Truth in Savings

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 707

Truth in Savings

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule; corrections and correcting amendments.

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SUMMARY: The National Credit Union Administration is amending part 707

of the NCUA Rules and Regulations (``part 707''), which implements the

Truth in Savings Act for credit unions. The effective date for part 707

is January 1, 1995. This document extends the compliance date for

nonautomated credit unions that have assets of $1 million or less as of

December 31, 1993. The extensions give the smaller nonautomated credit

unions time needed to come into compliance with part 707. The

extensions also give NCUA additional time to assist the smaller

nonautomated credit unions with compliance issues. This document also

contains clarifications, technical amendments and revisions to part

707.

DATES: Effective Date: This document is effective January 1, 1995.

Sections 707.3--707.9 contain information collection requirements that

are not effective until approved by the Office of Management and

Budget. When approval is received, NCUA will publish a document

announcing the effective date.

Compliance Dates: The compliance date of part 707 is extended to

March 31, 1995, for credit unions of an asset size between $500,000 and

$1 million as of December 31, 1993, that are not automated. The

compliance date of part 707 is extended to June 30, 1995, for credit

unions of an asset size of less than $500,000 as of December 31, 1993,

that are not automated. The compliance date for all other credit unions

remains January 1, 1995.

FOR FURTHER INFORMATION CONTACT: Martin S. Conrey, Staff Attorney,

Office of General Counsel, National Credit Union Administration, 1775

Duke Street, Alexandria, VA 22314-3428, or telephone (703) 518-6540.

SUPPLEMENTARY INFORMATION:

Background

NCUA's final part 707, published September 27, 1993 (58 FR 50394),

which is the subject of these revisions, implements the Truth in

Savings Act (12 U.S.C. 4301 et seq.). The final regulation and the

Truth in Savings Act require credit unions to disclose fees, dividend

and interest rates and other terms concerning share and deposit

accounts, and limit the methods by which credit unions determine the

balance on which dividends are calculated.

Need for Technical Amendments

As published, the Supplementary Information to the final rule, the

final rule, and appendix B to the final rule contained several drafting

and technical errors that are confusing or erroneous, and need to be

clarified.

Need for Extensions of Compliance Date

Since the Truth in Savings Act was enacted in 1991, NCUA has been

studying the effects it might have upon small credit unions. NCUA has

determined that there are at least 1,299 credit unions under $1 million

in assets that have no computers or in-house data processing

capability. Of these credit unions, approximately 977 have less than

$500,000 in assets and approximately 322 have between $500,000 and $1

million in assets. The NCUA Board has determined that these small,

nonautomated credit unions will need more time to comply with the Truth

in Savings rule than other credit unions. An extended compliance date

for these credit unions will enable NCUA and other interested parties

to complete the extensive training and preparation that will be

necessary to ensure that these credit unions comply with part 707 by

the extended compliance dates. This action is being taken to preserve,

educate, and possibly automate (by providing access to minimal cost

computer hardware, software and services) many of these small credit

unions; ensure compliance with Truth in Savings at the earliest

possible date; assist administrative convenience; reduce the risk of

potential losses to the National Credit Union Share Insurance Fund;

enable credit union data processing vendors to assist larger credit

unions in Truth in Savings compliance, thus avoiding a potential

shortage of credit union data processors if many of the small credit

unions automate; and to allow time for coordination in this effort

among NCUA, affected credit unions, data processors and other

interested parties.

NCUA intends to use the December 31, 1993, NCUA Form 5300 report to

determine the requisite nonautomation status and asset size for those

credit unions filing Form 5300 reports that are eligible for the

extensions in required compliance. Credit unions which do not file Form

5300 reports will be permitted to prove nonautomation status and asset

size by other means. NCUA will consider verified self-certifications,

certifications by appropriate state supervisory authorities, and other

equivalent forms of proof as sufficient for eligibility for the

extensions by these non-federally insured credit unions.

Need for Final Extensions and Amendments; Voluntary Compliance

The extensions and amendments made to this part are not subject to

the notice and comment provisions of the Administrative Procedure Act

(the ``APA''), 5 U.S.C. 551 et seq. The extensions relate to a few

credit unions that need more assistance in complying with part 707. The

amendments relate merely to technical amendments, clarifications and

revisions designed to eliminate confusion. No major changes are

contemplated, or made, by these revisions. Also, even though the

mandatory effective date for most credit unions is January 1, 1995,

many credit unions are proceeding with plans for early voluntary

compliance with part 707. Any notice and comment proceedings on these

minor changes would hinder these credit unions from these plans. Early

compliance will benefit members of those credit unions. Therefore, the

NCUA Board has determined that, in this case, the APA notice and

comment procedures for these extensions and amendments are

impracticable, unnecessary, and contrary to the public interest. 5

U.S.C. 553(b)(3)(B).

