Our bank is in the process of setting up a new platform system and we have run into a problem with our CD disclosures. We allow our CD customers to have their interest compound quarterly, or they can receive a check or have the interest deposited to another account either monthly or quarterly. The way the CD document comes off the system has caused us to question whether we are completing our TIS disclosures properly or if there is just a bug in the system. The new system will only allow us to choose one answer for the blank marked "Compounding." We felt that if a customer elects to receive the interest monthly or quarterly the compounding field should state "none" but if they elect to have the interest added to principal the compounding field should be completed by stating "quarterly." In looking at the regulation I am wondering if this field should be completed by always stating "quarterly" compounding simply because that is the basic product? Additionally, if the customer were to take a monthly check, should we also be disclosing an APY equal to the interest rate? Any guidance would be greatly appreciated. Thank you.

I am not sure if this is going to help or not because I am not sure what platform you are going to. In our platform parameters it states that (You should select "No Compounding" only if this bank product, by its terms, prohibits the addition of interest to principal during the term of the time account). I am sure that you probably do not prohibit interest from paying to the account. Our system lets us choose compounding or not compounding and then the frequency and then if they are getting a check or depositing it to an account. I hope that this makes sense to you.

The system is right. You must assume compounding, even if the interest is credited to another account. I think this thread will help you understand this confusing TISA issue.

Check compounding quarterly on the system as a standard parameter. The system will compound only if there are funds to compound with monthly and quarterly payments of interest by check or to other accounts eliminating those funds.

Thank you for the response and the link to last year's discussion. I guess I didn't search back far enough when I looked earlier. It is reassuring to know that I'm not the only one scratching my head on this one. But I had overlooked the disclosure that states "The annual percentage yield assumes interest will remain on deposit until maturity. A withdrawal will reduce earnings." Now it makes more sense to me, although like other regs meant to help the consumer, it should only serve to confuse them further. Thanks again for the assistance.