[Federal Register Volume 75, Number 39 (Monday, March 1, 2010)]
[Proposed Rules]
[Pages 9126-9129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-3719]



[[Page 9126]]

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FEDERAL RESERVE SYSTEM

12 CFR Part 230

[Regulation DD; Docket No. R-1315]


Truth in Savings

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule; request for public comment.

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SUMMARY: On January 29, 2009, the Board published final rules amending 
Regulation DD, which implements the Truth in Savings Act, and the 
official staff commentary to the regulation. The final rule addressed 
depository institutions' disclosure practices related to overdraft 
services, including balances disclosed to consumers through automated 
systems. The Board proposes to amend Regulation DD and the official 
staff commentary to clarify the application of the rule to retail sweep 
programs and the terminology for overdraft fee disclosures, and to make 
amendments that conform to the Board's final Regulation E amendments 
addressing overdraft services, adopted in November 2009.

DATES: Comments must be received on or before March 31, 2010.

ADDRESSES: You may submit comments, identified by Docket No. R-1315, by 
any of the following methods:
    <bullet> Agency Web Site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> E-mail: <a href="/cdn-cgi/l/email-protection#50223537237e333f3d3d353e2423103635343522313c223523352226357e373f26"><span class="__cf_email__" data-cfemail="10627577633e737f7d7d757e6463507675747562717c627563756266753e777f66">[email protected]</span></a>. Include the 
docket number in the subject line of the message.
    <bullet> Fax: (202) 452-3819 or (202) 452-3102.
    <bullet> Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at 
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper form in Room MP-500 of the Board's Martin Building (20th and C 
Streets, NW) between 9 a.m. and 5 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Dana E. Miller or Vivian W. Wong, 
Senior Attorneys, or Ky Tran-Trong, Counsel, Division of Consumer and 
Community Affairs, at (202) 452-3667 or (202) 452-2412, Board of 
Governors of the Federal Reserve System, 20th and C Streets, NW., 
Washington, DC 20551. For users of Telecommunications Device for the 
Deaf (TDD) only, contact (202) 263-4869.

SUPPLEMENTARY INFORMATION: 

I. Background

    In December 2008, the Board adopted a final rule amending 
Regulation DD, which implements the Truth in Savings Act, and the 
official staff commentary to the regulation. The final rule addressed 
depository institutions' disclosure practices related to overdraft 
services, including balances disclosed to consumers through automated 
systems. The rule was published in the Federal Register on January 29, 
2009 and became effective January 1, 2010. See 74 FR 5584 (Regulation 
DD final rule).\1\
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    \1\ The Board published a technical amendment in April 2009 
correcting a printing error with respect to Sample Form B-10. 
Depository institutions must use Sample Form B-10, or a 
substantially similar form, including the box and gridlines, to 
provide totals for overdraft fees and returned item fees for the 
statement cycle and year-to-date. 74 FR 17768 (April 17, 2009).
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    In November 2009, the Board adopted a final rule under Regulation 
E, which implements the Electronic Fund Transfer Act, limiting a 
financial institution's ability to assess fees for paying ATM and one-
time debit card transactions pursuant to the institution's 
discretionary overdraft service without the consumer's affirmative 
consent to such payment. The Rule was published in the Federal Register 
on November 17, 2009 and has a mandatory compliance date of July 1, 
2010. See 74 FR 59033 (Regulation E final rule).
    Since publication of the two rules, institutions and others have 
requested clarification of particular aspects of the rule and further 
guidance regarding compliance with the rule. In addition, conforming 
amendments to the Regulation DD final rule are necessary in light of 
certain provisions subsequently adopted in the Regulation E final rule. 
Accordingly, the Board is proposing to amend Regulation DD and the 
official staff commentary, as discussed in Section III of this 
SUPPLEMENTARY INFORMATION. Similarly, elsewhere in today's Federal 
Register, the Board has proposed to amend certain aspects of the 
Regulation E final rule.

