[Federal Register: April 30, 2007 (Volume 72, Number 82)]
[Proposed Rules]
[Page 21155-21162]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30ap07-19]
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FEDERAL RESERVE SYSTEM
12 CFR Part 230
[Regulation DD; Docket No. R-1285]
Truth in Savings
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Proposed rule; request for comments.
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SUMMARY: The Board is proposing to amend Regulation DD, which
implements the Truth in Savings Act, to withdraw portions of the
interim final rules for the electronic delivery of disclosures issued
March 30, 2001. The interim final rules address the timing and delivery
of electronic disclosures, consistent with the requirements of the
Electronic Signatures in Global and National Commerce Act (E-Sign Act).
Compliance with the 2001 interim final rules is not mandatory. Thus,
removing the interim rules from the Code of Federal Regulations would
reduce confusion about the status of the provisions and simplify the
regulation. The Board is also proposing to amend Regulation DD to
provide that certain disclosures may be provided to a consumer in
electronic form without regard to the consumer consent and other
provisions of the E-Sign Act; and that, when an advertisement is
accessed by the consumer in electronic form, the disclosures must be
provided in electronic form on or with the advertisement. Similar rules
are being proposed under other consumer fair lending and financial
services regulations administered by the Board.
DATES: Comments must be received on or before June 29, 2007.
ADDRESSES: You may submit comments, identified by Docket No. R-1285, by
any of the following methods:
Agency Web site: http://www.federalreserve.gov Follow the instructions for submitting comments at http://www.federalreserve.gov/.
.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: regs.comments@federalreserve.gov. Include the
docket number in the subject line of the message.
FAX: (202) 452-3819 or (202) 452-3102.
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: John C. Wood or David A. Stein,
Counsels, Division of Consumer and Community Affairs, at (202) 452-2412
or (202) 452-3667. For users of Telecommunications Device for the Deaf
(TDD) only, contact (202) 263-4869.
SUPPLEMENTARY INFORMATION:
I. Background
The purpose of the Truth in Savings Act (TISA), 12 U.S.C. 4301 et
seq., is to enable consumers to make informed decisions about accounts
at depository institutions. The act requires depository 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. It also includes rules about
advertising for deposit accounts. The Board's Regulation DD (12 CFR
part 230) implements the act. Credit unions are governed by a
substantially similar regulation issued by the National Credit Union
Administration. TISA and Regulation DD require a number of disclosures
to be provided in writing.
Board Proposals Regarding Electronic Disclosures
On May 2, 1996, the Board proposed to amend Regulation E
(Electronic Fund Transfers) to permit financial institutions to provide
disclosures by sending them electronically (61 FR 19696). Based on
comments received, in 1998 the Board published an interim rule
permitting the electronic delivery of disclosures under Regulation E
(63 FR 14528, March 25, 1998) and proposals under Regulations B (Equal
Credit Opportunity), M (Consumer Leasing), Z (Truth in Lending), and DD
(Truth in Savings) (63 FR 14552, 14538, 14548, and 14533, respectively,
March 25, 1998).
[[Page 21156]]
Based on comments received on the 1998 proposals, in September 1999
the Board published revised proposals under Regulations B, E, M, Z, and
DD (64 FR 49688, 49699, 49713, 49722 and 49740, respectively, September
14, 1999). At the same time, the Board published an interim rule under
Regulation DD allowing depository institutions to deliver disclosures
on periodic statements in electronic form if the consumer agreed (64 FR
49846, September 14, 1999). While these rulemakings were pending,
Federal legislation was enacted addressing the use of electronic
documents and records, including consumer disclosures.
Federal Legislation Addressing Electronic Commerce
On June 30, 2000, the President signed into law the Electronic
Signatures in Global and National Commerce Act (the E-Sign Act) (15
U.S.C. 7001 et seq.). The E-Sign Act provides that electronic documents
and electronic signatures have the same validity as paper documents and
handwritten signatures. The E-Sign Act contains special rules for the
use of electronic disclosures in consumer transactions. Under the E-
Sign Act, consumer disclosures required by other laws or regulations to
be provided or made available in writing may be provided or made
available, as applicable, in electronic form if the consumer
affirmatively consents after receiving a notice that contains certain
information specified in the statute, and if certain other conditions
are met.
The E-Sign Act, including the special consumer notice provisions,
became effective October 1, 2000, and did not require implementing
regulations. Thus, financial institutions are currently permitted to
provide in electronic form any disclosures that are required to be
provided or made available to the consumer in writing under Regulations
B, E, M, Z, and DD if the consumer affirmatively consents to receipt of
electronic disclosures in the manner required by section 101(c) of the
E-Sign Act.
The Interim Final Rules
On March 30, 2001, the Board published for comment interim final
rules to establish uniform standards for the electronic delivery of
disclosures required under Regulation DD (66 FR 17795). Similar interim
final rules for Regulations B, E, M, and Z were published on March 30,
2001 (66 FR 17322 (M)) and April 4, 2001 (66 FR 17779 (B), 66 FR 17786
(E), and 66 FR 17329 (Z)). The interim final rules incorporated most of
the provisions that were part of the 1999 proposals.
