Truth in Savings, 29582-29596 [05-10348]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 70, Number 99 (Tuesday, May 24, 2005)]
[Rules and Regulations]
[Pages 29582-29596]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-10348]


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FEDERAL RESERVE SYSTEM

12 CFR Part 230

[Regulation DD; Docket No. R-1197]


Truth in Savings

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.

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SUMMARY: The Board is amending Regulation DD, which implements the 
Truth in Savings Act, and the staff commentary to the regulation, to 
address concerns about the uniformity and adequacy of information 
provided to consumers when they overdraw their deposit accounts. The 
amendments, in part, address certain types of services--sometimes 
referred to as ``bounced-check protection'' or--courtesy overdraft 
protection''--which are offered by many depository institutions to pay 
consumers' checks, and which allow other overdrafts when there are 
insufficient funds in the account. These services are typically 
automated services provided to transaction account consumers as an 
alternative to a traditional overdraft line of credit. Among other 
things, the final rule creates a new section to the regulation that 
requires institutions that promote the payment of overdrafts in an 
advertisement to disclose on periodic statements, total fees imposed 
for paying overdrafts and total fees imposed for returning items unpaid 
on periodic statements, both for the statement period and the calendar 
year to date, and to include certain other disclosures in 
advertisements of overdraft services.

DATES: The rule is effective July 1, 2006.

FOR FURTHER INFORMATION CONTACT: Elizabeth A. Eurgubian, Attorney, or 
Ky Tran-Trong or Krista P. DeLargy, Senior Attorneys, Division of 
Consumer and Community Affairs, Board of Governors of the Federal 
Reserve System, at (202) 452-3667 or 452-2412; for users of 
Telecommunications Device for the Deaf (``TDD'') only, contact (202) 
263-4869.

SUPPLEMENTARY INFORMATION:

I. The Truth in Savings Act

    The Truth in Savings Act (TISA), 12 U.S.C. 4301 et seq., is 
implemented by the Board's Regulation DD (12 CFR part 230). The purpose 
of the act and regulation is to assist consumers in comparing deposit 
accounts offered by depository institutions, principally through the 
disclosure of fees, the annual percentage yield (APY), the interest 
rate, and other account terms. An official staff commentary interprets 
the requirements of Regulation DD (12 CFR part 230 (Supp. I)). Credit 
unions are governed by a substantially similar regulation issued by the 
National Credit Union Administration.
    Under TISA and Regulation DD, disclosures must be given upon a 
consumer's request and before an account is opened. Institutions are 
not required to provide periodic statements, but if they do, the act 
requires that fees, yields, and other information be provided on the 
statements. Notice must be given to accountholders before an adverse 
change in account terms occurs and prior to the renewal of certificates 
of deposit (time accounts).
    TISA and Regulation DD contain rules for advertising deposit 
accounts. Under TISA, there is a prohibition against advertisements, 
announcements, or solicitations that are inaccurate or misleading, or 
that misrepresent the deposit contract. Institutions also are 
prohibited from describing an account as free (or using words of 
similar meaning) if a regular service or transaction fee is imposed, if 
a minimum balance must be maintained, or if a fee is imposed when a 
customer exceeds a specified number of transactions. In addition, the 
act and regulation impose substantive restrictions on institutions' 
practices regarding the payment of interest on accounts and the 
calculation of account balances.

