The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FEDERAL RESERVE BANK
OF NEW YORK
[
Circular No. 10632
March 29, 1993
~|
j
TRUTH IN SAVINGS
— Amendments to Regulation DD
— Delay of Effective Date of Amendment to Regulation Q
To All Depository Institutions in the Second Federal
Reserve District, and Others Concerned:
The following statement has been issued by the Board of Governors of the Federal Reserve
System:
T h e F ederal R e se r v e B oard has p u b lish ed a fin al ru le am en d in g R eg u la tio n D D (Truth in S a v in g s)
to carry o u t recen t c h a n g es m ad e to the Truth in S a v in g s A ct b y th e H o u sin g and C o m m u n ity
D e v e lo p m e n t A ct o f 1 9 9 2 .
T h e law ex ten d s th e m andatory date for c o m p lia n c e w ith th e req u irem en ts o f th e Truth in S a v in g s
A ct b y three m o n th s, so that in stitu tio n s m u st c o m p ly b y June 2 1 , 1 9 9 3 , rather than M arch 2 1 , 1 9 9 3 .
T h e law a lso m o d ifie s th e a d v ertisin g ru les relatin g to sig n s on th e p r e m ise s o f an in stitu tio n , and m ak es
a tech n ica l c h a n g e to the p rovision d ea lin g w ith n o tic e s required to be g iv e n to e x is tin g a cco u n t h olders.
In a d d itio n , th e B oard is m ak in g tw o m in or c h a n g e s to the regu lation and p rovid in g g u id a n c e on
several is s u e s that h ave b een raised by in stitu tio n s sin c e p u b lication o f th e fin a l reg u la tio n in S ep tem b er
1992.
T h e B oard a lso is issu in g a tech n ica l am en d m en t to R eg u la tio n Q .
Enclosed, for depository institutions and others who maintain sets of the Board’s regulations,
are the texts of the amendments to Regulation DD and of a related change to the Board’s Regulation
Q (prohibiting the payment of interest on demand deposits), as published in the F ed era l R e g iste r
of March 19. Additional, single copies may be obtained at this Bank (33 Liberty Street) from the
Issues Division on the first floor, or by calling our Circulars Division (Tel. No. 212-720-5215 or
5216).
E.
G
erald
C
o r r ig a n
,
P resid en t.
Board of Governors of the Federal Reserve System
TEC H N IC AL A M EN D M E N T TO REGULATION Q
Delay of Effective Date of Prior Amendments
FEDERAL RESERVE SYSTEM
Development Act (HCDA), enacted in
October 1992 (Pub. L. 102-550, 106 Stat.
Patrick J. McDivitt, Staff Attorney, Legal 3672), amended the act by extending the
Division, Board of Governors of the
mandatory compliance date by three
Federal Reserve System, Washington,
months. In light of that delay, the Board
DC 20551, at (202) 452-3818; for the
is delaying the effective date of the
hearing impaired only, contact Dorothea advertising and other disclosure rules in
Thompson, Telecommunications Device Regulation Q from March 21,1993, to
June 21,1993, the new mandatory
for the Deaf, at (202) 452-3544.
compliance date for Regulation DD. (See
SUPPLEMENTARY INFORMATION:
Docket R-0791 elsewhere in today’s
(1) Background
Federal Register, which sets forth the
The Truth in Savings Act (Act) (12
amendments to Regulation DD.)
U.S.C 4301) directs the Board to issue
Institutions that begin compliance with
an implementing regulation, which
Regulation DD prior to the mandatory
compliance date may comply solely
shall apply six months after the final
with the advertising provisions of
regulation is issued. At the same time
Regulation DD, and not the advertising
the Board issued implementing
and disclosure provisions in Regulation
regulations on September 21,1992 (57
FR 43337), it amended Regulation Q (57 Q.
FR 43336) to provide that rules dealing
with advertising of deposit accounts
By order of the Board of Governors of the
were eliminated, effective March 21,
Federal Reserve System, March 1 2 ,19 9 3 .
1993. Regulation Qsets forth disclosure Jennifer J. Johnson,
and advertising rules for interest on
Associate Secretary of the Board.
deposits by member banks and certain
[FR Doc. 9 3 -6 3 2 5 Filed 3-18-93; 8.45 am]
other institutions.