Each of the interim final rules incorporated, but did not
interpret, the requirements of the E-Sign Act. Depository institutions,
creditors, and other persons, as applicable, generally were required to
obtain consumers' affirmative consent to provide disclosures
electronically, consistent with the requirements of the E-Sign Act.
The 2001 interim final rule for Regulation DD established uniform
requirements for the timing and delivery of electronic disclosures.
Under the interim rule, disclosures could be sent to an e-mail address
designated by the consumer, or could be made available at another
location, such as an Internet Web site. If the disclosures were not
sent by e-mail, institutions would have to provide a notice to
consumers alerting them to the availability of the disclosures.
Disclosures posted on a Web site would have to be available for at
least 90 days to allow consumers adequate time to access and retain the
information. Institutions also would be required to make a good faith
attempt to redeliver electronic disclosures that were returned
undelivered, using the address information available in their files.
Similar provisions were included in the interim final rules adopted
under Regulations B, E, M, and Z.
Commenters on the interim final rules identified significant
operational and information security concerns with respect to the
requirement to send the disclosure or an alert notice to an e-mail
address designated by the consumer. For example, commenters stated that
some consumers do not have e-mail addresses or may not want personal
financial information sent to them by e-mail. Commenters also noted
that e-mail is not a secure medium for delivering confidential
information and that consumers' e-mail addresses frequently change. The
commenters also opposed the requirement for redelivery in the event a
disclosure was returned undelivered. In addition, many commenters
asserted that making the disclosures available for at least 90 days, as
required by the interim final rule, would increase costs and would not
be necessary for consumer protection.
In August 2001, in response to comments received, the Board lifted
the previously established October 1, 2001 mandatory compliance date
for all of the interim final rules. (66 FR 41439, August 8, 2001.)
Thus, institutions are not required to comply with the interim final
rules. Since that time, the Board has not taken further action with
respect to the interim final rules on electronic disclosures in order
to allow electronic commerce, including electronic disclosure
practices, to continue to develop without regulatory intervention and
to allow the Board to gather further information about such practices.
II. The Proposed Rules
The Board is proposing to amend Regulation DD and the official
staff commentary by (1) withdrawing portions of the 2001 interim final
rule on electronic disclosures that restate or cross-reference
provisions of the E-Sign Act and accordingly are unnecessary; (2)
withdrawing other portions of the interim final rule that the Board now
believes may impose undue burdens on electronic banking and commerce
and may be unnecessary for consumer protection; and (3) retaining the
substance of certain provisions of the interim final rule that provide
regulatory relief or guidance regarding electronic disclosures.
(Similar amendments are also being proposed by the Board, in today's
issue of the Federal Register, under Regulations B, E, M, and Z.)
Because compliance with the 2001 interim final rules is not
mandatory, removing most portions of the interim rules from the Code of
Federal Regulations, while finalizing other provisions, would reduce
confusion about the status of the electronic disclosure provisions and
simplify the regulation. The Board is proposing to adopt certain
provisions that are identical or similar to provisions in the 2001
interim final rules in order to enhance the ability of consumers to
shop for deposit account products online, minimize the information-
gathering burdens on consumers, and provide guidance or eliminate a
substantial burden on the use of electronic disclosures, as discussed
further below.
Since 2001, industry and consumers have gained considerable
experience with electronic disclosures. During that period, the Board
has received no indication that consumers have been harmed by the fact
that compliance with the interim final rules is not mandatory. The
Board also has reconsidered certain aspects of the interim final rules,
such as sending disclosures by e-mail, in light of concerns about data
security, identity theft, and ``phishing'' (i.e., prompting consumers
to reveal confidential personal or financial information through
fraudulent e-mail requests that appear to originate from a financial
institution, government agency, or other trusted entity) that have
become more pronounced since 2001. Finally, the Board is proposing to
eliminate certain aspects of the 2001
[[Page 21157]]
interim final rule, such as provisions regarding the availability and
retention of electronic disclosures, as unnecessary in light of current
industry practices.
The 2001 interim final rule allowed depository institutions to
provide certain disclosures to consumers electronically without regard
to the consumer consent or other provisions of the E-Sign Act. These
included disclosures in connection with advertisements and disclosures
about deposit accounts that are provided upon request. The Board
reasoned that these disclosures, which would be available to the
general public while shopping for deposit products, did not ``relate to
a transaction,'' which is a prerequisite for triggering the E-Sign
consumer consent provisions, and thus were not subject to those
provisions. Some commenters on the interim final rules did not agree
with the Board's rationale. Upon further consideration, the Board does
not believe it is necessary to determine whether or not these
disclosures are related to a transaction. This proposal does not make
such determinations.