II. Concerns About Overdraft Services

    Historically, depository institutions have used their discretion on 
an ad hoc basis to pay overdrafts for consumers on transaction 
accounts, usually imposing a fee. Over the years, some institutions 
automated the process for considering whether to honor overdrafts to 
reduce the costs of reviewing individual items, but generally 
institutions did not inform customers of their internal policies for 
determining whether an item would be paid or returned. More recently, 
third-party vendors have developed and sold overdraft programs to 
institutions, particularly to smaller institutions. These programs 
generally build upon or add to the institution's existing internal 
reporting systems to enable the institution to automate its payment of 
overdrafts.\1\ What generally distinguishes the vendor programs from 
institutions' in-house automated processes is the addition of marketing 
plans that appear designed to promote the generation of fee income by 
disclosing to account-holders the dollar amount that the consumer 
typically will be allowed to overdraw their accounts. Some institutions 
also encourage consumers to use the service to meet short-term 
borrowing needs.
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    \1\ The Board's proposal referred to ``bounced-check 
protection'' services. These services also are sometimes referred to 
as ``courtesy overdraft protection.'' Because some institutions'' 
overdraft services apply to non-check transactions, for clarity the 
services are referred to generically as ``overdraft services.''
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    Paying consumers' occasional or inadvertent overdrafts is a long-
established customer service provided by depository institutions. The 
Board recognized this longstanding practice when it initially adopted 
Regulation Z in 1969, to implement the Truth in Lending Act (TILA); the 
regulation provided that these transactions are generally exempt from 
coverage under Regulation Z where there is no written agreement between 
the consumer and institution to pay an overdraft and impose a fee. See 
Sec.  226.4(c)(3). The exemption from Regulation Z was designed to 
facilitate depository institutions' ability to accommodate consumers on 
an ad-hoc basis.

[[Page 29583]]

    Although overdraft services vary among institutions, many 
institutions provide the coverage automatically for consumers who meet 
the institution's criteria (e.g., the account has been open for a 
certain number of days, and the consumer makes deposits regularly). 
Consumers are not required to apply for the coverage and the 
institution performs no credit underwriting. Many institutions clearly 
inform consumers that payment of an overdraft is discretionary on the 
part of the institution; deposit account agreements typically disclaim 
any legal obligation to pay any overdraft. Some institutions extend the 
overdraft service to non-check transactions, for example, withdrawal 
requests made at automated teller machines (``ATMs''), purchases made 
using a debit card, pre-authorized automatic debits from a consumer's 
account, telephone-initiated funds transfers, or on-line banking 
transactions. A flat fee is charged each time the service is triggered 
and an overdraft item is paid; often the fee for paying an overdraft is 
the same amount that the institution would charge when a check drawn on 
insufficient funds is returned unpaid. In some cases, a daily fee may 
be imposed for each day the account remains overdrawn.
    In November 2002, the Board solicited comment and information from 
the public about institutions' current overdraft services, to assist 
the Board in determining the need for guidance to depository 
institutions under Regulation Z (Truth in Lending) and other laws. 67 
FR 72618 (December 6, 2002). In response to the Board's request for 
comment, consumer advocates, state agency representatives, and others 
stated that certain overdraft services should be subject to the TILA 
and Regulation Z. They noted that in addition to warning consumers 
about the high cost of the services, TILA disclosures would apprise 
consumers about the true nature of these services as a credit 
transaction. Industry commenters opposed coverage under Regulation Z, 
stating that institutions currently provide adequate disclosures 
pursuant to TISA and Regulation DD, and that coverage under Regulation 
Z would be burdensome.
    The Board's study of overdraft services identified a number of 
other concerns about some programs. One major concern relates to the 
adequacy of information provided to consumers whose accounts are 
eligible for the service. For example, some institutions do not clearly 
inform consumers that ATM withdrawals, debit card transactions, or 
other electronic transfers may routinely be authorized under these 
overdraft services and that fees will be imposed in such cases.
    Other concerns center on institutions' marketing practices. 
Although the service may be designed to protect consumers against 
occasional inadvertent overdrafts, some institutions' promotional 
materials make the service appear to be a line of credit, apparently to 
promote a consumer's repeated use of the service. Many institutions 
inform consumers of the availability of the overdraft service, and also 
of the maximum aggregate dollar amount of overdrafts the institution 
will pay. Some marketing plans encourage consumers to use the service 
to meet short-term credit needs, and not just as protection against 
inadvertent overdrafts. Some institutions have encouraged consumers 
specifically to use an overdraft as an advance on their next paycheck. 
Notwithstanding the marketing promises, however, qualifying language 
disclaims any legal obligation by the institution to pay any overdraft. 
In some cases, deposit accounts that are promoted as being ``free'' 
also promote overdraft services that involve substantial fees.