II. Statutory Authority

    The Truth in Savings Act, 12 U.S.C. 4301 et seq., is implemented by 
the Board's Regulation DD (12 CFR part 230). The purpose of the act and 
regulation is to assist consumers in comparing deposit accounts offered 
by depository institutions, principally through the disclosure of fees, 
the annual percentage yield, the interest rate, and other account 
terms. An official staff commentary interprets the requirements of 
Regulation DD (12 CFR part 230 (Supp. I)). Credit unions are governed 
by a substantially similar regulation issued by the National Credit 
Union Administration. In the SUPPLEMENTARY INFORMATION to the 
Regulation DD final rule, the Board described its statutory authority 
and applied that authority to the requirements of the rule. For 
purposes of this rulemaking, the Board continues to rely on that legal 
authority and analysis.

III. Section-by-Section Analysis

A. Section 230.6(a)--Periodic Statement Disclosures; General Rule

    Section 230.6(a) describes disclosures that are required to be made 
when statements are provided, including certain fees or charges. The 
Board is proposing two technical amendments to Sec.  230.6(a) and the 
related staff commentary. First, the Board is proposing to add a new 
Sec.  230.6(a)(5) to clarify that the periodic statement aggregate fee 
disclosures required by Sec.  230.11(a), discussed below, are among the 
disclosures that are required to be provided on periodic statements for 
purposes of Sec.  230.6(a). Second, the Board is proposing to revise 
comment 6(a)(3)-2, which contains a cross-reference to Sec.  230.11(a) 
that references institutions that promote the payment of overdrafts. 
Because the Regulation DD final rule extended the aggregate fee 
disclosure requirement to all institutions, and not just those 
institutions that promote the payment of overdrafts, the proposed 
revision eliminates the promotion reference.

B. Section 230.11(a)--Disclosure of Total Fees on Periodic Statements

    Section 230.11(a)(1)(i) requires institutions to disclose on each 
periodic statement, as applicable, the total dollar amount of all fees 
or charges imposed on the account for paying checks or other items when 
there are insufficient or unavailable funds and the account becomes 
overdrawn. Sample Form B-10 displays this total as ``Total Overdraft 
Fees.'' Some institutions may use terms other than ``overdraft fee,'' 
such as ``NSF

[[Page 9127]]

items-paid'' to describe per-item overdraft fees in their account 
agreements. Under Regulation DD, comment 3(a)-2 requires institutions 
to use consistent terminology in their account-opening disclosures, 
periodic statements, and other disclosures. In light of this comment, 
questions have been raised as to whether institutions may use 
terminology other than ``Total Overdraft Fees'' in the periodic 
statement aggregate fee disclosure to describe the total amount of all 
fees or charges imposed on the account for paying overdrafts.\2\
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    \2\ The official staff commentary to Regulation DD provides that 
institutions should not use the generic term ``insufficient funds 
fee'' or ``NSF fee'' to describe both fees for paying overdrafts and 
fees for returning items unpaid. See, e.g., comment 6(a)(3)-2(iv) 
(institutions may group itemized fees, but may not group together 
fees for paying overdrafts and fees for returning checks or other 
items unpaid).
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    Under Sec.  230.11(a)(1), institutions are required to provide a 
fee total that includes all overdraft fees, including any additional 
daily or sustained overdraft, negative balance, or similar fees or 
charges imposed by the institution. See comment 11(a)(1)-2. Thus, the 
use of terminology other than ``Total Overdraft Fees'' may not capture 
the various fees associated with the discretionary overdraft service. 
Moreover, the purpose of the aggregate fee disclosure is to provide 
consumers who use overdraft services with additional information about 
fees to help them better understand the costs associated with the 
service. Permitting the use of other terminology could be confusing to 
consumers and potentially undermines their ability to compare costs, 
particularly if a consumer has accounts at different institutions that 
each use different terminology.
    Accordingly, the Board is proposing to revise Sec.  230.11(a)(1)(i) 
to clarify that the periodic statement aggregate fee disclosure must 
disclose the total dollar amount for all fees or charges imposed on the 
account for paying overdrafts, using the term ``Total Overdraft Fees.'' 
Proposed comment 11(a)-2 would explain that this provision supersedes 
comment 3(a)-2. As explained in comment 11(a)(1)-3, institutions may 
use terminology such as ``returned item fee'' or ``NSF fee'' to 
describe the fees for returning items unpaid.

