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FEDERAL RESERVE BANK OF NEW YORK No. 8 9 3 1 "1 LCircular October 8, 1980 J r AD VERTISIN G OF N O W ACCOUNTS To All State Member Banks, and Others Concerned, in the Second Federal Reserve District: The Board of Governors of the Federal Reserve System, in conjunction with the other Federal regulators o f banks and thrift institutions that offer N O W accounts, has adopted a policy statement concerning the advertising of such accounts. The text of the statement is printed below. Questions on this matter may be directed to our Regulations Division (T el. No. 2 1 2 -7 9 1 -5 9 1 4 ). A n th o n y M. S o l o m o n , President. Policy Statement Regarding Advertising of N O W Accounts The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corpora tion, the Federal Home Loan Bank Board and the Office of the Comptroller of the Currency (here after “ the agencies” ) wish to remind commercial banks and thrift institutions under their jurisdic tion that any such institution offering or preparing to offer negotiable order of withdrawal (N O W ) accounts must adhere to the advertising require ments applicable to all interest or dividend earn ing accounts when marketing N O W accounts. These basic advertising requirements appear in Section 217.6 of the Federal Reserve’s Regulation O (12 C FR 217.6) with respect to all Federal R e serve System member banks, including all national banks; Section 329.8 of the F D IC Rules and R eg ulations (12 C F R 329.8) for all F D IC insured nonmember institutions; and Section 526.6 of the F H L B B ’s Regulations for the Federal Home Loan Bank System (12 C F R 526.6) and Section 563.27 of the Federal Savings and Loan Insurance Corporation’s Regulations (12 C F R 563.27) with respect to all savings institutions chartered by the F H L B B , insured by the F S L IC , or which are otherwise members of the Federal Home Loan Bank System. The agencies recognize that those institutions receiving N O W account authority for the first time on December 31, 19801 may engage in advance N O W account promotional programs and may offer accounts that will be converted to N O W accounts on December 31, 1980. In this connection, the agencies draw special attention to the regulaLory requirements that no representation (e.g., 1 N O W accounts are currently authorized only in the six New England states and in New York and New Jer sey. Title III of the Depository Institutions Deregulation and Monetary Control Act of 1980 (P.L. 96-221, 94 Stat. 146) provides nationwide N O W account authority, effec tive December 31, 1980. any advertisement, announcement, solicitation, etc.) made with respect to an interest or dividend earning account, such as a N O W account, may be inaccurate or misleading or misrepresent the ac count contract or service being offered. Consistent with these regulatory requirements, any advertise ments or promotional materials issued before De cember 31, 1980 for N O W accounts or accounts that will be converted to N O W accounts should prominently indicate that, under Federal law, N O W account services are not available before December 31, 1980. Institutions receiving N O W account authority on December 31, 1980 should ensure that all ad vertisements or promotional materials accurately describe the nature of the service to be offered on or after December 31, 1980. In this regard, ac counts that will be converted to N O W accounts should not be characterized, prior to their conver sion, as N O W accounts or described in such a way as to imply that the accounts are interest-bear ing accounts upon which negotiable or transferable orders of withdrawal may be drawn. Institutions also are reminded that, if a specific rate of interest (o r dividends) to be paid on a N O W account is advertised, such advertisements must comply with the provisions of the agencies’ regulations regarding the advertising of interest on deposits. In addition, if conditions or charges will be imposed on the account, that fact should be disclosed in the advertisement or promotional material. Consistent with the agencies’ regulations, an institution should inform its customer not later than the time a N O W account is opened, or an existing account is converted to a N O W account, of the method that will be used in computing and paying interest on the account, including conditions that must be satisfied to earn a stated return and charges that may be assessed against the account.
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