FOR FURTHER INFORMATION CONTACT:
12CFR Part 217
[Regulation Q, Docket No. R-0775]
Prohibition Against the Payment of
Interest on Demand Deposits
Board of Governors of the
Federal Reserve System.
ACTION: Final rule; delay of effective
date.
AGENCY:
SUMMARY: T he Board is d elayin g the
effective date o f the final rule, p u b lish ed
on Septem ber 21,1992, w h ich am ended
R egulation Q in conjunction w ith its
am endm ents to Regulation DD, w h ich
im plem en ted the Truth in S avings Act.
D eletion o f the advertising rules in
R egulation Q is delayed by three m onths
u ntil June 21,1993. R egulation Q retains
provisions prohibiting the paym ent o f
interest on dem and deposits.
Effective March 19,
1993, the effective date for the
amendments to part 217 which were
published at 57 FR 43336 is delayed
EFFECTIVE DATE:
until June 21,1993.
T he H ou sin g and C om m unity
BILUNG CODE 8210-01-*!
PRINTED IN NEW YORK. FROM FEDERAL REGISTER. VOL. 58 NO. 52. p. 15076
IC. Cir. No. 10 6 3 2 ]
Friday
March 19, 1993
Vol. 58, No. 52
Pp. 15077-82
REGULATION DD —
TRUTH IN SAVINGS
E ffective M arch 21, 1993; com pliance optional
until June 21, 1993
[Enc. Cir. No. 10632]
Federal Register / Vol. 58, No. 52 / Friday, March 19, 1993 / Rules and Regulations t
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
SUPPLEM ENTARY 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 rules 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
12 CFR Part 230
depository institution, and modify the
[Regulation DD; Docket No. R-0791]
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 of Governors of the
published a proposal to implement
Federal Reserve System.
these amendments (58 FR 271). In
ACTION: Final rule.
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
Act by the Housing and Community
guidance on several issues raised by
Development Act of 1992. The law
institutions since adoption of the final
rules. The Board received 108
extends the mandatory date for
compliance with the requirements of the comments on the proposal. Based on a
Truth in Savings Act by three months,
review of the comments and further
so that institutions must comply by June analysis the Board is taking final action.
21.1993, rather than March 21,1993.
(2) Regulatory Provisions
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
15078
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 die
advertising provisions in Regulation DD
prior to June 21,1993, and not the
advertising and disclosure provisions in
Regulation Q.
Section 230.4—Account Disclosures
(c) Notice to Existing Account Holders
(1) Notice of availability of
disclosures. Action 957(b) of the HCDA
extended the mandatory compliance
date from 6 months to 9 months after
the Board’s issuance of a final rule. In
addition, section 1604(e) amended
section 266(e) of the Truth in Savings
Act to require that the notice to existing
account holders be sent “on or with the
first regularly scheduled mailing sent
after the end of the ‘6 month period’
beginning on the date of publication’’ of
the Board’s implementing regulations.
If the revisions to sections 957(b) and
1604(e) were read literally, institutions
would be required to provide the notice
to existing consumer account holders on
or with the first periodic statement sent
after March 21,1993, even though the
effective date has been delayed. The
Board believes the Congress intended to
grant institutions an additional three
months to comply with the disclosure
duty. The Board solicited comment on
amending § 230.4(c) of the regulation to
require that notice be given on or with
the first periodic statement sent on or
after the mandatory compliance date of
June 21,1993 (or the first periodic
statement for a statement cycle
beginning on or after that date).
Commenters urged the Board to adopt
this interpretation. They stated that a
notice to consumers before the June 21,
1993, mandatory compliance date
would be useless (and perhaps
confusing) since account disclosures
might not be available at depository
institutions. To facilitate compliance
and avoid consumer confusion, the
Board is exercising its exception
authority under section 269(a)(3) of the
act to extend the time to send notices to
existing account holders by three
months, to June 21,1993.
Section 230:5—Subsequent Disclosures
(a) Change in Terms
(2) No notice required.—(ii) Check
printing fees. The act and regulation
require depository institutions to
provide a 30-day advance notice to
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.
Commenters strongly supported
exempting all check printing fees from
the change in terms notice. Commenters
noted that these fees are based on the
style and quantity of checks ordered,
and the consumer has primary control
over such decisions. Consequently,
sending a change in terms notice for
such fees would provide minimal
benefit to consumers while imposing a
significant burden on institutions. The
final rule provides that a change in
terms notice is not required for any
increase in fees for printing checks. The
rule allows an institution to take
advantage of the exception even if it
adds a “mark-up” to the price charged
by the vendor before passing the fee on
to the consumer.
