offering accounts with
EFT services must provide a change-in-terms
notice to consumers at least 21 days in
advance of certain changes. For a change-interms notice posted on the Internet, an
institution must both post the notice and
notify consumers of its availability at least 21
days in advance of the change.
5. Retainability of disclosures. Financial
institutions satisfy the requirement that
disclosures be in a form that the consumer
may keep if electronic disclosures are
delivered in a format that is capable of being
retained (such as by printing or storing
electronically). The format must also be

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consistent with the information required to
be provided under section 101(c)(1)(C)(i) of
the E-Sign Act (15 U.S.C. 7001(c)(1)(C)(i))
about the hardware and software
requirements for accessing and retaining
electronic disclosures.
6. Disclosures provided on financial
institution’s equipment. A financial
institution that controls the equipment
providing electronic disclosures to
consumers (for example, an ATM or
computer terminal in a financial institution’s
lobby) must ensure that the equipment
satisfies the regulation’s requirements to
provide timely disclosures in a clear and
readily understandable format and in a form
that the consumer may keep. For example, if
disclosures are required at the time of an online transaction, the disclosures must be sent
to the consumer’s e-mail address or must be
made available at another location such as
the financial institution’s Internet web site,
unless the financial institution provides a
printer that automatically prints the
disclosures.
17(c) Address or Location To Receive
Electronic Communication
Paragraph 17(c)(1)
1. Electronic address. A consumer’s
electronic address is an e-mail address that
is not limited to receiving communications
transmitted solely by the financial
institution.
Paragraph 17(c)(2)
1. Identifying account involved. A financial
institution may identify a specific account in
a variety of ways and is not required to
identify an account by reference to the
account number. For example, where the
consumer has only one checking account,
and no confusion would result, the
institution may refer to ‘‘your checking
account.’’ If the consumer has two checking
accounts, the institution may, for example,
differentiate accounts based on names for
different checking account programs or by
using a truncated account number.
2. 90-day rule. The actual disclosures
provided to the consumer must be available
for at least 90 days, but the financial
institution has discretion to determine
whether they should be available at the same
location for the entire period.
17(d) Redelivery
1. E-mail returned as undeliverable. If an
e-mail to the consumer (containing an alert
notice or other disclosure) is returned as
undeliverable, the redelivery requirement is
satisfied if, for example, the institution sends
the disclosure to a different e-mail address or
postal address that the institution has on file
for the consumer. Sending the disclosure a
second time to the same electronic address is
not sufficient if the institution has a different
address for the consumer on file.
17(e) Persons Other Than Financial
Institutions
1. Electronic disclosures. Entities other
than financial institutions, such as
merchants, are subject to certain provisions
of Regulation E, including §§ 205.10(b) and
(d). These entities too may use electronic
communication to provide disclosures
required to be in writing.

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Federal Register / Vol. 66, No. 65 / Wednesday, April 4, 2001 / Rules and Regulations
By order of the Board of Governors of the
Federal Reserve System, March 27, 2001.
Robert deV. Frierson,
Associate Secretary of the Board.
[FR Doc. 01–8151 Filed 4–3–01; 8:45 am]
BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM
12 CFR Part 230
[Regulation DD; Docket No. R–1044]

Truth in Savings
AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Interim rule; request for
comments.
SUMMARY: The Board is adopting an
interim final rule amending Regulation
DD, which implements the Truth in
Savings Act, to establish uniform
standards for the electronic delivery of
disclosures required by the act and
regulation. The rule provides guidance
on the timing and delivery of electronic
disclosures to ensure consumers have
adequate opportunity to access and
retain the information. (Similar rules are
being adopted under other consumer
financial services and fair lending
regulations administered by the Board.)
Under the rule, depository institutions
may deliver disclosures electronically if
they obtain consumers’ affirmative
consent in accordance with the
Electronic Signatures in Global and
National Commerce Act (E-Sign Act).
Amendments are also adopted that
address electronic advertisements. The
rule is being adopted as an interim rule
to obtain additional public comment.
An interim rule published in 1999,
before enactment of the E-Sign Act, is
withdrawn.
DATES: The interim rule is effective
March 30, 2001; however, to allow time
for any necessary operational changes,
the mandatory compliance date is
October 1, 2001. Comments must be
received by June 1, 2001.
ADDRESSES: Comments, which should
refer to Docket No. R–1044, may be
mailed to Ms. Jennifer J. Johnson,
Secretary, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue, N.W.,
Washington, D.C. 20551 or mailed
electronically to
regs.comments@federalreserve.gov.
Comments addressed to Ms. Johnson
may also be delivered to the Board’s
mail room between 8:45 a.m. and 5:15
p.m. weekdays, and to the security
control room at all other times. The mail
room and the security control room,

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both in the Board’s Eccles Building, are
accessible from the courtyard entrance
on 20th Street between Constitution
Avenue and C Street, N.W. Comments
may be inspected in room MP–500 in
the Board’s Martin Building between
9:00 a.m. and 5:00 p.m., pursuant to the
Board’s Rules Regarding the Availability
of Information, 12 CFR part 261.
FOR FURTHER INFORMATION CONTACT: Jane
E. Ahrens, Senior Counsel, and Deborah
J. Stipick, Attorney, Division of
Consumer and Community Affairs, at
(202) 452–2412 or (202) 452–3667.
SUPPLEMENTARY INFORMATION:
I. Background
The Truth in Savings Act (TISA), 12
U.S.C. 4301 et seq., requires depository
institutions to disclose yields, fees, and
other terms concerning deposit accounts
to consumers at account opening, upon
request, when changes in terms occur,
and in periodic statements. It also
includes rules about advertising for
deposit accounts. The Board’s
Regulation DD (12 CFR part 230)
implements the act. Credit unions are
governed by a substantially similar
regulation issued by the National Credit
Union Administration.
TISA and Regulation DD require a
number of disclosures to be provided in
writing, presuming that depository
institutions provide paper documents.
Under the Electronic Signatures in
Global and National Commerce Act (ESign Act) (15 U.S.C. 7001 et seq.),
however, electronic documents and
signatures have the same validity as
paper documents and handwritten
signatures.
Board Proposals Regarding Electronic
Disclosures
Over the past few years, the Board has
published several interim rules and
proposals regarding the electronic
delivery of disclosures. In 1996, after a
comprehensive review of Regulation E
(Electronic Fund Transfers), the Board
proposed to amend the regulation to
permit financial institutions to provide
disclosures by sending them
electronically. (61 FR 19696, May 2,
1996.) Based on comments received on
the 1996 proposal, on March 25,1998,
the Board published an interim rule
permitting the electronic delivery of
disclosures under Regulation E (63 FR
14528) and similar proposals under
Regulation DD (63 FR 14533), and other
financial services and fair lending
regulations administered by the Board.
The 1998 interim rule and proposed
rules were similar to the 1996 proposed
rule under Regulation E.
The 1998 proposals and interim rule
allowed creditors, depository

