**Board of Governors of the Federal Reserve System**

**Federal Deposit Insurance Corporation**

**Office of the Comptroller of the Currency**

**Office of Thrift Supervision**

**Report to the Congress**

**on Review of Regulations Affecting**

**Online Delivery of Financial Products and Services**

November 2001

**Board of Governors of the Federal Reserve System**

**Federal Deposit Insurance Corporation**

**Office of the Comptroller of the Currency**

**Office of Thrift Supervision**

**Report to the Congress**

**on Review of Regulations Affecting**

**Online Delivery of Financial Products and Services**

#### 

#### 

#### 

#### Submitted to the Congress pursuant to section 729 of the Gramm-Leach-Bliley Act

November 2001

**Contents**

**Introduction 1**

**Summary of Conclusions 1**

**Part I Background and Methodology 2**

**A. Background 2**

**B. Methodology 3**

**Part II Jointly Administered Regulations 5**

**A. Appraisal Standards for Federally Related Transactions 5**

**1. Analysis 5**

**2. Conclusion 6**

**B. Community Reinvestment 6**

**1. Analysis 6**

**2. Conclusion 7**

**C. Consumer Protections for Depository Institution Sales of Insurance
7**

**1. Analysis 8**

**2. Conclusion 8**

**D. Loans in Areas Having Special Flood Hazards 9**

**1. Analysis 9**

**2. Conclusion 10**

**E. Management Official Interlocks 10**

**1. Analysis 10**

**2. Conclusion 11**

**F. Privacy of Consumer Financial Information 11**

**1. Analysis 11**

**2. Conclusion 13**

**Part III Regulations Administered by the Board of Governors of the
Federal Reserve System 15**

**A. Electronic Delivery of Disclosures under Various Consumer Financial
Services Regulations Administered by the Board 15**

**1. Overview 15**

**2. Analysis 16**

**3. Conclusion 19**

**B. Regulation B (Equal Credit Opportunity) and Regulation C (Home
Mortgage Disclosure) 20**

**1. Overview 20**

**2. Analysis 20**

**3. Conclusion 21**

**C. Regulation E (Electronic Fund Transfer), Regulation Z (Truth in
Lending), and Regulation DD (Truth in Savings) 21**

**1. Overview 21**

**2. Analysis 22**

**D. Regulation D (Reserve Requirements of Depository Institutions) 26**

**1. Overview 26**

**2. Analysis 26**

**3. Conclusion 27**

**E. Regulations T and U (Securities Margin Lending) 28**

**1. Overview 28**

**2. Analysis 28**

**3. Conclusion 28**

**F. Regulation CC (Availability of Funds and Collection of Checks) 28**

**1. Overview 28**

**2. Analysis 29**

**3. Conclusion 30**

**Part IV Regulations Administered by the Federal Deposit Insurance
Corporation 31**

**Part V Regulations Administered by the Office of the Comptroller of
the Currency 34**

**Part VI Regulations Administered by the Office of Thrift Supervision
39**

**A. Summary of Conclusions 39**

**B. Report Methodology and Information Learned 39**

**1. Request for Comment on Study of Banking Regulations Regarding the**

**Online Delivery of Financial Services 40**

**2. Examiner Survey 41**

**3. Interdisciplinary Headquarters Review 42**

**C. OTS's Previous Initiatives 43**

**Appendices -- Relevant Federal Register Publications 45**

**A. Board of Governors of the Federal Reserve System -- Study of
Banking Regulations Regarding the Online Delivery of Financial
Services**

**(66 Fed. Reg. 27,912)**

**B. Federal Deposit Insurance Corporation -- Request for Comment on
Study of**

**Banking Regulations Regarding the Online Delivery of Banking
Services**

**(66 Fed. Reg. 37,029)**

**C. Office of the Comptroller of the Currency -- Electronic Banking
NPRM**

**(66 Fed. Reg. 34,855); Electronic Banking ANPR (65 Fed. Reg. 4895)**

**D. Office of Thrift Supervision -- Request for Comment on Study of
Banking Regulations Regarding the Online Delivery of Financial
Services**

**(66 Fed. Reg. 31,186); Electronic Operations (63 Fed. Reg. 65,673)**

# Introduction

The Board of Governors of the Federal Reserve System (Board), Federal
Deposit Insurance Corporation (FDIC), Office of the Comptroller of the
Currency (OCC), and Office of Thrift Supervision (OTS) (collectively,
the Agencies), jointly issue this report about banking regulations that
affect the online delivery of financial products and services. The
Agencies prepared the report pursuant to section 729 of the
Gramm-Leach-Bliley Act (the GLB Act or Act).[^1]

The Agencies' report consists of several parts: Part I summarizes the
statutory mandate and the methods the Agencies used to conduct the
studies and prepare this report; Part II discusses the Agencies' review
of the regulations that the Agencies must administer jointly; and Parts
III -- VI describe each Agency's review of the regulations that it
solely administers.

##### Summary of Conclusions

This report concludes that the Agencies' regulations generally
accommodate online banking and lending. The report outlines those few
areas that the Agencies plan to consider further for possible
modifications.

The Agencies will continue to monitor developments in banking practices
and technology. The Agencies are committed to updating their respective
regulations and guidance as the need arises, both individually and in
conjunction with each other and the Federal Financial Institutions
Examination Council (FFIEC). In doing so, the Agencies will continue to
seek to minimize impediments to the electronic delivery of financial
products and services even as other regulations may be required to
ensure the lawful uses of those products or services, such as the
provisions that will be implemented under the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (USA PATRIOT ACT). The Agencies will
foster growth of these activities in a manner that is safe and sound and
helps ensure consumer acceptance and protection.

Part I

Background and Methodology

**A. Background**

Section 729 of the GLB Act requires the Board, FDIC, OCC, and OTS to
conduct a study of banking regulations regarding the delivery of
financial products and services. Section 729 further requires the
Agencies to report their recommendations on adapting existing
legislative or regulatory requirements to online banking and lending.

Even prior to the enactment of section 729 of the GLB Act, each Agency
had undertaken several initiatives to adapt its regulations to
facilitate and support the online delivery of financial products and
services. Moreover, following the Act, the Agencies jointly developed
regulations and guidance that are designed to facilitate the electronic
delivery of financial products and services. For example, the Agencies
recently issued the Interagency Guidelines Establishing Standards for
Safeguarding Customer Information, under section 501 of the Act, that
accommodate the needs for financial institutions to adopt new electronic
technologies to provide financial products and services to their
customers.[^2] In addition, through the FFIEC, the Agencies issued
guidance on authentication in the electronic banking environment.[^3]

Finally, on June 30, 2000, the President signed into law the Electronic
Signatures in Global and National Commerce Act (E-Sign Act),[^4] which
was designed to encourage the continued expansion of electronic
commerce. The E-Sign Act generally provides that a record or signature
will not be invalid solely because it is in electronic form, rather than
in a paper or customarily handwritten form. In addition, the E-Sign Act
provides that maintaining electronic records may satisfy record
retention requirements, provided that those records meet certain
conditions. The E-Sign Act also contains special rules applicable to
some consumer disclosure requirements that permit the use of electronic
records. The E-Sign Act is enforceable by its own terms; implementing
regulations are not required. In fulfilling their obligations under
other statutes, including the promotion of safe and sound banking
practices, the Agencies will act consistent with the terms and purposes
of the E-Sign Act.

# B. Methodology

To satisfy the requirements of section 729 of the Act, each Agency
conducted a full review and analysis of its regulations that could
affect the online delivery of financial services. Each of the Agencies
separately reviewed its regulations and certain supervisory policies
that relate to the delivery of financial products or services to assess
their suitability for transactions that are conducted through electronic
media. The Agencies jointly reviewed interagency regulations.

To assist this review, each Agency published in the *Federal Register* a
request for comment on a wide range of issues that bear on delivering
financial products and services over the Internet to assess whether any
of its respective regulations should be amended to facilitate online
banking and lending.[^5] In addition, the Agencies sought comment on how
particular statutory provisions affect the online delivery of financial
products and services.

After reviewing their respective regulations, the Agencies determined
that the report should focus on those regulations (or other supervisory
policies) that present issues with respect to the online delivery of
financial products or services to individual or business customers. In
this way, the Agencies have endeavored to tailor the report to address
key issues, common problems raised by the comments, and other aspects of
banking regulations with respect to the electronic delivery of financial
products and services, instead of a wide-ranging examination of all of
the Agencies' regulations. Furthermore, the Agencies determined that,
absent any compelling issues raised by the comments, the report should
not address other regulations, such as those that will be issued under
the recently enacted USA PATRIOT ACT, that will be the subject of a
future rulemaking proceeding.

**Part II**

**Jointly Administered Regulations**

###### **A. Appraisal Standards for Federally Related Transactions**

Under title XI of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, 12 U.S.C. § 3331 *et seq.,* the Agencies
promulgated regulations that provide protection for federal financial
and public policy interests in real estate-related transactions by
requiring appraisers to perform written real estate appraisals in
accordance with uniform standards.[^6] For the sake of simplicity in
this report, we refer to the rule as the "Appraisal Rule." Under the
rule, appraisers must demonstrate competency and their professional
conduct must be subject to effective supervision. The Appraisal Rule
applies to all federally related transactions entered into by the
Agencies or by institutions regulated by the Agencies. The Appraisal
Rule generally:

-   Identifies the real estate-related financial transactions that
    require the services of an appraiser;

-   Prescribes the categories of federally related transactions that a
    State certified appraiser must appraise and the categories a State
    licensed appraiser must appraise; and

-   Prescribes minimum standards for the performance of real estate
    appraisals in connection with federally related transactions under
    the jurisdiction of the Agencies.

1\. [Analysis]{.underline}

Some commenters recommended that the Agencies exempt from the written
appraisal requirement loans processed using an automated underwriting
system selected pursuant to an institution's required board-approved
real estate lending policy. Commenters also asserted that the \$250,000
threshold for requiring the use of state licensed or certified
appraisals is outmoded. However, under existing rules, any loan
underwritten to standards established by Fannie Mae and Freddie Mac is
exempt. Moreover, a commenter who has studied the industry commented
that simply switching from a paper-based format to an automated,
paperless one would not solve all appraisal issues about whether the
current system of appraisals is the optimal one.

