The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Federal Reserve Bank
OF DALLAS
ROBERT
D. M C T E E R , J R .
April 7, 1993
P R E S ID E N T
AND
C H IE F E X E C U T IV E
TO:
DALLAS, TEXAS 7 5 2 2 2
O F F IC E R
Notice 93-40
The Chief Executive Officer of each
member bank and others concerned in
the Eleventh Federal Reserve District
SUBJECT
Final Rule Amending Regulation DD
(Truth in Savings) and Technical Amendments to
Regulation Q (Interest on Deposits)
DETAILS
The Federal Reserve Board has published a final rule amending
Regulation DD (Truth in Savings) to carry out recent changes made to the Truth
in Savings Act by the Housing and Community Development Act of 1992.
The law extends the mandatory date for compliance with the require
ments of the Truth in Savings Act by three months, so that institutions must
comply by June 21, 1993, rather than March 21, 1993. The law also modifies
the advertising rules relating to signs on the premises of an institution, and
makes a technical change to the provision dealing with notices required to be
given to existing account holders.
In addition, the Board is making two minor changes to the regulation
and providing guidance on several issues that have been raised by institutions
since publication of the final regulation in September 1992.
The Board is also issuing a technical amendment to Regulation Q
(Interest on Deposits).
ATTACHMENT
58, No.
A copy of the Board’s notice as it appears on pages 15076-82, Vol.
52, of the Federal Register dated March 19, 1993, is attached.
MORE INFORMATION
For more information, please contact Eugene Coy at (214) 922-6201.
For additional copies of this Bank’s notice, please contact the Public Affairs
Department at (214) 922-5254.
Sincerely yours,
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.
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
15076
Federal Register / Vol. 58, No. 52 / Friday, March 19, 1993 / Rules and Regulations
FEDERAL RESERVE SYSTEM
12CFR Part 2 1 7
[R egulation Q, D ocket No. R -0775]
Prohibition Against the Payment of
Interest on Demand Deposits
Board of Governors of the
Federal Reserve System.
ACTION: F in a l rule; delay of effective
date,
AGENCY:
The Board is delaying the
effective date of the final rule, published
on September 21,1992, which amended
Regulation Q in conjunction with its
amendments to Regulation DD, which
implemented the Truth in Savings Act.
Deletion of the advertising rules in
Regulation Q is delayed by three months
until June 21,1993. Regulation Q retains
provisions prohibiting the payment of
interest on demand deposits.
EFFECTIVE DATE: Effective March 19,
1993, the effective date for the
amendments to part 217 which were
published at 57 FR 43336 is delayed
until June 21,1993.
SUMMARY:
FOR FURTHER INFORMATION CONTACT:
Patrick J. McDivitt, Staff Attorney, Legal
Division, Board of Governors of the
Federal Reserve System, Washington,
DC 20551, at (202) 452-3818: for the
hearing impaired only, contact Dorothea
Thompson, Telecommunications Device
for the Deaf, at (202) 452-3544.
SUPPLEMENTARY INFORMATION:
(1) Background
The Truth in Savings Act (Act) (12
U.S.C. 4301) directs the Board to issue
an implementing regulation, which
shall apply six months after the final
regulation is issued. At the same time
the Board issued implementing
regulations on September 21,1992 (57
FR 43337), it amended Regulation Q (57
FR 43336) to provide that rules dealing
with advertising of deposit accounts
were eliminated, effective March 21,
1993. Regulation Q sets forth disclosure
and advertising rules for interest on
deposits by member banks and certain
other institutions.
The Housing and Community
Development Act (HCDA), enacted in
October 1992 (Pub. L. 102-550,106 Stat.
3672), amended the act by extending the
mandatory compliance date by three
months. In light of that delay, the Board
is delaying the effective date of the
advertising and other disclosure rules in
Regulation Q from March 21,1993, to
June 21,1993, the new mandatory
compliance date for Regulation DD. (See
Docket R-0791 elsewhere in today’s
Federal Register, which sets forth the
amendments to Regulation DD.)
Institutions that begin compliance With
Regulation DD prior to the mandatory
compliance date may comply solely
with the advertising provisions of
Regulation DD, and not the advertising
and disclosure provisions in Regulation
Q-
By order of the Board of Governors of the
Federal Reserve System, March 12, 1993.