C. Section 230.11(c)--Disclosure of Account Balances

Comment 11(c)-2--Retail Sweep Programs
    Under the Regulation DD final rule, Sec.  230.11(c) requires 
institutions that disclose balance information to a consumer through an 
automated system to disclose a balance that does not include additional 
amounts that the institution may provide to cover an item when there 
are insufficient or unavailable funds in the consumer's account, 
including under a service to transfer funds from another account of the 
consumer. The Board adopted this provision to ensure that consumers 
receive accurate information about their account balances and to help 
avoid consumer confusion as to whether an account has sufficient funds 
to cover a transaction.
    Questions have been raised about the application of the rule to 
retail sweep programs. In a retail sweep program, an institution 
establishes two legally distinct subaccounts, a transaction subaccount 
and a savings subaccount, which together make up the consumer's 
account. The institution allocates and transfers funds between the two 
subaccounts in order to maximize the balance in the savings subaccount 
while complying with the monthly limitations on transfers out of 
savings accounts established under the Board's Regulation D, 12 CFR 
204.2(d)(2).
    Retail sweep programs are distinguishable from overdraft protection 
plans that transfer funds from a consumer's linked accounts in several 
respects. In particular, retail sweep programs are generally not 
established for the purpose of covering overdrafts. Rather, 
institutions typically establish retail sweep programs by agreement 
with the consumer, in order for the institution to minimize its 
transaction account reserve requirements and, in some cases, to provide 
a higher interest rate for the consumer than the consumer would earn on 
a transaction account alone. Furthermore, most retail sweep programs 
are structured so that the consumer (or person acting on behalf of the 
consumer) cannot independently access the funds in the savings 
subaccount; all transfers out of, and deposits or transfers into, the 
savings subaccount component of a retail sweep program are effected 
through the transaction subaccount. Notwithstanding the establishment 
of two legally distinct subaccounts under a retail sweep program, the 
account statements that consumers receive under such a program show a 
single consumer account balance, and a single account on which all 
transactions into and out of the account are reflected.
    By contrast, linked accounts can be used and funded independently 
of one another. For example, a consumer can directly make deposits to, 
and withdrawals from, a savings account whether or not it is linked to 
a checking account. The link between accounts under an overdraft 
protection program is primarily established for purposes of providing 
funds from the savings account in the event that the consumer has 
insufficient funds in the checking account. Additionally, retail sweep 
programs typically do not impose fees on transfers between the savings 
subaccount and the transaction subaccount, while institutions typically 
charge fees for transfers from linked accounts to cover an overdraft.
    Based on the foregoing, consumers under a retail sweep program may 
reasonably expect to see a single balance combining the funds in the 
transaction subaccount and the savings subaccount when they request an 
account balance. Consumers could be confused if a balance that only 
includes funds in the transaction subaccount were displayed because, in 
some cases, the balance in the transaction subaccount could be zero (to 
the extent funds had been transferred to the savings subaccount at the 
time of the balance inquiry). In recognition of the distinct 
characteristics of retail sweep programs, the Board is proposing to add 
a new comment 11(c)-2 to clarify that Sec.  230.11(c) does not require 
an institution to exclude from the consumer's balance funds that may be 
transferred from another account pursuant to a retail sweep program 
when disclosing a transaction account balance under such a program.
Comment 11(c)-3--Additional Balance
    Section 230.11(c) of the Regulation DD final rule permitted 
institutions to disclose an additional balance including overdraft 
funds, so long as the institution prominently states that the balance 
contains additional overdraft funds. Comment 11(c)-2 of the final rule 
provided guidance on how institutions could appropriately identify the 
additional funds. However, the comment only addressed opt-outs. 
Subsequent to the adoption of the Regulation DD final rule, however, 
the Board adopted the Regulation E final rule, which requires 
institutions to obtain a consumer's affirmative consent, or opt-in, to 
the institution's overdraft service, before charging any fee for paying 
ATM and one-time debit card transactions. In light of the final 
Regulation E opt-in requirement, the Board is proposing to renumber 
current comment 11(c)-2 as comment 11(c)-3 and amend it to include 
references to the opt-in requirement. References to opt-outs have been 
retained in some instances because some institutions may provide an 
opt-out choice with respect to checks, ACH, and other types of

[[Page 9128]]

transactions not subject to the Regulation E final rule restrictions.
    The Board is also proposing to extend the requirement to indicate, 
when applicable, that funds in the additional balance may not be 
available for all transactions to circumstances under which funds from 
overdraft services subject to the Board's Regulation Z or from services 
that transfer funds from another account are not available for all 
transactions. For example, if a consumer has an overdraft line of 
credit, but under the terms of the agreement with the institution, the 
consumer cannot access the line of credit when using a debit card at a 
point-of-sale transaction, the proposed comment would state that any 
additional balance displayed through an automated system should 
indicate that the overdraft funds are not available for all 
transactions.

