Compliance Guide to Small Entities
Regulation DD: Truth in Savings
12 CFR 230
Regulation DD requires depository institutions to disclose the terms of deposit accounts to consumers so that they can make informed decisions.
A general description of the regulation, by section, follows.
Section 230.1 Authority, purpose, coverage, and effect on state laws
Explains that all depository institutions, except credit unions, must provide disclosures about deposit accounts so that consumers can make meaningful comparisons among institutions. Deposit brokers are subject to the regulation's rules on advertising deposit accounts. The regulation implements the Truth in Savings Act; state laws that are inconsistent with the requirements of the act are preempted to the extent of the inconsistency.
Section 230.2 Definitions
Defines key terms used in the regulation, including annual percentage yield.
Annual percentage yield (APY) is a percentage rate reflecting the total amount of interest paid on an account, based on the interest rate and the frequency of compounding during a 365-day period and calculated according to the rules in appendix A.
Section 230.3 General disclosure requirements
States that depository institutions must provide to consumers written disclosures about the terms of deposit accounts in a form they can keep. The disclosures must reflect the terms of the deposit contract and must be understandable and noticeable. Also provides rules for quoting rates.
Section 230.4 Account disclosures
Requires depository institutions to provide account disclosures to a consumer before an account is opened or a service is provided. If the consumer is not present at the institution when the account is opened, the institution must mail or deliver the disclosure(s) within ten business days.
Stipulates the content that must be covered in disclosures, such as fees related to the account. For interest-bearing accounts, the interest rate and the annual percentage yield must also be disclosed.
Section 230.5 Subsequent disclosures
States that a consumer must receive advance notice from the depository institution if any term is changed, if the change may reduce the annual percentage yield or adversely affect the consumer. The notice must include the effective date and must be mailed or delivered at least thirty calendar days before the effective date of the change.
Requires depository institutions to send notices shortly before maturity of most automatically renewable (rollover) accounts such as certificates of deposit. Similar notices are also required for long-term accounts that do not automatically renew.
Section 230.6 Periodic statement disclosures
Details the types of information that a depository institution must include in a periodic statement if the institution chooses to provide statements.
Section 230.7 Payment of interest
Requires depository institutions to pay interest on the full principal balance in an account each day. Stipulates the methods institutions may use to calculate account balances: the daily balance and average daily balance methods.
Section 230.8 Advertising
States that an advertisement must not be inaccurate or misleading and must not misrepresent a depository institution's deposit contract. Discusses when institutions may advertise an account as "free." Requires an institution to disclose additional terms about a deposit account if it advertises rates or bonuses paid on the account.
Section 230.9 Enforcement and record retention
Contains provisions relating to administrative sanctions for failure to comply with the requirements of the act. Requires institutions to retain records of their compliance with the regulation for two years.
Appendix A Annual percentage yield calculation
Appendix B Model clauses and sample forms
Appendix C Effect on state laws
Appendix D Issuance of staff interpretations
Supplement I Official staff interpretations