Instead, pursuant to the Board's authority under section 269 of
TISA, as well as under section 104(d) of the E-Sign Act,\1\ the Board
is proposing to specify the circumstances under which certain
disclosures may be provided to a consumer in electronic form, rather
than in writing as generally required by Regulation DD, without
obtaining the consumer's consent under section 101(c) of the E-Sign
Act. The proposed rule would also clarify, as discussed in detail
below, that certain disclosures must be provided to the consumer in
electronic form on or with an advertisement that is accessed by the
consumer in electronic form.
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\1\ Section 269 of TISA provides that regulations prescribed by
the Board under TISA ``may provide for such adjustments and
exceptions * * * as, in the judgment of the Board, are necessary or
proper to carry out the purposes of [TISA], * * * or to facilitate
compliance with the requirements of [TISA].'' Section 104(d) of the
E-Sign Act authorizes federal agencies to adopt exemptions for
specified categories of disclosures from the E-Sign notice and
consent requirements, ``if such exemption is necessary to eliminate
a substantial burden on electronic commerce and will not increase
the material risk of harm to consumers.'' For the reasons stated in
this Federal Register notice, the Board believes that these criteria
are met in the case of the advertising disclosures and the
disclosures provided to a consumer upon request. In addition, the
Board believes TISA section 269 authorizes the Board to permit
institutions to provide disclosures electronically, rather than in
paper form, independent of the E-Sign Act.
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The Board continues to believe that depository institutions should
not be required to obtain the consumer's consent in order to provide
advertising disclosures to the consumer in electronic form if the
consumer accesses the advertisement containing those disclosures in
electronic form, such as at an Internet Web site. Similarly, the Board
continues to believe that institutions should not be required to follow
the E-Sign consent requirements in order to provide account disclosures
upon request to consumers electronically (although under the proposal,
the institution could provide the disclosures in electronic form only
if the consumer agrees).
The Board believes that consumers would not be harmed, and in fact
would benefit, by having timely access to disclosures in electronic
form when they are shopping for deposit account products online or
viewing online deposit account advertising. The Board also believes
that consumers' ability to shop for deposit accounts online and compare
the terms of various offers could be substantially diminished if
consumers had to consent in accordance with the E-Sign Act in order to
access advertisements or obtain account disclosures. Applying the
consumer consent provisions of the E-Sign Act to these disclosures
could impose substantial burdens on electronic commerce and make it
more difficult for consumers to gather information and shop for deposit
accounts.
At the same time, the Board recognizes that consumers who shop or
apply for deposit accounts online may not want to receive other
disclosures electronically. Therefore, with respect to, for example,
account-opening disclosures, periodic statements, and change-in-terms
notices, depository institutions would be required to provide written
disclosures or obtain the consumer's consent in accordance with the E-
Sign Act to provide such disclosures in electronic form.
Finally, the Board is proposing to delete, as unnecessary, certain
provisions that restate or cross-reference the E-Sign Act's general
rules regarding electronic disclosures (including the consumer consent
provisions) and electronic signatures because the E-Sign Act is a self-
effectuating statute. The proposed revisions to Regulation DD and the
official staff commentary are described more fully below in the
Section-by-Section Analysis.
The Board solicits comment on all aspects of this proposal.
Specifically, the Board seeks comment on the appropriateness of
eliminating certain provisions and retaining other provisions contained
in the 2001 interim final rule.
III. Section-by-Section Analysis
12 CFR Part 230 (Regulation DD)
Section 230.3 General Disclosure Requirements
Section 230.3(a) prescribes the form of disclosures required for
deposit accounts, and generally requires depository institutions to
provide the disclosures in writing and in a form that the consumer may
keep. The Board proposes to revise Sec. 230.3(a) to clarify that
institutions may provide disclosures to consumers in electronic form,
subject to compliance with the consumer consent and other applicable
provisions of the E-Sign Act. Some institutions may provide disclosures
to consumers both in paper and electronic form and rely on the paper
form of the disclosures to satisfy their compliance obligations. For
those institutions, the duplicate electronic form of the disclosures
may be provided to consumers without regard to the consumer consent or
other provisions of the E-Sign Act because the electronic form of the
disclosure is not used to satisfy the regulation's disclosure
requirements.
Section 230.3(a) would also be revised to provide that the
disclosures required by Sec. Sec. 230.4(a)(2) (disclosures provided
upon request) and 230.8 (advertising) may be provided to the consumer
in electronic form, under the circumstances set forth in those
sections, without regard to the consumer consent or other provisions of
the E-Sign Act.
Section 230.8 requires that if certain information is stated in a
deposit account advertisement, or if an advertisement promotes the
payment of overdrafts, the advertisement must also include specified
disclosures. The Board believes that, for a deposit account
advertisement accessed by the consumer in electronic form, permitting
institutions to provide the required disclosures in electronic form
without regard to the consumer consent and other provisions of the E-
Sign Act will eliminate a potential significant burden on electronic
commerce without increasing the risk of harm to consumers. This
approach will facilitate shopping for deposit products by enabling
consumers to receive important disclosures at the same time they access
an advertisement without first having to provide consent in accordance
with the requirements of the E-Sign Act. Requiring consumers to follow
the consent procedures set forth in the E-Sign Act in order to access
an online advertisement is potentially burdensome and could discourage
[[Page 21158]]
consumers from shopping for deposit products online. Moreover, because
these consumers are viewing the advertisement online, there appears to
be little, if any, risk that the consumer will be unable to view the
disclosures online as well.