The Board also proposed that check
printing fees are not maintenance or
activity fees for purposes of the
advertising rules in § 230.8(a), whether
the institution or a third party imposes
the fee. Section 230.8(a) prohibits
institutions from advertising an account
as “ free” or “no cost” if any
“maintenance or activity” fee might be
imposed. The Board believes that check
printing fees are not maintenance or
activity fees even if imposed in whole
or in part by the institution.
Section 230.8—Advertising
(e) Exemption for Certain
Advertisements
Section 263 of the act was amended
by the HDCA to provide that if a rate is
displayed on a sign designed to be
viewed only from the interior of an
institution, the sign need only include
the annual percentage yield and a
statement advising consumers to ask
employees about fees and terms
applicable to the advertised account.
Such signs need not provide other
information required under section
263(a) of the act, such as the statement
that fees could reduce earnings on the
account.
The proposal provided for abbreviated
disclosure requirements for "lobby signs
facing inside” a depository institution
(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 were
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 axe 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 br anch can also
be seen by passersby. Such a sign would
be an exempt indoor sign.
The final regulation does not define
“lobby sign.” Most ccmmenters 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 ihe
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 bonus displayed on an
indoor sign that meets the test in section
230.8(e)(2)(i) would not trigger
additional disclosures.
Appendix A to Part 230—Annual
Percentage Yield Calculation
Additional Formula for Certain
Accounts
The Board solicited comment on
whether an additional formula should
be added to Appendix A, Part II, to
calculate the annual percentage yield
earned on the periodic statement for
accounts in certain cases. The Board
had received inquiries about the
applicability of die current formula in
certain situations. Institutions that use
the daily balance method to accrue
interest noted that if a periodic
statement is sent more frequently than
the period for which interest is
compounded, the annual percentage
yield earned could be higher than the
annual percentage yield provided in
advertisements and opening account
disclosures. This would be the case, for
example, when an institution uses the
daily balance method of accruing
interest and compounds interest
annually, but provides monthly periodic
statements. If an institution pays a 5%
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 ennual
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 re q u irin g
institutions and vendors to develop and
have in place a new formula by June 21,
1993, would be a significant burden,
and that institutions might not be able
to achieve full compliance by that date.
The Board believes it is essential for
institutions to calculate the annual
percentage yield earned in a way that
ensures information provided to
consumers is accurate and not
misleading. The Board agrees, however,
that mandating the use of this formula
as of June 21,1993, could impose a
substantial burden on institutions.
Therefore, the Board is using its
exception authority in section 269(a)(3)
of the act to provide a delay in the
mandatory compliance date. As
applicable, institutions will be required
to use this special formula beginning
with the first periodic statement sent on
or after December 21,1993 (or with the
first periodic statement for a statement
cycle beginning on or after that date).
For periodic statements sent prior to
that date institutions may utilize the
general formula provided in Appendix
A for computing the annual percentage
yield earned. The Board believes that an
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
for purposes of Regulation DD.
The 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
15060
Federal Register / Vol. 58, No. 52 / Friday, March 19, 1993 / Rules and Regulations
during the month. Many commenters
believed, however, that institutions
should not be precluded from treating
these Regulation £ 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
they generate.
The Board believes that a flexible
approach is desirable. Whether the
interim statement is deemed a
Regulation DD statement or not,
consumers will receiveiull disclosures
for all activity in the quarter. If the
institution opts to make Regulation DD
disclosures on the interim statement,
consumers benefit from receiving
account information sooner rather than
later. A flexible rule also minimizes the
burden of compliance on institutions
that already have their programs in
place and would otherwise be required
to make significant revisions to their
systems.
Therefore, consistent with the
proposal, institutions that regularly
provide quarterly statements need not,
but may, treat any monthly Regulation
E statements as periodic statements for
Regulation DD purposes. For
institutions that choose not to do so, the
quarterly statement must reflect the
innual percentage yield earned and
interest earned for the full quarter.
Institutions that use the average daily
jalance method and calculate interest
:or a period other than the statement
Deriod must use the special rule in
) 230.6(bJ.) If an institution chooses to
provide interest or rate information on
hese interim statements, however, the
statement would be deemed a
Regulation DD statement, and be subject
o the periodic statement disclosure
ules.