2\. [Conclusion]{.underline}

The Agencies have not identified any provisions of the Appraisal Rule
that impede online banking or that need amendment to facilitate online
banking.

# B. Community Reinvestment

In 1977, Congress enacted the Community Reinvestment Act (CRA), 12
U.S.C. § 2901 *et seq.*, to encourage federally insured banks and
thrifts to help meet the credit needs of their entire communities,
including low- and moderate-income neighborhoods, consistent with safe
and sound banking practices. The Agencies' joint rule implements the
CRA.[^7]

1\. [Analysis]{.underline}

In connection with this study and report, a few commenters noted that
the CRA regulations have implications for online banking and lending.
For example, one commenter observed that geographical proximity to a
financial institution's service facility, such as an institution's
branch, may not serve as an appropriate criterion for evaluating whether
the institution is able to serve the credit needs of a particular group
of consumers.

On July 19, 2001, the Agencies issued a Joint Advance Notice of Proposed
Rulemaking (ANPR) as part of their review of the CRA regulations.[^8]
The Agencies sought public comment on a wide range of issues concerning
the CRA, including suggestions for revising the CRA regulations and on
other steps the Agencies might undertake instead of, or in addition to,
revising the regulations. One of the issues discussed in the Joint ANPR
is how to define the assessment areas.

The CRA regulations provide that an assessment area is the geographic
area in which the Agencies evaluate an institution's record of meeting
the credit needs of its community under the CRA. An institution's
assessment area generally consists of one or more metropolitan
statistical areas or one or more contiguous political subdivisions, and
includes geographies where the institution has its main office,
branches, and deposit-taking ATMs, as well as surrounding geographies
where the institution has originated or purchased a substantial portion
of its loans. Through the Joint ANPR, the Agencies sought comment on
whether the assessment area provisions provide a reasonable and
sufficient standard for designating the communities within which the
institution's activities will be evaluated during an examination. The
Agencies noted that members of the public have questioned the continued
appropriateness of delineating geographically defined assessment areas
in light of the increasing use of channels such as the Internet to serve
widely dispersed markets and to gather deposits and deliver products and
services without using deposit-taking branches or ATMs.

> 2\. [Conclusion]{.underline}

The Agencies are addressing CRA issues, including the appropriate
standards for defining assessment areas, in the separate CRA rulemaking.
Accordingly, the Agencies make no recommendation about regulatory or
legislative changes to the CRA in this report. Such recommendations, if
any, may emerge as a result of the CRA rulemaking.

**C.** **Consumer Protections for Depository Institution Sales of
Insurance**

Section 305 of the GLB Act generally requires the Agencies to prescribe
customer protection regulations that govern the retail sales practices
of any insurance product by a depository institution or any person
engaged in insurance sales at an office of or on behalf of the
institution. The Agencies implemented section 305 of the GLB Act through
regulations that were jointly developed and issued in consultation with
the National Association of Insurance Commissioners (NAIC).[^9] The
Agencies' respective rules are substantively identical; for the sake of
simplicity in this report, we refer to the rule as the "Insurance Rule."

> 1\. [Analysis]{.underline}

The Insurance Rule prohibits any institution, or anyone acting on its
behalf (a "covered person"), from engaging in any practice that could
mislead someone or otherwise cause a reasonable person to reach an
erroneous belief about:

-   The uninsured nature of any insurance product or annuity;

-   The investment risk associated with certain products; and

-   The fact that the approval of a credit extension cannot be
    conditioned on the purchase of an insurance product or annuity from
    the financial institution, and that the consumer is free to purchase
    the insurance product or annuity from another source.

The Insurance Rule requires that the covered person provide appropriate
insurance disclosures before the completion of the initial sale of an
insurance product or annuity to the consumer, as well as a credit
disclosure at the time the consumer applies for an extension of credit
in connection with which insurance is solicited, offered, or sold. The
covered person must obtain from the consumer a written acknowledgment of
receipt of the disclosures at the time the consumer receives the
disclosures or before the initial purchase of an insurance product or
annuity by the consumer. Disclosures must be made orally and in writing,
except that oral disclosures are not required for applications received
or sales conducted by mail. Similarly, any disclosures provided by
electronic media do not have to be provided orally.

The rule specifically authorizes the covered person to provide
disclosures electronically, subject to the requirements of section
101(c) of the E-Sign Act, if the consumer affirmatively consents and the
covered person makes the disclosures in a format that allows the
consumer to retain the disclosures or obtain them later.

##  2. [Conclusion]{.underline}

The Agencies believe that no change to the Insurance Rule is necessary
to adapt its requirements to online banking and lending. In the notice
of proposed rulemaking, the Agencies specifically invited comment on
issues of sales, disclosure, and acknowledgment of receipt of disclosure
by electronic means. After considering the comments submitted with
respect to those issues, the Agencies addressed those issues in the
Supplementary Material published with the final rule and in the rule
itself.[^10] The GLB Act mandates that the regulations include
requirements to provide disclosures and obtain an acknowledgment by the
consumer and permits the Agencies to adjust those requirements to suit
transactions conducted in electronic media. The Agencies believe that,
in accordance with the statute, the final rule contains appropriate
adjustments to the disclosure and acknowledgment requirements to
facilitate online banking and lending as discussed above.

# D. Loans in Areas Having Special Flood Hazards

Pursuant to the National Flood Insurance Act of 1968 and the Flood
Disaster Protection Act of 1973, as amended, the Agencies promulgated
regulations that prohibit financial institutions from making certain
loans if the collateral is located in a special flood hazard area unless
the collateral is covered by flood insurance.[^11] The Agencies'
regulations also prescribe requirements about how a financial
institution must inform a borrower of the insurance requirement for the
loan.

1\. [Analysis]{.underline}

The Agencies' flood insurance regulations expressly permit a financial
institution to use a computerized or electronic flood hazard
determination form. Similarly, an institution may deliver electronically
the notice of changes in servicer to the insurance company issuing the
flood insurance policy, if acceptable to the insurance company. However,
the regulations require the institution to provide the borrower with a
written, physical copy of the notice of special flood hazards.[^12]

The Agencies note that the requirement to provide a written notice of
special flood hazards to a borrower is affected by the E-Sign Act. That
statute, by its own force, permits a financial institution to satisfy
that notice requirement by providing the notice in electronic form in
lieu of a physical, written copy. Before the financial institution may
do so, it must comply with the provisions of section 101(c) of the
E-Sign Act. Among other requirements, section 101(c) mandates that the
consumer must have "affirmatively consented" to the use of an electronic
record in lieu of a physical, written notice.

## 2. [Conclusion]{.underline}

The Agencies have determined that, at this time, the flood insurance
regulations do not impose any undue burden that limits a financial
institution's ability to provide loans or other financial products or
services on line. Nevertheless, the Agencies may consider amending the
interagency rule to clarify the conditions for providing an electronic,
instead of written, notice of special flood hazards to a borrower.

# E. Management Official Interlocks

The Agencies jointly implemented regulations under the Depository
Institutions Management Interlocks Act. 12 U.S.C. § 3201 *et seq*. The
Agencies' respective rules are substantively identical; for the sake of
simplicity in this report, we refer to the rule as the "Management
Interlocks Rule."[^13]

1\. [Analysis]{.underline}

The Management Interlocks Rule generally prohibits a management official
of a depository organization from serving as a management official of an
unaffiliated depository organization if the depository organizations in
question or its affiliate have offices in the same community or relevant
metropolitan statistical area. *See, e.g*., 12 C.F.R. § 212.3(a). The
rule defines a "community" as "a city, town, or village, and contiguous
and adjacent cities, towns, or villages." *See, e.g*., 12 C.F.R. §
212.2(c). Similarly, the rule defines a "relevant metropolitan
statistical area" as a primary or consolidated metropolitan statistical
area, as defined and applied by the Office of Management and Budget.

One commenter noted that the definitions of "community" and "relevant
metropolitan statistical area" are predicated on conceptions of
geography. The commenter suggested that the Agencies should consider
revising these geographic limitations to suit financial institutions
that deliver products and services through the Internet.

2\. [Conclusion]{.underline}

The Agencies recognize that the Management Interlocks Rule is based upon
conceptions of geography, as mandated by the statute, that may not apply
to financial institutions engaged in online banking and lending.
Nevertheless, the Agencies believe that the geographic limitations have
a minimal impact, if any, upon the online delivery of financial products
and services. The Agencies believe that the Management Interlocks Rule
sufficiently suits the purpose of preventing anti-competitive practices
as determined by customary measures of banking products and services in
a local market. Because an alternative analysis of the competitive
effects of institutions that offer financial products and services over
the Internet has not been developed, the Agencies believe that it would
be premature to consider changes to the Management Interlocks Rule that
would apply to a competitive environment that includes online banking
and lending. Accordingly, the Agencies have determined that amendments
to the statute or the rule would be unnecessary at this time.

**F. Privacy of Consumer Financial Information**

The Agencies implemented the privacy provisions of Subtitle A of Title V
of the GLB Act through regulations that were jointly developed and
issued in coordination with the National Credit Union Administration,
the Federal Trade Commission, and the Securities and Exchange
Commission. The Agencies' respective rules are substantively identical;
for the sake of simplicity in this report, we refer to the rule as the
"Privacy Rule."[^14]

1\. [Analysis]{.underline}

The GLB Act generally requires a financial institution to provide
notices to its consumers that describe its privacy policies and
practices and, where applicable, allow a consumer to opt out of
disclosures of nonpublic personal information to nonaffiliated third
parties. The GLB Act requires that a financial institution provide
notices "in writing or in electronic form or other form permitted by the
regulations." *See, e.g*., 15 U.S.C. § 6803(a). The Privacy Rule
facilitates the electronic delivery of financial products and services
by allowing a financial institution to deliver its notices online,
provided that it satisfies certain conditions. In particular, the
Privacy Rule generally allows a financial institution to deliver the
applicable notices electronically only if the consumer agrees.

