FAQs
Advertising Rules
Question: We are considering offering a $10 gift card at the time of opening for all new accounts. If one person opens four new accounts, they would receive $40 in gift cards. Would we have to aggregate by account or by person for bonus purposes?
Answer: “Bonus” is defined in Reg. DD as: a premium, gift, award, or other consideration worth more than $10 (whether in the form of cash, credit, merchandise, or any equivalent) given or offered to a consumer during a year in exchange for opening, maintaining, renewing, or increasing an account balance. The term does not include interest, other consideration worth $10 or less given during a year, the waiver or reduction of a fee, or the absorption of expenses.
Comment 3 in the Official Staff Commentary to §1030.2(f) addresses aggregation and says:
- Aggregation. In determining if an item valued at $10 or less is a bonus, institutions must aggregate per account per calendar year items that may be given to consumers. In making this determination, institutions aggregate per account only the market value of items that may be given for a specific promotion. To illustrate, assume an institution offers in January to give consumers an item valued at $7 for each calendar quarter during the year that the average account balance in a negotiable order of withdrawal (NOW) account exceeds $10,000. The bonus rules are triggered since consumers are eligible under the promotion to receive up to $28 during the year. However, the bonus rules are not triggered if an item valued at $7 is offered to consumers opening a NOW account during the month of January, even though in November the institution introduces a new promotion that includes, for example, an offer to existing NOW account holders for an item valued at $8 for maintaining an average balance of $5,000 for the month.
So, if the $10 is paid to separate accounts owned by the same depositor, the amounts should NOT be aggregated. Only amounts paid to the SAME account must be aggregated for the purpose of determining if TISA’s bonus rules are triggered. Also amounts of $10 or less are not considered a “bonus” for Reg. DD purposes, so a $10 gift card would not be considered a “bonus”. The value of the bonus must be MORE THAN $10.
Question: My bank is going to offer a promotional six-month certificate of deposit (CD) with a specified rate for the first 3 months and a higher specified rate for the last 3 months. For purpose of compliance with Regulation DD’s (Truth in Savings Act) disclosure and advertising provisions, the bank is considering this CD to be a stepped-rate account and not a variable rate account. Is that correct?
Answer: Yes, the CD is a stepped-rate account, which is an account that has two or more rates that apply to succeeding periods and the rates are known when the account is opened. A variable-rate account is an account in which the interest rate may change after the consumer opens the account unless the bank provides 30 calendar days advance written notice of a rate decrease. The rate of a variable-rate account may change, but the future rate is NOT known at the time the account is opened.
Question: What are the advertising regulations for outdoor marquees or digital signs?
Answer: You will find deposit advertising regulations in Regulation. DD and loan advertising regulations in Regulation. Z. There are no separate advertising regulations for outdoor or digital signs. You will notice however, that “outdoor media” are afforded some relaxed requirements in Regulation. DD (see section 1030.8(e)(1)). Unfortunately, there are no relaxed requirements under Regulation. Z, so you may find it best to only promote lending products in general terms to avoid using a triggering term that would require additional disclosures.
Disclosure Requirements
Question: We are updating the interest rate and APY for one of our deposit products. For example, the interest rate is 3.00% with APY 3.03%. Our TISA disclosure shows the rate as 3.001%, using three decimal places instead of two. Is that compliant?
Answer: Yes. The answer is in Reg. DD, 1030.3(f) Rounding and accuracy for rates and yields. We are familiar with the requirement to show rates rounded to the nearest one-hundredth of one percentage point and expressed to two decimal places. However, the regulation goes on to state, “For account disclosures, the interest rate may be expressed to more than two decimal places.” The full text of 1030.3(f)(1) is below.
(f) Rounding and accuracy rules for rates and yields. (1) Rounding. The annual percentage yield, the annual percentage yield earned, and the interest rate shall be rounded to the nearest one-hundredth of one percentage point (.01%) and expressed to two decimal places. For account disclosures, the interest rate may be expressed to more than two decimal places.
Question: We are considering offering $10 to existing Christmas Club customers for making a deposit of $10 or more within 90 days of Christmas into their existing Christmas Club account as an incentive to retain the account and start saving immediately for the next holiday. Is this considered a bonus? Is the $10 deposited into the account reportable as interest income even if the account is not interest bearing?
Answer: There are two sets of rules you need to consider when offering bonuses.
- First, Regulation DD (which implements TISA) requires certain disclosures to be made in advertisements and your TISA disclosure when you offer bonuses related to opening, maintaining, renewing or increasing an account. A bonus for Regulation DD purposes is cash or merchandise worth MORE THAN $10. So, if you offer $10 to existing accountholders as an incentive to maintain their Christmas Club account, that is NOT a bonus for Regulation DD purposes, because the value of the offering is not MORE than $10.
- Secondly, you must consider the IRS reporting rules. The 1099-INT instructions indicate that amounts of $10 or more, whether or not designated as interest, that are paid or credited to an account must be reported as interest income.