Jennifer J. Johnson,
Associate Secretary o f the Board.
[FR Doc, 93—6325 Filed 3-18-93; 8:45 am]
BILLING CODE S210-01-M
*
Federal Register / Vol. 58, No. 52 / Friday, March 19, 1993 / Rules and Regulations
15077
or Mary Jane Seebach, Staff Attorneys,
Division of Consumer and Community
Affairs, at (202) 736-5500; for the
hearing impaired only contact Dorothea
Thompson, Telecommunications Device
for the Deaf, at (202) 452-3544
SUPPLEMENTARY INFORMATION:
(1) Background
The Truth in Savings Act ("act”)
(contained in the Federal Deposit
Insurance Corporation Improvement Act
of 1991) was enacted in December 1991.
The Board published proposed rales to
implement the act on April 13,1992 (57
FR 12735), and published final
regulations on September 21,1992 (57
FR 43337) (correction notice at 57 FR
46480, October 9,1992).
The Housing and Community
Development Act (HCDA) was enacted
into law in October 1992 (Pub. L. 102550,106 Stat. 3672). The law contains
three provisions that amend the Truth
in Savings Act. The provisions extend
the effective date for compliance with
the act by three months, reduce the
requirements that apply to some
advertisements on the premises of a
12CFR Part 230
depository institution, and modify the
[Regulation DD; Docket No. R-G791 ]
provision that requires a notice to be
given to existing account holders
Truth In Savings; Regulatory
alerting them to the availability of
Amendments
account disclosures.
On January 5,1993, the Board
AGENCY: Board o f Governors of the
published
a proposal to implement
Federal Reserve System.
these amendments (58 FR 271). In
ACTION: F i n a l r u le .
addition to proposing rules to
implement the statutory changes, the
SUMMARY: The Board is publishing a
Board solicited comment-on whether to
final rule amending Regulation DD
adopt a technical change to the
(Truth in Savings) to implement recent
regulation, and proposed to provide
changes made to the Truth in Savings
guidance on several issues raised by
Act by the Housing and Community
institutions since adoption of the final
Development Act of 1992. The law
rules. The Board received 108
extends the mandatory date for
compliance with the requirements of the comments on the proposal. Based on a
review of the comments and further
Truth in Savings Act by three months,
so that institutions must comply by June analysis the Board is taking final action.
21.1993, rather than March 21,1993.
(2) Regulatory P r o v i s i o n s
The law also modifies the advertising
Mandatory Compliance Date
rules relating to signs on the premises
of an institution, and makes a technical
Section 957(b) of the HCDA amended
change to the provision dealing with
section 269(a)(2) of the Truth in Savings
notices required to be given to existing
Act, extending the mandatory
account holders. In addition, the Board
compliance date for three months. The
is making two minor changes to the
Board proposed to change the
regulation and providing guidance on
compliance date from March 21,1993 to
several issues that have been raised by
June 21,1993, and the final rule reflects
institutions since publication of the
that change. The definition of “account'’
final regulation in September 1992.
under 230.2(a) states that existing
DATES: This final rule is effective March
accounts held by an unincorporated
21.1993. Compliance is optional until
nonbusiness association of natural
June 21,1993. Compliance with the
persons prior to March 21,1993 are not
amendment to part II of appendix A of
included in the term. The final rule
part 230 is optional until December 21,
changes the date to June 21,1993. The
1993.
change to the regulation also supersedes
FOR FURTHER INFORMATION CONTACT: Jane all references to an effective date of
Ahrens, Kyung Cho, Kurt Schumacher,
March 21,1993, appearing in the
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Federal Register / Vol. 58, No, 52 / Friday, March 19, 1993 / Rules and Regulations
supplementary information to the final
regulation.
Elsewhere in this issue of the Federal
Register, as proposed, the Board is
delaying the effective date of the
deletion of Regulation Q’s
advertisement and disclosure rules until
June 21,1993. Institutions may,
however, comply solely with the
advertising provisions in Regulation DD
prior to June 21,1993, and not the
advertising and disclosure provisions in
Regulation Q.
consumers of any change in a
previously disclosed term that may
adversely affect the consumer. In its
September 1992 rulemaking, the Board
used its authority to create a limited
exception to the notice requirements for
changes in check printing fees "assessed
by third parties.” In the proposal issued
in January 1993, the Board solicited
comment on whether the exception
should be broadened to apply to any
check printing fees—whether the fee is
assessed by a third party or by the
institution itself.