Similarly, Sec. 230.4(a)(2) requires that depository institutions
provide account disclosures, containing account terms, to consumers
upon request. If a consumer is not present at the depository
institution and requests the account disclosures, it would appear
unnecessary and burdensome to require the consumer to go through the E-
Sign consent procedures before the request could be satisfied, as long
as the consumer requests that the disclosures be provided
electronically. Applying the E-Sign consent procedures in this context
could discourage consumers from requesting account disclosures.
Section 230.3(g) in the 2001 interim final rule refers to Sec.
230.10, the section of the interim final rule setting forth general
rules for electronic disclosures. Because the Board is proposing to
delete Sec. 230.10, as discussed further below, the Board also
proposes to delete Sec. 230.3(g).
Section 230.4 Account Disclosures
Depository institutions generally must provide account-opening
disclosures to consumers before an account is opened or a service is
provided. Depository institutions may delay delivering the disclosures
if the consumer is not present at the institution when the account is
opened (or service is provided). Section 230.4(a)(1) provides that in
such cases, account-opening disclosures must be mailed or delivered
within ten business days. The rationale underlying the ten-day delay is
that the institution cannot provide written disclosures when, for
example, an account is opened by telephone. The 2001 interim final rule
provided that depository institutions opening accounts by electronic
communication (for example, on the Internet) may not delay providing
disclosures under Sec. 230.4(a)(1). The difficulties in providing
disclosures for accounts opened by mail or telephone are not present
for requests to open accounts received by electronic communication
using visual text. Thus, specific disclosures must be provided before
accounts are opened using electronic communication. The interim final
rule added new paragraph (ii) to Sec. 230.4(a)(1) to effectuate this
requirement. The Board continues to believe that the rationale
underlying Sec. 230.4(a)(1)(ii) is valid; accordingly, the Board
proposes to retain the provision as added by the interim final rule,
with minor wording changes.
Depository institutions must also provide account disclosures to a
consumer upon request. Section 230.4(a)(2)(i) provides that if a
consumer is not present at the institution when a request for account
disclosures is made, the institution must mail or deliver the
disclosures within a reasonable time after the institution receives the
request; ten days is deemed to be a reasonable time. The 2001 interim
final rule extended these provisions to requests for disclosures made
by electronic communication. Specifically, the interim final rule
revised Sec. 230.4(a)(2)(i) to allow institutions to mail or deliver
disclosures in either paper form or electronically to consumers who are
not present at the institution when they make their request. Under the
interim final rule, to provide the requested disclosures
electronically, the institution must send the disclosures to the
consumer's e-mail address, or send a notice alerting the consumer to
the location of the disclosures, such as on the institution's Internet
web site. Comment 4(a)(2)(i)-3 was revised and comment 4(a)(2)(i)-4 was
added to provide guidance.
The Board continues to believe that it is appropriate to allow
institutions to respond by paper mail, or by electronic means provided
the consumer agrees, if the consumer is not present at the institution
when the request is made, without following the E-Sign consent
provisions. Accordingly, the Board proposes to retain the changes made
to Sec. 230.4(a)(2)(i) and the accompanying commentary by the interim
final rule, with some revisions for clarification and to provide
greater flexibility for both institutions and consumers.
Section 230.8 Advertising
Section 230.8 contains requirements for advertisements for deposit
accounts, including the requirement that if an advertisement includes
certain ``trigger terms'' (such as a bonus or the annual percentage
yield), the advertisement must also include certain disclosures. The
Board proposes to add new comment 8(a)-11, to clarify that if a
consumer accesses an advertisement for deposit accounts in electronic
form, the disclosures required on or with the advertisement must be
provided to the consumer in electronic form on or with the
advertisement. A consumer accesses an advertisement in electronic form
when, for example, the consumer views the advertisement on his or her
home computer. On the other hand, if a consumer receives a written
advertisement in the mail, the institution would not satisfy its
obligation to provide Sec. 230.8 disclosures at that time by including
a reference in the advertisement to the Web site where the disclosures
are located.
Comment 8(a)-9, as added by the interim final rule, provides that
in an electronic advertisement, the required disclosures need not be
shown on each page where a ``trigger term'' appears, as long as each
such page includes a cross-reference to the page where the required
disclosures appear. For example, if a ``trigger term'' appears on a
particular web page, the additional disclosures may appear in a table
or schedule on another web page if there is a clear reference to the
page or location where the table or schedule begins (which may be
accomplished, for example, by including a link). The Board proposes to
retain comment 8(a)-9, allowing the use of links or other cross-
references in electronic deposit account advertisements, with minor
wording changes.
