View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

l l★K

Federal Reserve Bank
of Dallas

DALLAS, TEXAS
75265-5906

September 20, 1999
Notice 99-80

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

SUBJECT
Interim Rule to Regulation DD
(Truth in Savings)
DETAILS
The Board of Governors of the Federal Reserve System has published an interim rule
amending Regulation DD, which implements the Truth in Savings Act. The interim rule allows
depository institutions to deliver disclosures on periodic statements in electronic form, if the
consumer agrees. The rule was adopted in response to comments received on a proposed rule
issued in March 1998, allowing depository institutions to provide all disclosures under Regulation DD in electronic form.
ATTACHMENT
A copy of the Board’s notice as it appears on pages 49846–48, Vol. 64, No. 177 of the
Federal Register dated September 14, 1999, is attached.
MORE INFORMATION
For more information, please contact Eugene Coy in the Banking Supervision Department at (214) 922-6201. For additional copies of this Bank’s notice, contact the Public Affairs
Department at (214) 922-5254.

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.

federal register

Tuesday
September 14, 1999

Part II

Federal Reserve
System
12 CFR Part 230
Truth in Savings; Final Rule

49846

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Rules and Regulations

FEDERAL RESERVE SYSTEM
12 CFR Part 230
[Regulation DD; Docket No. R–1003]

Truth in Savings
Board of Governors of the
Federal Reserve System.
ACTION: Interim rule.
AGENCY:

SUMMARY: The Board is publishing an
interim rule amending Regulation DD,
which implements the Truth in Savings
Act. The interim rule allows depository
institutions to deliver Regulation DD
disclosures on periodic statements in
electronic form if the consumer agrees.
This interim rule is adopted in response
to comments received on a proposed
rule issued in March 1998, allowing
depository institutions to provide all
disclosures under Regulation DD in
electronic form. Elsewhere in today’s
Federal Register, the Board is
publishing, for further comment, a
modified proposal covering all
Regulation DD disclosures.
EFFECTIVE DATE: September 1, 1999.
FOR FURTHER INFORMATION CONTACT: Jane
Ahrens, Senior Counsel, or Michael
Hentrel, Staff Attorney, Division of
Consumer and Community Affairs,
Board of Governors of the Federal
Reserve System, Washington, DC 20551,
at (202) 452–3667 or 452–2412. Users of
Telecommunications Device for the Deaf
(TDD) only, contact Diane Jenkins at
(202) 452–3544.
SUPPLEMENTARY INFORMATION:

I. Background
The Truth in Savings Act (TISA), 12
U.S.C. 4301 et seq., requires depository
institutions to disclose to consumers
yields, fees, and other terms concerning
deposit accounts 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.
The TISA and Regulation DD require
a number of disclosures to be provided
in writing, presuming that institutions
provide paper documents. Under many
laws that call for information to be in
writing, information in electronic form
is considered to be ‘‘written.’’
Information produced, stored, or
communicated by computer is also
generally considered to be a writing,
where visual text is involved.
In May 1996, the Board proposed to
amend Regulation E (Electronic Fund

Transfers) to permit disclosures to be
provided electronically (61 FR 19696,
May 2, 1996). Based on the comments
received on that proposal and further
analysis, in March 1998 the Board
proposed to amend four of its other
regulations to allow institutions to
provide disclosures electronically:
Regulation DD (63 FR 14533, March 25,
1998), Regulation B (Equal Credit
Opportunity; 63 FR 14552), Regulation
M (Consumer Leasing; 63 FR 14538),
and Regulation Z (Truth in Lending; 63
FR 14548) (collectively, the ‘‘March
1998 proposed rules’’). In March 1998
the Board also issued an interim rule
under Regulation E so that financial
institutions could implement systems,
such as home-banking programs, to
provide account information
electronically (63 FR 14528, March 25,
1998).
The March 1998 proposed rules and
the interim rule permitted financial
institutions to provide disclosures
electronically if the consumer agreed,
with few other requirements. The rule
was intended to provide flexibility and
did not specify any particular method
for obtaining a consumer’s agreement.
Whether the parties had an agreement
would be determined by state law. The
proposals and the interim rule did not
preclude a financial institution and a
consumer from entering into an
agreement electronically, nor did they
prescribe a formal mechanism for doing
so.
The Board received approximately
200 written comments on the interim
rule and the March 1998 proposed rules.
The majority of comments were
submitted by financial institutions and
their trade associations. Industry
commenters generally supported the use
of electronic communication to deliver
information required by the TISA and
Regulation DD. Nevertheless, many
sought specific revisions and additional
guidance on how to comply with the
disclosure requirements in particular
transactions and circumstances.
Industry commenters were especially
concerned about the condition that the
consumer had to ‘‘agree’’ to receive
information by electronic
communication, because the rule did
not specify a method for establishing
that an ‘‘agreement’’ was reached. These
commenters believed that relying on
state law created uncertainty about what
constitutes an agreement and, therefore,
potential liability for noncompliance.
To avoid uncertainty over which state’s
laws apply, some commenters urged the
Board to adopt a federal minimum
standard for agreements or for informed
consent to receive disclosures by
electronic communication. These