Section 2.30.4—Account Disclosures
Commenters strongly supported
(c) Notice to Existing Account Holders
exempting all check printing fees from
the change in terms notice. Commenters
(1) Notice o f availability of
disclosures. Section 957(b) of the HCDA noted that these fees are based on the
style and quantity of checks ordered,
extended the mandatory compliance
and the consumer has primary control
date from 6 months to 9 months after
over such decisions. Consequently,
the Board’s issuance of a final rule. In
sending a change in terms notice for
addition, section 1604(e) amended
such fees would provide minimal
section 266(e) of the Truth in Savings
Act to require that the notice to existing benefit to consumers while imposing a
account holders be sent “on or with the significant burden on institutions. The
final rule provides that a change in
first regularly scheduled mailing sent
terms notice is not required for any
after the end of the '6 month period’
beginning on the date of publication" of increase in fees for printing checks. The
rule allows an institution to take
the Board’s implementing regulations.
If the revisions to sections 957(b) and
advantage of the exception even if it
1604(e) were read literally, institutions
adds a “mark-up” to the price charged
would be required to provide the notice by the vendor before passing the fee on
to existing consumer account holders on to the consumer.
or with the first periodic statement sent
The Board also proposed that check
after March 21,1993, even though th e
printing fees are not maintenance or
effective date has been delayed. The
activity fees for purposes of the
Board believes the Congress intended to advertising rules in § 230.8(a), whether
grant institutions an additional three*the institution or a third party imposes
months to comply with the disclosure
the fee. Section 230.8(a) prohibits
duty. The Board solicited comment on
institutions from advertising an account
amending § 230.4(c) of the regulation to as “free" or “no cost” if any
require that notice be given on or with
“maintenance or activity” fee might be
th e first periodic statement sent on or
imposed. The Board believes that check
after the mandatory compliance date of printing fees are not maintenance or
June 21,1993 (or the first periodic
activity fees even if imposed in whole
statement for a statement cycle
or in part by the institution.
beginning on or after that date).
Section 230.8—Advertising
Commenters urged the Board to adopt
this interpretation. They stated that a
(e) Exemption for Certain
notice to consumers before the June 21,
Advertisements
1993, mandatory compliance date
Section 263 of the act was amended
would be useless (and perhaps
by the HDCA to provide that if a rate is
confusing) since account disclosures
displayed on a sign designed to be
might not be available at depository
viewed only from the interior of an
institutions. To facilitate compliance
institution, the sign need only include
and avoid consumer confusion, the
the annual percentage yield and a
Board is exercising its exception
statement advising consumers to ask
authority under section 269(a)(3) of the
employees about fees and terms
act to extend the time to send notices to applicable to the advertised account.
existing account holders by three
Such signs need not provide other
months, to June 21,1993.
information required under section
263(a) of the act, such as the statement
Section 230.5—Subsequent Disclosures
that fees could reduce earnings on the
(a) Change in Terms
account.
(2) No notice required.—(ii) Check
The proposal provided for abbreviated
printing fees. The act and regulation
disclosure requirements for “lobby signs
require depository institutions to
facing inside” a depository institution
provide a 30-day advance notice to
(or feeing inside the premises of a
deposit broker). The Board proposed to
use a “facing inside” standard rather
than the "intent” standard of the
amendment. Many commenters wore
concerned about the certainty of
compliance with either standard.
Commenters noted that many branches
and main offices are often enclosed by
glass or are located in grocery stores or
shopping malls where signs visible to
customers are also visible to passersby.
The Board believes that the Congress
intended to permit abbreviated
disclosures for signs inside an
institution’s premises, unless the sign
faces outside and can reasonably be
viewed by a consumer only from
outside the premises.
The final rule provides a clearer
standard for determining what signs are
eligible for the exception. The final rule
exempts any sign inside the premises of
a depository institution (or the premises
of a deposit broker), unless the sign
faces outside and can reasonably be
viewed by a consumer only from
outside the premises. The Board
believes that the standard captures the
Congress’ goal to require full disclosures
for advertisements that are clearly
designed to be viewed by persons not
inside a depository institution. The rule
also avoids the uncertainty of
compliance when, for example, a sign
behind a teller and facing customers at
a small, glass-enclosed branch can also
be seen by passersby. Such a sign would
be an exempt indoor sign.