List of Subjects in 12 CFR Part 707

Advertising, Credit unions, Consumer protection, Interest, Interest

rates, Truth in savings.

For the reasons set forth above the following changes are made to

12 CFR part 708 as indicated below:

PART 707--TRUTH IN SAVINGS

Preamble Corrections

The final rule published in the Federal Register of September 27,

1993 (58 FR 50394) is corrected as follows:

1. On page 50404, in the first column, under the heading Paragraph

(q)--Member, in the third full paragraph, the seventh sentence is

corrected to read as follows: ``The Board adopts this approach, and

finds that it would not cover persons holding trust, estate and court-

ordered accounts, and other accounts held in a professional capacity.''

2. On page 50421, in the third column, under the heading Timing and

format requirements, in the first paragraph, in the third sentence, the

date ``July 15'' is corrected to read ``January 15.''

3. On page 50424, in the first column, under the heading

Alternative timing rule, in the first paragraph, in the second

sentence, the term ``time accounts'' is corrected to read ``term share

accounts.''

4. On page 50431, in the second column, the heading Tiered rate

accounts is corrected by adding a hyphen between ``tiered'' and

``rate'' to read ``Tiered-rate accounts.''

5. On page 50435, in the first column, under the heading

Advertising `Free' Accounts, in the first paragraph, the fourth, fifth,

sixth and seventh sentences are corrected to read as follows: ``To be

consistent with the FRB, which limited the prohibition to ``regular''

transaction or service fees, the final rule limits the scope of a

maintenance or activity fee to such charges as, for example, periodic

service charges and fees imposed to deposit, withdraw or transfer funds

(including per share draft or check charges and fees to use the credit

union's ATMs). A maintenance fee also includes fees imposed if a

minimum balance requirement is not met or if a transaction limit is

exceeded. A maintenance or activity fee does not include fees imposed

by a third party to print share drafts or checks for an account; stop

payment fees; fees for copies of share drafts or checks; fees for

checks returned for insufficient funds; or fees unrelated to the

account such as a fee for purchasing a cashier's check or traveler's

checks.''

6. On page 50436, in the third column, under the heading Paragraph

(c)(5)--Effect of fees, the first paragraph is corrected by adding a

new fourth sentence (after the third sentence) to read as follows: ``In

order to be consistent with the FRB, the Board has decided to limit the

scope of the disclosure to the imposition of maintenance and activity

fees alone.''

Correcting Amendments

1. The authority citation for part 707 continues to read as

follows:

Authority: 12 U.S.C. 4311.

Sec. 707.2 [Corrected]

2. In Sec. 707.2, paragraph (r) is amended by adding a hyphen

between ``non'' and ``dividend'' in the term ``nondividend.''

3. In Sec. 707.8, paragraph (c)(5), is revised to read as follows:

Sec. 707.8 Advertising.

* * * * *

(c) * * *

(5) A statement that fees could reduce the earnings on the account.

* * * * *

4. In Sec. 707.9, paragraph (b) is revised to read as follows:

Sec. 707.9 Enforcement and record retention.

* * * * *

(b) Section 271 of TISA (12 U.S.C. 4310) contains the provisions

relating to civil liability for failure to comply with the requirements

of TISA and this regulation.

* * * * *

Appendix B [Corrected]

5. In section B-1, paragraph (a)(iv), in the model clause entitled

3. Other Dividend-bearing Accounts, Tiering Method A, in paragraph

``1*'', the second sentence is amended by removing the phrase ``on your

account'' at the end of the sentence.

6. In section B-1, paragraph (a)(iv), in the model clause entitled

3. Other Dividend-bearing Accounts; Tiering Method A, in paragraph

``2*'', the second sentence is amended by removing the phrase ``on your

account'' at the end of the sentence.

7. In section B-1, paragraph (a)(iv), in the model clause entitled

3. Other Dividend-bearing accounts; Tiering Method A, in paragraph

``3*'', the first and second sentences are revised to read as follows:

``[As of the last dividend declaration date/ (date)], if your

[daily balance/average daily balance] was $______ or less, the dividend

rate paid on the entire balance in your account will be ______% with an

annual percentage yield (APY) of ______%. /or If your [daily balance/

average daily balance] is $______ or less, the prospective dividend

rate of ______% will be paid on the entire balance in your account with

a prospective annual percentage yield (APY) of ______% for this

dividend period.''

