An official staff commentary interprets the requirements of Regulation DD (12 C.F.R. General. For $15,000.01, interest would be figured on $2,500 at 5.25% interest rate, plus interest on $12,500 at 5.50% interest rate, plus interest on $.01 at 5.75% interest rate. (j) Depository institution and institution. PDF PAYING A BONUS ON DEPOSIT ACCOUNTS - Banker's Compliance The annual percentage yield is expressed as an annualized rate, based on a 365-day year. (i) A deposit that the depositor does not have a right and is not permitted to make withdrawals from within six days after the date of deposit unless the deposit is subject to an early withdrawal penalty of at least seven days' simple interest on amounts withdrawn within the first six days after deposit. Where a consumer has not opted into, or as applicable, has opted out of, the institution's discretionary overdraft service for some, but not all transactions (e.g. If an institution assesses and then waives and credits a fee within the same cycle, the institution may, at its option, reflect the adjustment in the total disclosed for fees imposed during the current statement period and for the total for the calendar year-to-date. 3. 2. (1) If an institution offers a $1,000 6-month certificate of deposit on which it pays a 5% interest rate, compounded daily, for the first three months (which contain 91 days), and a 5.5% interest rate, compounded daily, for the next three months (which contain 92 days), the total interest for six months is $26.68 and, using the general formula above, the annual percentage yield is 5.39%: (2) If an institution offers a $1,000 two-year certificate of deposit on which it pays a 6% interest rate, compounded daily, for the first year, and a 6.5% interest rate, compounded daily, for the next year, the total interest for two years is $133.13, and, using the general formula above, the annual percentage yield is 6.45%: For variable-rate accounts without an introductory premium or discounted rate, an institution must base the calculation only on the initial interest rate in effect when the account is opened (or advertised), and assume that this rate will not change during the year. is not sufficient. [76 FR 79278, Dec. 21, 2011, as amended at 84 FR 31701, July 3, 2019]. This account requires the distribution of interest and does not allow interest to remain in the account. The interest rate for the renewed account will be ____% with an annual percentage yield of ____%; or. ii. For variable-rate accounts: (A) The fact that the interest rate and annual percentage yield may change; (C) The frequency with which the interest rate may change; and. 2. Institutions may calculate the annual percentage yield based on a 365-day or a 366-day year in a leap year. 1. For account disclosures, the interest rate may be expressed to more than two decimal places. B3Model Clauses for Pre-Maturity Notices for Time Accounts, (a) Automatically Renewable Time Accounts With Maturities of One Year or Less But Longer Than One Month. iv. To earn the bonus, [$____/your entire principal] must remain on deposit [for (time period)/until (date)____]. ii. The annual percentage yield assumes interest will remain on deposit until maturity. The interest rate on your account is based on (name of index) [plus/minus a margin of ____]; or. 2. Electronic advertising. B6 Sample Form (Tiered-Rate Money Market Account). In addition to the interest rate and annual percentage yield, institutions may disclose a periodic rate corresponding to the interest rate. 1. Similar terms. The disclosures described in paragraphs (b)(1)(ii) and (iv) of this section are not required in connection with any advertisement made on an ATM screen or using a telephone response machine. Other information. Format. Thus, the calculation is based on the total amount of interest that would be received by the consumer for each tier of the account for a year and the principal assumed to have been deposited to earn that amount of interest. (1) Rounding. Length of the period. For the third tier, the institution would pay $841.45 in interest on the low end of the third tier (a balance of $15,000.01). For an assumed maximum balance amount of $100,000, interest would be figured on $2,500 at 5.25% interest rate, plus interest on $12,500 at 5.50% interest rate, plus interest on $85,000 at 5.75% interest rate. An advertisement shall not: (1) Be misleading or inaccurate or misrepresent a depository institution's deposit contract; or. The annual percentage yield for your account is ____%. (See appendix A, Part I, Paragraph C.). (See 12 CFR 1005.9(b).). Institutions must be able to reconstruct the required disclosures or other actions. Discounts on interest rates charged for loans at the institution. (a)(2) Determination of minimum balance to earn interest. (r) State means a state, the District of Columbia, the commonwealth of Puerto Rico, and any territory or possession of the United States. 2. (i) General. Within each tier, the annual percentage yield will not vary with the amount of principal assumed to have been deposited. (b)(3)(iii) When interest begins to accrue. The sample forms illustrate the information that must be provided to consumers when an account is opened, as required by 1030.4(a)(1). For example, if a plan calls for $10 weekly payments for 50 weeks, the institution cannot set a $500 minimum balance and then pay interest only if the consumer has made all 50 payments. (c) Date interest begins to accrue. 