III. Concerns About Uniform Disclosure of Overdraft Fees

    The Board also has concerns about the uniformity and adequacy of 
cost disclosures provided to consumers regarding overdraft and 
returned-item fees under Regulation DD. Many institutions already 
provide timely information to consumers about particular overdrafts and 
the fees imposed by sending a notice at the time an overdraft occurs. 
Institutions' practices and disclosures are not uniform, however, and 
some consumers may not receive adequate information on a timely basis.
    Fees for paying overdrafts and for returning items unpaid are 
typically flat fees unrelated to the amount of the item. These amounts 
may be significant when there are multiple overdrafts even though the 
items may represent relatively small dollar amounts. Even when 
consumers are aware that an account is or may become overdrawn, they do 
not necessarily know the number of overdraft items that will result or 
the total fees that will be imposed, both of which are determined by 
the order in which items drawn on the account are presented and the 
institution's policies concerning the order in which items are paid. 
Consumers may not be aware of the total fees imposed until the next 
periodic statement, and when the periodic statement is provided, it may 
intersperse fees for overdrafts and fees for returned items among other 
transactions rather than provide a total. As a result, the overall cost 
associated with overdrawing the account may not be clearly presented to 
consumers.

IV. The Board's Proposed Revisions to Regulation DD

    In May 2004, the Board proposed revisions to Regulation DD and the 
staff commentary to address concerns about the uniformity and adequacy 
of institutions' disclosure of overdraft fees generally, and to address 
concerns about advertised overdraft services in particular. 69 FR 31760 
(June 7, 2004). Specifically, the Board proposed to revise Regulation 
DD to expand the prohibition against misleading advertisements to cover 
communications with current consumers about existing accounts; the 
staff commentary provided examples of advertisements that would 
ordinarily be misleading. The proposed revisions also required 
additional fee and other disclosures about overdraft services, 
including disclosures on periodic statements of the total dollar 
amounts for all overdraft fees and for all returned-item fees, for the 
statement period and for the calendar year to date; however, the Board 
solicited comment on whether the periodic statement requirement to 
disclose calendar year-to-date totals should be limited to institutions 
that market overdraft services. Further, the Board proposed to require 
institutions that market automated overdraft services that are not 
covered by TILA to include certain disclosures about the service in 
their advertisements, including the fee for the payment of each 
overdraft item and the circumstances under which the institution would 
not pay an overdraft.

Overview of Public Comments

    Approximately 300 comments were received; the majority of comments 
were received from depository institutions or their trade associations. 
About 100 of these comment letters were received from consumer 
advocates and individual consumers, including about 60 nearly identical 
form letters sent by consumers through the same Internet site.
    Almost all the comments from consumers and consumer advocates 
oppose the proposed amendments to Regulation DD, and instead urge the 
Board to cover certain overdraft services under Regulation Z. Few of 
these comment letters contained substantive suggestions on the proposed 
revisions to Regulation DD. One Member of Congress submitted a letter 
also

[[Page 29584]]

requesting the Board to cover certain overdraft services under 
Regulation Z.
    Industry commenters were uniform in agreeing that overdraft 
protection is a deposit service that should be covered under Regulation 
DD rather than Regulation Z. Industry representatives that commented 
generally oppose covering overdraft services under Regulation Z. 
Industry representatives stated that disclosing an annual percentage 
rate (APR) for overdraft services would impose substantial compliance 
burdens without leaving consumers better-informed about the cost of 
credit or better able to compare the costs of different credit 
products.
    Although generally agreeing that coverage of overdraft services was 
more appropriate under Regulation DD, virtually all industry commenters 
have concerns about specific aspects of the proposal. The most frequent 
objection to the proposal concerns the requirements for disclosing 
aggregate totals for overdraft fees and returned item fees on periodic 
statements. In particular, most industry commenters cite the costs of 
implementing the new disclosures and assert that consumers are already 
provided sufficient information about these fees. Industry commenters 
also asked for clarification about the types of overdraft services that 
would be covered under the rule, focusing on the Board's use of the 
term ``automated overdraft service'' to describe the overdraft service 
that would be subject to the additional advertising disclosures. 
Finally, many industry commenters oppose the requirement to disclose in 
advertisements the circumstances under which an overdraft would not be 
paid, because it could suggest an agreement to pay overdrafts in other 
circumstances contrary to the ``discretionary'' nature of the product. 
Additional comments are discussed in the section-by-section analysis.