The final regulation does not define
“lobby sign.” Most commenters stated
that a definition was unnecessary.
Commenters stated that depository
institutions increasingly conduct
business in retail malls or grocery stores
where there is little or no “lobby” area;
therefore, references to “lobby” in the
final regulation have been deleted.
The regulation exempts indoor
advertisements however they are
displayed, such as banners, preprinted
posters, and chalk or peg boards—
whether affixed to a wall or displayed
on one or both sides of an easel. Indoor
advertisements on computer screens
and electronic media are also exempt.
Of course, an advertisement affixed to a
window and facing outside remains
subject to the general advertising rules,
since it can reasonably be viewed only
from outside the institution. Any sign or
notice inside the premises that can be
retained by a consumer (such as a
brochure or a print-out from a
computer) also is subject to the general
advertising rules, as are signs on the
exterior of a depository institution.
The final rule retains for indoor signs
the prohibition against misleading or
inaccurate advertisements, and thus
Federal Register / Vol. 58, No. 52 / Friday, March 19, 1993 / Rules and Regulations
against the description of accounts as
“free” if a maintenance or activity fee is
imposed.
The HDCA amendment to section
263(c) of the act states that the display
of any rate on an indoor sign triggers the
disclosure of the annual percentage
yield. The statute does not require that
the figure be described as “annual
percentage yield." The regulation
currently requires that in all cases, if a
rate of return is advertised, it must be
stated as the annual percentage yield,
using that term. The Board solicited
comment on whether rates on a lobby
sign should be identified as the annual
percentage yield or by the abbreviation
"APY." The vast majority of
commenters supported the proposal,
primarily to promote uniformity and
consistency in disclosures used by
consumers in comparison shopping.
The final rule provides that if a rate is
displayed on an indoor sign, only the
annual percentage yield, using that term
or the abbreviation “APY,” need be
stated along with a statement that
consumers should ask employees about
fees and terms for the account.
Finally, the proposal exempted lobby
signs from the disclosure requirements
under paragraphs (b), (c) and (d) of
section 230.8, whether or not a rate is
stated. Commenters supported the
proposal The final rule adopts the
proposal, with the addition of paragraph
(e)(1). Thus, any bonu^displayed on an
indoor sign that meets the test in section
230.8(e)(2)(i) would not trigger
additional disclosures.
interest rate and compounds annually, it
would disclose an annual percentage
yield of 5.00% in its advertisements and
initial account disclosures. However,
under the general annual percentage
yield earned formula, the institution
would show $4.11 of interest accrued on
$1,000 of principal on a monthly
periodic statement reflecting 30 days,
and an annual percentage yield earned
of 5.12% on that statement.
Most commenters asked the Board to
adopt the proposed alternative annual
percentage yield earned formula for use
in such cases. They expressed concern
that consumers would be confused or
misled by the use of an annual
percentage yield earned figure that is
higher than the initially disclosed
annual percentage yield. In response to
comments received and upon further
analysis, the Board is adopting the
proposed formula. The formula must be
used when an institution uses the daily
balance method to accrue interest and
when a periodic statement is sent more
often than the period for which interest
is compounded.
The Board also solicited comment on
whether the use of this new formula
should be optional or required. While
the majority of commenters believed
that the formula should be adopted,
they were divided on whether its use
should be required. Some commenters
stated that it should be made optional,
given the brief time remaining before
the mandatory compliance date. These
commenters said that requiring
institutions and vendors to develop and
have in place a new formula by June 21,
Appendix A to Part 230—Annual
1993, would be a significant burden,
Percentage Yield Calculation
and that institutions might not be able
to achieve full compliance by that date.
