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Consumer Banking and Payments Law: Introductory Materials

After rulemaking authority was transferred from the Federal Reserve Board to the Consumer Financial Protection Bureau in 2011, the CFPB reissued, renumbered, and renamed the official staff commentary on Regulation DD as the official interpretations of Regulation DD. See 12 C.F.R. pt. 1030, supp. I. The official interpretations are reprinted below.

Consumer Banking and Payments Law: (c) Coverage

1. Foreign applicability. Regulation DD applies to all depository institutions, except credit unions, that offer deposit accounts to residents (including resident aliens) of any state as defined in § 1030.2(r). Accounts held in an institution located in a state are covered, even if funds are transferred periodically to a location outside the United States. Accounts held in an institution located outside the United States are not covered, even if held by a U.S. resident.

Consumer Banking and Payments Law: (a) Account.

1. Covered accounts. Examples of accounts subject to the regulation are:

i. Interest-bearing and noninterest-bearing accounts.

ii. Deposit accounts opened as a condition of obtaining a credit card.

iii. Accounts denominated in a foreign currency.

iv. Individual retirement accounts (IRAs) and simplified employee pension (SEP) accounts.

Consumer Banking and Payments Law: (b) Advertisement.

1. Covered messages. Advertisements include commercial messages in visual, oral, or print media that invite, offer, or otherwise announce generally to prospective customers the availability of consumer accounts—such as:

i. Telephone solicitations.

ii. Messages on automated teller machine (ATM) screens.

iii. Messages on a computer screen in an institution’s lobby (including any printout) other than a screen viewed solely by the institution’s employee.

Consumer Banking and Payments Law: (f) Bonus.

1. Examples. Bonuses include items of value, other than interest, offered as incentives to consumers, such as an offer to pay the final installment deposit for a holiday club account. Items that are not a bonus include discount coupons for goods or services at restaurants or stores.

Consumer Banking and Payments Law: (h) Consumer.

1. Professional capacity. Examples of accounts held by a natural person in a professional capacity for another are attorney-client trust accounts and landlord-tenant security accounts.

2. Other accounts. Accounts not held in a professional capacity include accounts held by an individual for a child under the Uniform Gifts to Minors Act.

3. Sole proprietors. Accounts held by individuals as sole proprietors are not covered.

Consumer Banking and Payments Law: (p) Passbook savings account.

1. Relation to Regulation E. Passbook savings accounts include accounts accessed by preauthorized electronic fund transfers to the account (as defined in 12 CFR 1005.2(j)), such as an account that receives direct deposit of social security payments. Accounts permitting access by other electronic means are not “passbook saving accounts” and must comply with the requirements of § 1030.6 if statements are sent four or more times a year.

Consumer Banking and Payments Law: (q) Periodic statement.

1. Examples. Periodic statements do not include:

i. Additional statements provided solely upon request.

ii. General service information such as a quarterly newsletter or other correspondence describing available services and products.

Consumer Banking and Payments Law: (t) Tiered-rate account.

1. Time accounts. Time accounts paying different rates based solely on the amount of the initial deposit are not tiered-rate accounts.

2. Minimum balance requirements. A requirement to maintain a minimum balance to earn interest does not make an account a tiered-rate account.

Consumer Banking and Payments Law: (u) Time account.

1. Club accounts. Although club accounts typically have a maturity date, they are not time accounts unless they also require a penalty of at least seven days’ interest for withdrawals during the first six days after the account is opened.

Consumer Banking and Payments Law: (a) Form.

1. Design requirements. Disclosures must be presented in a format that allows consumers to readily understand the terms of their account. Institutions are not required to use a particular type size or typeface, nor are institutions required to state any term more conspicuously than any other term. Disclosures may be made:

i. In any order.

ii. In combination with other disclosures or account terms.

Consumer Banking and Payments Law: (c) Relation to Regulation E.

1. General rule. Compliance with Regulation E (12 CFR Part 1005) is deemed to satisfy the disclosure requirements of this part, such as when:

i. An institution changes a term that triggers a notice under Regulation E, and uses the timing and disclosure rules of Regulation E for sending change-in-term notices.

ii. Consumers add an ATM access feature to an account, and the institution provides disclosures pursuant to Regulation E, including disclosure of fees (see 12 CFR 1005.7.)

Consumer Banking and Payments Law: (f)(2) Accuracy.

1. Annual percentage yield and annual percentage yield earned. The tolerance for annual percentage yield and annual percentage yield earned calculations is designed to accommodate inadvertent errors. Institutions may not purposely incorporate the tolerance into their calculation of yields.

Consumer Banking and Payments Law: (a)(1) Account opening.

1. New accounts. New account disclosures must be provided when:

i. A time account that does not automatically rollover is renewed by a consumer.

ii. A consumer changes a term for a renewable time account (see comment 5(b)-5 regarding disclosure alternatives.)