V. The Final Rule

    Pursuant to the Board's authority under Section 269(a) of TISA (12 
U.S.C. 4308(a)), the Board is adopting final revisions to Regulation DD 
and the staff commentary generally as proposed. Some clarifications and 
modifications to the proposal have been made to respond to commenters' 
concerns; in particular, the requirement to disclose aggregate 
overdraft and returned item fees on periodic statements has been 
limited to institutions that promote the payment of overdrafts in an 
advertisement. The final rule consolidates the guidance for 
institutions that promote the payment of overdrafts in a new Sec.  
205.11 of the regulation to facilitate compliance. To give institutions 
sufficient time to implement the necessary system changes to comply 
with the regulation, compliance with the final rule will not become 
mandatory until July 1, 2006.

Summary of Revisions to the Regulation

    The following is a summary of the final revisions to the regulation 
and the staff commentary. These revisions are discussed in detail below 
in the section-by-section analysis.

Disclosures Concerning Overdraft Fees

Periodic Statements
     Institutions that promote the payment of overdrafts in an 
advertisement must separately disclose on their periodic statements, 
the total amount of fees or charges imposed on the deposit account for 
paying overdrafts and the total amount of fees charged for returning 
items unpaid. These disclosures must be provided for the statement 
period and for the calendar year to date for any account to which the 
advertisement applies. The final rule is narrower than the proposal, 
which would have applied to all institutions, regardless of whether 
they market the payment of overdrafts. Thus, institutions that do not 
promote the payment of overdrafts would not be required to provide the 
new periodic statement disclosures under the final rule.
     To facilitate compliance, the staff commentary provides 
specific examples of when an institution is promoting the payment of 
overdrafts in an advertisement. For example, stating the overdraft 
limit for an account on a periodic statement or stating an account 
balance that includes available overdraft funds on an ATM receipt would 
be considered an advertisement triggering the required disclosures.
     An institution that does not otherwise promote the payment 
of overdrafts would not trigger the requirement to provide aggregate 
fee disclosures on periodic statements solely by:
    (1) Communicating information about the payment of overdrafts in 
response to a consumer-initiated inquiry about overdrafts or deposit 
accounts generally. Providing information about the payment of 
overdrafts in response to a balance inquiry made through an automated 
system, such as a telephone response machine, an ATM, or an 
institution's Internet site, is not a response to a consumer-initiated 
inquiry for purposes of this provision, and would trigger the periodic 
statement disclosure requirements;
    (2) Providing educational materials that do not specifically 
describe the institution's overdraft service;
    (3) Promoting in an advertisement a traditional line of credit that 
is subject to the Board's Regulation Z (Truth in Lending);
    (4) Engaging in an in-person discussion with a consumer;
    (5) Making a disclosure required by Federal or other applicable 
law;
    (6) Including information on a periodic statement or providing a 
notice informing a consumer about a specific overdrawn item or the 
amount the account is overdrawn;
    (7) Including in a deposit account agreement a discussion of the 
institution's right to pay overdrafts; or
    (8) Notifying a consumer that completing a requested transaction, 
such as an ATM withdrawal, may trigger an overdraft fee, or providing a 
general notice that items overdrawing an account may trigger an 
overdraft fee.
Account-Opening Disclosures
     Institutions must specify in TISA's account-opening 
disclosures the categories of transactions for which an overdraft fee 
may be imposed. An exhaustive list of transactions is not required; it 
is sufficient to state that the fee is imposed for overdrafts created 
by checks, in-person withdrawals, ATM withdrawals, or by other 
electronic means, as applicable. This requirement applies to all 
institutions, including institutions that do not promote the payment of 
overdrafts in an advertisement.
Advertising Rules
     To avoid confusion with traditional lines of credit, 
institutions that promote the payment of overdrafts are required to 
include certain disclosures in their advertisements about the service: 
the applicable fees or charges, the categories of transactions covered, 
the time period consumers have to repay or cover any overdraft, and the 
circumstances under which the institution would not pay an overdraft. 
Stating the available overdraft limit or the amount of funds available 
on a periodic statement would be considered an advertisement triggering 
the required disclosures.
    [cir] The final rule provides safe harbors from the advertising 
requirements similar to those described above for the periodic 
statement disclosure requirements. Thus, for example, the advertising 
disclosure requirements would not apply to institutions when they 
provide educational materials, respond to a consumer-initiated inquiry 
about overdrafts or deposit accounts, or notify a consumer about a 
specific overdraft in their account.
    [cir] Advertising disclosures are not required on ATM receipts, due 
to space