The Board proposes to add new comment 8(a)-12 to clarify that the
rules regarding advertising disclosures provided in electronic form
also apply to the disclosures described in Sec. 230.11(b), which are
incorporated by reference in Sec. 230.8(f).
Section 230.8(b) permits institutions to state an interest rate in
addition to the APY, as long as the rate is stated in conjunction with,
but not more conspicuously than, the APY. In the 2001 interim final
rule, comment 8(b)-4 was added to state that in an advertisement using
electronic communication, the consumer must be able to view both rates
simultaneously, and that this requirement is not satisfied if the
consumer can view the APY only by use of a link that takes the consumer
to another web location. The Board proposes to delete comment 8(b)-4 as
unnecessary. The requirement to state the simple annual rate or
periodic rate in conjunction with, and not more conspicuously than, the
APY, continues to apply to electronic advertisements no less than to
advertisements in other media. Requiring the consumer to scroll to
another part of the page, or access a link, in order to view the APY
would likely not satisfy this requirement.
Section 230.8(e) exempts from some disclosure requirements
advertisements made through broadcast or electronic media, such as
television and radio or outdoor billboards. The interim final rule
added comment 8(e)(1)(i)-1 to provide that this exemption would not
apply to advertisements using electronic communication, such as
Internet advertisements, which do not have the
[[Page 21159]]
same time and space constraints as radio or television advertisements.
The Board continues to believe that space constraints for
advertisements on Internet web sites are not significantly different
than those for a print advertisement (a newspaper, for example). Thus,
requiring advertisements provided by electronic means to comply with
the regulation's advertising requirements is not overly burdensome.
Accordingly, the Board proposes to retain comment 8(e)(1)(i)-1 with
minor wording changes.
Section 230.10 Electronic Communication
Section 230.10 was added by the 2001 interim final rule to address
the general requirements for electronic communications. The Board
proposes to delete Sec. 230.10 from Regulation DD and the accompanying
sections of the staff commentary.
In the interim rule, Sec. 230.10(a) defines the term ``electronic
communication'' to mean a message transmitted electronically that can
be displayed on equipment as visual text, such as a message displayed
on a personal computer monitor screen. The deletion of Sec. 230.10(a)
would not change applicable legal requirements under the E-Sign Act.
Sections 230.10(b) and (c) incorporate by reference provisions of
the E-Sign Act, such as the provision allowing disclosures to be
provided in electronic form and the requirement to obtain the
consumer's affirmative consent before providing disclosures in
electronic form. The deletion of these provisions will have no impact
on the general applicability of the E-Sign Act to Regulation DD
disclosures. Section 230.10(f) was added in the interim final rule to
clarify that persons, other than depository institutions, that are
required to comply with Regulation DD may use electronic disclosures.
This provision is unnecessary because the E-Sign Act is a self-
effectuating statute and permits any person to use electronic records
subject to the conditions set forth in the Act.
Sections 230.10(d) and (e) address specific timing and delivery
requirements for electronic disclosures under Regulation DD, such as
the requirement to send disclosures to a consumer's e-mail address (or
post the disclosures on a Web site and send a notice alerting the
consumer to the disclosures), and to make a good faith attempt to
redeliver an e-mailed disclosure or notice returned undelivered. The
Board no longer believes that these additional provisions are necessary
or appropriate. Electronic disclosures have evolved since 2001, as
industry and consumers have gained experience with them. Although many
institutions offer e-mail alert notices to consumers in connection with
online services, some consumers may choose not to receive notifications
by e-mail and the Board sees no reason to require e-mail alert notices
in all cases. In addition, the Board has reconsidered certain aspects
of the interim final rules, such as sending disclosures by e-mail, in
light of concerns about data security, identity theft, and phishing
that have become more pronounced since 2001.
With regard to the requirement to attempt to redeliver returned
electronic disclosures, as the commenters noted, institutions would be
required to search their files for an additional e-mail address to use,
and might be required to use a postal mail address for redelivery if no
additional e-mail address was available. The Board believes that both
requirements would likely be unduly burdensome. In addition, the
concerns that have been raised about the requirement to use e-mail for
the initial delivery of a disclosure or notice apply equally to the use
of e-mail for an attempted redelivery.
Under the proposed rule, the Board would not require depository
institutions to maintain disclosures posted on a Web site for at least
90 days as provided in the 2001 interim final rule for several reasons.
First, based on a review of industry practices, it appears that many
institutions maintain disclosures posted on an Internet Web site for
several months, and, in a number of cases, for more than a year. For
example, it appears that institutions that offer online periodic
statements to consumers typically make those statements available
without charge for six months or longer in electronic form. This
practice has developed even though Regulation DD does not currently
require institutions to maintain disclosures for any specific period of
time. Second, the Board believes that an appropriate time period
consumers may want electronic disclosures to be available may vary
depending upon the type of disclosure, and is reluctant to establish
specific time periods depending on the disclosures. Nevertheless, while
the Board is not proposing to require disclosures to be maintained on
an Internet Web site for any specific time period, the general
requirements of Regulation DD continue to apply to electronic
disclosures, such as the requirement to provide disclosures to
consumers at certain specified times and in a form that the consumer
may keep. Although these general requirements apply to electronic
disclosures, the Board does not believe that the 90-day time period set
out in Sec. 230.10(d) of the 2001 interim final rule is needed to
ensure that institutions satisfy these requirements when they provide
electronic disclosures. The Board, however, will monitor institutions'
electronic disclosure practices with regard to the ability of consumer
to retain Regulation DD disclosures and will consider further
regulatory action if it appears necessary.