The Agencies received several comments regarding the Privacy Rule; we
address those issues below.

a\. [Providing "clear and conspicuous" notices over the
Internet]{.underline}

Section 503 of the GLB Act (15 U.S.C. § 6803) requires a financial
institution to deliver a notice of its privacy policies and practices to
a consumer at the time of establishing a customer relationship and
annually thereafter. The Privacy Rule refers to these notices as an
"initial notice" and "annual notice," respectively.

Section 502 (15 U.S.C. § 6802) generally prohibits a financial
institution from disclosing nonpublic personal information about a
consumer to any nonaffiliated third party unless the institution
provides the consumer with an initial notice and a reasonable
opportunity to opt out of that disclosure. The privacy regulation refers
to the notice that describes the consumer's right to opt out of
disclosures to nonaffiliated third parties as an "opt out notice."

The Privacy Rule mandates that the initial, annual, and opt out notices
be "clear and conspicuous," and defines that requirement as "reasonably
understandable and designed to call attention to the nature and
significance of the information in the notice." This provision does not
prescribe specific requirements for written or online notices. Rather,
several examples illustrate how a financial institution may comply in
various media, such as the use of a "plain-language heading to call
attention to the notice" and the use of "distinctive type size, style,
and graphic devices, such as shading or sidebars" when the notice is
combined with other information. The rule also includes an example that
is tailored to notices that a financial institution provides on its web
site(s).[^15]

Several commenters urged the Agencies to modify the "clear and
conspicuous" standard to accommodate the delivery of financial products
and services via non-traditional computing devices, such as wireless
handheld computers. Relative to standard desktop computers, handheld
devices have smaller screens that require information to be displayed in
smaller or altered formats. One commenter believed that the Agencies
should clarify the Privacy Rule to state where notices are available to
consumers via customary personal computers, a financial institution
should not have to ensure that secondary access through wireless devices
meets the same standard of "clear and conspicuous" as would apply to
notices that are accessed via a personal computer.

As noted above, the Privacy Rule does not prescribe specific
requirements for written or online notices. Nevertheless, the Agencies
may consider providing guidance to illustrate how the standard of "clear
and conspicuous" applies to delivering notices over smaller computing
devices.

b\. [Applicability of the E-Sign Act]{.underline}

One commenter asked the Agencies to address whether the consumer consent
provisions of the E-Sign Act apply to the notices required under the
privacy provisions of the GLB Act. The commenter asserted that "\[s\]ome
confusion" has arisen over whether an institution must comply with the
E-Sign Act when it is required to provide a notice under the GLB Act and
the Privacy Rule. The commenter urged the Agencies to amend the Privacy
Rule to expressly state that the E-Sign Act does not apply to any
notices required under the GLB Act that are delivered electronically in
accordance with the Privacy Rule.

The provisions of the E-Sign Act that regulate disclosures to consumers
apply "if a statute, regulation, or other rule of law requires that
information relating to a transaction or transactions in or affecting
interstate or foreign commerce be provided or made available to a
consumer in writing." 15 U.S.C. § 7001(c). After gathering more
experience implementing the Privacy Rule, the Agencies will be prepared
to assess whether any additional actions would be appropriate to clarify
the applicability of the E-Sign Act to the privacy provisions of the GLB
Act.

2\. [Conclusion]{.underline}

Based upon the review of the privacy provisions of the GLB Act and the
Privacy Rule, and the comments submitted in connection with this study,
the Agencies conclude that none of the provisions of the GLB Act or the
regulation impose any undue burden that limits a financial institution's
ability to provide financial products or services on line. The Agencies
may consider including additional examples or issuing other guidance
that aims to clarify how a financial institution may satisfy its
obligations under the Privacy Rule through various electronic media.

**Part III**

**Regulations Administered by the Board of Governors**

**of the Federal Reserve System**

###### **Electronic Delivery of Disclosures under Various Consumer Financial Services Regulations Administered by the Board** 

###### [Overview]{.underline}

As early as the mid-1990s, the Board recognized the potential benefits
of electronic commerce to both consumers and the financial services
industry. In 1996, the Board amended Regulation E (Electronic Fund
Transfers) to permit electronic authorizations for preauthorized debits
from consumers' deposit and other asset accounts. Since that time, the
Board has exercised its authority under the consumer financial services
laws that it administers to permit electronic delivery of certain
disclosures. For example, in 1997, the Board interpreted the
written-disclosure requirement under Regulation CC (Expedited Funds
Availability) to permit electronic disclosures, and interpreted
Regulation Z (Truth in Lending) to permit the electronic delivery of
periodic statements. In 1998, the Board issued an interim rule
permitting all disclosures under Regulation E to be provided
electronically and, in 1999, the Board issued an interim rule under
Regulation DD (Truth in Savings) permitting deposit account disclosures
on periodic statements to be provided electronically.

In August 1999, the Board issued proposed rules permitting electronic
delivery of *all* disclosures (for example, via e-mail or at a web site)
that under the Board's consumer financial services regulations are
required to be in writing. The proposals required institutions to obtain
consumers' consent to receive electronic disclosures by requiring a
standardized consent form identifying the types of disclosures to be
delivered electronically, how to access them, and other information
deemed necessary for consumers to make informed decisions about
electronic delivery.

The E-Sign Act, which became law in June 2000, established the legal
validity and enforceability of electronic signatures, contracts, and
other records (including consumer disclosures). The E-Sign Act
superseded much of the Board's rulemakings but contained a consent
requirement similar to that proposed by the Board. The E-Sign Act
authorizes the electronic delivery of written records required by law to
be provided or made available to a consumer if an institution obtains
the consumer's consent in accordance with the E-Sign Act's requirements.

In March 2001, the Board published interim final rules under Regulations
B, E, M (Consumer Leasing), Z, and DD to incorporate the requirements of
the E-Sign Act by reference. Under the interim final rules, financial
institutions, creditors, lessors, and others may use electronic
disclosures if they obtain consumers' consent in accordance with the
requirements of section 101(c) of the E-Sign Act. The Board's interim
final rules also establish uniform requirements for satisfying the
timing and delivery requirements of the consumer financial services laws
when electronic disclosures are used.

Under the interim final rules, electronic disclosures may be provided by
e-mail or they can be made available at another location, such as an
institution's web site. If a disclosure---such as an account statement
or a notice of a change in account terms---is provided at a web site, an
institution must notify the consumer of the disclosure's availability by
e-mail. The disclosure must remain available for 90 days, not
necessarily at the same location, to allow consumers adequate time to
access and retain the information. In addition, when a disclosure sent
by e-mail to a consumer is returned undelivered, the interim rule
requires the institution to take reasonable steps to attempt redelivery
using the information in its files. This requirement is satisfied if,
for example, the institution sends the disclosure or notice to a
different e-mail or postal address that the institution has on file.

2.  [Analysis]{.underline}

In connection with the March 2001 interim final rules, the Board also
requested comment on whether other regulatory or legislative changes are
needed to facilitate online banking and lending. Only a few comments
were received on the study, which mostly focused on the Board's interim
final rules. In May, the Board solicited comments specifically on the
section 729 study. The Board received approximately twenty-five comment
letters; most of the comments concerning the Board's consumer financial
services regulations focused on the March 2001 interim final rules and
mirrored the comments received earlier.

The Board's consumer financial services regulations generally require
that institutions "send," "provide," or "deliver" disclosures to
consumers as opposed to merely making the disclosures available. The
requirement typically is satisfied by mailing disclosures to a postal
address designated by the consumer. Where disclosures are provided
electronically, sending disclosures to a consumer's e-mail address would
satisfy this requirement.

The Board has recognized, however, that because of security and privacy
concerns associated with data transmissions, institutions may choose to
make the disclosures available at their web sites, where consumers may
retrieve them under secure conditions. The Board's rulemakings on
electronic disclosures, therefore, have not required institutions to
send the required disclosures by e-mail, but have also allowed
institutions to make the disclosures available at another location, such
as an Internet web site.

In allowing disclosures to be made available in this manner, the Board
also considered whether additional rules might be necessary to ensure
their effective delivery. For example, the Board believes that consumers
should not be required to initiate a search of the web site of each
financial institution with which an account is held to determine whether
a disclosure has been made available. Consumers who receive disclosures
by accessing an institution's web site should be alerted when the
information is first available in order to ensure that they have the
opportunity to access the information before it is removed.

Accordingly, to ensure effective delivery, when disclosures are not sent
to the consumer's e-mail address, a notice alerting the consumer of the
disclosures' availability must be sent to the consumer's e-mail address
in a timely fashion. The consumer's e-mail address is defined as a
location where the consumer can also receive messages from parties other
than the institution.

a\. [Alert notices]{.underline}

Several commenters objected to the interim final rules' requirement that
alert notices be sent to the consumer's e-mail address when disclosures
are posted on a web site. Commenters that were opposed to the alert
notice requirement asserted that some consumers do not have an e-mail
address (and may not want to sign up for one, due to cost or other
reasons), or they may have an e-mail address but prefer not to receive
account information there. Commenters were also concerned that some
consumers would not update their e-mail address on file with the
institution when their address changes, causing problems with attempts
to send disclosures or notices via e-mail. Some commenters thought that
the costs of developing an e-mail system for alert notices could be
prohibitive for certain institutions. Some large institutions, however,
have stated that they already use e-mail to send notices and disclosures
to consumers.

Several commenters believe the requirement for sending alert notices
when disclosures are made available at a web site is inconsistent with
the E-Sign Act because it imposes an additional requirement for using
electronic disclosures. They also believe that alert notices are
unnecessary where a consumer receives a disclosure at the time the
consumer completes an online transaction such as consummating a loan or
opening a credit card or deposit account.

b\. [Redelivery requirement]{.underline}

A related area of concern was the requirement to redeliver a disclosure
sent to a consumer's e-mail that was returned undelivered. The
institution must take reasonable steps to attempt redelivery using the
information in its files. Some commenters believe that institutions
should not be required to send disclosures to another address on file
that has not been designated by the consumer for that purpose. These
commenters also stated that if the only other address on file is a
postal address, the interim rule would result in a requirement for paper
disclosures, which they believe is inconsistent with the E-Sign Act.