So, in your example, the $10 paid to the account would NOT be considered a bonus triggering additional disclosure requirements but would have to reported as interest income paid to the account because it was at least $10 – even if the account is not an interest-bearing account.
Question: Is there a federal or state law that caps what a bank may impose for early withdrawal penalties on time certificates of deposit? In this rising interest rate environment, we have experienced an increased number of depositors cashing their CDs, taking the penalty and moving the funds elsewhere for higher interest rates, so we are contemplating increasing our early withdrawal penalty in an attempt to discourage this.
Answer: Neither state nor federal law places a cap or other restriction on early withdrawal penalties for CDs. However Regulation DD, which implements the Truth-in-Savings Act does require banks to disclose their early withdrawal penalties on the account opening disclosures. (See § 1030.4(b)(6)(ii))
Question: Our bank would like to offer a promotional six-month certificate of deposit with a specified rate for the first three months and a lower specified rate for the last three months. For purpose of compliance with Regulation DD’s disclosure provisions, the bank is considering this CD to be a stepped-rate account and not a variable rate account. Is that correct?
Answer: You are correct. The CD is a stepped-rate account, which is an account that has two or more rates that apply to succeeding periods and are known when the account is opened. A variable-rate account is an account in which the interest rate may change after the consumer opens the account. The rate on a variable-rate account may change, however the rate is not known at the time the account is opened.
Question: For Truth in Savings disclosure purposes, we utilize a “common features” brochure, which includes fees that are not related directly to an account, for example, garnishment fees, copying fees, money order fees, etc. Do all these fees really need to be included in the TISA disclosure?
Answer: Yes. Regulation. DD at section 1030.4(b)(4) states that initial disclosures must include the amount of any fee that may be imposed in connection with the account (or an explanation of how the fee will be determined) and the conditions under which the fee may be imposed. Also keep in mind state law requirements at Iowa Code section 524.805(3), requiring full disclosure of the charges for the “handling or custody of deposits.” This broader language in state code covers a host of additional fees, such as for cashing or certifying checks, garnishment, levy and other miscellaneous services related either to the account or to “handling” of deposits maintained at the bank.
Changing Terms of an Account
Question: We are considering revising our Truth in Savings Act disclosure and fee schedule to clarify that checks and other items that have been returned NSF can be represented for payment multiple times and if funds are not available upon re-presentment to pay the item, a NSF fee may be assessed each time the check or other item is represented. Do you have any model language for this purpose?
Answer: Regulation DD, which implements the TISA, does not provide model language for this purpose nor have the regulators released any sort of suggested language. Thus, banks should consult with their form vendors and bank legal counsel in revising their NSF fee disclosure. The focus should be on ensuring your disclosure is clear so that a consumer who is not familiar with banking processes understands if a check, draft, ACH, preauthorized transfer, etc. is presented for payment and the consumer does not have sufficient funds in the account to pay such item(s), the bank may return the item and charge the consumer a NSF fee. Further, the disclosure should explain if returned items are presented multiple times for payment, and funds are still not available to pay the item, the same item may be returned again and another NSF fee may be assessed to the consumer, regardless of the number of times the item is presented for payment.
Question: Can we change the early withdrawal penalty on existing time certificates of deposit?
Answer: Changes to existing CDs are not typically permitted during the term of a CD as your deposit account agreement with the consumer constitutes a legal contract and those contract terms do not typically allow the bank to change the terms of the agreement without the depositor’s consent. However, if the CD automatically renews at the end of the contract term, the bank would have an opportunity to change the early withdrawal penalty at the time of renewal by providing a change-in-terms notice as required by Regulation DD to impacted customers at the time of renewing the deposit contract.
If a bank would like to change the early withdrawal penalty at the time of renewal, it is important to meet the timing requirements in § 1030.5(a). This section of Regulation DD requires the bank to give at least 30 calendar days advance notice to affected consumers of any change in a term required to be disclosed under § 1030.4(b) if the change may reduce the annual percentage yield or adversely affect the consumer. The notice must include the effective date of the change and be mailed or delivered at least 30 calendar days before the effective date of the change. So the notice must be mailed at least 30 calendar days before the date the CD auto renews. The bank could elect to include this change-in-terms notice with the CD renewal notice, but then would need to send the renewal earlier than normal to meet the change-in-terms timing requirement.
Question: We are changing a number of fees and the minimum balance pricing on a number of our deposit accounts. Is it appropriate that we provide notice of these changes by simply including the new pricing and fee schedules in our revised Truth in Savings disclosure?
Answer: Regulation DD requires advance notice to all affected consumers of any change in term that is required to be disclosed under section 1030.4(b) that is adverse to the consumer or may reduce the APY. The notice must include the effective date of the change and must be mailed or delivered at least 30 calendar days before the effective date of the change. Regulation DD Commentary, at Section 1030.5(a)(1) allows that institutions “may provide a change-in-terms notice on or with a periodic statement or in another mailing. If the institution provides notice through revised account disclosures, the changed terms must be highlighted in some manner. For example, the institution may note that a particular fee has been changed (also specifying the new amount) or use an accompanying letter that refers to the changed term.”