Additional Formula for Certain
The Board believes it is essential for
Accounts
institutions to calculate the annual
The Board solicited comment on
percentage yield earned in a way that
whether an additional formula should
ensures information provided to
be added to Appendix A, Part II, to
consumers is accurate and not
calculate the annual percentage yield
misleading. The Board agrees, however,
earned on the periodic statement for
that mandating the use of this formula
accounts in certain cases. The Board
as of June 21,1993, could impose a
had received inquiries about the
substantial burden on institutions.
applicability of die current formula in
Therefore, the Board is using its
certain situations. Institutions that use
exception authority in section 269(a)(3)
the daily balance method to accrue
of the act to provide a delay in the
interest noted that if a periodic
mandatory compliance date. As
statement is sent more frequently than
applicable, institutions will be required
the period for which interest is
to use this special formula beginning
compounded, the annual percentage
with-the first periodic statement sent on
yield earned could be higher than the
or after December 21,1993 (or with the
annual percentage yield provided in
first periodic statement for a statement
advertisements and opening account
cycle beginning on or after that date).
disclosures. This would be the case, for For periodic statements sent prior to
example, when an institution uses the
that date institutions may utilize the
daily balance method of accruing
general formula provided in Appendix
interest and compounds interest
A for computing the annual percentage
annually, but provides monthly periodic yield earned. The Board believes that an
statements. If an institution pays a 5%
extension of six months from June 21,
15079
1993, is appropriate to allow
institutions about nine months to
implement the necessary changes in
their operating systems.
While the definitions that apply to the
general formula in Appendix A, Part II
apply to the new formula as well, the
Board has added a definition of
“compounding” to the final rule. This
definition differs from the proposed
definition (where compounding was
defined as the “frequency with which
interest is compounded, expressed as a
number of days”). Several commenters
mistakenly believed the proposed
definition referred to the frequency of
compounding periods in a year. The
final rule clarifies that “compounding”
is the number of days in each
compounding period. For example,
quarterly compounding is to be
expressed as 91.25 days in the
compounding period; semi-annual
compounding is to be expressed as
182.5; and annual compounding is to be
expressed as 365.
The Board has added an example of
the computation of an annual
percentage yield earned that utilizes the
special formula. Finally, the Board has
rearranged the format of this section in
the appendix to reflect the adoption of
the special formula.
(3) Additional Guidance
Section 230.2(q)—Periodic Statement
The regulation defines a periodic
statement as one sent to a consumer "on
a regular basis four or more times a
year.” The supplementary information
accompanying the final rule stated that
if an institution provides a statement to
meet other legal requirements (for
example, to comply with Regulation E),
such a statement is a periodic statement
forpurposes of Regulation DD.
Tne Board solicited comment on
whether certain Regulation E statements
should be considered periodic
statements for purposes of Regulation
DD. (Regulation E requires a statement
to be sent for each monthly or shorter
cycle in which an electronic fund
transfer has occurred, but at least
quarterly if no transfer has occurred (12
CFR 205.9(b)).) The Board proposed that
if an institution provides regular
quarterly statements, and in addition
provides a monthly statement when a
transfer has occurred (to comply with
Regulation E), the monthly statement is
not a periodic statement for Regulation
DD purposes.
Most commenters supported the
Board's proposal. These commenters
agreed that monthly statements are not
sent on a “regular basis” if they are sent
only when an electronic transfer occurs
15080
Federal Register / Vol. 58, No. 52 / Friday, March 19, 1993 / Rules and Regulations
earned and an annual percentage yield
earned for the month of March and
would not repeat or aggregate such
interest information for the entire
quarter. As the periodic statement
disclosures are intended to provide the
consumer with a “snapshot” of how
much interest was earned during a
specific period, the Board believes
subsequent statements must not repeat
T^ie Board believes that a flexible
or incorporate interest earned or the
approach is desirable. Whether the
annual percentage yield earned for
interim statement is deemed a
previous periods that have already been
Regulation DD statement or not,
disclosed.
The Board also solicited comment on
consumers will receive full disclosures
whether institutions should have to
for all activity in the quarter. If the
redisclose fees on a quarterly statement
institution opts to make Regulation DD
if the fees were reflected in a prior
disclosures on the interim statement,
monthly statement to comply with
consumers benefit from receiving
account information sooner rather than
Regulation E. Many commenters
later, A flexible rule also minimizes the believed that fees disclosed in the
monthly Regulation E statement should
burden of compliance on institutions
not be repeated in the quarterly periodic
that already have their programs in
statement. These commenters were
place and would otherwise be required
concerned that consumers might be
to make significant revisions to their
confused if the same fees were disclosed
systems.