Other commenters expressed the view that the burden should rest with the
consumer to ensure that the institution has the consumer's correct
e-mail address and that financial institutions should be allowed to rely
on procedures that allow consumers to provide the updated address
information. At a minimum, commenters urged the Board to clarify that
financial institutions may make a second attempt to deliver the
disclosure to the same e-mail address because the e-mail service could
have been temporarily unavailable.

c\. ["Reasonable demonstration"]{.underline}

The Board's interim final rules permit financial institutions to deliver
disclosures electronically, provided that the consumer consents in
accordance with the E-Sign Act's requirements. Under the E-Sign Act, the
consumer must consent electronically, or confirm his or her consent
electronically, in a manner that "reasonably demonstrates" that the
consumer can access the electronic record in the format used by the
institution. One commenter requested that the Board provide additional
clarification of the E-Sign Act's "reasonable demonstration"
requirement. The commenter believes that the need to ensure that the
consumer can access electronic disclosures should not create undue
burdens that might discourage consumers from obtaining financial
products and services online. Another commenter observed that the
requirement for consumers to reasonably demonstrate that they have the
ability to access the disclosures is counter to the E-Sign Act's premise
that electronic and paper disclosures should be treated the same.
Accordingly, this commenter suggested that the Congress delete this
requirement.

d\. [Preemption]{.underline}

Several commenters urged the Board to confirm that financial
institutions that comply with the E-Sign Act do not need to comply with
additional or different requirements imposed under state law when
providing electronic disclosures under the Board's consumer financial
services regulations. Commenters also asked the Board to clarify that
where the Board has determined that the E-Sign Act's consumer consent
provision (§ 101(c)) does not apply to certain disclosures (*e.g.*,
disclosures in connection with advertisements, or credit and charge card
applications and solicitations), state law may not require consumer
consent with respect to those disclosures. They believe that uniform
federal law would promote electronic commerce.

One commenter noted that section 102(a) of the E-Sign Act grants limited
authority to states, with respect to their own laws, to enact their own
electronic writing and signature requirements under certain conditions.
This commenter believes that this authority could result in state law
requirements that create significant impediments for institutions that
conduct electronic transactions in multiple states that have varying
writing and signature requirements.

####### 

####### Conclusion

In general, comments received on the section 729 study have raised the
same issues that were raised in connection with the March 2001 interim
final rules and request for comment. The Board lifted the October 1,
2001 mandatory effective date for compliance with the interim final
rules in response to comments received on the March 2001 rules stating
that additional time was needed to make operational changes.
Furthermore, the Board may consider adjustments to the rules to provide
additional flexibility. Financial institutions may continue to provide
electronic disclosures under their existing policies and practices (in
accordance with the E-Sign Act), or they may follow the interim final
rules until permanent final rules are issued.

With respect to the preemption issues raised, the Board believes that it
is premature to make any recommendation concerning whether Federal law
should preempt State law in these areas.

**B. Regulation B (Equal Credit Opportunity) and Regulation C (Home
Mortgage Disclosure)**

1\. [Overview]{.underline}

Regulation B prohibits discrimination in any aspect of a credit
transaction on the basis of national origin, marital status, religion,
gender, color, age, race, receipt of public assistance funds, and
exercise of any right under the Consumer Credit Protection Act.

Regulation C requires mortgage lenders in metropolitan areas to disclose
to the public data about home purchase and home improvement loans
(including refinancings) that lenders originate or purchase and about
the disposition of applications for such loans. Lenders collect and
report data about each application or loan, each applicant or borrower
(including national origin or race, gender, and annual income), and each
property (including occupancy status and location).

####### 

####### 2. Analysis

Section 202.13 of Regulation B generally requires a creditor that
receives an application for credit for the purchase or refinancing of a
consumer's primary residence to collect as part of the application
certain information about the applicant (*e.g.,* national origin or
race, marital status, and gender). Similarly, section 203.4 of
Regulation C generally requires financial institutions to collect data
about the national origin, gender, and race of applicants for home
purchase and home improvement loans. The commentaries for both
regulations provide that if an application is taken over the phone,
creditors need not collect monitoring information under Regulations B
and C. If an application is taken by mail, the creditor must request the
information, but the applicant need not provide it. One commenter noted
that if online credit applications are treated like mail or telephone
applications, then information about applicant characteristics may not
be reported and thus it will be more difficult to identify
discriminatory lending practices.

The collection of monitoring information is essential in enhancing the
transparency of creditor lending practices. As more applications are
being taken by telephone, by mail, and over the Internet, however, less
information about applicant characteristics is being provided by
consumers, while at the same time, lenders cannot make visual
observations. In August 1999, as part of a comprehensive review of
Regulation B, the Board proposed to treat online credit applications
similarly to applications taken by mail. Therefore, a creditor would
have to request monitoring information on the online application form,
but if the consumer chose not to provide the information, the creditor
would not be required to make an additional request to the applicant.
(This interpretation is consistent with the current interpretation under
Regulation C.) No final action has been taken on this rulemaking.

######## Conclusion

The Board will monitor developments in online credit applications for
both Regulations B and C reporting requirements and will consider
adjustments to the rules where appropriate.

**C. Regulation E (Electronic Fund Transfer Act), Regulation Z**

**(Truth in Lending Act), and Regulation DD (Truth in Savings Act)**

1\. [Overview]{.underline}

Regulation E establishes rules about the disclosure of terms and
conditions of electronic fund transfer (EFT) services; limitations on a
consumer's liability for unauthorized use of debit cards; restrictions
on the unsolicited issuance of debit cards; documentation of EFTs by
means of receipts and periodic account activity statements; and
procedures for error resolution. The regulation covers transactions at
automated teller machines, point-of-sale terminals in stores, telephone
bill-payment plans, and preauthorized transfers to and from a customer's
account, such as direct deposit of salary and social security benefits.

Regulation Z promotes the informed use of consumer credit by requiring
disclosures about its terms and cost. The regulation also gives
consumers the right to cancel certain credit transactions that involve a
lien on a consumer's principal dwelling, regulates certain credit card
practices, and provides a means for fair and timely resolution of credit
billing disputes.

Regulation DD requires institutions to disclose yields, fees, and other
terms concerning deposit accounts to consumers at account opening, upon
request, when changes in terms occur, and in periodic statements. The
regulation also covers advertising for deposit accounts and prohibits
certain methods of calculating interest.

> 2\. [Analysis]{.underline}

In responding to the Board's request for comment on whether additional
legislative or regulatory changes are needed to further facilitate the
electronic delivery of consumer financial services, many commenters
raised issues that apply to more than one regulation. For example, many
commenters addressed requirements for periodic statements and
advertising under Regulations Z and DD. To streamline the discussion on
issues that apply to multiple regulations, the discussion of Regulations
E, Z, and DD has been consolidated in this subsection. Where
appropriate, comments received on issues that are unique to a specific
regulation are also addressed.

> a\. [Periodic statements under Regulations E, Z and DD]{.underline}

The Board specifically solicited comment on whether the rules for
periodic account activity statements on deposit and credit accounts
should be modified for online banking and lending. Several commenters
stated that it was not necessary at this time to modify the rules for
periodic statements to specifically apply to the electronic environment.
One commenter noted that periodic statements perform multiple functions
in addition to providing transaction summaries which are typically
available online. This commenter stated, for example, that it would be
difficult to manage the error resolution process under Regulations E and
Z without actual statement cycle dates and beginning and ending
balances. In addition, it would be unclear how an annual percentage
yield earned under Regulation DD could be calculated if beginning and
ending balances were not provided on a statement cycle basis.

In contrast, a few commenters urged the Board to modify or eliminate the
rules for periodic statements when institutions provide transaction
information on a daily basis. These commenters believed that the value
of providing disclosures based on a particular "statement period" or
beginning and ending dates is questionable when customers can view their
account and transaction history online at any time.

Other commenters suggested that it would be appropriate to permit
financial institutions to deliver modified periodic statements
electronically that provide links or access instructions to disclosures
that are continuously available. For example, to comply with periodic
statement requirements under Regulations E and Z, a financial
institution could provide links to error resolution disclosures that are
posted on a continuous basis on a web site. Similarly, a link between a
daily transaction summary and the periodic statement could be used. In
addition, one commenter recommended that consumers should have a legal
right to waive delivery of periodic statements if they already have this
information available in their online banking history.

Two commenters argued that the Board's periodic statement requirements
under Regulation E are hindering the development of certain electronic
products and services such as stored-value cards, account aggregation
services, and electronic/ Internet cash exchange. In particular, these
commenters argue that the periodic statement requirements in connection
with these services presented unnecessary technical and compliance
burdens that have slowed the development and maintenance of these
emerging products and services.

The Electronic Fund Transfer Act (EFTA) requires the Board in issuing
regulations to take into account, and allow for, the continuing
evolution of electronic banking services and the technology used in such
services. The Board is aware that the application of certain provisions
of the EFTA and Regulation E, including the requirement to provide
periodic account activity statements, could impose significant
compliance costs and impact the development of electronic payment
products, such as stored-value cards. The Board has modified Regulation
E periodic statement and other requirements to accommodate the
development of specific EFT services, such as electronic benefit
transfer accounts.

The Board does not believe that there is a need to modify the general
statutory requirements under Regulations E, Z, and DD concerning
disclosures in periodic statements at this time. The daily transaction
summaries that consumers may access online are not adequate substitutes
for the periodic statements required by statute. These disclosure
statements provide uniform information to consumers about the overall
costs of credit, EFT services, or interest earned on an account for a
particular period and thus allows consumers to evaluate, for example,
whether a particular credit card or deposit account continues to suit
their financial needs.

In recent rulemakings, the Board has provided guidance on the electronic
delivery of periodic statements. The Board will provide additional
guidance in this area as necessary and provide additional flexibility as
warranted.

######## b. Error resolution and preauthorized transfers under Regulation E

Commenters addressed issues concerning error resolution and liability
for unauthorized transfers. The EFTA and section 205.11 of Regulation E
sets out detailed error-resolution procedures. Several commenters
observed that any new kinds of statements and electronic methods of
delivering statements might require an adjustment to the error
resolution timing requirements. For example, one commenter suggested
that for online banking, it may be appropriate to begin the time period
by which a consumer would be required to notify his or her financial
institution of a billing error or unauthorized transfer after some
reasonable period of time in which the consumer would be expected to
view his or her daily online statements.