[[Page 29585]]

limitations. Similarly, advertising disclosures are not required for 
advertisements using broadcast media, billboards, or telephone response 
systems. This parallels an exemption in Regulation DD which applies to 
other types of advertising disclosures. Limited advertising disclosures 
are required on ATM screens, telephone response machines and indoor 
signs.
Prohibiting Misleading Advertisements
     TISA's prohibition against advertisements, announcements, 
or solicitations that are misleading or that misrepresent the deposit 
contract is extended to communications with consumers about the terms 
of their existing accounts.
Examples of Misleading Advertisements
     The staff commentary is revised to provide five examples 
of advertisements that would ordinarily be deemed misleading:
    (1) Representing an overdraft service as a ``line of credit;''
    (2) Representing that the institution will honor all checks or 
transactions, when the institution retains discretion at any time not 
to honor any transaction;
    (3) Representing that consumers with an overdrawn account are 
allowed to maintain a negative balance when the terms of the account's 
overdraft service require consumers to promptly return the deposit 
account to a positive balance;
    (4) Describing an overdraft service solely as protection against 
bounced checks, when the institution also permits overdrafts for a fee 
in connection with ATM withdrawals and other electronic fund transfers 
that permit consumers to overdraw their account; and
    (5) Describing an account as ``free'' or ``no cost'' in an 
advertisement that also promotes a service for which there is a fee 
(including an overdraft service), unless the advertisement clearly and 
conspicuously indicates there is a cost associated with the service.

Possible Coverage Under the Truth in Lending Act

    The amendments to Regulation DD recognize that an overdraft service 
is provided as a feature and term of a deposit account, and that the 
fees associated with the service are assessed against the deposit 
account. As noted above, consumer advocates and some others who 
commented on the proposed revisions to Regulation DD believe that 
certain overdraft services should be covered by Regulation Z. These 
commenters state that overdraft services compete with traditional 
credit products--open-end lines of credit, credit cards, and short-term 
closed-end loans--all of which are covered under TILA and Regulation Z 
and provide consumers with the cost of credit expressed as a dollar 
finance charge and an APR. They believe that TILA disclosures would 
enhance consumers' understanding of the cost of overdraft services and 
their ability to compare costs of competing financial services.
    At its October 2004 meeting, the Board's Consumer Advisory Council 
also discussed this issue, including ways to distinguish between an 
institution's infrequent, ad hoc accommodation of a customer, and an 
overdraft service that operates more like a line of credit. Some 
Council members believed that overdraft services that are the 
functional equivalent of a traditional overdraft line of credit should 
be subject to Regulation Z, but that institutions' historical practice 
of paying occasional overdrafts on an ad hoc basis should not be 
covered by Regulation Z.
    The Board's adoption of final rules under Regulation DD does not 
preclude a future determination that TILA disclosures would also 
benefit consumers. The Board expressly stated in its proposal that 
further consideration of the need for coverage under Regulation Z may 
be appropriate in the future.