D. Effective Date

    Because some depository institutions may be using terminology other 
than ``Total Overdraft Fees'' in their aggregate fee disclosure under 
Sec.  230.11(a)(1), the Board is proposing to make the proposed 
revisions to Sec.  230.11(a)(1)(i) effective approximately 90 days 
after publication of the final rule in the Federal Register. The Board 
solicits comment on whether this time frame would be an appropriate 
time period for implementation. The Board is proposing to make the 
remaining revisions effective approximately 30 days after publication 
of the final rule in the Federal Register.

IV. Regulatory Analysis

    Sections VI and VII of the SUPPLEMENTARY INFORMATION to the 
Regulation DD final rule set forth the Board's analyses under the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.) and the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR part 1320 Appendix A.1). 
See 74 FR 5591-5593. Because the proposed amendments are clarifications 
and would not, if adopted, alter the substance of the analyses and 
determinations accompanying the Regulation DD final rule, the Board 
continues to rely on those analyses and determinations for purposes of 
this rulemaking.

Text of Proposed Revisions

    Certain conventions have been used to highlight the proposed 
revisions. New language is shown inside [rtrif]bold-type arrows[ltrif] 
while language that would be deleted is set off with [lsqbb]bold-type 
brackets[rsqbb].

List of Subjects in 12 CFR Part 230

    Advertising, Banks, Banking, Consumer protection, Reporting and 
recordkeeping requirements, Truth in savings.

Authority and Issuance

    For the reasons discussed in the preamble, the Board proposes to 
amend 12 CFR part 230 and the Official Staff Commentary, as set forth 
below:
    1. The authority citation for part 230 continues to read as 
follows:

    Authority: 12 U.S.C. 4301 et seq.

    2. Section 230.6 is amended by adding paragraph (a)(5) to read as 
follows:
    (a) General rule. * * *
    [rtrif](5) Aggregate fee disclosure. The disclosure of total 
overdraft and returned item fees required by Sec.  230.11(a).[ltrif]
* * * * *
    3. Section 230.11 is amended by revising paragraph (a)(1)(i) to 
read as follows:
    (a) Disclosure of total fees on periodic statements--(1) * * *
    (i) The total dollar amount for all fees or charges imposed on the 
account for paying checks or other items when there are insufficient or 
unavailable funds and the account becomes overdrawn[rtrif], using the 
term ``Total Overdraft Fees.''[ltrif][lsqbb].[rsqbb]
* * * * *
    4. In Supplement I to part 230,
    a. In Section 230.6(a)(3), paragraph 2. is revised.
    b. In Section 230.11(a)(1), paragraph 2. is revised.
    c. In Section 230.11(c), paragraphs 2. and 3. are redesignated as 
paragraphs 3. and 4., respectively.
    d. In Section 230.11(c), new paragraph 2. is added.
    e. In Section 230.11(c), newly redesignated paragraph 3. is 
revised.

Supplement I to Part 230--Official Staff Interpretations

* * * * *


Sec.  230.6  Periodic Statement Disclosures.

    (a) General Rule
    (a)(3) Fees Imposed
* * * * *
    2. Itemizing fees by type. In itemizing fees imposed more than once 
in the period, institutions may group fees if they are the same type. 
(See 230.11(a)(1) of this part regarding certain fees that are required 
to be grouped [lsqbb]when an institution promotes the payment of 
overdrafts[rsqbb].) * * *
* * * * *


Sec.  230.11  Additional Disclosures Regarding the Payment of 
Overdrafts.