Section 205.10(b) of Regulation E requires a consumer's financial
institution or payee to provide advance notice to the consumer whenever
a preauthorized EFT from the consumer's account will vary in amount from
the previous transfer under the same authorization or from the
preauthorized amount. The consumer may have the option, however, of
receiving notice only when a transfer falls outside an agreed-upon range
or when a transfer differs from the most recent transfer by more than an
agreed-upon amount.

One commenter believes that this notice requirement may impede
electronic initiatives. The commenter asks the Board to consider
revising the rule to allow institutions to debit a consumer's account
based on a computable amount or percentage, as opposed to a specific
dollar amount or range of dollar amounts, or by reference to the entire
balance or the total amount currently due.

The Board believes that the rule currently provides sufficient
flexibility for financial institutions. The Board has not observed a
significant compliance problem to date with the current provisions of
the rule, but will consider this issue as part of a future review of the
regulation.

c\. [Issues that apply to Regulation Z]{.underline}

> 1\) "[Clear and conspicuous" and format requirements for electronic
> credit card solicitations]{.underline}

Section 226.5a of Regulation Z requires credit card issuers to provide
clear and conspicuous disclosures of the terms of the credit account on
or with a card solicitation or application. Some commenters observed
that it was unclear how to meet certain of the provision's format
requirements in an electronic environment. In particular, section
226.5a(b)(1) requires the annual percentage rate for purchases to be
disclosed in at least 18-point type to the consumer. These commenters
noted that because creditors have no control over how disclosures will
appear on the consumer's computer screen, they should not have a duty to
ensure that a consumer views the disclosures in the context of the
format and type size requirements.

The Board has addressed this concern in a prior rulemaking. *See* 65
Fed. Reg. at 58,906 (Oct. 3, 2000). The Board's official staff
commentary to Regulation Z generally provides that disclosures
transmitted electronically satisfy the clear and conspicuous standard
based on the form in which the disclosures are provided. Thus, a
creditor may satisfy the clear and conspicuous standard by displaying
the disclosures in a credit card solicitation at its web site in a large
type size, regardless of the size of the device used by a consumer to
view the disclosures.

2\) [Prompt crediting of payments]{.underline}

Section 226.10 of Regulation Z requires a creditor to credit a payment
to a consumer's account as of the date of receipt. The rule permits a
creditor to specify the requirements for making payments, including
setting a cut-off hour for payments to be considered received on a
particular day. Given the emerging technologies for processing
electronic payments, the Board may in the future consider whether
adjustments to the rule for crediting payments are necessary.

> 3\) [Advertising]{.underline}

Regulations Z and DD contain provisions that ensure that advertisements
are not misleading or inaccurate, with regard to the account terms
actually offered by the institution. For example, the regulations
specify that if an advertisement contains certain account terms, then
the advertisement must also include other specified terms. There are
special rules permitting abbreviated disclosures for broadcast media
advertisements to account for time and space restrictions.

Some commenters urged the Board to extend the rules for broadcast media
advertising to Internet advertisements. Several commenters cautioned
against applying the advertising requirements to disclosures accessed by
hand-held wireless devices because of the potential cost and the
difficulty in presenting the disclosures in an easy to read format. One
commenter believes that because Internet technology allows institutions
to provide a wealth of information to consumers, the Board should amend
its advertising regulations to require institutions to provide more
information about terms in advertisements.

More generally, one commenter urged the Board to publish a compliance
guide containing the rules for electronic advertising that would apply
to all the consumer financial services regulations administered by the
Board.

The Board has considered certain aspects of electronic advertisements in
connection with its interim final rules on electronic delivery of
disclosures. For example, the Board has previously determined that rules
for broadcast media advertisements in Regulation DD do not apply to web
sites. 66 Fed. Reg. 17,795 (Apr. 4, 2001). Nevertheless, additional
guidance on aspects of electronic advertisements not covered in the
proposals may be appropriate for future regulatory reviews. For
disclosures provided on hand-held wireless devices, however, the Board
notes that it would be difficult to streamline the required disclosures
for such devices without diminishing the effectiveness of the
disclosures.

**D. Regulation D (Reserve Requirements of Depository Institutions)**

####### 1. Overview

Regulation D implements section 19 of the Federal Reserve Act.[^16]
Regulation D generally requires depository institutions to distinguish
between "transaction accounts" and "savings deposits" and to maintain
reserves against transaction accounts. Reserve requirements aid in the
conduct of open market operations for monetary policy purposes by
helping to ensure a stable, predictable demand for reserves, thereby
increasing the Board's control over short-term interest rates.
Regulation D also defines "demand deposit" for the purposes of the
prohibition of paying interest on demand deposits under Regulation Q.

2\. [Analysis]{.underline}

Regulation D requires depository institutions to hold reserves against
their transaction accounts, generally defined as accounts from which the
depositor is permitted to make payments or transfers to third parties.

Depository institutions are not required to hold reserves against
savings deposits. Regulation D defines a "savings deposit," in part, as
a deposit or account from which the depositor is limited to no more than
six preauthorized, automatic, or telephonic transfers or withdrawals, or
combination thereof, per calendar month or statement cycle. In addition,
the regulation provides that "no more than three of the six such
transfers may be made by check, draft, debit card, or similar order made
by the depositor and payable to third parties."

Regulation D permits unlimited transfers or withdrawals from savings
deposits when such transfers or withdrawals are made by mail, messenger,
automated teller machine, in person, or by telephone (via check mailed
to the depositor).[^17] Commenters noted that the regulation limits the
number of transactions from a savings account that a customer may
initiate on line because this exception applies only to postal, ATM, or
physical means of transfer or withdrawal rather than electronic means,
such as a transfer or withdrawal initiated through a bank's web site.
One commenter explained that customers who maintain the bulk of their
funds in savings accounts are constrained by Regulation D from making
online transfers to transaction accounts to cover possible overdrafts or
meeting other unexpected expenses paid to third parties from the
transaction accounts.

3\. [Conclusion]{.underline}

The Board recognizes that Regulation D imposes limitations on the extent
to which depositors may make transfers or withdrawals from their savings
accounts using online services. To implement section 19 of the Federal
Reserve Act, however, the Board must distinguish between transaction
accounts and savings accounts. It has made this distinction based on the
ease with which the depositor may transfer funds to third parties. The
Board recognizes that depository institutions are generally able to
offer more attractive interest rates to consumers on savings accounts
than on transaction accounts because depository institutions do not have
to maintain reserves on savings accounts. (Currently, business customers
that are not eligible for NOW accounts are not able to obtain
interest-bearing transaction accounts.)

The Board believes that the interest-rate differential between
transaction accounts and savings accounts could be reduced by
legislation that would permit the payment of interest on reserve and
clearing balances held by depository institutions at Federal Reserve
Banks. The Board has long supported such a change. In addition, the
Board has also long advocated repeal of the prohibition against payment
of interest on demand deposits, which would permit businesses to obtain
interest-bearing transaction accounts. Legislation is currently pending
before the Congress that would accomplish both of these changes.

**E. Regulations T and U (Securities Margin Lending)**

####### 

####### 1. Overview

Regulations T and U implement section 7 of the Securities Exchange Act
of 1934.[^18] Regulation T applies to extensions of credit by brokers
and dealers. Regulation U applies to persons other than brokers and
dealers who extend credit for the purpose of buying or carrying margin
stock if the credit is secured directly or indirectly by margin stock.
The regulations impose, among other obligations, initial margin
requirements and payment rules on certain securities transactions.

####### 

####### 2. Analysis

Regulation T provides, in general, that every extension of credit shall
be deemed to be purpose credit unless the creditor "accepts in good
faith from the customer a written statement that it is not purpose
credit."[^19] Presently, the Board requires a creditor to collect (and
validate) a purpose statement (form T-4).

Regulation U similarly requires a lender that extends credit secured by
margin stock to collect and validate a purpose statement. Presently, the
Board requires a creditor to file a purpose statement (form U-1 or G-3).
Unlike Regulation T, which requires a "written statement," Regulation U
does not specify how that statement must be executed.

####### 

#######  3. Conclusion

The Board may consider amendments to Regulation T and U to clarify the
purpose statement requirements of the respective regulations under the
E-Sign Act.

**F. Regulation CC (Availability of Funds and Collection of Checks)**

1\. [Overview]{.underline}

Regulation CC implements the Expedited Funds Availability Act.[^20]
Regulation CC requires a bank to make funds deposited into transaction
accounts available for withdrawal in accordance with prescribed
schedules. The regulation also sets forth rules that govern the
collection and return of checks by banks, same-day settlement for
certain checks, and liability of banks for failure to comply with its
provisions.

In the request for comment, the Board noted that laws or regulations
that contain concepts of time may not be relevant in an online
environment. The Board asked whether the provisions of Regulation CC
that define a "banking day" are appropriate in the context of a customer
that opened an account and performs all banking functions online.

####### 

####### 2. Analysis

a\. [Schedule of funds availability and the definition of]{.underline}

> ["banking day]{.underline}"

Regulation CC generally requires funds deposited or received for deposit
to be available on specified business days after the "banking day" on
which the funds are deposited or received. The term "banking day" is
defined as that part of any business day on which an office of a bank is
open to the public for carrying on substantially all of its banking
functions.[^21] Several commenters agreed with the Board's suggestion
that the term "banking day" may be incompatible with services that may
be obtained electronically at any time and on any day. One commenter
contended that traditional accounting principles, including definitions
of time, may require modification as financial institutions develop
continuous processing systems. Nevertheless, customers' demands for
services that would require such continuous processing systems have not
emerged at this time. Because re-engineering computer systems to
implement continuous processing will be costly, particularly in view of
customers' current expectations about banking services, commenters urged
the Board to retain the regulatory provisions that define time.
Commenters explained that the definition of "banking day" allows
institutions to schedule certain banking functions, such as batch
processing of ACH transactions, in a manner that efficiently uses their
available resources.

b\. [Disclosure requirements]{.underline}

Regulation CC contains several provisions that require depository
institutions to provide notices to their customers. For example, section
229.16 requires a bank to provide a notice that describes the bank's
policy as to when funds deposited in an account are available for
withdrawal. Under the general requirements, contained in section 229.15,
a bank must provide most notices in writing and in a form that the
customer may keep. The commentary to section 229.15 explains that a bank
"satisfies the written-disclosure requirement by sending an electronic
disclosure that displays the text and is in a form that the customer may
keep, if the customer agrees to such means of disclosure."[^22] Other
notice requirements, such as the notice to a customer when the bank
receives a returned check or a notice of nonpayment of a check under
section 229.33(d), do not specify the form of the notice.

