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Compliance Ramifications if Negative IR (TISA)

I have been instructed to lead a project around compliance ramifications if negative interest rates were to occur in the US. ​With regard to deposit accounts, would all TISA and other initial​ disclosures need to be updated to reflect this change. Since the change in​ terms would negatively affect our customers. This would be quite an​ undertaking as we have 10 member banks. Would all of our advertisements have to be re-disclosed? Any feedback is greatly appreciated.

by Randy Carey: There is absolutely no difference between applying a rate of +.05% and applying a rate -.05%. Going between the two would require the same disclosures as going from 2.10% down to 2.00%. I am at a loss as to why this would represent any change in your current possess to adjust interest rates on deposit accounts.


by Richard Insley: Randy - It's highly unusual for me to take exception with your advice, but unless you're basing it on inside information from the regulators, I have to disagree with this conclusion!

Reg. DD defines "interest" as "any payment to a consumer" and "interest rate" as "the annual rate of interest paid." If a deposit rate goes negative, there's no longer a payment to the depositor and therefore no "interest." In the eyes of Reg. DD, the absence of "interest" means the "interest rate" has to be zero. Beginning with an interest rate of 0.00%, the APY can't go lower than zero.

What do you think?


by Ken GoInvestopedia:

A negative interest rate means the central bank and perhaps private banks will charge negative interest: instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank. This is intended to incentivize banks to lend money more freely and businesses and individuals to invest, lend, and spend money rather than pay a fee to keep it safe.

Our Regulation DD was not designed for the purpose. Stretched to fit, my opinion is that our regulation would call it a fee; e.g. advance disclosure required, etc. There would be no interest rate, APY, or APYE disclosures because no interest was being paid.



by Randy Carey: Richard and Ken: Interesting, but probably true.


by Jim Bedsole: One might hope that the CFPB would give us an interim rule to Reg DD if we approach negative interest rate territory. I'm not sure that would make the situation any better, though, given CFPB's current track record at rule writing.

First published on 01/22/2017

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