The official staff commentary to Sec. 230.10 of the interim final
rule provides guidance on the provisions set forth in Sec. 230.10 such
as delivery of disclosures or alert notices by e-mail, redelivery if
disclosures or a notice is returned undelivered, and retention of
disclosures on a web site for 90 days. As noted above, because the
Board is proposing to delete Sec. 230.10 of the regulation, the Board
also proposes to delete the accompanying provisions of the official
staff commentary.
IV. Solicitation of Comments Regarding the Use of ``Plain Language''
Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the
Board to use ``plain language'' in all proposed and final rules
published after January 1, 2000. The Board invites comments on whether
the proposed rules are clearly stated and effectively organized, and
how the Board might make the proposed text easier to understand.
V. Initial Regulatory Flexibility Analysis
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA)
generally requires an agency to perform an assessment of the impact a
rule is expected to have on small entities.
However, under section 605(b) of the RFA, 5 U.S.C. 605(b), the
regulatory flexibility analysis otherwise required under section 604 of
the RFA is not required if an agency certifies, along with a statement
providing the factual basis for such certification, that the rule will
not have a significant economic impact on a substantial number of small
entities. Based on its analysis and for the reasons stated below, the
Board believes that this proposed rule will not have a significant
economic impact on a substantial number of small entities. A final
regulatory flexibility analysis will be conducted after consideration
of comments received during the public comment period.
1. Statement of the objectives of the proposal. The Board is
proposing revisions to Regulation DD to withdraw the 2001 interim final
rule on electronic communication and to allow depository institutions
to provide certain
[[Page 21160]]
disclosures to consumers in electronic form on or with an advertisement
that is accessed by the consumer in electronic form, or if the consumer
requests the disclosure, without regard to the consumer consent and
other provisions of the E-Sign Act. The Board is also proposing to
clarify that other Regulation DD disclosures may be provided to
consumers in electronic form in accordance with the consumer consent
and other applicable provisions of the E-Sign Act.
TISA was enacted to enhance economic stabilization, improve
competition between depository institutions, and strengthen the ability
of consumers to make informed decisions regarding deposit accounts. 12
U.S.C. 4301. It is the purpose of TISA to require the clear and uniform
disclosure of rates of interest payable on deposit accounts and the
fees that are assessable against deposit accounts, so that consumers
can make a meaningful comparison between the competing claims of
institutions. TISA authorizes the Board to prescribe regulations to
carry out the purposes of the statute. 12 U.S.C. 4308. The Act
expressly states that the Board's regulations may contain ``such
classifications, differentiations, or other provisions, * * *, as in
the judgment of the Board, are necessary or proper to carry out the
purposes of [the Act], to prevent circumvention or evasion of [the
Act], or to facilitate compliance with [the Act].'' 12 U.S.C. 4308(a).
The Board believes that the revisions to Regulation DD discussed above
are within Congress's broad grant of authority to the Board to adopt
provisions that carry out the purposes of the statute. These revisions
facilitate informed decisions about deposit accounts by consumers in
circumstances where a consumer accesses a deposit account
advertisement, or requests deposit account disclosures, in electronic
form.
2. Small entities affected by the proposal. The ability to provide
advertising disclosures in electronic form on or with an advertisement
that is accessed by the consumer in electronic form, or to provide
disclosures in electronic form if requested to do so by the consumer,
applies to all depository institutions, regardless of their size.
Accordingly, the proposed revisions would reduce burden and compliance
costs for small entities by providing relief, to the extent the E-Sign
Act applies in these circumstances. The number of small entities
affected by this proposal is unknown.
3. Other Federal rules. The Board believes no federal rules
duplicate, overlap, or conflict with the proposed revisions to
Regulation DD.
4. Significant alternatives to the proposed revisions. The Board
solicits comment on any significant alternatives that may provide
additional ways to reduce regulatory burden associated with this
proposed rule.
VI. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (PRA) (44
U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the rule
under the authority delegated to the Board by the Office of Management
and Budget (OMB). The collection of information that is required by
this proposed rule is found in 12 CFR part 230. The Federal Reserve 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 OMB control number is 7100-0271.
Section 269 of the Truth in Savings Act (TISA)(12 U.S.C. 4308)
authorizes the Board to issue regulations to carry out the provisions
of TISA. TISA and Regulation DD require depository institutions to
disclose yields, fees, and other terms concerning deposit accounts to
consumers at account opening, upon request, and when changes in terms
occur. Depository institutions that provide periodic statements are
required to include information about fees imposed, interest earned,
and the annual percentage yield earned during those statement periods.