Institutions that treat Regulation E
tatements as Regulation DD periodic
itatements must provide information for
he period since the last statement was
ssued. For example, an institution may
ssue quarterly periodic statements in
darch, June, September, and December,
f the consumer initiates an electronic
und transfer in February, an interim
tatement would be provided. An
nstitution treating that February
tatement as a Regulation DD statement
oust reflect all interest earned and an
nnual percentage yield earned for the
>eriod since the previous DD statement
vas issued in December. Disclosures of
he interest earned and the annual
•ercentage yield earned on the next
tatement (March) would not repeat
nterest information disclosed on the
ebruary statement. Thus, the March
tatement would only reflect interest
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
or incorporate interest earned or the
annual percentage yield earned for
previous periods that have already been
disclosed.
The Board also solicited comment on
whether institutions should have to
redisclose fees on a quarterly statement
if the fees were reflected in a prior
monthly statement to comply with
Regulation E. Many commenters
believed that fees disclosed in the
monthly Regulation E statement should
not be repeated in the quarterly periodic
statement. These commenters were
concerned that consumers might be
confused if the same fees were disclosed
twice—once in the month the fee was
incurred and again on a quarterly
statement.
For institutions that issue a statement
to comply with the requirements of
Regulation E only, the Board believes
disclosing fees on the monthly
statement is sufficient and that the same
fees need not be redisclosed on the
quarterly statement. Institutions asked
how they should treat fees that are not
required to be disclosed on the interim
Regulation E statements (for example,
fees unrelated to electronic fund
transfers) but that the institution
provides on that statement. Fees (for
example, per check fees or stop payment
fees) disclosed on a monthly statement
need not be redisclosed on the quarterly
statement. On the other hand, if an
institution imposes such fees during the
period and does not disclose them on
the monthly statement, such fees must
be reflected on the quarterly statement
to meet the requirements of § 230.6.
Account Balance Information
Several commenters raised another
issue related to the definition of a
periodic statement Currently, many
institutions include on the periodic
statement for one account "status
information” for other accounts held at
the same institution. For example, a
monthly statement for a consumer’s
checking account may also provide the
account number and balance of the
consumer’s savings account. In
addition, a full periodic statement for
the savings account is sent on a
quarterly basis. Commenters stated that
providing balance information on the
periodic statement for another account
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
Use of “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
between institutions that accrue interest
using a collected balance compared to
those that use a ledger balance.
Many commenters expressed great
concern over the Board’s proposed
position. They stated institutions that
accrue interest using the collected
balance method do net have the
computer capability to use a ledger
balance for calculating the annual
percentage yield earned. They further
stated that developing such a capability
would be expensive and could not be
done prior to the mandatory compliance
date without substantial difficulty, if at
all. Some commenters noted that
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
sta te m e n t w ill reflect w h ic h e v e r m e th o d
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.
(4) Regulatory Flexibility Analysis and
Paperwork Reduction Act
The change to the regulation is likely
to have an insignificant impact on
institutions’ costs, including those of
small institutions.
(3) List of Subjects in 12 CFR Part 230
Advertising, Banks, Banking,
Consumer protection, Deposit accounts,
Interest, Interest rates, Federal Reserve
System, Truth in savings.
For the reasons set forth in the
preamble, 12 CFR part 230 is amended
as follows:
15081
PART 230— TRUTH IN SAVINGS
1. T h e a u th o r ity c ita tio n for part 2 3 0
c o n tin u e s to read as fo llo w s:
Authority:
12 U.S.C. 4301 et. seq.
2. S e c tio n 2 3 0 . 2 is a m e n d e d b y
r e v is in g th e la st s e n te n c e in paragraph
(a) to read a s fo llo w s:
$230.2
*
*
Definition*.
*
*
*
-I
(a)
* * * T h e term d o e s n o t in c lu d e
an e x is tin g a c c o u n t h e ld b y an
u n in c o r p o r a te d n o n b u s in e s s a s s o c ia tio n
o f n atu ral p e r so n s p rior to Ju n e 2 1 ,
1 9 9 3 , u n le s s th e a s s o c ia tio n n o tifie s th e
in s titu tio n th at it m e e ts th e d e fin itio n o f
“ c o n s u m e r .”