1. iii. Those include disclosures when an account is opened, upon request, when account terms are changed, when periodic statements are required, and when term share accounts mature. For purposes of the advertising requirements in 1030.8 of this part, the term also includes an account at a depository institution that is held by or on behalf of a deposit broker, if any interest in the account is held by or offered to a consumer. 3. In determining the term of a time account, institutions may disregard the fact that the term will be extended beyond the disclosed number of days because the disclosed maturity falls on a nonbusiness day. Rollover time accounts. 1. An institution must describe the circumstances under which it will not pay an overdraft. 2. (iv) The circumstances under which the institution will not pay an overdraft. There is an exception if you don't know the interest rate and APY at the time of the notice. On more than one document, as long as the documents are provided at the same time. Renewal of a time account. B1 Model Clauses for Account Disclosures, B1(h) Disclosures Relating to Time Accounts. For time accounts: (i) Time requirements. Representing an overdraft service as a line of credit, unless the service is subject to Regulation Z, 12 CFR part 1026. ii. If consumers close an account between crediting periods and forfeits accrued interest, the institution may not show any figures for interest earned or annual percentage yield earned for the period (other than zero, at the institution's option). The purpose of Regulation DD is to enable consumers to make informed decisions about their accounts at depository institutions through the use of uniform disclosures. 1. Maintenance fees, such as monthly service fees. The Fed - Supervision and Regulation: - Federal Reserve Board Institutions must pay interest on the full balance in the account that meets the required minimum balance. iv. The regulation does not require an institution to provide, nor a consumer to agree to receive, the disclosures required by 1030.4(a)(2) in electronic form. An advertisement that states an annual percentage yield for a given type of account (such as a time account for a specified term) need not state the annual percentage yield applicable to other time accounts offered by the institution or indicate that other maturity terms are available. Disclosures for opening accounts. Regulation D and savings account withdrawal limits - Bankrate Institutions may calculate interest by using a ledger or collected balance method, as long as the crediting requirements of the EFAA are met (12 CFR 229.14). As a If you do not renew the account, your deposit will be placed in [an interest-bearing/a noninterest-bearing] account. The institution that computes interest in this manner must provide a range that shows the lowest and the highest annual percentage yields for each tier (other than for the first tier, which, like the tiers in Method A, has the same annual percentage yield throughout). Assuming daily compounding, the institution would pay $53.90 in interest on a $1,000 deposit. If the interest rate and annual percentage yield that will be paid for the new account are unknown when disclosures are provided, the institution shall state that those rates have not yet been determined, the date when they will be determined, and a telephone number consumers may call to obtain the interest rate and the annual percentage yield that will be paid for the new account. (a) Disclosure of total fees on periodic statements. Institutions may refer to the calendar month or to roughly equivalent intervals during a calendar year as a month.. If the change is initiated by the consumer, the account opening disclosure requirements of 1030.4(b) apply. Instead, the advertisement may: i. (7) Bonuses. Penalties imposed by the Internal Revenue Code for certain withdrawals from IRAs or similar pension or savings plans are not early withdrawal penalties for purposes of this part. Time period to repay. Institutions using debit slips may disclose the date the fee was debited on the periodic statement and show the amount and type of fee on the dated debit slip. ii. iii. (t) Tiered-rate account means an account that has two or more interest rates that are applicable to specified balance levels. The notice shall be mailed or delivered at least 30 calendar days before the effective date of the change. (1) Automatically Renewable Time Accounts. Example. A statement that fees could reduce the earnings on the account. The daily rate applied to a balance carried to five or more decimal places, ii. Any fee imposed when a minimum balance requirement is not met, or when consumers exceed a specified number of transactions. ii. If such fees, such as ATM transaction fees, are disclosed on a Regulation E statement, they need not be disclosed again on a periodic statement required under part 707. For time accounts with a stated maturity greater than one year that do not compound interest on an annual or more frequent basis, and that require the consumer to withdraw interest at least annually, the annual percentage yield may be disclosed as equal to the interest rate. (ii) Variable rates. (2) Assume an institution calculates interest on the average daily balance for the calendar month and provides periodic statements that cover the period from the 16th of one month to the 15th of the next month. In making this determination, institutions aggregate per account only the market value of items that may be given for a specific promotion. General. Interest earned is the actual amount of interest earned on the account for the period. 