Therefore, consistent with the
twice—once in the month the fee was
proposal, institutions that regularly
incurred and again on a quarterly
provide quarterly statements need not,
statement.
For institutions that issue a statement
but may, treat any monthly Regulation
E statements as periodic statements for
to comply with the requirements of
Regulation DD purposes. For
Regulation E only, the Board believes
institutions that choose not to do so, the disclosing fees on the monthly
quarterly statement must reflect the
statement is sufficient and that the same
annual percentage yield earned and
fees need not be redisclosed on the
interest earned for the full quarter.
quarterly statement. Institutions asked
(Institutions that use the average daily
how they should treat fees that are not
balance method and calculate interest
required to be disclosed on the interim
for a period other than the statements
Regulation E statements (for example,
period must use the special rule in
fees unrelated to electronic fund
transfers) but that the institution
§ 230.6(b).) If an institution chooses to
provide interest or rate information on
provides on that statement. Fees (for
these interim statements, however, the
example, per check fees or stop payment
statement would be deemed a
fees) disclosed on a monthly statement
Regulation DD statement, and be subject need not be redisclosed on the quarterly
to the periodic statement disclosure
statement. On the other hand, if an
rules.
institution imposes such fees during the
Institutions that treat Regulation E
period and does not disclose them on
statements as Regulation DD periodic
the monthly statement, such fees must
statements must provide information for be reflected on the quarterly statement
the period since the last statement was
to meet the requirements of § 230.6.
issued. For example, an institution may
Account Balance Information
issue quarterly periodic statements in
Several commenters raised another
March, June, September, and December.
issue related to the definition of a
If the consumer initiates an electronic
periodic statement. Currently, many
fund transfer in February, an interim
institutions include on the periodic
statement would be provided. An
institution treating that February
statement for one account “status
statement as a Regulation DD statement information” for other accounts held at
must reflect all interest earned and an
the same institution. For example, a
annual percentage yield earned for the
monthly statement for a consumer’s
period since the previous DD statement
checking account may also provide the
was issued in December. Disclosures of account number and balance of the
the interest earned and the annual
consumer's savings account. In
percentage yield earned on the next
addition, a full periodic statement for
statement (March) would not repeat
the savings account is sent on a
interest information disclosed on the
quarterly basis. Commenters stated that
February statement. Thus, the March
providing balance information on the
statement would Only reflect interest
periodic statement for another account
during the month. Many commenters
believed, however, that institutions
should not be precluded from treating
these Regulation E statements as
periodic statements for purposes of
Regulation DD. A number of institutions
are already prepared to include the
Regulation DD disclosures on the
“interim” Regulation E statements that
serves several purposes. For example, if
a minimum balance fee on a checking
account depends on the combined
balance in a consumer’s savings and
checking accounts, balance information
on the savings account helps the
consumer understand that the fee was
properly assessed. Balance information
also enables consumers to monitor total
deposits maintained at an institution.
For example, an institution may include
balance information for a money market
deposit account (MMDA) on the
monthly statement for a NOW account,
even though the MMDA account also
receives a monthly statement, but on a
different cycle.
Commenters requested that
institutions be allowed to provide the
account number, type of account and
balance information for one account (for
example, a MMDA) on the periodic
statement for another account without
having to provide complete disclosures
required by § 230.6 for the MMDA.
Institutions have stated that without
such a rule they may stop providing
balance information about other deposit
accounts on periodic statements, due to
the difficulty and costs associated with
calculating an annual percentage yield
earned for odd short periods, and the
limited space available on periodic
statements to provide such information.
In the final regulation issued in
September 1992, the Board recognized
this problem, as well as the benefits of
receiving secondary account
information. The definition of periodic
statement excludes information about
time accounts and passbook savings
accounts, so that institutions may give
information about such accounts
without triggering the periodic
statement disclosure rules. Commenters
believe, however, that the exemption
from the definition of periodic
statement should be broadened to allow
balance information for an account that
appears on the periodic statement of
another account.
