OCC 2005-23
OCC Bulletin

Subject:       Truth In Savings Act (TISA) - Regulation DD
Description:  Final Rule: Disclosure of Overdraft Fees

Date:           June 22, 2005

TO:  Chief Executive Officers and Compliance Officers of All
        National Banks, Department and Division Heads, and All
        Examining Personnel

The Board of Governors of the Federal Reserve System published
the attached final rule in the Federal Register on May 24, 2005.1
The final rule amends Regulation DD and the Official Staff
Interpretations, and is designed to improve the uniformity and
adequacy of information to consumers about certain services
provided by banks to their deposit customers.  These services are
commonly referred to as "bounced-check protection" or "courtesy
overdraft protection" services (overdraft services).  The
amendments become effective on July 1, 2006.

The amendments require banks to disclose information about
overdraft fees on periodic statements and account-opening
disclosures, and to include certain disclosures in advertisements
for overdraft services.  The principal changes made by the
amendments include:

Advertisements

Before the final rule, Regulation DD defined "advertisement" in a
manner that generally excluded communications with existing
customers about existing accounts.  The final rule expands this
definition for certain purposes to include communications with
existing customers.  First, "advertisements" include
communications that are misleading or inaccurate, or misrepresent
the deposit contract.  Second, "advertisements" include any
communications about overdraft services.

Advertisements that promote the payment of overdrafts must
include certain disclosures about the service.  In particular,
banks must clearly and conspicuously disclose: the applicable
fees for the payment of overdrafts, the categories of
transactions for which an overdraft fee may be imposed, the time
period consumers have to repay or cover an overdraft, and the
circumstances under which the bank will not pay an overdraft.

The final rule also sets forth a number of situations in which
some or all of these specified disclosures would not be required.
Banks do not need to provide these additional disclosures, for
example, in certain educational materials; on an ATM receipt; on
television, radio, or billboard advertisements; or in response to
a consumer-initiated inquiry.

Periodic Statement Disclosures

Regulation DD generally requires that if an institution mails or
delivers a periodic statement, the institution must disclose fees
imposed in connection with the account during the statement
period.  Under the final rule, if a bank promotes the payment of
overdrafts in an advertisement, the bank must separately disclose
on each periodic statement the total dollar amount of fees
imposed:

*    On the deposit account for paying overdrafts and
*    For returning items unpaid.

These disclosures must be provided both for the statement period
and for the calendar year to date.  Banks that do not promote the
payment of overdraft services would not be required to provide
the new periodic statement disclosures.

The final rule also specifies a number of customer communications
that do not trigger these new disclosure requirements, such as
providing certain educational materials, responding to a consumer-
initiated inquiry, and having in-person discussions.

Account Opening Disclosures

Regulation DD generally requires that banks disclose the amount
of any fee that may be imposed in connection with the account and
the conditions under which a fee may be imposed.  The final rule
amends the Official Staff Interpretations to state that, in
satisfying this requirement with respect to fees for overdraft
services, a bank must specify the categories of transactions for
which an overdraft fee may be imposed.  An exhaustive list of
such transactions is not required.  It is sufficient for an
institution to disclose that a fee may be imposed for covering
overdrafts "created by check, in-person withdrawal, ATM
withdrawal, or other electronic means," as applicable.  Simply
disclosing a fee "for overdraft items would not be sufficient."
This account-opening disclosure requirement applies to all banks,
including those that do not promote overdraft services in an
advertisement.

Questions concerning this final rule may be directed to your
supervisory office, the Compliance Department at (202) 874-4428,
or the Community and Consumer Law Division at (202) 874-5750.


_____________________________
Ann F. Jaedicke
Deputy Comptroller for Compliance

Attachment:  70 FR 29582
               [http://www.occ.treas.gov/fr/fedregister/70fr29582.pdf]
_______________________________
1 70 FR 29582 (May 24, 2005). The rule does not replace the
interagency Joint Guidance on Overdraft Protection Program issued
on February 24, 2005, which addressed safety and soundness
considerations and legal risks raised by, and best practices for,
overdraft protection programs.  70 FR 9127 (February 24, 2005).