4. Foreign institutions. Institutions offering club accounts (such as a holiday or vacation club) cannot impose a minimum balance requirement for interest based on the total number or dollar amount of payments required under the club plan. Rather, institutions typically establish retail sweep programs by agreement with the consumer, in order for the institution to minimize its transaction account reserve requirements and, in some cases, to provide a higher interest rate than the consumer would earn on a transaction account alone. The termination of employment for consumers for whom account maintenance or activity fees were waived during their employment by the depository institution. (1) Account opening. Thus, the annual percentage yield range that would be stated for the third tier is 5.61% to 5.87%. 6. Except as provided in paragraph (a)(1)(ii) of this section, if the consumer is not present at the institution when the account is opened or the service is provided and has not already received the disclosures, the institution shall mail or deliver the disclosures no later than 10 business days after the account is opened or the service is provided, whichever is earlier. For a tiered-rate account, it also provides the lower dollar amount of the tier corresponding to the advertised annual percentage yield. Rounding for calculations. You can learn more about the process The disclosures required by this part may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. Subject to state or other law, an institution may choose not to pay accrued interest if consumers close an account prior to the date accrued interest is credited, as long as the institution has disclosed that fact. Ways to disclose when the annual percentage yield will be available include the use of: i. For accounts with a stated maturity greater than one year that do not compound interest on an annual or more frequent basis, that require interest payouts at least annually, and that disclose an APY determined in accordance with section E of appendix A of this part, a statement that interest cannot remain on deposit and that payout of interest is mandatory. Section 1030.6Periodic Statement Disclosures. This part, known as Regulation DD, is issued by the Bureau of Consumer Financial Protection to implement the Truth in Savings Act of 1991 (the act), contained in the Federal Deposit Insurance Corporation Improvement Act of 1991 ( 12 U.S.C. 7. iv. If an advertisement discloses an annual percentage yield as of a specified date, that date must be recent in relation to the publication or broadcast frequency of the media used, taking into account the particular circumstances or production deadlines involved. Examples of limitations on the number or dollar amount of deposits or withdrawals that institutions must disclose are: i. 2. Although club accounts typically have a maturity date, they are not time accounts unless they also require a penalty of at least seven days' interest for withdrawals during the first six days after the account is opened.2. For accounts in which two or more interest rates paid on the account are applicable to specified balance levels, the institution must calculate the annual percentage yield in accordance with the method described below that it uses to calculate interest. A depository institution, state, or other interested party may request the Bureau to determine whether a state law requirement is inconsistent with the federal requirements. Established and maintained procedures for paying interest and providing timely disclosures as required by the regulation, and. (b) Advertising disclosures for overdraft services. If the balance is obtained at an ATM, the requirement also applies whether the balance is disclosed on the ATM screen or on a paper receipt. ii. 5. For tiered-rate accounts, the minimum balance required for each tier shall be stated in close proximity and with equal prominence to the applicable annual percentage yield. Federal Register :: Truth in Savings (Regulation DD) All calculations in the insert assume daily compounding. 6. 3501 et seq. Accounts denominated in a foreign currency. (a) Misleading or inaccurate advertisements. iii. For example, for a one-year certificate of deposit an institution could make monthly interest payments equal to 2. State law requirements that are inconsistent with the requirements of the act and this part are preempted to the extent of the inconsistency. We recommend you directly contact the agency associated with the content in question. The purpose behind Regulation DD is to enable consumers to make better-informed decisions about their accounts at depository institutions through the use of uniform disclosures. The notice shall include the effective date of the change. Fees for travelers checks for account holders. Examples of accounts not subject to the regulation are: i. The notice shall state that consumers may request account disclosures containing terms, fees, and rate information for their account. Messages on automated teller machine (ATM) screens. (b) Content of account disclosures. Indicate that various rates are available, such as by stating short-term and longer-term maturities along with the applicable annual percentage yields: We offer