    (a) Disclosure of total fees on periodic statements
    (a)(1) General
* * * * *
    2. Fees for paying overdrafts. Institutions must disclose on 
periodic statements a total dollar amount for all fees or charges 
imposed on the account for paying overdrafts. The institution must 
disclose separate totals for the statement period and for the calendar 
year-to-date. The total dollar amount includes per-item fees as well as 
interest charges, daily or other periodic fees, or fees charged for 
maintaining an account in overdraft status, whether the overdraft is by 
check or by other means. It also includes fees charged when there are 
insufficient funds because previously deposited funds are subject to a 
hold or are uncollected. It does not include fees for transferring 
funds from another account of the consumer to avoid an overdraft, or 
fees charged under a service subject to the Board's Regulation Z (12 
CFR part 226). [rtrif]Under Sec.  230.11(a)(1)(i), the disclosure must 
describe the total dollar amount for all fees or charges imposed on the 
account for paying overdrafts using the term ``Total Overdraft Fees.'' 
This requirement supersedes comment 3(a)-2.[ltrif]
* * * * *
    (c) Disclosure of account balances
* * * * *
    [rtrif]2. Retail sweep programs. In a retail sweep program, an 
institution establishes two legally distinct subaccounts, a transaction 
subaccount and a savings subaccount, which together make up the 
consumer's account. The institution allocates and transfers funds 
between the two subaccounts in order to maximize the balance in the 
savings account while complying with the monthly limitations on 
transfers out of savings accounts established under the Board's 
Regulation D, 12 CFR 204.2(d)(2). Retail sweep programs are generally 
not established for the purpose of covering overdrafts. Rather, 
institutions typically establish retail sweep programs by agreement 
with the consumer, in order for the institution to minimize its 
transaction account reserve requirements and, in some cases, to provide 
a higher interest rate for the consumer than the consumer would earn on 
a transaction account alone. Section 230.11(c) does not require an 
institution to exclude from the consumer's balance funds that may be 
transferred from another account pursuant to a retail sweep program 
that

[[Page 9129]]

are established for such purposes and that have the following 
characteristics: (1) The classification of the accounts involved 
complies with the Board's Regulation D, 12 CFR 204.2(d)(2), (2) the 
consumer does not have direct access to the non-transaction subaccount 
that is part of the retail sweep program, and (3) the consumer's 
monthly statement shows the account balance as the combined balance in 
the subaccounts.
    3[ltrif][lsqbb]2[rsqbb]. Additional balance. The institution may 
disclose additional balances supplemented by funds that may be provided 
by the institution to cover an overdraft, whether pursuant to a 
discretionary overdraft service, a service subject to the Board's 
Regulation Z (12 CFR part 226), or a service that transfers funds from 
another account held individually or jointly by the consumer, so long 
as the institution prominently states that any additional balance 
includes these additional overdraft amounts. The institution may not 
simply state, for instance, that the second balance is the consumer's 
``available balance,'' or contains ``available funds.'' Rather, the 
institution should provide enough information to convey that the second 
balance includes these amounts. For example, the institution may state 
that the balance includes ``overdraft funds.'' Where a consumer 
[rtrif]has not opted into, or as applicable,[ltrif] has opted out of 
the institution's discretionary overdraft service, any additional 
balance disclosed should not include funds [lsqbb]institutions[rsqbb] 
provided under that service. Where a consumer [rtrif]has not opted 
into[ltrif][lsqbb]has opted out of [rsqbb] the institution's 
discretionary overdraft service for some, but not all transactions 
(e.g., the consumer has [rtrif]not opted into[ltrif][lsqbb]opted 
out[rsqbb] overdraft services for ATM and [rtrif]one-time [ltrif]debit 
card transactions), an institution that includes [rtrif]these 
additional overdraft [ltrif]funds [lsqbb]from its discretionary 
overdraft service[rsqbb] in the [rtrif]second [ltrif]balance should 
convey that the overdraft funds are not available for all transactions. 
For example, the institution could state that overdraft funds are not 
available for ATM and [rtrif]one-time (or everyday) [ltrif]debit card 
transactions.[rtrif] Similarly, if funds are not available for all 
transactions pursuant to a service subject to the Board's Regulation Z 
(12 CFR part 226) or a service that transfers funds from another 
account, a second balance that includes such funds should also indicate 
this fact.[ltrif]
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, February 18, 2010.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2010-3719 Filed 2-26-10; 8:45 am]
BILLING CODE 6210-01-P


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