8. In section B-1, paragraph (a)(iv), in the model clause entitled

3. Other Dividend-bearing Accounts; Tiering Method B, in paragraph

``3*'', the second sentence is revised to read as follows:

``/or If your [daily balance/average daily balance] was $______ or

less, the prospective dividend rate paid on the entire balance in your

account will be ______% with a prospective annual percentage yield

(APY) of ______% for this dividend period.''

9. In section B-1, the heading for paragraph (f), is amended by

adding a parenthesis before the citation Sec. 704.4(b)(3)(iii).

10. In section B-6, under the heading Regular Share Account

Disclosures, in the first paragraph entitled 1. Rate information, the

second sentence is amended by removing the phrase ``on your share

account'' at the end of the sentence.

11. In section B-6, under the heading Regular Share Account

Disclosures, the first paragraph entitled 1. Rate information, is

amended by adding a third sentence (after the second sentence) to read

as follows:

``The dividend rate and annual percentage yield may change every

quarter as determined by the credit union board of directors.''

12. In section B-6, under the heading Regular Share Account

Disclosures, in the sixth paragraph entitled 6. Fees and charges, item

(e) is revised to read as follows:

``Minimum balance service fee--$5.00 per quarter.''

13. In section B-8, under the heading Money Market Share Account

Disclosures, in the sixth paragraph entitled 6. Fees and charges, items

(e), (h) and (i) are revised to read as follows:

``(e) Minimum balance service fee--$5.00 per (time period).

* * * * *

(h) Certified checks--$5.00 per check.

(i) Stop Payment Order--$5.00 per order''.

14. In section B-9, under the heading Term Share (Certificate)

Account Disclosures, in the first paragraph entitled 1. Rate

information, the first sentence is revised to read as follows:

``[Repeat rates disclosed on face of term share certificate, see

Sec. B-5, Sample Form (Term Share (Certificate) Account)].''

15. In section B-9, under the heading Term Share (Certificate)

Account Disclosures, the twelfth paragraph entitled 12. Nature of

dividends, is removed and reserved.

16. In section B-11, under the heading Rate and Fee Schedule, under

the subheading Regular Share, the entry ``Dividend Rate as of Last

______% Dividend Declaration Date.'' is revised to read as follows:

``Dividend Rate as of Last Dividend Declaration Date ______%.''

17. In section B-11, under the heading Rate and Fee Schedule, under

the subheading Regular Share, the entry ``Annual Percentage Yield as of

______% Last Dividend Declaration Date.'' is revised to read as

follows:

``Annual Percentage Yield as of Last Dividend Declaration Date

______%.''

18. In section B-11, under the heading Rate and Fee Schedule, under

the subheading Regular Share, the entry ``Prospective Annual Percentage

______% Yield.'' is revised to read as follows:

``Prospective Annual Percentage Yield ______%.''

19. In section B-11, under the heading Rate and Fee Schedule, under

the subheading Share Draft, the entry ``Dividend Rate as of Last

______% Dividend Declaration Date.'' is revised to read as follows:

``Dividend Rate as of Last Dividend Declaration Date ______%.''

20. In section B-11, under the heading Rate and Fee Schedule, under

the subheading Share Draft, the entry ``Annual Percentage Yield as of

______% Last Dividend Declaration Date.'' is revised to read as

follows:

``Annual Percentage Yield as of Last Dividend Declaration Date

______%.''

21. In section B-11, under the heading Rate and Fee Schedule, under

the subheading Share Draft, the entry ``Prospective Annual Percentage

______% Yield.'' is revised to read as follows:

``Prospective Annual Percentage Yield ______%.''

22. In section B-11, under the heading Rate and Fee Schedule, under

the subheading Money Market, the entry ``Dividend Rate as of Last

______% Dividend Declaration Date.'' is revised to read as follows:

``Dividend Rate as of Last Dividend Declaration Date ______%.''

23. In section B-11, under the heading Rate and Fee Schedule, under

the subheading Money Market, the entry ``Annual Percentage Yield as of

______% Last Dividend Declaration Date.'' is revised read as follows:

``Annual Percentage Yield as of Last Dividend Declaration Date

______%.''

24. In section B-11, under the heading Rate and Fee Schedule, under

the subheading Money Market, the entry ``Prospective Annual Percentage

______% Yield.'' is revised to read as follows:

``Prospective Annual Percentage Yield ______%.''

25. In section B-11, under the heading Rate and Fee Schedule, under

the subheading Fees Applicable to All Accounts, the entry ``Minimum

balance violation fee'' is revised to read as follows:

``Minimum balance service fee.''

By the National Credit Union Administration Board on February

28, 1994.

Becky Baker,

Secretary of the Board.

[FR Doc. 94-6644 Filed 3-21-94; 8:45 am]

BILLING CODE 7535-01-M