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institutions, lessors, and others to
provide disclosures electronically if the
consumer agreed, with few other
requirements. For ease of reference, this
background section uses the terms
‘‘institutions’’ and ‘‘consumers.’’
Industry commenters generally
supported the Board’s 1998 proposals
and interim rule, but many of them
sought specific revisions and additional
guidance on how to comply with the
disclosure requirements in certain
transactions and circumstances. In
particular, they expressed concern that
the rule did not specify a uniform
method for establishing that an
‘‘agreement’’ was reached for sending
disclosures electronically. Consumer
advocates, on the other hand, generally
opposed the 1998 proposals and the
interim rule. They believed that
consumer protections in the proposals
were inadequate, especially in
connection with transactions that are
typically consummated in person (such
as automobile loans and leases, homesecured loans, and door-to-door credit
sales).
September 1999 Proposals
In response to comments received on
the 1998 proposals, the Board published
revised regulatory proposals in
September 1999 under Regulations B, E,
M, Z, and DD, (64 FR 49688, 49699,
49713, 49722 and 49740, respectively,
September 14, 1999) (collectively, the
‘‘1999 proposals’’), and an interim rule
under Regulation DD (64 FR 49846). The
interim rule under Regulation DD
allowed depository institutions to
deliver disclosures on periodic
statements electronically if the
consumer agrees.
Generally, the 1999 proposals
required institutions to use a
standardized form containing specific
information about the electronic
delivery of disclosures so that
consumers could make informed
decisions about whether to receive
disclosures electronically. If the
consumer affirmatively consented, most
disclosures could be provided
electronically. To address concerns
about potential abuses, the 1999
proposals generally would have
required disclosures to be given in
paper form when consumers transacted
business in person. The proposals
contained rules for disclosures that are
made available to consumers at an
institution’s Internet web site
(governing, for example, how long
disclosures must remain posted at a web
site).
Comments on the September 1999
proposals—The Board received letters
representing 115 commenters

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Federal Register / Vol. 66, No. 65 / Wednesday, April 4, 2001 / Rules and Regulations

expressing views on the revised
proposals. Industry commenters
generally supported the Board’s
approach establishing federal rules for a
uniform method of obtaining
consumers’ consents to the receipt of
electronic disclosures instead of
deferring to state law. Still, many sought
specific additional guidance and in
some cases wanted more flexibility.
They were concerned about the length
of time the proposals would have
required electronic disclosures to
remain available to a consumer at an
institution’s Internet web site or upon
request. In addition, they believed the
proposed rule requiring paper
disclosures for transactions conducted
in person was not sufficiently flexible.
Consumer advocates believed the 1999
proposals addressed many of their
concerns about the 1998 proposals.
Nevertheless, they urged the Board to
incorporate greater protections for
consumers, such as restricting the
delivery of electronic disclosures to
only those consumers who initiate
transactions electronically.
The Board also obtained views
through four focus groups with
individual consumers, conducted in the
Washington-Baltimore metropolitan
area. Participants reviewed and
commented on the format and content
of the proposed sample consent forms,
as well as on alternative revised forms.
Federal Legislation Addressing
Electronic Commerce
On June 30, 2000, the President
signed the E-Sign Act, which was
enacted to encourage the continued
expansion of electronic commerce. The
E-Sign Act generally provides that
electronic documents and signatures
have the same validity as paper
documents and handwritten signatures.
The act contains special rules for the
use of electronic disclosures in
consumer transactions. Consumer
disclosures may be provided in
electronic form only if the consumer
affirmatively consents after receiving
certain information specified in the
statute.
The Board and other government
agencies are permitted to interpret the
E-Sign Act’s consumer consent
requirements within prescribed limits,
but may not impose additional
requirements for consumer consent. In
addition, agencies generally may not reimpose a requirement for using paper
disclosures in particular transactions,
such as those conducted in person.
The consumer consent provisions in
the E-Sign Act became effective October
1, 2000, and did not require
implementing regulations. Thus,

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financial institutions are currently
permitted to use electronic disclosures
under Regulations B, E, M, Z and DD if
the consumer affirmatively consents in
the manner required by the E-Sign Act.
Under section 101(c)(5) of the E-Sign
Act, consumers who consented prior to
the effective date of the act to receive
electronic disclosures as permitted by
any law or regulation, are not subject to
the consent requirements.
II. The Interim Rule
The Board is adopting an interim final
rule to establish uniform standards for
the electronic delivery of disclosures
required under Regulation DD.
Consistent with the requirements of the
E-Sign Act, depository institutions
generally must obtain consumers’
affirmative consent to provide
disclosures electronically. The interim
rule published in 1999, before
enactment of the E-Sign Act, is
withdrawn.
The interim rules also establish
uniform requirements for the timing and
delivery of electronic disclosures.
Disclosures may be sent by electronic
mail (e-mail) to an electronic address
designated by the consumer, or they
may be made available at another
location, such as an Internet web site. If
the disclosures are not sent by e-mail,
consumers must receive a notice
alerting them to the availability of the
disclosures. Disclosures posted on a
web site must be available for at least 90
days, to allow consumers adequate time
to access and retain the information.
With regard to the timing of electronic
disclosures, for disclosures that must be
provided before the consumer opens an
account, consumers are required to
access the electronic disclosures before
the account is opened. Under the
interim rule, institutions must make a
good faith attempt to redeliver
electronic disclosures that are returned
undelivered, using the address
information available in their files.
Similar rules are being adopted under
Regulations B, E, M and Z.
III. Request for Comment
Interim Rules
The interim rules include most of the
revisions that were part of the 1999
proposals and were not affected by the
E-Sign Act. The Board is adopting these
rules with some minor changes
discussed below. The rules are adopted
as interim rules, to allow commenters to
present new information or views not
previously considered in the context of
the 1998 and 1999 proposals. Since the
Board’s 1999 proposals were issued,
more institutions have gained

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experience in offering financial services
electronically. The Board believes that
additional comments, beyond those
previously considered in connection
with the Board’s earlier proposals,
might inform the Board whether any
developments in technology or industry
practices have occurred that warrant
further changes in the rules. The
comment period ends on June 1, 2001.
The Board expects to adopt final rules
on a permanent basis prior to October 1,
2001.
Interpreting E-Sign Provisions
Under section 104(b) of the E-Sign
Act, the Board and other government
agencies are permitted to interpret the
act, within prescribed limits. The Board
may issue rules that interpret how the
E-Sign Act’s consumer consent
requirements apply for purposes of the
laws administered by the Board. Also,
the Board may, by regulation, exempt a
particular category of disclosures from
the E-Sign Act’s consumer consent
requirements if it will eliminate a
substantial burden on electronic
commerce without creating material risk
for consumers.
The Board requests comment on
whether the Board should exercise its
authority under the E-Sign Act in future
rulemakings to interpret the consumer
consent provisions or other provisions
of the act, as they affect the Board’s
consumer protection regulations.
Comment is requested on whether the
statutory provisions relating to
consumer consent are sufficient, or
whether additional guidance is needed.
For example, is interpretative guidance
needed concerning the statutory
requirement that consumers confirm
their consent electronically in a manner
that reasonably demonstrates they can
access information in the form to be
used by the depository institution? Is
clarification needed on the effect of
consumers’ withdrawing their consent,
or on requesting paper copies of
electronic disclosures? Institutions must
also inform consumers of changes in
hardware or software requirements if
the change creates a material risk that
the consumer will not be able to access
or retain the disclosure. The Board
solicits comment on whether regulatory
standards are needed for determining a
‘‘material risk’’ for purposes of
Regulation DD and other financial
services and fair lending laws
administered by the Board, and if so
what standards should apply.
Under section 104(d) of the E-Sign
Act, the Board is authorized to exempt
specific disclosures from the consumer
consent requirements of section 101(c)
of the E-Sign Act, if the exemption is