The Board agrees there are significant
reasons to allow institutions to provide
account balance information for one or
more accounts on the periodic statement
for another account, without triggering
the duty to provide complete periodic
statement disclosures. Thus, an
institution may provide the account
number, the type of account, and
balance information for an account on a
periodic statement given for another
account. This rule may be used only to
provide balance information for
accounts that receive periodic
statements. Under this interpretation,
the consumer will always receive a
regular statement with frill Regulation
DD disclosures in addition to the
Federal Register / Vol. 58, No. 52 / Friday, March 19, 1993 / Rules and Regulations
balance information. For example, if an
institution issues quarterly periodic
statements for savings accounts, and
monthly statements for MMDAs,
disclosing balance information for the
savings account and the MMDA on
monthly checking account statements
will not trigger full periodic statement
disclosures for the savings account or
the MMDA on the monthly checking
account statements. However, providing
information other than the balance in an
account on the checking account
statement (for example, the current
interest rate being paid on the MMDA)
would require the institution to give full
disclosures for the MMDA on the
checking account statement. (The
existing exemption for time accounts
and passbook savings accounts is
unaffected by this rule).
Appendix A to Part 230—Annual
Percentage Yield Calculation
because the Board’s final rule was silent
about which balance should be used,
they had proceeded with implementing
the rule based on the assumption that
the collected balance could be used in
determining the annual percentage yield
earned. Commenters suggested that
using the ledger balance would not
result in a significantly different annual
percentage yield earned figure, since the
difference between the date a deposit is
entered on a ledger balance and on a
collected balance is often only one day.
In response to the comments and
upon further analysis, the final
regulation permits institutions that
accrue interest using the collected
balance method to use either the ledger
balance or the collected balance in
determining the annual percentage yield
earned. (Of course, if an institution
accrues interest using a ledger balance
method, it would use the ledger balance
to determine the annual percentage
yield earned.) Either method will
produce very similar results in most
cases, given the typically short interval
between the deposit of an item and its
collection. Moreover, since institutions
must describe whether they accrue
interest by using a ledger or a collected
balance, consumers will have this
information to compare institutions’
interest accrual policies. (See section
230.4(b)(3)(iii).) In addition, the interest
figure disclosed on the periodic
statement will reflect whichever method
an institution uses to accrue interest.
Finally, the Board believes permitting
the use of either a ledger or a collected
balance to calculate the annual
percentage yield earned will minimize
compliance costs and burdens on
institutions, since many institutions
proceeded with implementing the rule
based on the assumption that the
collected balance could be used in
computing the annual percentage yield
earned.
Use o f "Ledger” and “Collected"
Balance To Calculate the Annual
Percentage Yield Earned
The Board proposed to address a
second issue in Part II of Appendix A.
The annual percentage yield earned
reflects the relation between the amount
of interest earned and the account
balance for the period reflected on the
statement. The Board was previously
asked how the balance figure should be
determined when an institution uses a
'‘collected” balance method of accruing
interest.
The final rule issued in September
1992 allows institutions to accrue
interest using either the collected or
ledger balance method. In its January
proposal, the Board stated that
whichever method was used to accrue
interest, institutions should use the
ledger—and not the collected—balance
in the account for calculating the annual
percentage yield earned. The Board
noted its belief that using the ledger
balance for the periodic statement cycle
provides a more accurate yield figure
since it demonstrates the difference
(4) Regulatory Flexibility Analysis and
between institutions that accrue interest Paperwork Reduction Act
using a collected balance compared to
The change to the regulation is likely
those that use a ledger balance.
Many commenters expressed great
to have an insignificant impact on
concern over the Board’s proposed
institutions’ costs, including those of
position. They stated institutions that
small institutions.
accrue interest using the collected
(5) List of Subjects in 12 CFR Part 230
balance method do not have the
computer capability to use a ledger
Advertising, Banks, Banking,
balance for calculating the annual
Consumer protection, Deposit accounts,
percentage yield earned. They further
Interest, Interest rates, Federal Reserve
stated that developing such a capability System, Truth in savings.
would be expensive and could not be
done prior to the mandatory compliance
For the reasons set forth in the
date without substantial difficulty, if at
preamble, 12 CFR part 230 is amended
all. Some commenters noted that
as follows:
15081
PART 230-TRUTH IN SAVINGS
1. The authority citation for part 230
continues to read as follows:
Authority: 12 U.S.C. 4301 et. seq.
