Truth in Savings

SUMMARY: The Board is publishing a final rule amending Regulation DD,

which implements the Truth in Savings Act. The rule implements

amendments to the Truth in Savings Act enacted as part of the Economic

Growth and Regulatory Paperwork Reduction Act of 1996. The law modifies

the rules for indoor lobby signs, eliminates subsequent disclosure

requirements for automatically renewable time accounts with terms of

one month or less, and repeals the civil liability provisions as of

September 30, 2001.

DATES: This rule is effective September 24, 1998.

FOR FURTHER INFORMATION CONTACT: Kyung Cho-Miller, Staff Attorney,

Division of Consumer and Community Affairs, at (202) 452-3667 or 452-

2412. For the hearing impaired only, Telecommunications Device for the

Deaf (TDD), contact Diane Jenkins, at (202) 452-3544.

SUPPLEMENTARY INFORMATION:

I. Background

The Truth in Savings Act (TISA) is implemented by the Board's

Regulation DD (12 CFR Part 230). The act and regulation require

depository institutions to disclose yields, fees, and other terms

concerning deposit accounts to consumers at account opening. The

regulation also includes rules about advertising of deposit accounts.

Credit unions are governed by a substantially similar regulation issued

by the National Credit Union Administration. The act was amended by the

Economic Growth and Regulatory Paperwork Reduction Act of 1996 (1996

Act).

II. Regulatory Revisions

On March 25, 1998, the Board published proposed amendments to

Regulation DD to implement statutory amendments that eliminate the

requirement that institutions provide disclosures in advance of

maturity for automatically renewable (rollover) time accounts with a

term of 30 days or less, expand an exemption from certain advertising

provisions for signs on the premises of a depository institution, and

repeal TISA's civil liability provisions, effective September 30, 2001

(63 FR 14533). Commenters on the proposal--all financial institutions

or their trade associations--unanimously supported the proposed

amendments.

In March 1998, the Board also published a proposal to allow

institutions to provide Regulation DD disclosures electronically (63 FR

14533, March 25, 1998). Similar proposals were made under Regulations B

(Equal Credit Opportunity), M (Consumer Leasing), and Z (Truth in

Lending); an interim rule was issued under Regulation E. The Board

anticipates further action on these proposals by year-end.

III. Section-by-Section Analysis

Section 230.5 Subsequent Disclosures

5(c) Notice for Time Accounts One Month or Less That Renew

Automatically

Section 266(a)(3) of TISA requires institutions to provide certain

disclosures for rollover time accounts at least 30 days before

maturity. In implementing this provision, the Board determined in 1992

that the purposes of the legislation would not be served by requiring

advance disclosures for rollover time accounts with maturities of one

month or less. Regulation DD therefore does not require disclosures to

be provided in advance of maturity for such time accounts. However,

under Sec. 230.5(c) of the regulation, if a term disclosed when the

account was opened is changed at renewal, institutions were required to

send a notice describing the change within a reasonable time after the

renewal of the account.

The 1996 Act eliminates the requirement that institutions provide

subsequent disclosures (that is, disclosures in advance of maturity)

for automatically renewable time accounts with a term of 30 days or

less. (Institutions will continue to provide disclosures when these

accounts are opened.) Accordingly, Sec. 230.5(c) and the corresponding

provision in the official staff commentary, comment 5(c)-1, are

deleted.

Technically, the statute could be read to require subsequent

disclosures for rollover time accounts with a maturity of 31 days. For

ease of compliance, the Board has eliminated these disclosures for

rollover time accounts with a maturity of ``one month or less.''

Subsequent disclosures for accounts with a maturity of 31 days are not

required under this approach, which is consistent with other provisions

of Regulation DD that interpret one month to include 31 days.

Section 230.8 Advertising

8(e) Exemption for Certain Advertisements

8(e)(2) Indoor Signs

Section 263(a) of TISA provides that a reference to a specific

interest rate, yield, or rate of earnings in an advertisement triggers

a duty to state certain additional information, including the annual

percentage yield. In 1994, the Congress amended section 263(c) of the

advertising rules to provide that if a rate is displayed on a sign

(including a rate board) designed to be viewed only from the interior

of an institution, the disclosure requirements of section 263 do not

apply.

A further amendment to section 263(c) contained in the 1996 Act

expands the exemption for signs on the premises of the depository

institution. All signs inside the premises of an institution are now

exempt from certain advertising disclosures (including signs that are

intended to be viewed from outside the premises). Accordingly, the

reference in Sec. 230.8(e) to signs that face outside the premises and

the corresponding provision in the official staff commentary, comment

8(e)(2)(I)-2, are deleted. Any sign posted outside a depository

institution remains covered by the advertising provisions unless the

sign qualifies for some other exemption, such as the exemption for

electronic media.