*
*
*
*
*
3. S e c tio n 2 3 0 . 4 is a m e n d e d b y
r e v is in g th e first a n d s e c o n d s e n te n c e s
in paragraph (c )(1 ) to read as fo llo w s:
$230.4
*
*
Account disclosures.
*
*
*
(c)
* * * (1 ) * * * D e p o sito r y
in s titu tio n s s h a ll p r o v id e a n o tic e to
c o n su m e r s w h o r e c e iv e p e r io d ic
sta te m e n ts an d w h o h o ld e x is tin g
a c c o u n ts o f th e ty p e o ffered b y th e
in s titu tio n on June 2 1 , 1 9 9 3 . T h e n o tic e
s h a ll b e in c lu d e d on or w ith th e first
p e r io d ic sta te m e n t se n t o n or after June
2 1 , 1 9 9 3 (or o n or w ith th e first p e r io d ic
sta te m e n t for a sta te m e n t c y c le
b e g in n in g on or after th at d ate). * * *
*
*
*
*
*
4. S e c tio n 2 3 0 .5 is a m e n d e d by
r e v is in g paragraph (a )(2 )(ii) to read as
fo llo w s:
$ 230.5
Subsequent disclosures.
(a) * * *
( 2) * * *
(ii)
Check printing fees. C h an ges in
fe e s a s s e s s e d for c h e c k p rin tin g.
*
*
*
*
*
5. S e c tio n 2 3 0 . 8 is a m e n d e d by
r e v is in g paragraph (e) to read as fo llo w s
$ 230.8
*
*
Advertising.
*
*
*
(e)
Exemption for certain
advertisements.—(1 ) Certain media.
If
an a d v e r tise m e n t is m a d e th rou gh o n e
o f th e fo llo w in g m e d ia , it n e e d n o t
c o n ta in th e in fo r m a tio n in p aragraphs
(c ) (1 ), (c )(2 ), (c )(4 ), (c )(5 ), (c )(6 )(ii).
(d ) (4), a n d (d )(5 ) o f th is section :
(1) B ro a d ca st or e le c tr o n ic m ed ia , sue!
as t e le v is io n or radio;
(ii) O u td o o r m e d ia , su c h as b illb oard s
cr
(iii) T e le p h o n e r e sp o n s e m a c h in e s.
(2 ) In d o o r sig n s, (i) S ig n s in s id e th e
p r e m ise s o f a d e p o sito r y in s titu tio n (or
th e p r e m ise s o f a d e p o s it broker) are n o
su b ject to p aragrap h s (b), (c), (d ), or
15002
,Federal Register / Vol. 58, No. 52 / Friday, March 19, 1993 / Rules and Regulations
(e)(1) of this section unless they face
Dutside 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
ierm "APY.” The sign shall not state
my other rate, except that the interest
rate may be stated in conjunction with
he annual percentage yield to which it
•elates.
(B) Contain a statement advising
:onsumers to contact an employee for
(1
lOOi
1+
The following definition applies for use in
his formula (all other terms are defined
rnder Part II):
'Compounding” is the number of days in
each com pounding period.
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 fc- convenience in
the formulas):
is amended in the first paragraph
A. General formula.
following the introductory text by
revising the text preceding the formula
and adding a heading for a new section
B. Special formula for use where periodic
A immediately preceding the formula,
statement is sent more often than the period
and by adding a new section B at the
for which interest is compounded.
end of the appendix to read as follows:
Institutions that use the daily balance
*
Appendix A to Part 230—A nnual Percentage
Yield Calculation
*
*
*
*
*
Part II. Annual percentage yield earned for
periodic statements
*
*
m ethod to accrue interest and that issue
periodic statem ents more often than the
period for w hich interest is com pounded
shall use the following special formula:
APY Earned=
(Compounding) (365Compoundi ng)
Days in period
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.
/ ,
)
11 1 000
([■*-
30
(3 6 5)
APY Earned=5.00%
By order of the Board of Governors of the
Federal Reserve System, March 1 2 ,1 9 9 3 .
Jennifer J. Johnson,
Associate Secretary of the Board.
IFR Doc. 9 3 -6 3 2 6 Filed 3 -1 8 -9 3 ; 8:45 am]
BILUNG CODE 6210-01-P
*
J
(Interest eamed/Balance)
APY Earned=100
*
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%:
J<***“>-lj
@FedFRASER