certificates of deposit with annual percentage yields that depend on the maturity you choose. The institution must disclose separate totals for the statement period and for the calendar year-to-date. (1) General. To calculate the annual percentage yield earned, accrued but uncredited interest: i. Disclosing penalties. Your interest rate and annual percentage yield may change. ii. 29(g)). Institutions are not required to provide rate information orally. (ii) Balance computation method. iii. If the variable rate is tied to an index, the index-based rate in effect at the time of disclosure must be used for the remainder of the year. General. If the maturity is one year or less but longer than one month, the institution shall either: (i) Provide disclosures as set forth in paragraph (b)(1) of this section; or. 1. Use of electronic means. For a time account, it also provides the term required to obtain the advertised annual percentage yield. For purposes of the examples discussed below, assume the following: Tiering Method A. Fees for paying overdrafts and fees for returning checks or other items unpaid. (A) Any minimum balance required to: ( 1) Open the account; ( 2) Avoid the imposition of a fee; or ( 3) Obtain the annual percentage yield disclosed. (d) Effect on state laws. Examples of messages that are not advertisements are: i. 7. For the tiering structure assumed above, the institution would state a total of five annual percentage yieldsone figure for the first tier and two figures stated as a range for the other two tiers. For time accounts with a maturity longer than one month that renew automatically at maturity, institutions shall provide the disclosures described below before maturity. ii. iv. 1. Reg. DD | Bankers Online ii. The average daily balance is determined by adding the full amount of principal in the account for each day of the period and dividing that figure by the number of days in the period. Fees required to be disclosed under 1030.4(b)(4) of this part that were debited to the account during the statement period. 3. The disclosures aid com- parison shopping by informing consumers about the fees, annual percentage yield, interest rate, and other terms for deposit accounts. L. 111203, 124 Stat. Bonuses are not interest for purposes of this part. (See 1030.11(a)(1) of this part regarding certain fees that are required to be grouped.) Waiver or reduction of a fee or absorption of expenses. Disclosure Requirements for Consumer and Business Deposit Accounts, as (c) Annual percentage yield means a percentage rate reflecting the total amount of interest paid on an account, based on the interest rate and the frequency of compounding for a 365-day period and calculated according to the rules in appendix A of this part. (See 1030.4(a)(2), which states the requirements for disclosing the annual percentage yield, the interest rate, and the maturity of a time account in responding to a consumer's request.). Ledger and collected balances. No other rate may be stated. A withdrawal will reduce earnings. ii. Limits on the number of checks that may be written on an account within a given time period. The low figure for an annual percentage yield range is calculated based on the total amount of interest earned for a year assuming the minimum principal required to earn the interest rate for that tier. The following fees may be assessed against your account: The minimum amount you may [withdraw/write a check for] is $____. ii. An institution changes a term that triggers a notice under Regulation E, and uses the timing and disclosure rules of Regulation E for sending change-in-term notices. For example, if a consumer's statement period typically closes on the 15th of each month, an institution must provide the disclosures required by 1030.11(a)(1) on subsequent periodic statements for that consumer beginning with the statement reflecting the period from January 16, 2010 to February 15, 2010. An institution is deemed to have provided a service when a fee required to be disclosed is assessed. 4. The term does not include interest, other consideration worth $10 or less given during a year, the waiver or reduction of a fee, or the absorption of expenses. General. Annual percentage yield and annual percentage yield earned. Additional disclosures in connection with the payment of overdrafts. For example, the institution could state that overdraft funds are not available for ATM and one-time (or everyday) debit card transactions. Aggregation. (ii) Effect of closing an account. You may not make [deposits into/withdrawals from] your account until the maturity date. If institutions choose to use the latter rule, they must use the same number of days to calculate the dollar amount of interest earned on the account that is used in the annual percentage yield formula (where Interest is divided by Principal). Sample forms. Except as provided in paragraph (e) of this section, if a bonus is stated in an advertisement, the advertisement shall state the following information, to the extent applicable, clearly and conspicuously: (1) The annual percentage yield, using that term; (2) The time requirement to obtain the bonus; (3) The minimum balance required to obtain the bonus; (4) The minimum balance required to open the account, if it is greater than the minimum balance necessary to obtain the bonus; and, (e) Exemption for certain advertisements .
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