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necessary to eliminate a substantial
burden on electronic commerce and will
not increase the material risk of harm to
consumers. The Board requests
comment on whether it should consider
exercising this exemption authority.
Study on Adapting Requirements to
Online Banking and Lending
The E-Sign Act eliminated legal
impediments to the use of electronic
records and signatures, the Board
requests comment on whether other
legislative or regulatory changes are
needed to adapt current requirements to
online banking and lending and
facilitate electronic delivery of
consumer financial services.
As an example, under Regulations Z
and DD, periodic statements inform
consumers about their account activity
over a period of time, typically monthly.
The beginning and ending dates of the
cycle determine costs and other
information that must be disclosed. In
addition, transmittal of the periodic
statement triggers important consumer
protections such as billing error
resolution procedures. Online banking,
however, can provide consumers with
up-to-date information about their
accounts on a continuing basis. Such
information is a helpful supplement
to—but does not comply as a substitute
for—periodic statements. Should the
rules for periodic statements be
modified for online banking, and if so,
how could the rules be crafted to
maintain for consumers (1) a
perspective of the cost and activity of an
account over time, and (2) protections
for resolving errors or liability for
unauthorized transactions.
The comments may assist the Board
in future efforts to update the
regulations. The comments may also be
used in connection with a study
required under the Gramm-Leach-Bliley
Act of 1999. That act requires the
federal bank supervisory agencies to
conduct a study of banking regulations
that affect the electronic delivery of
financial services and to submit to the
Congress a report recommending any
legislative changes that are needed to
facilitate online banking and lending.
IV. Section-by-Section Analysis
Pursuant to its authority under
section 269 of TISA, the Board amends
Regulation DD to establish uniform
standards for the use of electronic
communication to provide disclosures
required by this regulation. Electronic
disclosures can effectively reduce
compliance costs without adversely
affecting consumer protections. The
purpose of Regulation DD disclosures is
to ensure that consumers have

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meaningful information about account
terms so that consumers can compare
savings and investment products. The
use of electronic communication may
allow institutions to provide Regulation
DD disclosures to the consumer more
efficiently. To the extent that a
depository institution may make
electronic disclosures available at its
web site instead of providing the
disclosures directly to the consumer, the
Board finds that such an exception is
warranted pursuant to its authority
under section 269(a)(3) of TISA. Below
is a section-by-section analysis of the
rules for providing disclosures by
electronic communication, including
references to changes in the official staff
commentary.
Section 230.3 General Disclosure
Requirements
3(a) Form
Section 230.3(a) has been revised to
reflect that the disclosures provided
under § 230.10 for electronic
communications are subject to the same
requirements as other disclosures
provided under Regulation DD.
3(g) Electronic Communication
Section 230.3(g) is added to provide a
cross reference to rules governing the
electronic delivery of disclosures in
§ 230.10.
Section 230.4

Account Disclosures

4(a) Delivery of Account Disclosures
Depository institutions generally must
provide account-opening disclosures to
consumers before an account is opened
or a service is provided. Currently,
depository institutions may delay
delivering TISA disclosures if the
consumer is not present at the
institution when the account is opened
(or service is provided). The rationale
underlying the ten-day delay is that the
institution cannot provide written
disclosures is such cases, for example,
when an account is opened by
telephone. Section 230.4(a) provides
that in such cases, account-opening
disclosures must be mailed or delivered
within ten business days.
Under the 1999 proposal, the delayed
timing rule under § 230.4(a) did not
apply to depository institutions opening
accounts by ‘‘electronic
communication’’ (for example, those
offered on the Internet). Some
commenters agreed that the ten-day
delay should not apply in such cases.
Others expressed concern about
providing accurate disclosures if a
consumer ‘‘opens’’ an account
electronically after normal business

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hours, and account terms change when
the institution next opens for business.
The interim final rule, as in the 1999
proposal, provides that depository
institutions opening accounts by
‘‘electronic communication’’ (for
example, those offered on the Internet)
may not delay providing disclosures
under § 230.4(a). This rule is adopted
pursuant to the Board’s exception
authority under Section 269(a)(3) of
TISA, to carry out the purposes of the
statute. The difficulties in providing
disclosures for accounts opened by mail
or telephone are not present for requests
to open accounts received by electronic
communication using visual text. Thus,
specific disclosures must be provided
before accounts are opened using
electronic communication. TISA and
Regulation DD do not define when an
account is deemed to be opened; thus,
institutions may establish policies and
procedures to address after-hours
requests to open accounts, to ensure that
accurate disclosures are provided before
the account is deemed by the institution
to be ‘‘opened.’’
Depository institutions must also
provide account disclosures to a
consumer upon request. Section
230.4(a)(2)(i) provides that if a
consumer is not present at the
institution when a request for account
disclosures is made, the institution must
mail or deliver the disclosures within a
reasonable time after the institution
receives the request; ten days is deemed
to be a reasonable time. The 1999
proposal extended the rule to requests
for disclosures made by electronic
communication. Most commenters
agreed that a ten-day period was
reasonable for responding to electronic
requests for disclosures. Some stated
that having one uniform time period
would aid compliance. The interim final
rule provides that ten days is a
reasonable time for responding to
request for account disclosures made by
electronic communication. Comment
4(a)(2)(i)–3 has been revised to include
this guidance.
Section 230.4(a)(2)(i) is revised to
require institutions to mail or deliver
disclosures in paper form or
electronically to consumers who are not
present at the institution when a request
is made. To provide disclosures
electronically, the institution must send
the disclosures to the consumer’s e-mail
address, or send a notice alerting the
consumer to the location of the
disclosures, such as on the institution’s
Internet web site. Posting disclosures on
a depository institution’s web site does
not relieve the institution’s duty to
provide the disclosures upon request.

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Comment 4(a)(2)(i)–4 is added to
contain this advice.
Section 230.6
Disclosures

Periodic Statement

6(c) Electronic Communication
Section 230.6(c) was adopted by the
Board in 1999 as an interim rule
allowing the electronic delivery of
periodic statements, if the consumer
agreed. (64 FR 49846, September 14,
1999.) The electronic delivery of
periodic statements for consumer asset
accounts was already permissible under
an interim rule to Regulation E issued
in March 1998. The 1999 interim rule
allowed institutions to delivery
electronically a single statement that
complied with Regulation E and
Regulation DD. The interim rule did not
specify the manner or form of
consumers’ consent to electronic
statements.
Effective October 1, 2000, the E-Sign
Act permits depository institutions to
provide disclosures to consumers using
electronic communication, if the
depository institution complies with
Section 101(c) of that act. Section 101(c)
of the E-Sign Act requires depository
institutions to provide specific
information about the electronic
delivery of disclosures and obtain the
consumer’s affirmative consent to
receive electronic disclosures. As
discussed below, § 226.10(b) is being
adopted to set forth the general rule that
depository institutions subject to
Regulation DD may provide disclosures
electronically only if the institution
complies with Section 101(c) of the ESign Act. This requirement applies to
disclosures on periodic statements that
are provided electronically, and
§ 230.6(c) is withdrawn accordingly.
Section 230.8