Section 230.9 Enforcement and Record Retention

9(b) Civil Liability

Section 271 of TISA, which provides for civil liability for

violations of the act's provisions, was repealed by the 1996 Act,

effective September 30, 2001. The regulation refers to TISA's civil

liability provisions in Sec. 230.9(b), and has been revised to reflect

the effective date of the repeal of Section 271.

IV. Regulatory Flexibility Analysis

In accordance with section 3(a) of the Regulatory Flexibility Act

(5 U.S.C. 604), the Board has reviewed the final amendments to

Regulation DD. Two of the three requirements of a final regulatory

flexibility analysis under this section are (1) a succinct statement of

the need for and the objectives of the rule and (2) a summary of the

issues raised by the public comments, the agency's assessment of the

issues, and a statement of the changes made in the final rule in

response to the comments. These two areas are discussed above.

The third requirement of the analysis calls for a description of

significant alternatives to the rule that would

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minimize the rule's economic impact on small entities and reasons why

the alternatives were rejected. The final amendments will apply to all

financial institutions subject to Regulation DD, including small

institutions. The amendments represent minor changes to the existing

regulation; in some cases, the amendments reduce economic burden.

Accordingly, the amendments should not have a negative economic impact

on small institutions, and, therefore, there were no significant

alternatives that would have further minimized the economic impact on

those institutions.

V. 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 rule under the

authority delegated to the Board by the Office of Management and

Budget. The Federal Reserve may not conduct or sponsor, and an

organization is not required to respond to, this information collection

unless it displays a currently valid OMB control number. The OMB

control number is 7100-0271.

The collection of information that is revised by this rulemaking is

found in 12 CFR 230--Regulation DD, including Appendices A and B and

Supplement I. This information collection is mandatory under the Truth

in Savings Act (12 U.S.C. 4308) and the Board's Regulation DD, which

requires that consumers be given certain account disclosures. The

disclosures assist consumers in comparing deposit accounts offered by

depository institutions, principally through the disclosure of fees,

APY, interest rates, and other account terms whenever a consumer

requests the information and before an account is opened. The

regulation also requires that fees and other information be provided on

any periodic statement the institution sends to the consumer. The

respondents are for-profit financial institutions, including small

businesses. Institutions are also required to retain records for

twenty-four months as evidence of compliance. No comments specifically

addressing the burden estimate were received.

The Board also extended the recordkeeping and disclosure

requirements in connection with Regulation DD for three years. The

current total annual burden for this information collection is an

estimated 1,478,395 hours. This amount reflects the burden estimate of

the Federal Reserve System for the 996 state member banks under its

supervision. The modified rules for indoor lobby signs and elimination

of subsequent disclosure requirements for automatically renewable time

accounts with terms less than one month will decrease the frequency of

response slightly. The estimated total annual burden after the

revisions will be about 1,476,071 hours, a decrease of 2,324 hours.

There is estimated to be no associated capital or start up cost and no

annual cost burden.

Because the records would be maintained at state member banks and

the notices are not provided to the Federal Reserve, no issue of

confidentiality arises under the Freedom of Information Act.

The Board has a continuing interest in the public's opinions of

Federal Reserve collections of information. At 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: Secretary, Board of Governors of the Federal Reserve System,

20th and C Streets, N.W., Washington, DC 20551; and to the Office of

Management and Budget, Paperwork Reduction Project (7100-0271),

Washington, DC 20503.

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 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.

Sec. 230.5 [Amended]

2. Section 230.5 is amended by removing paragraph (c) and

redesignating paragraph (d) as new paragraph (c).

3. Section 230.8 is amended by revising paragraph (e)(2)(i) to read

as follows:

Sec. 230.8 Advertising.

* * * * *

(e) Exemption for certain advertisements. * * *

(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 (e)(1) of this section.

* * * * *

4. Section 230.9 is amended by revising paragraph (b) to read as

follows:

Sec. 230.9 Enforcement and record retention.

* * * * *

(b) Civil liability. Section 271 of the Act contains the provisions

relating to civil liability for failure to comply with the requirements

of the act and this part; Section 271 is repealed effective September

30, 2001.

* * * * *

SUPPLEMENT I to PART 230--OFFICIAL STAFF INTERPRETATION

PART 230--SUPPLEMENT I [AMENDED]

5. In Supplement I to Part 230, in Section 230.5--Subsequent

disclosures, under paragraph (c), paragraph 1. is removed.

6. In Supplement I to Part 230, in Section 230.8--Advertising,

under paragraph (e)(2)(i), paragraph 2. is removed.

By order of the Board of Governors of the Federal Reserve

System, September 23, 1998.

Jennifer J. Johnson,

Secretary of the Board.

[FR Doc. 98-26010 Filed 9-28-98; 8:45 am]

BILLING CODE 6210-01-P