VI. Section-by-Section Analysis

Section 230.2 Definitions

2(b) Advertisement
    TISA prohibits institutions from making any advertisement, 
announcement, or solicitation relating to a deposit account that is 
inaccurate or misleading or that misrepresents its deposit contract. 12 
U.S.C. 4302(e). Regulation DD currently defines ``advertisement'' to 
include ``a commercial message appearing in any medium, that promotes 
directly or indirectly the availability of, or a deposit in, an 
account.'' See Sec.  230.2(b). Under the existing staff commentary, 
institutions' communications with consumers about existing accounts are 
not considered ``advertisements'' under Regulation DD. See comment 
2(b)-2.iii.
    The Board proposed to revise the definition of ``advertisement'' to 
include an institution's communications with existing customers for 
purposes of TISA's prohibition against advertisements that are 
misleading or inaccurate or that misrepresent the deposit contract. The 
Board also proposed to expand the definition to cover communications 
with existing customers that promote the institutions' overdraft 
services, which would trigger additional disclosures about the costs 
and terms of the service.
    The final rule adopts the revised definition of ``advertisement'' 
as proposed under Sec.  230.2(b)(1). Section 230.2(b)(2) of the final 
rule provides that for purposes of the prohibition on misleading 
advertisements in Sec.  230.8(a) and the new disclosure requirements in 
Sec.  230.11, the definition of ``advertisement'' includes the terms 
of, or a deposit in, a new or existing account. The staff commentary 
has been modified to address commenters' concerns about the need to 
clarify the scope of the revised definition.
    Most commenters who addressed this aspect of the proposal did not 
oppose applying the prohibition on misleading or inaccurate 
advertisements to communications about existing accounts. Many 
commenters believe, however, that modifications are necessary to 
clarify the scope of the proposed definition. In particular, several 
commenters expressed concern that, without clarification, the 
definition would be interpreted to apply to routine communications, 
such as notices commonly sent to inform accountholders that their 
account has become overdrawn. Other commenters asked the Board to 
provide additional guidance on types of communications that would 
constitute promoting an overdraft service and thus satisfy the 
definition of ``advertisement.''
    Comment 2(b)-2 currently provides examples of messages that are not 
considered advertisements. The Board proposed to re-designate comment 
2(b)-2 as comment 2(b)-3. The re-designation is not necessary in the 
final rule. In response to commenters' concerns, comment 2(b)-2 has 
been revised to provide additional examples of messages that are not 
advertisements. Paragraph 2(b)-2.iii is revised for conformity with the 
final rule. Paragraph 2(b)-2.iv. clarifies that an institution is not 
promoting a deposit or service solely by providing information about a 
particular transaction in an account, such as in a notice or a periodic 
statement advising a consumer about a specific overdrawn item.
    Paragraph 2(b)-2.v. provides that an institution is not promoting a 
deposit or service solely by providing legally required disclosures. 
Similar guidance had been included in proposed comment 2(b)-2. The 
guidance in the final rule has been revised by deleting the specific 
reference to disclosures provided at account-opening, on periodic 
statements, and on electronic terminal receipts, to address commenters' 
concerns that other required disclosures should also be

[[Page 29586]]

excluded from the definition of ``advertisement.'' If an institution 
combines promotional material with the required disclosures, however, 
this additional information would be considered an advertisement. An 
institution that includes promotional materials about its overdraft 
service with required disclosures generally would be required to 
provide the new disclosures in Sec.  230.11 (discussed below). 
Paragraph 2(b)-2.vi. clarifies that an account agreement is not an 
advertisement.
    The revised definition of advertisement does not affect rules for 
triggering additional disclosures when an advertisement states an APY 
or bonus. The previous definition of ``advertisement'' continues to 
apply for this purpose and has been redesignated as Sec.  230.2(b)(1). 
Modifications have been made only for stylistic consistency; no 
substantive change is intended.