Advertising

8(a) Misleading or Inaccurate
Advertisements
Stating certain account terms in an
advertisement for a deposit account
triggers the disclosure of additional
terms. Although Regulation DD does not
currently address multiple-page
advertisements, Regulations Z (Truth in
Lending) and M (Consumer Leasing)
permit creditors and lessors to provide
required advertising disclosures on
more than one page, if certain
conditions are met. In September 1999,
the Board proposed consistent
approaches under Regulations Z, M, and
DD for complying with the regulations’
advertising requirements in the context
of electronic advertising. Under the
proposal, a depository institution that
advertises using electronic
communication can comply with the

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regulation’s advertising requirements if
the required terms are disclosed in more
than one location, under certain
conditions. Most commenters
addressing the issue agreed with the
proposed approach.
Comment 8(a)–9 is adopted as
proposed, with technical amendments
for clarity. If an advertisement using
electronic communication displays a
triggering term (such as a bonus or
annual percentage yield) the
advertisement must clearly refer the
consumer to the location where the
additional required information begins.
For example, an advertisement that
includes a bonus or annual percentage
yield may be accompanied by a link in
close proximity, that directly takes the
consumer to the additional information.
8(b) Permissible Rates
Section 230.8(b) permits depository
institutions to state an interest rate in
addition to the APY, as long as the rate
is stated in conjunction with, but not
more conspicuously than, the APY. As
proposed, both rates must appear at the
same location so the consumer can view
both rates simultaneously. An
advertised interest rate with a link to
another location that contains the
related APY would not comply with the
requirements of § 230.8(b); the interest
rate would be the only rate readily
visible to consumers, and therefore
would be more conspicuous.
Commenters generally agreed with this
requirement. Comment 8(b)–4 is
adopted as proposed.
8(e) Exemption for Certain
Advertisements
8(e)(1) Certain Media
Section 230.8(e) exempts from some
requirements advertisements made
through broadcast or electronic media,
such as television and radio or outdoor
billboards. Proposed comment
8(e)(1)(i)–1 provided that this
exemption would not apply to
electronic advertisements using
electronic communication, such as
Internet advertisements, which do not
have the same time and space
constraints as radio or television
advertisements.
Views were mixed on whether
advertisements using electronic
communication should be subject to the
broadcast or media exception. Many
commenters noted that a frequent form
of advertisement on the Internet is the
‘‘banner’’ advertisement and these are
often priced based on size. Similarly,
they noted that space limitations may
exist, especially on third-party web
sites. Accordingly, these commenters

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requested that the Board consider
extending a similar exception to Internet
advertisements that currently exists for
television and billboards. However,
other commenters agreed with the
Board’s position that these types of
advertisements (for example Internet
advertisements with link capability) do
not possess the same time and space
limitations as those that are currently
exempted.
The Board believes that space
constraints for advertisements on
Internet web sites are not significantly
different than those for a print
advertisement (a newspaper, for
example). Thus, requiring
advertisements provided by electronic
communication to comply with the
regulation’s advertising requirements is
not overly burdensome. Accordingly,
advertisements made via electronic
communication, such as advertisements
posted on the Internet, are subject to
Regulation DD’s general advertising
rules. Comment 8(e)(1)(i)–1 is adopted
as proposed.
Section 230.10 Electronic
Communication
10(a) Definition
As adopted, the definition of the term
‘‘electronic communication’’ remains
substantially unchanged from the 1999
proposals. Section 230.10(a) limits the
term to a message transmitted
electronically that can be displayed on
equipment as visual text; an example is
a message displayed on a personal
computer monitor screen. Thus, audio
and voice response telephone systems
are not included. Because the rule
permits the use of electronic
communication to satisfy the statutory
requirement for written disclosures that
must be clear and conspicuous, the
Board believes visual text is an essential
element of the definition. Institutions
that accommodate vision-impaired
consumers by providing disclosures that
do not use visual text must also provide
disclosures using visual text.
Some commenters asked for
clarification that the definition was not
intended to preclude the use of devices
other than personal computers, which
also can display visual text. The
equipment on which the text message is
received is not limited to a personal
computer, provided the visual display
used to deliver the disclosures meets the
‘‘clear and conspicuous’’ format
requirement, discussed below.
10(b) General Rule
Effective October 1, 2000, the E-Sign
Act permits depository institutions to
provide disclosures using electronic

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communication, if the depository
institution complies with the consumer
consent requirements in Section 101(c).
Under section 101(c) of the E-Sign Act,
depository institutions must provide
specific information about the electronic
delivery of disclosures before obtaining
the consumer’s affirmative consent to
receive electronic disclosures. The
consent requirements in the E-Sign Act
are similar but not identical to the
Board’s 1999 proposal. Accordingly,
§ 230.10(b) sets forth the general rule
that depository institutions subject to
Regulation DD may provide disclosures
electronically if the institution complies
with section 101(c) of the E-Sign Act.
The E-Sign Act authorizes the use of
electronic disclosures. The act does not
affect any requirement imposed under
TISA other than a provision that
requires disclosures to be in paper form,
and the act does not affect the content
or timing of disclosures. Electronic
disclosures are subject to the
regulation’s format, timing and
retainability rules and the clear and
conspicuous standard. Comment 10(b)–
1 contains this guidance.
Presenting Disclosures in a Clear and
Conspicuous Format
Electronic disclosures must be clear
and conspicuous, as is the case for all
written disclosures under TISA and the
Regulation DD. See §§ 230.3(a). An
institution must provide electronic
disclosures using a clear and
conspicuous format. Also, in accordance
with the E-Sign Act: (1) The institution
must disclose the requirements for
accessing and retaining disclosures in
that format; (2) the consumer must
demonstrate the ability to access the
information electronically and
affirmatively consent to electronic
delivery; and (3) the institution must
provide the disclosures in accordance
with the specified requirements.
Comment 10(b)–2 contains this
guidance.
Comments posed a few questions
about the applicability of the clear and
conspicuous standard to particular
situations. Some asked whether
electronic advertisements or other
unrelated promotional information may
appear on the same screen as mandatory
disclosures that are posted on an
Internet web site. Except to the extent
required by the regulation, disclosures
do not have to be provided separately
from other information. Advertisements
should not be integrated into the text of
the disclosure in a manner that violates
the clear and conspicuous standard.
Commenters also had questions about
the use of navigational tools with
electronic disclosures. For example,

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some believed that such tools might be
helpful in directing consumers to
related information that explains the
terminology used in the disclosures.
Many Internet web sites use
navigational tools that are conspicuous
through the use of bold text, larger fonts,
different colors, underlining, or other
methods of highlighting. Such tools are
not per se prohibited so long as they are
not used in a manner that would violate
the clear and conspicuous standard.
Providing Timely Disclosures
Disclosures delivered electronically
must comply with existing timing
requirements under TISA and
Regulation DD. See § 230.4(a).
Commenters on the Board’s 1999
proposals requested specific guidance
that an electronic disclosure would be
considered timely based on the time it
is sent by e-mail or posted on an
Internet web site, regardless of when the
consumer receives or reads the
disclosure.
Under the final rule, consistent with
rules for disclosures that are sent by
postal mail, disclosures provided by email are timely when they are sent by
the required time. Disclosures posted
periodically at an Internet web site are
timely if, by the required time, the
depository institution both makes the
disclosures available at that location
and, in accordance with § 230.10(d)(2),
sends a notice alerting the consumer
that the disclosures have been posted.
For example, under § 230.5, institutions
must give advance notice to affected
customers at least 30 calendar days in
advance of certain changes. For a
change in terms notice posted on the
Internet, an institution must both post
the notice and notify consumers of its
availability at least 30 days in advance
of the change. Comment 10(b)–3(ii)
contains this guidance.
Certain disclosures must be provided
before the consumer opens an account
or a service is provided. When a
depository institution permits the
consumer to open an account on-line,
the consumer must be required to access
the disclosures required under § 230.4
before the account is opened. A link to
the disclosures satisfies the timing rule
if the consumer cannot bypass the
disclosure before opening the account.
Or, the disclosures in this example must
automatically appear on the screen,
even if multiple screens are required to
view the entire disclosure. Comment
10(b)–3(i) contains this guidance, as
proposed.
Some industry commenters believed
that requiring disclosures to
automatically appear or be accessed by
the consumer is cumbersome and

