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#530840 - 04/12/06 03:11 PM Interest pymt issue- DD
complyaudit2 Offline
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complyaudit2
Joined: Apr 2002
Posts: 119
Situation: New product development- A NOW account 100,000 minimum to open, 100,000 minimum balance to earn APY. This account would be calculated using the daily balance computation.

In the proposed DD TISA disclosure, there would be an additional terms section that states..."if at any time the statement cycle your balance falls below the minimum, no interest will be credited to your account for the statement cycle".

DD 230.7(a)(2)1-2; 4 is the citation area I am reviewing.

My interpretation is that interest accrued during the statement cycle for the days that the account met or exceeded the 100,000, the account must receive that accrued interest at the statement cycle completion. The "additional terms" statement as proposed, would be in error with DD.

Opinions?

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Operations Compliance
#530841 - 04/12/06 04:23 PM Re: Interest pymt issue- DD
PJ Offline
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Joined: Sep 2005
Posts: 115
I think you're right - the commentary says that if you require a minimum balance and use the daily balance method to calculate interest, you may "...choose not to pay interest for days when the balance drops below the required minimum.." I think you can charge a fee for falling below the minimum, but you would have to pay the interest for the other days IMO.

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#530842 - 04/12/06 08:09 PM Re: Interest pymt issue- DD
BrendaC Offline
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BrendaC
Joined: Sep 2001
Posts: 6,029
Sweet Home AL
You can't avoid paying interest for the entire statement cycle if the customer falls below the minimum at any time during the statement period.. You must pay interest on the days the customer maintained the required minimum balance to earn the stated APY.
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#530843 - 04/12/06 08:41 PM Re: Interest pymt issue- DD
PJ Offline
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Joined: Sep 2005
Posts: 115
That's what I meant to say - thanks for saying it so much more clearly!

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