The act and regulation mandate the methods by which institutions
determine the account balance on which interest is calculated. They
also contain rules about advertising deposit accounts. To ease the
compliance cost (particularly for small entities), model clauses and
sample forms are appended to the regulation. Depository institutions
are required to retain evidence of compliance for twenty-four months,
but the regulation does not specify types of records that must be
retained. This information collection is mandatory. Since the Federal
Reserve does not collect any information, no issue of confidentiality
arises.
Regulation DD applies to all depository institutions except credit
unions. Credit unions are covered by a substantially similar rule
issued by the National Credit Union Administration. The Federal Reserve
accounts for the paperwork burden associated with Regulation DD only
for Federal Reserve-regulated institutions. Federal Reserve-regulated
institutions are defined by Regulation DD as: State member banks,
branches and agencies of foreign banks (other than Federal branches,
Federal agencies, and insured state branches of foreign banks),
commercial lending companies owned or controlled by foreign banks, and
organizations operating under section 25 or 25A of the Federal Reserve
Act. Other Federal agencies account for the paperwork burden imposed on
the depository institutions for which they have administrative
enforcement authority. The annual burden is estimated to be 232,443
hours for 1,172 Federal Reserve-regulated institutions that are deemed
respondents for purposes of the PRA.
As mentioned in the Preamble, Sec. Sec. 230.4 and 230.8 would be
revised to clarify the disclosure requirements. The Federal Reserve
estimates that 1,172 respondents would take approximately 1.5 minutes
per transaction to comply with the existing disclosure requirements in
Sec. 230.4 and estimates the annual burden to be 14,650 hours. The
Federal Reserve estimates that 1,172 respondents would take
approximately 30 minutes per month to comply with the existing
disclosure requirements in Sec. 230.8 and estimates the annual burden
to be 7,032 hours. The Federal Reserve requests specific comment on
whether the revisions in this proposed rule would change the burden on
respondents.
Comments are invited on: a. Whether the collection of information
is necessary for the proper performance of the Federal Reserve's
functions; including whether the information has practical utility; b.
the accuracy of the Federal Reserve's estimate of the burden of the
information collection, including the cost of compliance; c. ways to
enhance the quality, utility, and clarity of the information to be
collected; and d. ways to minimize the burden of information collection
on respondents, including through the use of automated collection
techniques or other forms of information technology. Comments on the
collections of information should be sent to Secretary, Board of
Governors of the Federal Reserve System, Washington, DC 20551, with
copies of such comments to be sent to the Office of Management and
Budget, Paperwork Reduction Project (7100-0271), Washington, DC 20503.
List of Subjects in 12 CFR Part 230
Advertising, Banks, banking, Consumer protection, Federal Reserve
System, Reporting and recordkeeping requirements, Truth in Savings.
Text of Proposed Revisions
Certain conventions have been used to highlight the proposed
changes to
[[Page 21161]]
Regulation DD. New language is shown inside bold-faced arrows, while
language that would be removed is set off with bold-faced brackets.
For the reasons set forth in the preamble, the Board proposes to
amend Regulation DD, 12 CFR part 230, as set forth below:
PART 230--TRUTH IN SAVINGS (REGULATION DD)
1. The authority citation for part 230 continues to read as
follows:
Authority: 12 U.S.C. 4301 et seq.
2. Section 230.3 would be amended by revising paragraph (a) and
removing paragraph (g), to read as follows:
Sec. 230.3 General disclosure requirements.
(a) Form. Depository institutions shall make the disclosures
required by Sec. Sec. 230.4 through 230.6 and Sec. 230.10 of this
part, as applicable, clearly and conspicuously, in writing, and in a
form the consumer may keep. [rtrif]The disclosures required by this
part may be provided to the consumer in electronic form, subject to
compliance with the consumer consent and other applicable provisions of
the Electronic Signatures in Global and National Commerce Act (E-Sign
Act) (15 U.S.C. 7001 et seq.). The disclosures required by Sec. Sec.
230.4(a)(2) and 230.8 may be provided to the consumer in electronic
form without regard to the consumer consent or other provisions of the
E-Sign Act in the circumstances set forth in those sections.[ltrif]
Disclosures for each account offered by an institution may be presented
separately or combined with disclosures for the institution's other
accounts, as long as it is clear which disclosures are applicable to
the consumer's account.
* * * * *
[(g) Electronic communication. For rules governing the electronic
delivery of disclosures, including the definition of electronic
communication, see Sec. 230.10.]
3. Section 230.4 would be amended by revising paragraphs (a)(1)(ii)
and (a)(2)(i), to read as follows:
Sec. 230.4 Account disclosures.
(a) * * *
(1) * * *
(ii) [rtrif]Timing of disclosures where electronic means are
used[ltrif][Electronic communication]. If a consumer who is not present
at the institution uses [rtrif]electronic means (for example, an
Internet Web site)[ltrif][electronic communication (as defined in Sec.