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unnecessary. Some commenters
suggested that the Board allow the
required disclosures to be accessible via
a clearly marked navigational tool; they
believe that once the tool is provided,
the disclosure should be deemed to
have been provided to the consumer.
TISA and Regulation DD require that
depository institutions provide or send
disclosures to consumers. It is not
sufficient for institutions to provide a
bypassable navigational tool that merely
gives consumers the option of receiving
disclosures. Such an approach reduces
the likelihood that consumers actually
receive the disclosures. The interim
final rule ensures that consumers
actually see the disclosures provided
electronically so that they have the
opportunity to read them before opening
an account.
Commenters on the various proposals
requested guidance on the depository
institution’s duty in cases where an
automated teller machine (ATM) or
other automated equipment controlled
by the depository institution
malfunctions or otherwise fails to
operate properly and cannot provide
timely disclosures. Where the
depository institution controls the
equipment and disclosures are required
at that time, an institution might not be
liable for failing to provide timely
disclosures if the defense in section
271(c) of TISA is available.
Providing Disclosures in a Form the
Consumer May Keep
Under TISA and Regulation DD,
disclosures required to be in writing
also must be in a form the consumer can
retain. (See § 230.3(a)) Electronic
disclosures are subject to this
requirement. Comment 10(b)–4 contains
guidance on this requirement.
Consumers may communicate
electronically with depository
institutions through a variety of means
and from various locations. Depending
on the location (at home, at work, in a
public place such as a library), a
consumer may not have the ability at a
given time to preserve TISA disclosures
presented on-screen. To ensure that
consumers have an adequate
opportunity to access and retain the
disclosures, the depository institution
also must send them to the consumer’s
designated e-mail address or make them
available at another location, for
example, on the depository institution’s
Internet web site, where the information
may be retrieved at a later date.
Where the depository institution
controls the equipment providing the
electronic disclosures (for example, an
ATM or computer terminal located in
the depository institution’s lobby), the

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depository institution must ensure that
the consumer has the opportunity to
retain the required information.
Comment 10(b)–5 contains this
guidance.
10(c) When Consent Is Required
Under the E-Sign Act, consumers
must affirmatively consent before they
receive electronic disclosures ‘‘relating
to a transaction’’ if the disclosures are
required by law or regulation to be in
writing. Section 230.10(c) is added to
provide that certain disclosures are not
deemed to be related to a transaction for
purposes of the E-Sign Act’s consumer
consent provision. These include
disclosures in connection with
advertisements (§ 230.8) and disclosures
about deposit accounts that are
provided upon request (§ 230.4(a)(2)).
Advertising disclosures are available to
the general public. Consumers receiving
disclosures on request may not open an
account; those that do open an account
will ultimately receive account opening
disclosures subject to the consent
requirements.
10(d) Address or Location To Receive
Electronic Communication
Consistent with the 1999 proposals,
the interim rule provides that
depository institutions may deliver
electronic disclosures by sending them
to a consumer’s e-mail address.
Alternatively, the rule provides that
depository institutions may make the
disclosures available at another location
such as an Internet web site. If the
depository institution makes a
disclosure available at such a location,
the depository institution effectively
delivers the disclosure by sending a
notice alerting the consumer when the
disclosure can be accessed and making
the disclosure available for at least 90
days. The time period for keeping
disclosures available at a location such
as a depository institution’s Internet
web site under the interim rule differs
from the 1999 proposals, based on
commenters’ concerns as discussed
below.
10(d)(1)
For purposes of § 226.10(d), a
consumer’s electronic address is an email address that is not limited to
receiving communications transmitted
solely by the depository institution, as
proposed. This guidance is contained in
comment 10(d)(1)–1.
An electronic address would not
include systems that permit
communication only between the
consumer and the depository
institution, for example, home-banking
programs that allow consumers to

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communicate directly with a depository
institution on-line with the use of a
computer and modem. These systems,
like a depository institution’s web site
accessed via the Internet, give
consumers access to information about
their accounts at a location controlled
by the depository institution. In both
cases, the depository institution
determines how long disclosures will be
available to the consumer. Consumers
who receive disclosures at their e-mail
address may choose when to review,
and for how long to retain, account
information. Consumers who receive
disclosures by contacting a depository
institution’s site, however, need to be
alerted when the information is first
available in order to ensure that they
have the opportunity to access the
information before it is removed. Thus,
disclosures provided using systems
such as home-banking programs are
treated in the same manner as
disclosures made available at an
Internet web site, and a notice alerting
the consumer when disclosures are
posted must be sent, by e-mail or to a
postal address, at the depository
institution’s option.
10(d)(2)
Under § 230.10(d)(2)(i) of the interim
rule, for disclosures made available at
an Internet web site, a notice alerting
the consumer when disclosures are
posted must be sent, by e-mail (or to a
postal address, at the depository
institution’s option). Section
230.10(d)(2)(i) requires that the alert
notice identify the account involved and
the address or other location where the
disclosure is available. Comment
10(d)(2)–1 provides guidance on the
level of detail required in identifying
the account.
As proposed, under § 230.10(d)(2)(ii)
the interim rule, disclosures provided at
an Internet web site must remain
available for at least 90 days. The
requirement seeks to ensure that
consumers have adequate time to access
and retain a disclosure under a variety
of circumstances, such as when a
consumer may not be able for an
extended period of time to access the
information due to computer
malfunctions, travel, or illness. The 90day period is uniform for all
disclosures, for ease of compliance.
Comment 10(d)(2)–2 is added to provide
that during this period, the actual
disclosures must be available to the
consumer, but the institution has
discretion to determine whether they
should be available at the same location
for the entire period.
Some industry commenters believed
the 90-day time period is reasonable and

