Ok, I am reading the part of Regulation DD where it talks about compounding and crediting and how these can me different. the is a portion that read as follows: "Compounding and Annual percentage yield are disclosed on the assumption that the customer will leave the interest in the account till maturity. This is true even though you know the assumption is wrong". I understand how that works, but I have a CD clerk who is completing CDs with the words "will not compound" and will credit "monthly" on a CD where the customer is requesting the interest be transfered in to another account (i.e checking account). Now the crediting part is correct, but is the compounding portion correct? The way I read the regulation she should put that the compounding is "monthly" like the crediting portion. Which way is correct to comply with the regulation? I refer to the portion that reads, "...even though you know the assupmtion is wrong". Thanks

If you have a product that ordinarily compounds monthly and customers may elect to withdraw interest or have it transferred out, the account should be set up to compound monthly and the APY disclosed must reflect that compounding.

If you offer a product from which interest MUST be withdrawn during the term, you set the account up not to compound and the APY will reflect that fact.

The difference is the product design. If the customer can decide whether to take interest distributions, you have to assume that those distributions won't occur.