Section 230.4 Account Disclosures

4(b) Content of Account Disclosures
4(b)(4) Fees
    Under TISA and Regulation DD, before an account is opened, 
institutions must provide a schedule describing all fees that may be 
charged in connection with the account. The schedule must also disclose 
the amount of the fee and the conditions under which the fee will be 
imposed. 12 U.S.C. 4303; Sec.  230.4(b)(4). When terms required to be 
disclosed in the schedule change and adversely affect accountholders, 
notice of the change must be provided 30 days in advance. 12 U.S.C. 
4305; Sec.  230.5(a).
    Currently, the guidance for describing fees is quite general, and 
provides that ``naming and describing the fee will typically satisfy 
these requirements.'' See comment 4(b)(4)-3. The Board proposed comment 
4(b)(4)-5 to require institutions to state in their account-opening 
disclosures the types of transactions for which an overdraft fee may be 
imposed. As proposed, describing the fee solely as a ``fee for 
overdrafts'' or fee for ``overdraft items'' would not provide 
sufficient notice to consumers as to whether the fee applies to 
overdrafts by check only, or whether it also applies to overdrafts by 
other means, such as by ATM withdrawal or other electronic 
transactions. The revisions are being adopted substantially as 
proposed, with some modifications to address commenters' concerns, and 
would apply to all institutions, regardless of whether they promote the 
payment of overdrafts.
    A few commenters that support the proposed comment affirm that they 
already provide such disclosures. Most commenters do not oppose the 
proposed change, but encourage the Board to clarify that an exhaustive 
list of transactions for which an overdraft fee may be imposed, is not 
required. These commenters express concern that requiring disclosure of 
an exhaustive list of transactions could necessitate a change-in-terms 
notice as new technologies are implemented. For example, several 
commenters believe that an institution solely disclosing that overdraft 
fees may be imposed for transfers initiated using the Internet might 
have to provide a change-in-terms notice if telephone transfers are 
subsequently allowed. These commenters assert that an illustrative list 
of transactions would sufficiently notify the consumer that overdraft 
fees will apply in multiple circumstances, while allowing institutions 
to avoid the need to provide a change-in-terms notice if, subsequently, 
overdrafts are permitted through another channel. A few commenters 
asked the Board to provide model language to ease compliance.
    To address commenters' concerns, comment 4(b)(4)-5 has been revised 
to clarify that an exhaustive list of transactions is not required. As 
revised, the comment provides that institutions may specify categories 
of transactions for which an overdraft fee may be imposed. The final 
comment also includes model language. Institutions may satisfy the 
requirements by stating that the fee applies to overdrafts ``created by 
check, in-person withdrawal, ATM withdrawal, or other electronic 
means,'' as applicable. The model language is sufficiently broad to 
cover most situations in which overdrafts can occur, but institutions 
are free to add additional categories. For example, an institution 
using the model language would not be required to change its 
disclosures when implementing a system for making electronic transfers 
by telephone. But if an institution only discloses that overdraft fees 
are imposed in connection with the payment of checks, new disclosures 
would be required if the institution subsequently imposes the fees for 
overdrafts created by ATM withdrawals or other electronic means.
    Institutions are not required to provide new account-opening 
disclosures or change-in-terms notices to consumers who previously 
received overdraft fee disclosures under existing guidance currently in 
the staff commentary. However, to the extent that an institution's 
prior disclosures suggested the overdraft service only covers checks, 
institutions should consider informing their customers that the service 
is broader and applies to overdrafts by in-person withdrawals, ATM 
withdrawals, and by other electronic means, as applicable.

Section 230.6 Periodic Statement Disclosures

6(a) General Rule
6(a)(3) Fees Imposed
    The Board proposed to revise Regulation DD, by adding Sec.  
230.6(a)(3)(ii), to require all institutions to disclose separately, 
the total dollar amount of overdraft fees and the total dollar amount 
of returned-item fees, for the statement period and the calendar year 
to date. As further discussed below, this provision has been moved to 
new Sec.  230.11(a), and the requirements are limited to institutions 
that promote the payment of overdrafts in an advertisement. Proposed 
comment 6(a)(3)-2 has been adopted, with some modifications, to clarify 
that fees for paying overdrafts and fees for returning items unpaid may 
not be grouped together as fees for insufficient funds.

Section 230.8 Advertising

    As discussed above, the Board is revising Regulation DD to apply 
the prohibition in Sec.  230.8(a) on misleading advertisements to 
communications with consumers about the terms of their existing 
accounts. The Board also proposed to revise the staff commentary to 
provide examples of advertisements that would ordinarily be misleading. 
In addition, to reduce consumer confusion about how overdraft services 
differ from a traditional line of credit, the proposed rule required 
institutions that promote automated overdraft services to include 
certain disclosures in their advertisements about the service. In the 
final rule, the prohibition on guidance regarding misleading and 
inaccurate advertisements in Sec.  230.8(a) is being revised. The 
proposed examples in the commentary of advertisements that would 
ordinarily be misleading are being adopted largely as proposed under 
Sec.  230.8(a), with some modifications for clarity. The additional 
disclosure requirements for advertisements that promote the payment of 
overdrafts in proposed Sec.  230.8(f) are contained in new Sec.  
230.11(b), discussed below.
8(a) Misleading or Inaccurate Advertisements
    In the final rule, Sec.  230.8(a) has been reorganized, as 
proposed. To provide guidance on the types of advertisements that may 
violate the rule, the Board proposed to add comment 8(a)-10. The 
proposed comment provided five examples of advertisements that would