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feasible. About an equal number of
commenters believed it was too
burdensome and costly; some of these
commenters suggested periods that
ranged from 30 to 60 days.
The 1999 proposals provided that
after the 90-day time period, disclosures
would be available upon consumers’
request, generally for 24 months, in the
same format as initially provided to the
consumer. The 24-month period is
consistent with a depository
institution’s duty to retain records that
evidence their compliance. Consumer
advocates supported the proposed
retention period; some recommended
that disclosures should be available
upon request for the length of the
contractual relationship with the
consumer.
Industry commenters strongly
opposed the 24-month period. Many
believed that keeping copies of
electronic disclosures actually provided
to consumers for that period of time
would be costly and burdensome.
Moreover, industry commenters
believed that once a consumer has
accessed the disclosures, the consumer
rather than the depository institution
should have the duty to retain them for
future reference. They also noted that
under existing record retention
requirements applicable to paper
disclosures, a depository institution
need only demonstrate compliance with
the rules, but need not retain copies of
the actual disclosures provided to
consumers.
The requirement for depository
institutions to retain the disclosures in
the format provided duplicate
disclosures upon request for 24 months
has not been adopted. A depository
institution’s duty to retain evidence of
compliance for 24 months remains
unchanged.
10(d)(3) Exceptions
Section 230.10(d)(3) is added to make
clear that the requirements of
paragraphs (i) and (ii) of § 230.10(d)(2)
do not apply to disclosures in certain
advertisements (§ 230.8), and that
paragraph (ii) of § 230.10(d)(2) does not
apply to disclosures made available
upon a consumer’s request (§ 230.4(a)).
10(e) Redelivery
Industry commenters on the 1998
proposal asked for clarification that
sending the electronic disclosures
complies with the regulation, and that
institutions are not required to confirm
that the consumer actually received
them. Consumer advocates asked that
institutions be required to verify the
delivery of disclosures by return receipt,
in the case of e-mail. In the 1999

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proposals, the Board solicited comment
on the need for and the feasibility of
such a requirement.
Consumer advocates believe that email systems are not yet sufficiently
reliable and that safeguards are
necessary to ensure that consumers
actually receive disclosures. Industry
commenters stated that a return receipt
requirement would be costly and
burdensome, and would require
depository institutions to monitor return
receipts in every case to determine that
individual consumers received the
disclosures.
Section 101(c) of the E-Sign Act
requires that consumers consent
electronically, or confirm their consents
electronically, in a manner that
reasonably demonstrates that the
consumer can access the information
that the institution will be providing.
This requirement seeks to verify at the
outset that the consumer is actually
capable of receiving the information in
the electronic format being used by the
institution. After the consumer
consents, the E-Sign Act also requires
the institution to notify consumers of
changes that materially affect
consumers’ ability to access electronic
disclosures.
The interim rule does not impose a
verification requirement because the
cost and burden associated with
verifying delivery of all disclosures
would not be warranted. When
electronic disclosures are returned
undelivered, however, § 230.10(e)
imposes a duty to attempt redelivery
(either electronically or to a postal
address) based on information in the
institution’s own files. Unlike paper
disclosures delivered by the postal
service, there generally is no commonlyaccepted mechanism for reporting a
change in electronic address or for
forwarding e-mail. Where a depository
institution actually knows that the
delivery of an electronic disclosure did
not take place, the institution should
take reasonable steps to effectuate
delivery in some way. For example, if
an e-mail message to the consumer
(containing an alert notice or other
disclosure) is returned as undeliverable,
the redelivery requirement is satisfied if
the institution sends the disclosure to a
different e-mail address or postal
address that the institution has on file.
Sending the disclosures a second time
to the same electronic address would
not be sufficient if the institution has a
different address for the consumer on
file. Comment 10(e)–1 provides this
guidance.
This redelivery requirement is limited
to situations where the electronic
communication cannot be delivered and

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does not apply to situations where the
disclosure is delivered but, for example,
cannot be read by the consumer due to
technical problems with the consumer’s
software. A depository institution’s duty
to redeliver a disclosure under
§ 230.10(e) does not affect the timeliness
of the disclosure. Depository
institutions comply with the timing
requirements of the regulation when a
disclosure is initially sent in a timely
manner, even though the disclosure is
returned undelivered and the depository
institution is required under § 230.10(e)
to take reasonable steps to attempt
redelivery.
10(f) Entities Other Than a Depository
Institution
The requirements of § 230.8 apply to
advertisements by deposit brokers.
Section 230.10(f) is added to clarify that
deposit brokers who are required to
comply with Regulation DD may use
electronic communication to do so,
provided the requirements of § 230.10
are satisfied.
Additional Issues
Document Integrity
The interim rule does not impose
document integrity standards.
Consumer advocates and others have
expressed concerns that electronic
documents can be altered more easily
than paper documents. They say that
consumers’ ability to enforce rights
under the consumer protection laws
could be impaired, in some cases, if the
authenticity of disclosures they retain
cannot be demonstrated.
Institutions are generally required to
retain evidence of compliance with the
Board’s consumer regulations.
Accordingly, the Board requested
comment on the feasibility of requiring
institutions to have systems in place
capable of detecting whether or not
information has been altered, or to use
independent certification authorities to
verify disclosure documents.
Consumer advocates strongly
supported document integrity
requirements (including the use of
certification authorities) that would
apply to all-electronic disclosures.
Signatures, notary seals, and verification
procedures such as recordation are used
to protect against alterations for
transactions memorialized in paper
form. Consumer advocates believe that
comparable verification procedures are
needed for electronic disclosures as
well.
Industry commenters opposed
mandatory document integrity
standards for electronic disclosures.
Because the technology in this area is

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still evolving, they believed that
mandatory standards would be
premature. Others believed that
imposing document integrity standards
or requiring the use of certification
authorities would be costly to
implement.
The Board recognizes the concerns
about document integrity, but believes it
is not practicable at this time to impose
document integrity standards for
consumer disclosures or mandate the
use of independent certification
authorities. Effective methods may be
too costly. Other less costly methods
may deter alterations in some cases, but
would not necessarily ensure document
integrity.
Moreover, the issue of document
integrity affects electronic commerce
generally and is not unique to the
written disclosures required under the
consumer protection laws administered
by the Board. Section 104(b)(3) of the ESign Act authorizes federal or state
regulatory agencies to specify
performance standards to assure the
accuracy, record integrity, and
accessibility of records that are required
to be retained, but prohibits the agencies
from requiring the use of a particular
type of software or hardware in order to
comply with record retention
requirements. Technology is likely to
develop to protect electronic contracts
and other legal documents. Thus, it
seems premature for the Board to
specify any particular standards or
methods for consumer disclosure at this
time.
V. Form of Comment Letters
Comment letters should refer to
Docket No. R–1044, and, when possible,
should use a standard typeface with a
font size of 10 or 12. This will enable
the Board to convert the text to
machine-readable form through
electronic scanning, and will facilitate
automated retrieval of comments for
review. Also, if accompanied by an
original document in paper form,
comments may be submitted on 31⁄2
inch computer diskettes in any IBMcompatible DOS-or Windows-based
format.
VI. Regulatory Flexibility Analysis
The Board has reviewed these interim
amendments to Regulation DD in
accordance with section 3(a) of the
Regulatory Flexibility Act (5 U.S.C.
§ 604), the Board has reviewed these
interim amendments to Regulation DD.
Two of the three requirements of a final
regulatory flexibility analysis under the
Act are (1) a succinct statement of the
need for and the objectives of the rule
and (2) a summary of the issues raised