commenters believed that such a
standard would avoid the compliance
burden associated with tailoring legally
binding ‘‘agreements’’ to the contract
laws of all jurisdictions where
electronic communications may be sent.
Consumer advocates generally
opposed the March 1998 interim rule
and the proposed rules. Without
additional safeguards, they believed,
consumers may not be provided with
adequate information about electronic
communication before an ‘‘agreement’’
is reached. They also believed that
promises of lower costs could induce
consumers to agree to receive
disclosures electronically without a full
understanding of the implications. To
avoid such problems, they urged the
Board, for example, either to require
institutions to disclose to consumers
that their account with the institution
will not be adversely affected if they do
not agree to receive electronic
disclosures, or to permit financial
institutions to offer electronic
disclosures only to consumers who
initiate contact with the institution
through electronic communication.
They also noted that some consumers
will likely consent to electronic
disclosures believing that they have the
technical capability to retrieve
information electronically, but might
later discover that they are unable to do
so. They questioned consumers’
willingness and ability to access and
retain disclosures posted on Internet
websites, and expressed their
apprehension that the goals of federally
mandated disclosure laws will be lost.
After careful consideration of the
comments and further analysis, the
Board is requesting comment on a
modified rule under Regulation DD as
well as the other four regulations
(including Regulation E). The proposed
amendments to Regulation DD and the
other four regulations are published
elsewhere in today’s Federal Register.
The Board is also issuing this interim
rule under Regulation DD, pursuant to
its authority under section 269 of the
TISA, permitting depository institutions
to deliver Regulation DD disclosures on
periodic statements in electronic form,
as discussed below.
II. Regulatory Revisions
Some depository institutions are
prepared to offer on-line banking
programs that would include the
electronic delivery of periodic
statements and other material now
provided in paper form. These
institutions have urged the Board to
move forward with the electronic
communication rulemakings, to
facilitate the development of electronic

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Rules and Regulations
commerce and enable them to realize
cost savings by reducing or eliminating
paper disclosures. Institutions have also
requested that, pending the issuance of
final rules, the Board adopt interim
rules.
Based on the comments received and
further analysis, the Board is issuing an
interim rule allowing the issuance of
periodic statements under Regulation
DD. The electronic delivery of periodic
statements for consumer asset accounts
is already permissible under the
Regulation E interim rule issued in
March 1998. Institutions commonly
provide a single periodic statement that
complies with Regulation E and
Regulation DD; thus, the issuance of a
comparable interim rule for periodic
statements under Regulation DD should
allow institutions to implement
electronic delivery of deposit account
statements with a single set of
procedures, and avoid the cost of
printing and mailing the information in
paper form. In addition to reducing
paperwork and costs for institutions, the
interim rule may benefit many
consumers by allowing them to receive
their periodic account statements,
including required disclosures, more
quickly and in a more convenient form.
In addition to reducing paperwork and
costs for institutions, the interim rule
may benefit many consumers by
allowing them to receive their periodic
account statements, including required
disclosures, more quickly and in a more
convenient form. The Regulation DD
interim rule follows the approach of the
Regulation E interim rule.
Electronic delivery of periodic
statements for open-end consumer
credit accounts is currently permitted
under the Board’s Official Staff
Commentary to Regulation Z, comment
5(b)(2)(ii)–3. Thus, an institution that
issues combined periodic statements,
covering deposit accounts along with
open-end credit accounts (such as for
overdrafts), can use electronic delivery
for the combined statements and be in
compliance with Regulations E, DD, and
Z.
The interim rule under Regulation DD
is limited to the electronic delivery of
periodic statements. Other disclosures
required by Regulation DD, such as
account-opening disclosures and
change-in-terms notices, are addressed
in the modified proposals being
published for comment. Additional
public comment would be useful before
a rule is issued permitting electronic
delivery more generally. Institutions
that opt to deliver periodic statements
electronically are encouraged to test the
approach outlined in the modified
proposals; this may be helpful in