###### 3. [Conclusion]{.underline}

The Board believes that changes to the regulatory definition of "banking
day" are not appropriate at this time. Although certain online banking
services may be available outside the hours of a normal banking day,
most banks are generally not open to the public for carrying on
substantially all of their banking functions on a 24-hour basis.
Furthermore, most banks have not upgraded to continuous processing
systems that would accommodate a more expansive definition of "banking
day." Accordingly, the Board concludes that, at this time, such an
amendment is not warranted. The Board will continue to monitor
developments in banking practices and technology that may affect such
issues. In addition, the Board may consider clarifications to Regulation
CC or its commentary regarding the interaction of the regulation's
notice provisions and the E-Sign Act.

The report also summarizes the few suggestions of commenters that
certain provisions of the Board's consumer financial services
regulations be modified to better accommodate online lending and
banking. The report states that the Board will continue to provide
compliance guidance and will consider additional flexibility in the
rules as appropriate.

**Part IV**

**Regulations Administered by the Federal Deposit Insurance
Corporation**

As required by section 729 of the GLB Act, the FDIC has reviewed all of
its regulations that could affect the online delivery of financial
services to ensure that they do not impede online or other forms of
electronic banking. As part of this review, on July 16, 2001, the FDIC
published in the *Federal Register* a request for comment on how its
banking regulations affect the online delivery of banking services. 66
Fed. Reg. 37,029. (*See* Appendix B.) The FDIC asked the public to
respond to certain general questions:

-   Are there specific regulations the FDIC should modify because they
    impede the use of a new technology that would allow financial
    institutions to offer improved products or services in a more
    efficient manner and at a lower cost?

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-   Are there areas where financial institutions would benefit from
    additional clarification of rules or guidance concerning the risks
    associated with electronic banking activities?

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-   Are there specific areas in which regulatory changes are needed to
    enhance consumer acceptance of, confidence in, or access to,
    electronic banking?

In addition, the FDIC specifically asked for comments on hyperlinking;
whether certain terms in its regulations regarding physical location
requirements, such as the definition of a bank "branch," should be
revised to deal with electronic banking; whether regulations involving
appraisals should be amended to provide for the possibility of online
appraisals; and whether the FDIC should promulgate regulations or
publish guidance setting forth standards for the use of electronic
signatures and records.

The FDIC received comments from 3 associations of financial services
providers, 6 financial services firms, a firm that provides software to
financial services firms, 3 individuals, and the Conference of State
Bank Supervisors (CSBS). Some of the submissions also responded to
requests for comment by the other Federal banking agencies, and
addressed regulations that the other agencies have that the FDIC does
not.

Most commenters cautioned the FDIC not to amend or issue new regulations
until this developing area of financial activity has had more time to
develop on its own. Only two commenters suggested changes to specific
FDIC-only rules. One commenter suggested that the FDIC should amend part
303 of the FDIC's rules to exclude online banking services from the
definition of "branch" in 12 C.F.R. § 303.41(a). CSBS recommended that
the FDIC work on a joint interagency basis to clarify where a depository
institution's Internet banking operations are located. CSBS believes
that such an approach would maintain competitive equality among all
depository institutions.

In addition, commenters suggested that guidance, or as one commenter
termed it, "practical information resources," be issued in certain
areas. Commenters cited, as examples of existing helpful guidance, the
FDIC's June 4, 2001 Bank Technology Bulletin On Outsourcing
(FIL-50-2001) and the FFIEC's July 30, 2001 guidance on Authentication
in an Electronic Banking Environment (*see* FDIC FIL-69-2001, Aug. 24,
2001).

As commenters have suggested, electronic banking is a dynamic area that
needs an opportunity to develop as much as possible without formal
regulation. This has been a guiding principle in the FDIC's review of
its regulations, and in the FDIC's approach to electronic banking,
predating the enactment of the GLB Act. When the FDIC has been required
to issue or amend regulations, the FDIC has tried to structure them so
as to avoid obstacles to the growth of online and electronic banking.
Otherwise, the FDIC has tried to foster online banking through the
training of its own employees and, when necessary, by issuing
non-regulation guidance. The purpose of such guidance is to ensure that
electronic banking does not engender unreasonable risks without creating
impediments to its development. The FDIC issued electronic banking
examination procedures in January 1997 and implemented an electronic
banking subject matter expert program in April 1997. The Division of
Supervision created an Electronic Banking Branch to focus attention on
electronic banking supervisory issues in September 2000. In addition,
the FDIC has issued a variety of written guidance concerning risks and
appropriate procedures for electronic banking. *See, e.g.,* FIL 81-2000,
Risk Management of Technology Outsourcing (Nov. 29, 2000); FIL 77-2000,
Bank Technology Bulletin, Internet Domain Names (Nov. 9, 2000); FIL
72-2000, Electronic Signatures in Global and National Commerce Act (Nov.
2, 2000); FIL 67-2000, Security Monitoring of Computer Networks (Oct. 3,
2000); FIL 63-2000, Online Banking (Sept. 21, 2000); FIL 131-97,
Security Risks Associated with the Internet (Dec. 18, 1997).

The FDIC has not identified any of its rules that would, by its terms,
impede online banking. When rulemaking is required, the FDIC will
continue to craft rules to avoid unnecessarily impeding online banking,
and in individual cases, such as the review of applications, the FDIC
will attempt to find interpretations of its rules that will accommodate
legitimate activities while fulfilling the rule's purpose. In addition,
the FDIC will continue to issue guidance, individually or in conjunction
with the other Federal banking agencies and the FFIEC, as necessary to
foster online banking without interfering with its safe and sound
growth.

**Part V**

**Regulations Administered by the Office of the Comptroller of the
Currency**

Prior to enactment of section 729, the OCC had made a concerted effort
to facilitate and support online delivery of financial services.
Recognizing that uncertainty over permissible electronic bank activities
could hinder the delivery of online financial services, the OCC sought
to provide clear guidance on the scope of these activities through its
decisions on bank licensing applications and its legal interpretive
letters. The OCC has approved a number of activities involving
innovative uses of new technology, including the establishment of
transactional Web sites, virtual marketplaces, Internet access services,
and electronic payment systems. The OCC has also permitted national
banks to provide digital certification, electronic correspondent banking
services, and electronic safekeeping. These opinions and decisions are
summarized and are made available on the OCC web site.[^23]

Further, to ensure that electronic banking activities are conducted
consistent with bank safety and soundness and to reduce uncertainty over
supervisory expectations on the delivery of online financial services,
OCC has issued guidance addressing supervisory issues relating to banks'
use of technology.[^24] With the other Federal banking agencies, the OCC
recently issued guidelines prescribing information security standards
that implement the requirements of the GLB Act[^25] and guidance on
authentication in the electronic banking environment.[^26] The OCC also
issued a comprehensive handbook on Internet banking that discusses
business and technical issues associated with providing banking services
via the World Wide Web, the risks presented by these activities, and the
OCC's procedures for Internet-related examinations.[^27] In addition,
the OCC issued "The Internet and the National Bank Charter," as part of
the Comptroller's Corporate Manual (Jan. 2001) and guidance on
weblinking activities and aggregation activities.[^28] These and other
issuances, including Internet-related regulatory updates, are available
on OCC's Electronic Banking web site.

Finally, the OCC has conducted a comprehensive review of the OCC's
regulations with a view toward removing impediments to national banks'
use of technology. In an advance notice of proposed rulemaking (ANPR)
published on February 2, 2000,[^29] the OCC invited public comment on
issues involving Internet banking and other uses of electronic
technology. (*See* Appendix C.) Specifically, the ANPR focused on three
issues:

-   How should the OCC adapt its regulations and supervisory policies to
    facilitate national banks' use of electronic technology consistent
    with bank safety and soundness?;

-   What statutes can the OCC interpret more flexibly to accommodate new
    technologies?; and

-   How can the OCC enhance the operational flexibility of banks
    engaging in electronic banking consistent with bank safety and
    soundness?[^30]

The OCC received 16 comments on the ANPR, including 7 from banks, 6 from
trade associations, 2 from individuals, and 1 from a company that
provides information processing management, outsourcing services, and
application software to banks. The commenters strongly supported the
OCC's initiative, emphasizing that outdated and inflexible regulations
are one of the largest obstacles banks face as they attempt to adopt new
technologies. The comments offered suggestions in each of the three
areas identified in the ANPR and raised a variety of additional issues.

After reviewing these comments, the OCC developed a proposed rule to
update its regulations to reflect national banks' use of new technology.
On July 2, 2001 the OCC published in the *Federal Register* a notice of
proposed rulemaking (NPRM) that would provide simpler and clearer
guidance for national banks using electronic and developing technologies
to conduct their activities and, also, would codify positions that the
OCC has taken previously in published interpretive letters to national
banks.[^31] (*See* Appendix C.) The NPRM also solicited additional
suggestions under section 729 either for legislative action or for
actions that may be appropriately undertaken on an interagency basis.

The proposed rule would create a new subpart E to part 7 of the OCC's
regulations to house these and other OCC provisions related to the
conduct of national bank activities through electronic means. Among its
most significant provisions, the proposed rule would:

-   Codify recent OCC interpretative letters approving the use of the
    finder authority by national banks to engage in several new
    activities made possible by technological developments. The proposed
    regulation includes examples, both in the electronic banking context
    and in the non-electronic banking context, illustrating the range of
    finder activities that the OCC has authorized.

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-   Set forth the factors the OCC considers in determining whether an
    electronic activity is part of, or incidental to, the business of
    banking. These factors are based on OCC and Federal judicial
    precedent and will provide better guidance to national banks seeking
    to engage in new electronic activities.