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by the public comments, the agency’s
assessment of those issues, and a
statement of the changes made in the
final rule in response to the comments.
These two areas are discussed above.
The third requirement of the analysis
is a description of significant
alternatives to the rule that would
minimize the rule’s economic impact on
small entities and reasons why the
alternatives were rejected. This interim
final rule is designed to provide
depository institutions with an
alternative method of providing
disclosures; the rule will relieve
compliance burden by giving depository
institutions flexibility in providing
disclosures required by the regulation.
Overall, the costs of providing
electronic disclosures are not expected
to have significant impact on small
entities. The expectation is that
providing electronic disclosures may
ultimately reduce the costs associated
with providing disclosures.
VII. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320 Appendix A.1), the Board
reviewed the rule under the authority
delegated to the Board by the Office of
Management and Budget. The Federal
Reserve may not conduct or sponsor,
and an organization is not required to
respond to, this information collection
unless it displays a currently valid OMB
control number. The OMB control
number is 7100–0271.
The collection of information that is
revised by this rulemaking is found in
12 CFR part 230 and in Appendix B.
This information is mandatory (15
U.S.C. 4301 et seq.) to evidence
compliance with the requirements of the
Regulation DD and the Truth in Savings
Act (TISA). The respondents/
recordkeepers are for-profit financial
institutions, including small businesses.
Institutions are required to retain
records for twenty-four months. This
regulation applies to all types of
depository institutions, not just state
member banks. However, under
Paperwork Reduction Act regulations,
the Federal Reserve accounts for the
burden of the paperwork associated
with the regulation only for state
member banks. Other agencies account
for the paperwork burden on their
respective constituencies under this
regulation.
The revisions provide that depository
institutions may deliver disclosures
electronically upon obtaining
consumers affirmative consent in
accordance with the E-Sign Act. The
revisions provide guidance to
institutions on the timing and delivery

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of electronic disclosures, to ensure that
consumers have adequate opportunity
to access and retain the information.
With respect to state member banks, it
is estimated that there are 1,000
respondent/recordkeepers and an
average frequency of 87,071 responses
per respondent each year. Current
annual burden is estimated to be
1,482,000 hours. No comments
specifically addressing the burden
estimate were received, therefore, the
numbers remain unchanged. There is
estimated to be no additional cost
burden and no capital or start up cost
associated with the interim rule.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality arises under the
Freedom of Information Act.
The Board has a continuing interest in
the public’s opinions of the Federal
Reserve’s collections of information. At
any time, comments regarding the
burden estimate, or any other aspect of
this collection of information, including
suggestions for reducing the burden,
may be sent to: Secretary, Board of
Governors of the Federal Reserve
System, 20th and C Streets, NW.,
Washington, DC 20551; and to the
Office of Management and Budget,
Paperwork Reduction Project (7100–
0271), Washington, DC 20503.
VIII. Solicitation of Comments
Regarding the Use of ‘‘Plain Language’’
Section 722 of the Gramm-LeachBliley Act of 1999 requires the Board to
use ‘‘plain language’’ in all proposed
and final rules published after January
1, 2000. The Board invites comments on
whether the interim rule is clearly
stated and effectively organized, and
how the Board might make the rule
easier to understand.
List of Subjects in 12 CFR Part 230
Advertising, Banks, banking,
Consumer protection, Federal Reserve
System, Reporting and record keeping
requirements, Truth in Savings.
For the reasons set forth in the
preamble, the Board amends Regulation
DD, 12 CFR part 230, as set forth below:
PART 230—TRUTH IN SAVINGS
(REGULATION DD)
1. The authority citation for part 230
continues to read as follows:
Authority: 12 U.S.C. 4301 et seq.

2. Section 230.3 is amended by
revising paragraph (a) and adding a new
paragraph (g) as follows:

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§ 230.3

General disclosure requirements.

(a) Form. Depository institutions shall
make the disclosures required by
§§ 230.4 through 230.6 and § 230.10 of
this part, as applicable, clearly and
conspicuously, in writing, and in a form
the consumer may keep. Disclosures for
each account offered by an institution
may be presented separately or
combined with disclosures for the
institution’s other accounts, as long as it
is clear which disclosures are applicable
to the consumer’s account.
*
*
*
*
*
(g) Electronic communication. For
rules governing the electronic delivery
of disclosures, including the definition
of electronic communication, see
§ 230.10.0
3. Section 230.4 is amended by
revising paragraph (a)(1) and paragraph
(a)(2)(i) to read as follows:
§ 230.4

Account disclosures.

(a) Delivery of account disclosures. (1)
Account opening. (i) General. A
depository institution shall provide
account disclosures to a consumer
before an account is opened or a service
is provided, whichever is earlier. An
institution is deemed to have provided
a service when a fee required to be
disclosed is assessed. Except as
provided in paragraph (a)(1)(ii) of this
section, if the consumer is not present
at the institution when the account is
opened or the service is provided and
has not already received the disclosures,
the institution shall mail or deliver the
disclosures no later than 10 business
days after the account is opened or the
service is provided, whichever is earlier.
(ii) Electronic communication. If a
consumer who is not present at the
institution uses electronic
communication (as defined in § 230.10)
to open an account or request a service,
the disclosures required under
paragraph (a)(1) of this section must be
provided before an account is opened or
a service is provided.
(2) Requests. (i) A depository
institution shall provide account
disclosures to a consumer upon request.
If a consumer who is not present at the
institution makes a request, the
institution shall mail or deliver the
disclosures within a reasonable time
after it receives the request and may
provide the disclosures in paper form,
or electronically if the consumer
provides an electronic mail address.
*
*
*
*
*
§ 230.6

[Amended]

4. Section 230.6 is amended by
removing paragraph (c).

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5. Add a new § 230.10 to read as
follows:
§ 230.10

Electronic communication.

(a) Definition. ‘‘Electronic
communication’’ means a message
transmitted electronically between a
depository institution and a consumer
in a format that allows visual text to be
displayed on equipment, for example, a
personal computer monitor.
(b) General rule. In accordance with
the Electronic Signatures in Global and
National Commerce Act (the E-Sign Act)
(15 U.S.C. 7001 et seq.) and the rules of
this part, a depository institution may
provide by electronic communication
any disclosure required by this part to
be in writing.
(c) When consent is required. Under
the E-Sign Act, a depository institution
is required to obtain a consumer’s
affirmative consent when providing
disclosures related to a transaction. For
purposes of this requirement, the
disclosures required under
§§ 230.4(a)(2) and 230.8 are deemed not
to be related to a transaction.
(d) Address or location to receive
electronic communication. A depository
institution that uses electronic
communication to provide disclosures
required by this part shall:
(1) Send the disclosure to the
consumer’s electronic address; or
(2) Make the disclosure available at
another location such as an Internet web
site; and
(i) Alert the consumer of the
disclosure’s availability by sending a
notice to the consumer’s electronic
address (or to a postal address, at the
depository institution’s option). The
notice shall identify the account
involved (if applicable) and the address
of the Internet web site or other location
where the disclosure is available; and
(ii) Make the disclosure available for
at least 90 days from the date the
disclosure first becomes available or
from the date of the notice alerting the
consumer of the disclosure, whichever
comes later.
(3) Exceptions. A depository
institution need not comply with
paragraph (d)(2)(ii) of this section for
disclosures required under § 230.4(a)(2),
and need not comply with paragraphs
(d)(2)(i) and (ii) of this section for
disclosures required under § 230.8.
(e) Redelivery. When a disclosure
provided by electronic communication
is returned to a depository institution
undelivered, the depository institution
shall take reasonable steps to attempt
redelivery using information in its files.
(f) Entities other than a depository
institution. A person other than a
depository institution that is required to