2. Section 230.2 is amended by
revising the last sentence in paragraph
(a) to read as follows:
$230.2
*
Definitions.
*
*
*
*
(a) * * * The term does not include
an existing account held by an
unincorporated nonbusiness association
of natural persons prior to June 21,
1993, unless the association notifies the
institution that it meets the definition of
"consumer.”
*
*
*
*
*
3. Section 230.4 is amended by
revising the first and second sentences
in paragraph (c)(1) to read as follows:
$ 230.4 Account disclosures.
*
* * * *
(c) * * * (1) * * * Depository
institutions shall provide a notice to
consumers who receive periodic
statements and who hold existing
accounts of the type offered by the
institution on June 21, 1993. The notice
shall be included on or with the first
periodic statement sent on or after June
21, 1993 (or on or with the first periodic
statement for a statement cycle
beginning on or after that date). * * *
* * * * *
4. Section 230.5 is amended by
revising paragraph (a)(2)(ii) to read as
follows:
$230.5 Subsequent disclosures.
(a) * * *
( 2)
*
*
*
(ii) Check printing fees. Changes in
fees assessed for check printing.
* * * * *
5. Section 230.8 is amended by
revising paragraph (e) to read as follows:
§ 230.8 Advertising.
*
* * * *
(e) Exemption for certain
advertisements.—-{I) Certain media. If
an advertisement is made through one
of the following media, it need not
contain the information in paragraphs
(c)(1), (c)(2), (c)(4), (c)(5), (c)(6)(ii).
(d)(4), and (d)(5) of this section:
(1) Broadcast or electronic media, such
as television or radio;
(ii) Outdoor media, such as billboards;
or
(iii) Telephone response machines.
(2) Indoor signs, (i) Signs inside the
premises of a depository institution (or
the premises of a deposit broker) are not
subject to paragraphs (b), (c), (d), or
15082
Federal Register / Vol. 58, No. 52 / Friday, March 19, 1993 / Rules and Regulations
(e)(1) of this section unless they face
outside the premises and can reasonably
be viewed by a consumer only from
outside the premises.
(ii) If a sign exempt by paragraph
(e)(2) of this section states a rate of
return, it shall:
(A) State the rate as an “annual
percentage yield,” using that term or the
term "APY.” The sign shall not state
any other rate, except that the interest
rate may be stated in conjunction with
the annual percentage yield to which it
relates.
(B) Contain a statement advising
consumers to contact an employee for
100
1
The annual percentage yield earned shall
further information about applicable
be calculated by using the following formulas
fees and terms.
6. In Appendix A to Part 230, Part II (“APY Earned" is used f c convenience in
the formulas):
is amended in the first paragraph
A. General form ula.
following the introductory text by
* * * * *
revising the text preceding the formula
and adding a heading for a new section
B. Special form ula fo r use where periodic
A immediately preceding the formula,
statem ent is sent m ore often than the period
fo r which interest is com pounded.
and by adding a new section B at the
Institutions that use the daily balance
end of the appendix to read as follows:
Appendix A to P art 230—A nnual Percentage
Yield Calculation
*
*
*
*
*
Part II, A nnual percentage yield earned fo r
periodic statem ents
(Interest eamed/Balance)
(Compounding)J OM'con'pounding) _ -jj
Days in period
“
The following definition applies for use in
this formula (all other terms are defined
under Part 11):
’‘Compounding" is the number of days in
each com pounding period.
{[’
APY Eamed=5.00%
By order of the Board of Governors of the
Federal Reserve System, March 12,1993.
Jennifer J. Johnson,
Associate Secretary o f the Board.
[FR Doc. 93-6326 Filed 3-18-93; 8:45 am)
The account has a daily balance of $1,000 for
a 30-day statement period. The interest
earned is $4.11 for the period, and the annual
percentage yield earned (using the special
formula above) is 5.00%:
Assume an institution calculates interest
for the statement period using the daily
balance method, pays a 5.00% interest rate,
compounded annually, and provides
periodic statements for each monthly cycle.
(4.11/1,000)
(365)
APY Earned=100 1 1 +
BILUNG CODE *210-01- P
m ethod to accrue interest and that issue
periodic statements more often than the
period for w hich interest is compounded
shall use the following special formula:
APY Earned=
30
j
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-1
j
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