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-   Clarify that State law applies to a national bank's conduct of
    activities electronically only to the same extent it would apply if
    the activity were conducted through traditional means.

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-   Codify OCC interpretations that permit national banks as part of a
    digital signature transaction to act as a certification authority
    that issues certificates verifying the *identity* of the certificate
    holder. The proposal also requested comments on whether this
    authority should include the ability of a national bank to issue a
    digital certificate that verifies that the holder has certain
    *authority* or the *financial capacity* to make a purchase or engage
    in a transaction, how these activities will be structured, and
    whether these activities present unique risks.

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-   Codify OCC interpretations that permit a national bank to collect,
    process, transcribe, analyze and store banking, financial and
    economic data for itself and its customers as part of the business
    of banking. The proposal also requested comments on whether the OCC
    should issue a rule on incidental data processing that would
    recognize that a national bank may generally derive a certain
    specified percentage of its *total* annual data processing revenue
    from processing non-financial data as incidental to its financial
    data processing services.

### Clarify that a national bank will not be considered "located" in a state simply because it maintains technology, such as a server or an automated loan center, in that state or because customers in that state electronically access a bank's products and services. 

-   Require, as a matter of safety and soundness, that banks that share
    co-branded web sites or other electronic space with affiliated or
    unaffiliated third parties take reasonable steps to enable customers
    to distinguish between products and services offered by the bank and
    those offered by the third party. National banks must disclose their
    limited role with respect to the third party product or service, and
    ensure that these disclosures are conspicuous, simple, direct,
    readily understandable, and designed to call attention to the fact
    that the bank does not provide, endorse, or guarantee any of the
    products or services available.

The comment period on the proposed rule closed on August 31, 2001. OCC
received 26 comments. The comments included 16 from financial
institutions, 8 from trade and government associations, 1 from an
individual, and 1 from a law firm. The comments were generally
supportive of the proposed rule, but suggested some refinements. The OCC
is currently studying these comments and may issue a final rule before
the end of this year.

The OCC also stated in the NPRM that it is considering whether to
further revise its regulations in light of the E-Sign Act[^32] in a
separate project, and that any such revisions would be undertaken in a
separate rulemaking. To that end, the OCC has completed an initial
review of the regulations and statutory provisions administered by the
OCC that require banks: (1) to provide signatures or written documents
to (or obtain them from) consumers or other third parties or (2) to give
notices or disclosures to consumers or other third parties. The OCC is
considering various actions to clarify the effect of the E-Sign Act on
these regulations and provisions, including the possibility of
commencing a rulemaking project or issuing guidance. In this context,
the OCC is consulting with other federal banking agencies to determine
how to interpret and apply various words and phrases in OCC administered
regulations and laws that arguably appear to contemplate written
documents or signatures. These words and phrases include "execute,"
"written agreement," "agreement," "form," "instrument," "copy," "make
available," "notice," "legend," "notify," "inform," "report," "publish,"
"post," "inform," "mail," and "by mail." Likewise, OCC is consulting
with the other agencies on how to administer provisions that require
information to be posted in a particular place or locality, for example
in a lobby or in an office.

**Part VI**

**Regulations Administered by the Office of Thrift Supervision**

OTS makes the following conclusions based upon its review:

**A. Summary of Conclusions**

There is not a need, at this time, for legislative amendments to the
statutes that OTS's regulations implement in order to adapt requirements
to online banking and lending. Nor is there a need, at this time, for
OTS to revise its regulations in order to adapt requirements to online
banking and lending.

As discussed in more detail in subpart C below, OTS already has a very
flexible regulatory framework that permits savings associations to
conduct banking and lending electronically. *See* 12 C.F.R. part 555.
OTS also reviewed its other regulations but found none that would impede
electronic delivery of products or services.

OTS has established processes for periodically reviewing the need for
new legislation and legislative amendments, as well as regulatory
changes. OTS will consider the information learned through this study as
part of those processes.

OTS is committed to updating its regulations and guidance as the need
arises, both individually and in conjunction with the other Federal
banking agencies and the FFIEC. In doing so, OTS will continue to avoid
impediments to online banking and lending. OTS will foster growth of
these activities in a manner that is safe and sound and helps ensure
consumer acceptance and protection.

**B. Report Methodology and Information Learned**

An interdisciplinary team OTS established in April 2001 derived the
above conclusions. Representatives from OTS's Offices of Supervision
Policy, Compliance Policy, Technology Risk Management, and Chief Counsel
comprised the team. This team used three methods, described below, to
contribute to its thorough review of its regulations on the delivery of
financial services for this study: (1) a request for public comment
published in the *Federal Register*; (2) a survey of OTS examiners; and
(3) a headquarters review of OTS regulations.

> 1\. [Request for Comment on Study of Banking Regulations Regarding the
> Online Delivery of Financial Services]{.underline}

On June 11, 2001, OTS published in the *Federal Register* a request for
comment on a variety of issues relating to the electronic delivery of
financial products and services by savings associations.[^33] (*See*
Appendix D.) OTS received eight comments. Three were from trade
associations: America's Community Bankers (ACB), American Bankers
Association (ABA), and Electronic Financial Services Counsel (EFSC). The
others were from MasterCard International (MasterCard), VISA U.S.A.
(VISA), JPMorganChase (JPM), a law firm, and an appraiser. The OTS
interdisciplinary team reviewed the public comments.

ACB, ABA, EFSC, MasterCard, and VISA commented against further federal
restrictions on electronic transactions, including in the area of
Internet link arrangements. ACB and MasterCard urged OTS to continue to
provide flexible guidance rather than mandates. ACB and EFSC
specifically discouraged OTS from issuing regulations or guidance on the
E-Sign Act. MasterCard specifically discouraged OTS from providing
guidance on the application of Most Favored Lender rules to electronic
banking. These commenters asserted that action by OTS in these areas
would be premature and unnecessary.

ACB, EFSC, MasterCard, and VISA encouraged OTS to help ensure that
states do not impose a patchwork of requirements burdening electronic
commerce. EFSC raised specific concerns about state privacy legislation,
state licensing provisions for banking and other financial products and
services, and state requirements that financial service providers
maintain offices in state or employ local residents. ABA raised the
issue of the extent to which the E-Sign Act may preempt state law.

ABA, MasterCard, and the law firm advocated greater flexibility to
provide disclosures electronically under federal consumer protection
statutes and regulations. VISA argued that if an institution provides
disclosures on a web site, the federal banking agencies should not also
require the institution to e-mail the disclosure to the consumer. VISA
specifically asked the agencies to revise their Privacy rules so as not
to require consumer consent before providing privacy notices
electronically instead of on paper. A few commenters addressed
regulations under the purview of other agencies. JPM focused on
disclosures under Regulations E, DD, and Z, VISA focused on Regulations
E and the Truth in Lending Act (TILA), and MasterCard also focused on
TILA, all of which are under the Board's purview. The law firm focused
on the Real Estate Settlement Procedures Act (RESPA), which is under the
Department of Housing and Urban Development's purview.

ACB urged the agencies to allow automated underwriting systems to
substitute for the written appraisals currently required for certain
real estate loans, an alternative EFSC also suggested the agencies
consider through a separate process. ACB also encouraged OTS to raise
the current \$250,000 regulatory threshold for loans requiring the use
of state licensed or certified appraisers to the conforming GSE loan
limit (now \$275,000 for most parts of the country). In contrast, the
appraiser who commented urged OTS to retain the written appraisal
requirement, arguing that appraisals are necessary to ensure that the
collateral for mortgage loans is sufficient. VISA also called for some
increased flexibility in using electronic appraisals.

ACB encouraged OTS to consider how to address "location" under the CRA,
management interlocks, and branching. It suggested that OTS allow use of
something like a CRA strategic plan for management interlocks and
branching but did not provide further elaboration on how this option
would work. In contrast, ABA and VISA advised the agencies not to revise
rules with geographic or time components.

Consistent with the comments, this report does not recommend any new
federal restrictions on electronic transactions. Part II of this report,
which discusses jointly administered regulations, addresses Appraisal
Standards (Part II.A), CRA (Part II.B), and Management Official
Interlocks (Part II.E). In Part III of this report, the Board discusses
providing disclosures electronically under a variety of federal consumer
protection statutes and regulations.

2\. [Examiner Survey]{.underline}

During July and August 2001, OTS surveyed examiners who are directly
involved in examining our savings associations that offer electronic
banking and lending services. The questions pertained to the following:

-   Examiners' observations of associations and customers that encounter
    difficulties or barriers with online banking and lending arising
    from OTS regulations or guidance.

-   Whether there are specific regulatory requirements in an
    association's delivery of financial services, including those
    regulations that assume person-to-person contact, that OTS should
    adapt to online banking and lending.

-   Whether OTS lacks, or could improve upon, guidance or regulation of
    online banking and lending.

The interdisciplinary team reviewed the examiners' survey responses. The
examiners provided insightful responses regarding their examination
experience with online banking and lending. OTS will consider the
information learned from the examiners' responses in ongoing agency
efforts to ensure that examinations are conducted in a thorough and
efficient manner and to enhance employee guidance and training.

3\. [Interdisciplinary Headquarters Review]{.underline}

The OTS interdisciplinary team, in addition to participating in the
interagency review of joint regulations as discussed in this report,
also reviewed OTS-specific regulations. In performing this review, the
team consulted with those OTS staff most familiar with particular
regulations.

The first step of the review was to review all of OTS's regulations to
determine which regulations address the delivery of financial services,
including those regulations that may assume that there will be
person-to-person contact during the course of a financial transaction,
as indicated in section 729(a).

The second step was to identify in what way the assumption manifested
itself in the particular regulation. For example, some regulations
require that certain information be provided in writing through the mail
or designate certain types of activities to be provided in separate
areas of an office from where other activities are conducted. *See,
e.g.,* 12 C.F.R. § 563b.3 (conversions) and § 563.76 (securities sales).

The third step was to identify whether any of the regulations, or the
statutes they implement, would need to be revised to adapt the
requirements to online banking and lending so as not to impede the
electronic delivery of financial products and services. The review
uncovered no statutes or regulations impeding the electronic delivery of
financial products and services.