assessing how well the modified
proposals will work in practice.
The interim rule for Regulation DD
incorporates various requirements set
forth in the March 1998 proposed rule
and in the Regulation E interim rule. For
example, the periodic statement must be
provided in a form that can be displayed
as visual text, and must be clear and
conspicuous and in a form that the
consumer can retain. With regard to the
rule that the consumer must agree to
electronic delivery, the reference to state
law is not intended to require a formal
contract. The Board believes, however,
that consumers should be clearly
informed when they are consenting to
the electronic delivery of Regulation DD
periodic statements.
Comment 2(q)–1(ii) in the Regulation
DD Official Staff Commentary states that
a periodic statement does not include
‘‘information provided by computer
through home banking services.’’ Prior
to the adoption of this interim rule, if a
depository institution provided account
information electronically that might be
deemed to constitute a periodic
statement as defined in Regulation DD,
the institution could not comply with
the regulation by including the
disclosures required by § 230.6 in the
information provided electronically;
rather, it would have to send paper
periodic statements including the
required disclosures. The comment was
intended to avoid this result. Because
electronic delivery of statements,
including the required disclosures, will
now be permissible, the comment
appears to be unnecessary. In the
modified proposal under Regulation DD,
published elsewhere in today’s Federal
Register, the Board proposes to delete
the comment.
III. Regulatory Flexibility Analysis
In accordance with section 3(a) of the
Regulatory Flexibility Act, the Board
has reviewed the interim rule to
Regulation DD. Overall, the
amendments are not expected to have
any significant impact on small entities.
A depository institution’s use of
electronic communication to provide
disclosures required by the regulation is
optional. The rule will relieve
compliance burden by giving depository
institutions flexibility in providing
disclosures.
IV. 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 interim rule under the
authority delegated to the Board by the
Office of Management and Budget
(OMB). The Federal Reserve may not

49847

conduct or sponsor, and an organization
is not required to respond to, this
information collection unless it displays
a currently valid OMB number. The
OMB control number for this interim
rule is 7100–0271.
The collection of information
requirements that are relevant to this
interim rule are found in 12 CFR part
230. This information is mandatory (15
U.S.C. 4301 et seq.) to ensure adequate
disclosure of basic terms, costs, and
rights relating to services affecting
consumers holding deposit accounts
and receiving certain disclosures by
electronic communication. (12 CFR
230.6). Institutions are also required to
retain records for 24 months. The
respondents/recordkeepers are for-profit
depository institutions, including small
businesses. 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 imposed by
this regulation.
Since the interim amendments
provide an alternative method for
delivering periodic statements, it is
anticipated that the requirements will
not be burdensome. The use of
electronic communication will likely
reduce the paperwork burden of
depository institutions. Institutions will
be able to use electronic communication
to provide periodic statements rather
than having to print and mail the
information in paper form. There is
estimated to be no additional annual
cost burden and no capital or start-up
cost.
With respect to the existing
requirements of Regulation DD as they
apply to state member banks, it is
estimated that there are 988
respondents/recordkeepers and an
average frequency of about 87,100
responses per respondent each year, and
the current amount of annual burden is
estimated to be roughly 1,464,000 hours.
Because the information is not
provided to the Federal Reserve, no
issue of confidentiality under the
Freedom of Information Act arises;
however, the information may be
protected from disclosure under
exemptions (b)(4), (6), and (8) of the
Freedom of Information Act (5 U.S.C.
522(b)(4), (6), and (8)). The disclosures
are confidential between institutions
and the customer.
The Board has a continuing interest in
the public’s opinions of the Federal
Reserve’s collections of information. At

49848

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Rules and Regulations

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 the Office of
Management and Budget, Paperwork
Reduction Project (7100–0271),
Washington, DC 20503, with copies of
such comments sent to Mary M. West,
Federal Reserve Board Clearance
Officer, Division of Research and
Statistics, Mail Stop 97, Board of
Governors of the Federal Reserve
System, Washington, DC 20551.
List of Subjects in 12 CFR Part 230
Advertising, Banks, banking,
Consumer protection, Federal Reserve
System, Reporting and recordkeeping
requirements, Truth in savings.

Text of Revisions
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. Under § 230.6, a new paragraph (c)
is added to read as follows:
§ 230.6 Periodic statement disclosures.

*

*
*
*
*
(c) Electronic communication. (1)
Definition. The term electronic
communication means a message
transmitted electronically between a
consumer and a depository institution

in a format that allows visual text to be
displayed on equipment such as a
personal computer monitor.
(2) Electronic communication between
depository institution and consumer. A
depository institution and a consumer
may agree that the institution will send
by electronic communication periodicstatement disclosures required by
§ 230.6. Periodic-statement disclosures
sent by electronic communication to a
consumer must comply with § 230.3 and
any applicable timing requirements
contained in this part.
By order of the Board of Governors of the
Federal Reserve System, August 31, 1999.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 99–23136 Filed 9–13–99; 8:45 am]
BILLING CODE 6210–01–P

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