Source: https://www.federalregister.gov/documents/2009/07/22/E9-17313/truth-in-savings
Timestamp: 2017-08-18 09:13:54
Document Index: 50015504

Matched Legal Cases: ['§\u2009707', 'art 230', 'art 707', 'art 707', 'art 707', 'art 707', '§\u2009707', 'art 707', 'art\n8', 'art 707', 'art 226']

A Rule by the National Credit Union Administration on 07/22/2009
74 FR 36102
36102-36106 (5 pages)
E9-17313
II. Comments and the Final Rule
https://www.federalregister.gov/d/E9-17313 https://www.federalregister.gov/d/E9-17313
NCUA is amending its Truth in Savings rule and official staff interpretation to remove the provisions regarding the electronic delivery of disclosures. The official staff interpretations are amended to include guidance on electronic disclosures. Additionally, NCUA is amending the rule to require all credit unions to disclose aggregate overdraft fees on periodic statements regardless of whether they promote the payment of overdrafts. The final rule also addresses account balance disclosures provided to members through automated systems.
The Truth in Savings Act (TISA) requires NCUA to promulgate regulations substantially similar to those promulgated by the Federal Reserve Board (FRB). 12 U.S.C. 4311(b). In doing so, NCUA is to take into account the unique nature of credit unions and the limitations under which they pay dividends on member accounts. In March 2009, NCUA proposed amendments to its TISA rule to align it with recent changes the Federal Reserve Board made to Regulation DD. See 74 FR 13129 (March 26, 2009).
As required by the Truth in Savings Act (TISA), NCUA proposed to amend its TISA rule and official staff interpretation to align it with the Federal Reserve Board's Regulation DD. Specifically, the proposed rule contained the provisions and guidance on the electronic delivery of disclosures. Additionally, NCUA proposed to amend the rule and the official staff commentary to require all credit unions to disclose aggregate overdraft fees on periodic statements. The proposed rule also addressed balance disclosures credit unions provide to members through automated systems.
NCUA is adopting the rule as it was proposed with minor changes. Specifically, the final rule amends § 707.1 to include the Office of Management and Budget approval number for the information collections in the rule and includes a minor technical correction to the sample form in Appendix B-12 for formatting purposes.
NCUA received comments from two credit unions and two trade associations. One credit union supported the proposal to withdraw the provisions regulating electronic delivery of disclosures under TISA and to permit electronic disclosures in accordance with the E-Sign Act, but opposed the proposed amendments that would require all credit unions to disclose the aggregate periodic and year-to-date fees charged to a member account for overdraft services. The credit union commented the amendment would be burdensome and act as a disincentive to credit unions that do not advertise or market overdraft programs to their members. NCUA must issue TISA rules that are substantially similar to Regulation DD, 12 CFR Part 230, unless the unique nature of credit unions and their payment of dividends call for different regulations. See 12 U.S.C. 4311(b). The Board concludes the nature of credit unions and the payment of dividends do not give it reason to issue regulations regarding overdraft fees and the electronic delivery of disclosures that differ from Regulation DD.
The second credit union commenter requested a final rule become effective no earlier than January 1, 2010, to give credit unions sufficient time to make the necessary operational changes and educate members. The Board is aware that credit unions have anticipated amendments to Part 707 since the Federal Reserve Board issued amendments to Regulation DD in December 2008. Therefore, the Board is issuing this final rule with an effective date of January 1, 2010.
One trade association supported the proposed amendments regarding electronic disclosures, but had concerns with the provisions involving disclosure of overdraft fees. It does not believe the benefit of the rule would outweigh the burden. To mitigate the burden, the trade association suggested permitting members to request the aggregate overdraft fee disclosures instead of requiring credit unions to provide them to all members. Additionally, it encouraged NCUA to differentiate between overdraft fees resulting from credit unions paying funds to cover an overdraft as a courtesy and fees that result from a credit union's contractual obligation to pay a transaction, such as under an agreement with VISA or MasterCard. The trade association believes credit unions should be required to disclose the fees resulting from a courtesy payment, but not the fees that stem from a contractual obligation. Another trade association supported the provisions that would exclude funds in an overdraft program from a member's available balance disclosed in response to a balance inquiry on an automated system and that address electronic disclosures, but questioned the need for the amendments to the overdraft fee disclosures.