**C. OTS's Previous Initiatives**

Through the end of the 1990's, OTS periodically revised its regulations
to better enable savings associations to use new technologies for
electronic banking and lending. In 1998, OTS streamlined and updated its
regulations relating to electronic operations to make it easier for
Federal savings associations to develop new ways of delivering products
and services through the prudent and innovative use of emerging
technology.[^34] (*See* Appendix D.) The revised rule permits Federal
savings associations to use, or participate with others to use,
electronic means or facilities to perform any function, or provide any
product or service, as part of an authorized activity. The rule also
requires each savings association (federally chartered or
state-chartered) to notify OTS 30 days before it establishes a
transactional web site. It provides that savings associations that
present supervisory or compliance concerns may be subject to additional
procedural requirements.

In promulgating the rule, OTS emphasized the importance of enabling
regulations in this area. At the same time, OTS designed its regulations
to help ensure that it would have sufficient information to understand
developing technologies, to provide appropriate guidance on these
technologies, and to supervise electronic operations effectively. OTS
designed the final rule to provide both the industry and the agency with
the appropriate amount of flexibility to adapt to changing conditions.

The preamble to the final rule noted that the agency had issued, and
would continue to issue, guidance as electronic operations evolve. This
guidance has taken the form of letters to chief executive officers of
savings associations, interagency examiner guidelines, revisions to the
Thrift Activities and Compliance Activities Handbooks, conditions on the
approval of applications, and responses to requests for legal
interpretations.[^35] Since the publication of the final rule, OTS has
continued to provide additional guidance in this area and post it on its
web site at \<www.ots.treas.gov\>.[^36]

**APPENDICES**

**Relevant Federal Register Publications**

[^1]: Pub. L. 106-102, 113 Stat. 1338, 1476 (1999).

[^2]: 66 Fed. Reg. 8616 (Feb. 1, 2001). These guidelines implement the
    requirements of section 501(b) of the GLB Act, 113 Stat. at 1436-37,
    *codified at* 15 U.S.C. § 6801.

[^3]: Board of Governors' Division of Banking Supervision and
    Regulation, SR Letter 01-20 (SUP) (Aug. 15, 2001), FDIC FIL-69-2001
    (Aug. 24, 2001), OCC Advisory Letter No. 2001-8 (July 30, 2001), OTS
    CEO Memorandum No. 143 (Aug. 8, 2001).

[^4]: Pub. L. 106-229, 114 Stat. 464 (2000), *codified at* 15 U.S.C. §
    7001 *et seq.*

[^5]: 65 Fed. Reg. 4895 (Feb. 2, 2000) (OCC); 66 Fed. Reg. 27,912 (May
    21, 2001) (Board); 66 Fed. Reg. 31,186 (June 11, 2001) (OTS); 66
    Fed. Reg. 34,855 (July 2, 2001) (OCC); 66 Fed. Reg. 37,029 (July 16,
    2001) (FDIC). The Appendix includes copies of the *Federal Register*
    publications. The Board also solicited comments relating to the
    section 729 study and report as part of its publication of interim
    final rules to establish uniform standards for the electronic
    delivery of disclosures to consumers under the consumer financial
    services regulations administered by the Board (Regulations B, E, M,
    Z and DD). 66 Fed. Reg. 17,779; 66 Fed. Reg. 17,786; 66 Fed. Reg.
    17,322; 66 Fed. Reg. 17,329; 66 Fed. Reg. 17,795 (Mar. 30 and Apr.
    4, 2001).

[^6]: 12 C.F.R. parts 34 (OCC), 225 (subpart G) (Board), 323 (FDIC), and
    564 (OTS).

[^7]: *See* 12 C.F.R. parts 25 (OCC), 228 (Board), 345 (FDIC), and 563e
    (OTS).

[^8]: 66 Fed. Reg. 37,602.

[^9]: 65 Fed. Reg. 75,821 (Dec. 4, 2000). The Agencies' rules are
    codified at 12 C.F.R. parts 14 (OCC), 208 (subpart H) (Board), 343
    (FDIC), and 536 (OTS) respectively.

[^10]: 65 Fed. Reg. at 75,827-29; *see, e.g.,* 12 C.F.R. § 14.40(c)(4).

[^11]: 42 U.S.C. § 4104a. The Agencies' regulations are codified at 12
    C.F.R. parts 22 (OCC), 339 (FDIC) and 572 (OTS) and § 208.25
    (Board), respectively.

[^12]: Notwithstanding this requirement with respect to the borrower,
    the lender may provide the *servicer* an electronic copy of the
    notice of special flood hazards.

[^13]: *See* 12 C.F.R. parts 26 (OCC), 212 (Board), 348 (FDIC), and 563f
    (OTS).

[^14]: *See* 12 C.F.R. parts 40 (OCC), 216 (Board), 332 (FDIC), and 573
    (OTS).

[^15]: Section \_\_.3(b)(2)(iii) of the Agencies' Privacy Rule provides:
    "If you provide a notice on a web page, you design your notice to
    call attention to the nature and significance of the information in
    it if you use text or visual cues to encourage scrolling down the
    page if necessary to view the entire notice and ensure that other
    elements on the web site (such as text, graphics, hyperlinks, or
    sound) do not distract attention from the notice, and you either:
    (A) Place the notice on a screen that consumers frequently access,
    such as a page on which transactions are conducted; or (B) Place a
    link on a screen that consumers frequently access, such as a page on
    which transactions are conducted, that connects directly to the
    notice and is labeled appropriately to convey the importance,
    nature, and relevance of the notice."

[^16]: 12 CFR part 204; 12 U.S.C. § 461.

[^17]: 12 C.F.R. § 204.2(d)(2).

[^18]: 12 C.F.R. parts 220 and 221; 15 U.S.C. § 78g.

[^19]: 12 C.F.R. § 220.6(e)(2).

[^20]: 12 C.F.R. part 229; 12 U.S.C. §§ 4001-10.

[^21]: 12 C.F.R. § 229.2(f).

[^22]: 12 C.F.R. part 229, App. E, at IX.A.1., FRRS 9-190.

[^23]: The OCC established a web site that contains information relating
    to electronic banking activities. *See*
    [www.occ.treas.gov/netbank/netbank.htm]{.underline} (Electronic
    Banking web site). The site includes a listing of opinions, approval
    letters, supervisory guidance, and other issuances on this subject
    and provides links to the documents listed.

[^24]: *See, e.g.,* OCC Bulletin 98-3, Technology Risk Management --
    Guidance for Bankers and Examiners (Feb. 4, 1998).

[^25]: 66 Fed. Reg. 8616 (Feb. 1, 2001) (information security guidelines
    issued jointly by the OCC, the Board, the FDIC, and OTS). These
    guidelines implement the requirements of section 501(b) of the GLB
    Act, 113 Stat. at 1436-37 *codified at* 15 U.S.C. 6801.

[^26]: OCC Advisory Letter No. 2001-8 (July 30, 2001).

[^27]: Comptroller's Handbook, Other Income Producing Activities:
    Internet Banking (Oct. 1999).

[^28]: "Weblinking," OCC Bulletin 2001-31 (July 3, 2001) and
    "Bank-Provided Account Aggregation Services," OCC Bulletin 2001-12
    (Feb. 28, 2001).

[^29]: 65 Fed. Reg. 4895 (Feb. 2, 2000).

[^30]: The ANPR also solicited suggestions that would be helpful in
    formulating recommendations for legislative action or for actions
    that may be appropriately undertaken on an interagency basis.

[^31]: 66 Fed. Reg. 34,855.

[^32]: Shortly after the ANPR was published, Congress passed the E-Sign
    Act, which was enacted on June 30, 2000. Among other provisions, the
    E-Sign Act establishes certain uniform Federal rules concerning the
    use of electronic signatures and records in commercial and consumer
    transactions and establishes certain requirements for making
    disclosures to consumers electronically. Although it does not
    require implementing regulations, the E-Sign Act gives the OCC (and
    other Federal and state regulatory agencies) authority to interpret
    the E-Sign Act's requirements with respect to the statutes they
    administer, subject to specified limitations.

[^33]: *Request for Comment on Study of Banking Regulations Regarding
    the Online Delivery of Financial Services,* 66 Fed. Reg. 31,186
    (June 11, 2001).

[^34]: *See* 63 Fed. Reg. 65,673 (Nov. 30, 1998).

[^35]: ^?^ *See, e.g.*, Memorandum from Richard M. Riccobono, Deputy
    Director, for Chief Executive Officers (Nov. 3, 1998) (Policy
    Statement on Privacy and Accuracy of Personal Customer Information);
    Memorandum from Richard M. Riccobono, Deputy Director, for Chief
    Executive Officers (July 23, 1998) (Interagency Guidance on
    Electronic Financial Services and Consumer Compliance); Memorandum
    from John Downey, Executive Director, Supervision, for Chief
    Executive Officers (June 23, 1997) (Statement on Retail On-Line
    Personal Computer Banking); Thrift Activities Regulatory Handbook,
    Section 341, Information Technology (Oct. 1997)

    (Regulatory Bulletin 32-6, Oct. 15, 1997); Federal Financial
    Institutions Examinations Council (FFIEC) Information Systems
    Examination Handbook (1996); OTS Order No. 95-88 (May 8, 1995)
    (application approval of Internet bank); OTS Op. Chief Counsel (Oct.
    1, 1998) (authority of federal savings associations to provide
    payroll processing services); OTS Op. Chief Counsel (July 1, 1998)
    (preemption of state ATM restrictions); OTS Op. Chief Counsel (Sept.
    19, 1997) (establishment of automated loan machines).

[^36]: *See, e.g.*, Memorandum from Richard M. Riccobono, Deputy
    Director, for Chief Executive Officers (June 10, 1999)
    (Transactional Web Sites); OTS Op. Chief Counsel (Dec. 7, 1999) (San
    Francisco ATM fee ordinance); OTS Op. Chief Counsel (Nov. 22, 1999)
    (preemption of local ATM fee restrictions); OTS Op. Chief Counsel
    (Jan. 15, 1999) (New York State ATM Safety Act); OTS Mem. Chief
    Counsel (Dec. 22, 1998) (Massachusetts Electronic Branch
    Restrictions).