230.10)] to open an account or request a service, the disclosures
required under paragraph (a)(1) of this section must be provided before
[rtrif]the[ltrif] [an] account is opened or [rtrif]the[ltrif] [a]
service is provided.
(2) Requests. (i) A depository institution shall provide account
disclosures to a consumer upon request. If a consumer who is not
present at the institution makes a request, the institution shall mail
or deliver the disclosures within a reasonable time after it receives
the request and may provide the disclosures in paper form, or
electronically if the consumer [rtrif]agrees[ltrif] [provides an
electronic mail address].
* * * * *
Sec. 230.10 [Removed and Reserved]
4. Section 230.10 would be removed and reserved.
5. In Supplement I to Part 230, the following amendments would be
made:
a. In Section 230.4--Account disclosures, under (a)(2)(i),
paragraphs 3. and 4. would be revised.
b. In Section 230.8--Advertising, under (a) Misleading or
inaccurate advertisements, paragraph 9. would be revised and new
paragraphs 11. and 12. would be added.
c. In Section 230.8--Advertising, under (b) Permissible rates,
paragraph 4. would be removed.
d. In Section 230.8--Advertising, under (e)(1)(i), paragraph 1.
would be revised.
e. Section 230.10 would be removed and reserved.
The amendments read as follows:
Supplement I to Part 230--Official Staff Interpretations
* * * * *
Section 230.4--Account Disclosures
(a) Delivery of Account Disclosures
* * * * *
(a)(2) Requests
(a)(2)(i)
* * * * *
3. Timing for response. Ten business days is a reasonable time
for responding to requests for account information that consumers do
not make in person, including requests made by electronic
[communication][rtrif]means (such as by electronic mail)[ltrif].
4. [Requests by electronic communication] [rtrif]Use of
electronic means[ltrif].
[Posting disclosures on a depository institution's Web site
generally does not relieve the institution's duty to provide
disclosures upon request. If the consumer provides an e-mail
address, the institution may provide the disclosures electronically,
but the institution must either send the disclosures by e-mail or
send a notice to the consumer's e-mail address pursuant to Sec.
230.10(d)(2)(i) to inform the consumer where the disclosures are
posted.]
[rtrif]If a consumer who is not present at the institution makes
a request for account disclosures, including a request made by
telephone, e-mail, or via the institution's web site, the
institution may send the disclosures in paper form or, if the
consumer agrees, may provide the disclosures electronically, such as
to an e-mail address that the consumer provides for that purpose, or
on the institution's Web site, without regard to the consumer
consent or other provisions of the E-Sign Act. The regulation does
not require an institution to provide, nor a consumer to agree to
receive, disclosures in electronic form.[ltrif]
* * * * *
Section 230.8--Advertising
(a) Misleading or Inaccurate Advertisements
* * * * *
9. Electronic advertising. If an [rtrif]electronic advertisement
(such as an advertisement appearing on an Internet Web site)[ltrif]
[advertisement using electronic communication] displays a triggering
term (such as a bonus or annual percentage yield) the advertisement
must clearly refer the consumer to the location where the additional
required information begins. For example, an advertisement that
includes a bonus or annual percentage yield may be accompanied by a
link that directly takes the consumer to the additional information.
* * * * *
[rtrif]11. Electronic form of disclosures. For an advertisement
that is accessed by the consumer in electronic form, the disclosures
required under this section must be provided to the consumer in
electronic form on or with the advertisement. Providing the
disclosures at a different time or place, or in paper form, would
not comply. Conversely, if a consumer views a paper advertisement,
the required disclosures must be provided in paper form on or with
the advertisement. For example, if a consumer receives an
advertisement in the mail, the creditor would not satisfy its
obligation to provide the disclosures at that time by including a
reference in the advertisement to the web site where the disclosures
are located.
12. Additional disclosures in connection with the payment of
overdrafts. The rule in Sec. 230.3(a), providing that disclosures
required by Sec. 230.8 may be provided to the consumer in
electronic form without regard to E-Sign Act requirements, applies
to the disclosures described in Sec. 230.11(b), which are
incorporated by reference in Sec. 230.8(f).[ltrif]
(b) Permissible rates
* * * * *
[4. Electronic communication. An interest rate may be stated
only if it is provided in conjunction with, but not more
conspicuously than, the annual percentage yield to which it relates.
In an advertisement using electronic communication, the consumer
must be able to view both rates simultaneously. This requirement is
not satisfied if the consumer can view the annual percentage yield
only by use of a link that connects the consumer to information
appearing at another location.]
* * * * *
[[Page 21162]]
(e)(1) Certain Media
(e)(1)(i)
1. Internet advertisements. The exemption for advertisements
made through broadcast or electronic media does not extend to
[advertisements made by electronic communication, such as]
advertisements posted on the Internet or sent by e-mail.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, April 20, 2007.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E7-7873 Filed 4-27-07; 8:45 am]
BILLING CODE 6210-01-P