The final rule requires all credit unions to disclose periodic and aggregate year-to-date overdraft fees on periodic statements, regardless of whether they advertise or promote member use of overdraft services. Under the current TISA regulation, credit unions that provide periodic statements must disclose fees or charges imposed on a member account during the statement period. 12 CFR 707.6(a)(3). Further, credit unions that promote the payment of overdrafts in an advertisement must also disclose the aggregate totals for overdraft fees and returned item fees for both the statement period and calendar year-to-date. 12 CFR 707.11(a). The rule eliminates the distinction between credit unions that promote overdraft services and those that do not, and requires all credit unions offering overdraft services to disclose the fees imposed for the payment of overdrafts for each statement period and the year-to-date aggregate. The amendment also eliminates the confusion surrounding the distinction between marketing and educational materials for purposes of determining when to disclose the year-to-date fees.
Additionally, credit unions are not required to offer overdraft services and may restrict the payment of overdrafts on debit card or point-of-sale transactions. Credit unions generally impose a fee for overdraft services regardless of whether the payment of an overdraft is a courtesy or results from a contractual obligation. To inform members about the fees charged for using discretionary overdraft services Start Printed Page 36103and to help them better understand the costs associated with their accounts, the rule requires all credit unions to disclose the aggregate fee information for the statement period and calendar year-to-date.
The Regulatory Flexibility Act requires NCUA to prepare an analysis to describe any significant economic impact any regulation may have on a substantial number of small entities. 5 U.S.C. 603(a). For purposes of this analysis, NCUA considers credit unions having under $10 million in assets small entities. Interpretive Ruling and Policy Statement 03-2, 68 FR 31949 (May 29, 2003). As of March 31, 2009, out of 7,749 federally insured credit unions, 3,335 had less than $10 million in assets.
NCUA prepared a regulatory flexibility analysis as a part of the proposed rule issued in March 2009. 74 FR 13129, 13135 (March 26, 2009). The Board received no comments addressing how the rule would affect small credit unions.
This final rule aligns NCUA's regulation with the Federal Reserve Board's Regulation DD, as required under TISA. TISA was enacted, in part, for the purpose of requiring clear and uniform disclosures regarding deposit account terms and fees assessable against these accounts. Such disclosures allow consumers to make meaningful comparisons between different financial institutions and also allow consumers to make informed judgments about the use of their accounts. 12 U.S.C. 4301. TISA requires the Board to prescribe regulations to carry out the purpose and provisions of the statute. 12 U.S.C. 4308(a)(1), 4311(b). The Board is adopting revisions to part 707 to address the uniformity and adequacy of credit unions' disclosure of fees associated with overdraft services. Additionally, the rule eliminates the regulatory burden associated with credit unions providing disclosures to their members through electronic means.
Credit unions must consider other laws when administering an overdraft protection program. Although other laws and regulations may apply to a credit union's payment of overdrafts, the final revisions to part 707 do not duplicate or conflict with the requirements imposed by these laws. The Board has also considered the interagency guidance on overdraft protection programs issued in February 2005 and has determined that issuance of the final revisions to part 707 is consistent with the interagency guidance. 70 FR 9127 (February 24, 2005).
This final rule directly affects all credit unions that offer overdraft services or provide electronic disclosures. While NCUA does know how many credit unions provide electronic disclosures, it estimates 2,782 credit unions offer overdraft services other than a traditional line of credit, and 226 of them are small credit unions. Therefore, NCUA has determined this final rule will not have an impact on a substantial number of small entities.
Additionally, NCUA has determined the economic impact on small credit unions affected by the final rule will not be significant. NCUA expects the rule will increase the paperwork burden for disclosing overdraft fees and eliminate the burden for electronic delivery of disclosures. Therefore, the economic impact, if any, will be minimal. A majority of credit unions use software vendors to provide the disclosures required under TISA and the implementing regulations. The vendors routinely provide updates to software and other products to credit unions to ensure compliance with regulatory requirements under the terms of the service contract. NCUA expects credit unions employing a third party vendor to provide TISA disclosures will incur minimal additional costs, if any. Accordingly, the Board certifies this rule will not have a significant economic impact on a substantial number of small entities.