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comply with this part may use
electronic communication in
accordance with the requirements of
this section, as applicable.
6. In Supplement I to Part 230, the
following amendments are made:
a. Under Section 230.2 Definitions,
under (q) Periodic statement, paragraph
ii. is removed and paragraph iii. is
redesignated as paragraph ii.
b. Under Section 230.4 Account
disclosures, under (a)(2) Requests,
under (a)(2)(i), paragraph 3. is revised
and a new paragraph 4. is added.
c. Under Section 230.8 Advertising,
under (a) Misleading or inaccurate
advertisements, a new paragraph 9. is
added.
d. Under Section 230.8 Advertising,
under (b) Permissible rates, a new
paragraph 4. is added.
e. Under Section 230.8 Advertising,
under (e)(1) Certain media, a new
heading (e)(1)(i), and a new paragraph 1.
are added.
f. A new Section 230.10 Requirements
for electronic communication is added
at the end of Supplement I.
The amendments read as follows:
*
*
*
*
*
Supplement I to Part 230—Official Staff
Interpretations

*

*

*

*

*

Section 230.4 Account Disclosures
(a) Delivery of Account Disclosures

*

*

*

*

*

*

*

(a)(2) Requests
(a)(2)(i)

*

*

*

3. Timing for response. Ten business days
is a reasonable time for responding to
requests for account information that
consumers do not make in person, including
requests made by electronic communication.
4. Requests by electronic communication.
Posting disclosures on a depository
institution’s web site generally does not
relieve the institution’s duty to provide
disclosures upon request. If the consumer
provides an e-mail address, the institution
may provide the disclosures electronically,
but the institution must either send the
disclosures by e-mail or send a notice to the
consumer’s e-mail address pursuant to
§ 230.10(d)(2)(i) to inform the consumer
where the disclosures are posted.

*

*

*

*

*

Section 230.8 Advertising
(a) Misleading or Inaccurate Advertisements

*

*

*

*

*

9. Electronic advertising. If an
advertisement using electronic
communication displays a triggering term
(such as a bonus or annual percentage yield)
the advertisement must clearly refer the
consumer to the location where the
additional required information begins. For
example, an advertisement that includes a

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bonus or annual percentage yield may be
accompanied by a link that directly takes the
consumer to the additional information.
(b) Permissible Rates

*

*

*

*

*

4. Electronic communication. An interest
rate may be stated only if it is provided in
conjunction with, but not more
conspicuously than, the annual percentage
yield to which it relates. In an advertisement
using electronic communication, the
consumer must be able to view both rates
simultaneously. This requirement is not
satisfied if the consumer can view the annual
percentage yield only by use of a link that
connects the consumer to information
appearing at another location.

*

*

*

*

*

(e)(1) Certain Media
(e)(1)(i)
1. Internet advertisements. The exemption
for advertisements made through broadcast
or electronic media does not extend to
advertisements made by electronic
communication, such as advertisements
posted on the Internet or sent by e-mail.

*

*

*

*

*

Section 230.10 Electronic Communication
(b) General Rule
1. Relationship to the E-Sign Act. The ESign Act authorizes the use of electronic
disclosures. It does not affect any
requirement imposed under this part other
than a provision that requires disclosures to
be in paper form, and it does not affect the
content or timing of disclosures. Electronic
disclosures are subject to the regulation’s
format, timing, and retainability rules and the
clear and conspicuous standard. For
example, to satisfy the clear and conspicuous
standard for disclosures, electronic
disclosures must use visual text.
2. Clear and conspicuous standard. An
institution must provide electronic
disclosures using a clear and conspicuous
format. Also, in accordance with the E-Sign
Act:
i. The institution must disclose the
requirements for accessing and retaining
disclosures in that format;
ii. The consumer must demonstrate the
ability to access the information
electronically and affirmatively consent to
electronic delivery; and
iii. The institution must provide the
disclosures in accordance with the specified
requirements.
3. Timing and effective delivery. i. When a
consumer opens an account on-line. When a
consumer opens an account on-line, the
consumer must be required to access the
disclosures required under § 230.4 before the
account is opened or a service is provided,
whichever is earlier. A link to the disclosures
satisfies the timing rule if the consumer
cannot bypass the disclosures before opening
the account. Or the disclosures in this
example must automatically appear on the
screen, even if multiple screens are required
to view the entire disclosure. The institution
is not required to confirm that the consumer
has read the disclosure.

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ii. For disclosures provided periodically.
Disclosures provided by mail are timely
based on when the disclosures are sent.
Disclosures posted at an Internet web site,
such as periodic statements or change-interms and other notices, are timely when the
institution has both made the disclosures
available and sent a notice alerting consumer
that the disclosures have been posted. For
example, under § 230.5, institutions must
give advance notice to affected customers at
least 30 calendar days in advance of certain
changes. For a change in terms notice posted
on the Internet, an institution must both post
the notice and notify consumers of its
availability at least 30 days in advance of the
change.
4. Retainability of disclosures. Depository
institutions satisfy the requirement that
disclosures be in a form that the consumer
may keep if electronic disclosures are
delivered in a format that is capable of being
retained (such as by printing or storing
electronically). The format must also be
consistent with the information required to
be provided under 101(c)(1)(C)(i) of the ESign Act 15 U.S.C. 7001(c)(1)(C)(i)) about the
hardware and software requirements for
accessing and retaining electronic
disclosures.
5. Disclosures provided on depository
institution’s equipment. A depository
institution that controls the equipment
providing electronic disclosures to
consumers (for example, a computer terminal
located in a depository institution’s lobby or
at a public kiosk) must ensure that the
equipment satisfies the regulation’s
requirements to provide timely disclosures in
a clear and conspicuous format and in a form
that the consumer may keep. For example, if
disclosures are required at the time of an online transaction, the disclosures must be sent
to the consumer’s e-mail address or must be
posted at another location such as the
institution’s Internet web site, unless the
institution provides a printer that
automatically prints the disclosures.
(d) Address or Location To Receive
Electronic Communication
(d)(1)
1. Electronic address. A consumer’s
electronic address is an e-mail address that
is not limited to receiving communications
transmitted solely by the depository
institution.
(d)(2)
1. Identifying account involved. A
depository institution may identify a specific
account in a variety of ways and is not
required to identify an account by reference
to the account number. For example, where
the consumer has only one deposit account,
and no confusion would result, the
depository institution may refer to ‘‘your
deposit account.’’ If the consumer has two
accounts, the depository institution may, for
example, differentiate accounts by using
terms such as ‘‘primary account’’ and
‘‘secondary account’’ or by using a truncated
account number.
2. 90-day rule. The actual disclosures
provided to consumer must be available for
at least 90 days, but the institution has

discretion to determine whether they should
be available at the same location for the
entire period.
(e) Redelivery
1. E-mail returned as undeliverable. If an
e-mail to the consumer (containing an alert
notice or other disclosure) is returned as
undeliverable, the redelivery requirement is
satisfied if, for example, the depository
institution sends the disclosure to a different
e-mail address or postal address that the
depository institution has on file for the
consumer. Sending the disclosures a second
time to the same electronic is not sufficient
if the depository institution has a different
address for the consumer on file.
By order of the Board of Governors of the
Federal Reserve System, March 27, 2001.
Robert deV. Frierson,
Associate Secretary of the Board.
[FR Doc. 01–8149 Filed 4–3–01; 8:45 am]
BILLING CODE 6210–01–P

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