So the new TISA disclosure brochure could contain the revised terms — highlighted in some fashion to call the consumers’ attention to them — and an accompanying statement message or letter could describe the changes (e.g. “Our deposit accounts fee schedules are changing effective (date). See highlighted terms in accompanying Truth in Savings Disclosure.”)
Question: Since Regulation DD (which implements the Truth in Savings Act) is a consumer regulation only, does this mean we don’t need to provide 30 days advance notice prior to making changes to a business account? Is there any law that requires we provide advance notice to our business checking account customers (other than being courteous) if we are going to increase fees or change a term of their account?
Answer: You are correct in that TISA, implemented by Regulation DD, only covers consumer accounts. However, Iowa Code chapter 524.805(3) requires banks provide “reasonable notice” prior to increasing charges assessed to “customers” for the handling or custody of their deposits. Customers are defined in 524.103 as “a person with an account or other contractual arrangement with a state bank.” And “Persons” are defined in the code at chapter 4.1 as “Unless otherwise provided by law, “person” is an individual, corporation, Limited Liability Company, government or governmental subdivision or agency, business trust, estate, trust, partnership or association, or any other legal entity.” So business accounts are covered under Iowa law and do need to be provided “reasonable prior notice.” Also, check your deposit account agreement with your business customers, it should also contain language stating you will provide prior notice of any changes that may affect the customer.
Periodic Statements
Question: Our core system has limitations on the number of characters for account names and/or fees that can be detailed on periodic statements. Do you have any suggestions on how we can ensure consistent terminology between disclosures and periodic statements when we experience these limitations?
Answer: Reg. DD does require consistent terminology when describing terms or features on disclosures. For example, if an institution describes a monthly fee (regardless of account activity) as a “monthly service fee” in account-opening disclosures, the periodic statement and change-in-term notices must use the same terminology so consumers can readily identify the fee.
It is best practice to have all disclosure terms match exactly from periodic statements and Truth in Savings (TISA) disclosures to rate sheets and fee schedules. It is common for periodic statements to have character limitations. When this is the case, we suggest you match everything to the periodic statement. If you are using abbreviations on the periodic statement, include the abbreviations in parentheses in the account opening disclosures for your consumer to better identify the fee and/or account name between all disclosures.
Question: We are trying to make sure the Regulation DD disclosure is going to print correctly on our periodic statements. Our core processor told us that if the account did not have any overdraft fees for the period and year-to-date, the disclosure will not print on the statement. Is this acceptable? I assumed that disclosure needs to appear on the periodic statement even if no overdraft or insufficient funds charges have been assessed.
Answer: Actually, Regulation DD allows either option. Regulation DD, section 1030.11(a) states:
(a) Disclosure of total fees on periodic statements (1) General. A depository institution must separately disclose on each periodic statement, as applicable:
(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; and
(ii) The total dollar amount for all fees or charges imposed on the account for returning items un-paid.
If there are no fees for any particular statement period or year-to-date, the disclosures need not be provided as they would not be “applicable” to that particular account. However, the confusion comes from the Model Clause B-10, which illustrates how to make the disclosure if there are no fees for a period – essentially, entering $0.00.
B-10 Aggregate Overdraft and Returned Item Fees Sample Form
| Total This Period | Total Year-to-Date | |
| Total Overdraft Fees | $60.00 | $150.00 |
| Total Returned Item Fees | $0.00 | $30.00 |
Therefore, the bank may either leave the disclosure off the statement or show “$0” in all fields when there are no fees for the statement period and year-to-date. However, if either a fee for the statement period or an aggregate for the year-to-date has occurred, then those disclosures must be made on each subsequent periodic statement.
Question: How do we show refunded or waived overdraft or insufficient funds fees on periodic statements?
Answer: The answer to this question is found in the Official Staff Commentary to Regulation DD, section 1030.11(a)(1), paragraph 4:
- Waived fees. In some cases, an institution may provide a statement for the current period reflecting that fees imposed during a previous period were waived and credited to the account. Institutions may, but are not required to, reflect the adjustment in the total for the calendar year-to-date and in the applicable statement period. For example, if an institution assesses a fee in January and refunds the fee in February, the institution could disclose a year-to-date total reflecting the amount credited, but it should not affect the total disclosed for the February statement period, because the fee was not assessed in the February statement period if an institution assesses and then waives and credits a fee within the same cycle, the institution may, at its option, reflect the adjustment in the total disclosed for fees imposed during the current statement period and for the total for the calendar year-to-date. Thus, if the institution assesses and waives the fee in the February statement period, the February fee total could reflect a total net of the waived fee.