In accordance with the Paperwork Reduction Act of 1995, 44 U.S.C. 3501 et seq., the Board has submitted the information collection requirements contained in this final rule to the Office of Management and Budget (OMB). The NCUA may not conduct or sponsor, and an organization is not required to respond to, this information collection unless it displays a currently valid OMB control number. The current OMB control number for the Truth in Savings program is 3133-0134. This information collection has been revised to include the requirements of this final rule. The proposed rule contained a discussion of the revised information collection. 74 FR 13129, 13136 (March 26, 2009). OMB approval is pending.
The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996, Public Law 104-121, provides generally for congressional review of agency rules. A reporting requirement is triggered in instances where NCUA issues a final rule as defined by Section 551 of the Administrative Procedures Act. 5 U.S.C. 551. The Office of Information and Regulatory Affairs, an office within OMB, is reviewing this final rule for purposes of SBREFA, and a determination is pending.
By the National Credit Union Administration Board on July 16, 2009.
(a) Authority. This regulation is issued by the National Credit Union Administration to implement the Truth in Savings Act of 1991 (TISA), Start Printed Page 36104contained in the Federal Deposit Insurance Corporation Improvement Act of 1991, 12 U.S.C. 3201 et seq., Pub. L. 102-242, 105 Stat. 2236. Information collection requirements in this regulation have been approved by the Office of Management and Budget under the provisions of 44 U.S.C. 3501 et seq. and have been assigned OMB No. 3133-0134.
3. Section 707.3 is amended by revising paragraph (a) and removing paragraph (g) to read as follows:
4. Section 707.4 is amended by revising paragraph (a)(1) and (a)(2)(i), to read as follows:
(a) Delivery of account disclosures—(1) Account opening. (i) General. A credit union must provide account disclosures to a member or potential member before an account is opened or a service is provided, whichever is earlier. A credit union is deemed to have provided a service when a fee required to be disclosed is assessed. Except as provided in paragraph (a)(1)(ii) of this section, if a member or potential member is not present at the credit union when the account is opened or the service is provided and has not already received the disclosures, the credit union must mail or deliver the disclosures no later than 10 business days after the account is opened or the service is provided, whichever is earlier.
5. Section 707.10 is removed and reserved.
6. Section 707.11 is amended by revising the heading, paragraphs (a), (b)(2)(x) and (b)(2)(xi), and adding paragraphs (b)(2)(xii) and (c) to read as follows:
(a) Disclosure of total fees on periodic statements. (1) General. A credit union must separately disclose on each periodic statement, as applicable:
(3) Format requirements. The aggregate fee disclosures required by paragraph (a) of this section must be disclosed in close proximity to fees identified under § 707.6(a)(3), using a format substantially similar to Sample Form B-10 in appendix B.
7. Amend Appendix B to part 707, by adding B-12 to read as follows:
B-12 Aggregate Overdraft and Returned Item Fees Sample Form
Start Printed Page 36105 Start Amendment Part
8. In Appendix C to Part 707, the following amendments are made:
2. Additional balance. The credit union may disclose additional balances supplemented by funds that may be provided by the credit union to cover an overdraft, whether pursuant to a discretionary overdraft service, a service subject to part 226 of this title (Regulation Z), or a service that transfers Start Printed Page 36106funds from another account held individually or jointly by the member, so long as the credit union prominently states that any additional balance includes these additional overdraft amounts. The credit union may not simply state, for instance, that the second balance is the member's “available balance,” or contains “available funds.” Rather, the credit union should provide enough information to convey that the second balance includes these amounts. For example, the credit union may state that the balance includes “overdraft funds.” Where a member has opted out of the credit union's discretionary overdraft service, any additional balance disclosed should not include funds credit unions provide under that service. Where a member has opted out of the credit union's discretionary overdraft service for some, but not all transactions, e.g., the member has opted out of overdraft services for ATM and debit card transactions, a credit union that includes funds from its discretionary overdraft service in the balance should convey that the overdraft funds are not available for all transactions. For example, the credit union could state that overdraft funds are not available for ATM and debit card transactions.
[FR Doc. E9-17313 Filed 7-21-09; 8:45 am]