[[Page 29587]]

ordinarily be misleading, inaccurate, or misrepresent the deposit 
contract. The examples of misleading advertisements in proposed comment 
8(a)-10 are adopted as proposed, with some revisions for clarity.
    The first example is an advertisement that represents an overdraft 
service as a ``line of credit'' unless the service is subject to the 
Board's Regulation Z. The second example is an advertisement that 
misleads consumers by representing that the institution will honor all 
checks or authorize all transactions that overdraw an account, with or 
without a specified dollar limit, when the institution retains 
discretion at any time not to honor checks or authorize transactions.
    A third example states that an advertisement could mislead 
consumers by representing that consumers with overdrawn accounts are 
allowed to maintain a negative balance when the terms of the account's 
overdraft service require consumers to promptly return the deposit 
account to a positive balance. The fourth example provides that 
promotional materials describing a service solely as protection against 
bounced checks could mislead consumers if the service also applies to 
ATM withdrawals, and other debit card transactions, and electronic fund 
transfers.
    The fifth example of misleading advertisements relates to the 
advertisement of free accounts. Under Regulation DD, an institution may 
not describe an account as ``free'' (or use a similar term) if any 
maintenance or activity fee may be imposed on the account. As the Board 
noted in the proposal, fees for overdraft services are not considered 
maintenance or activity fees, because the fees do not relate to the use 
of the consumer's own funds in the account. Thus, institutions may 
impose overdraft fees in connection with ``free'' accounts. The example 
addresses concerns about institutions that advertise overdraft services 
(or other services) as a feature of their free checking accounts in a 
manner that could mislead consumers to believe that the service is 
without cost. Accordingly, an advertisement would be deemed misleading 
if the account is described as ``free'' and the advertisement also 
promotes account-related services for which there is a fee, unless the 
advertisement clearly and conspicuously indicates there is a cost 
associated with the advertised service.
    Most commenters agree that the misleading advertising practices 
identified by the Board should be prohibited, and support the proposed 
examples. One consumer group, however, believes that the proposed 
examples are not sufficient because they do not prohibit institutions 
from encouraging consumers to use the service for intentional 
overdrafts. The final rule does not contain such an example. Although 
advertisements that encourage intentional overdrafts may under some 
circumstances mislead consumers about the terms of the service, such a 
determination must be made on a case-by-case basis.
    A few industry commenters objected to the scope of the fifth 
example which pertains to advertisements that promote ``free'' accounts 
as well as services for which a fee is charged. These commenters 
believe the example should be limited to advertisements promoting 
overdraft services in connection with free accounts. Although comment 
8(a)-10.v. addresses concerns that consumers may be misled into 
thinking that overdraft protection is without cost when the service is 
advertised as a feature of free checking accounts, the same possibility 
of misleading consumers exists when other account-related services are 
advertised in connection with free accounts. Thus, the scope of the 
final comment is not limited to the promotion of overdraft services.
    TISA's limitation on advertising an account as free is currently 
implemented in Sec.  230.8(a). This provision has been redesignated as 
Sec.  230.8(a)(2), without any substantive change.
8(f) Additional Disclosures in Connection With Overdraft Services
    Proposed Sec.  230.8(f) would have required advertisements 
promoting an automated overdraft service to include certain fee and 
other information about the service. This requirement is in Sec.  
230.11(b) in the final rule. Section 230.8(f) of the final rule 
contains a cross-reference to the new advertising disclosures in Sec.  
230.11(b).

Section 230.11 Additional Disclosure Requirements for Institutions 
Advertising the Payment of Overdrafts

    New Sec.  230.11 consolidates the disclosure requirements 
previously set forth in Sec. Sec.  230.6(a)(3) and 230.8(f) of the 
proposed rule. Section 230.11(a) contains the disclosure requirements 
for periodic statements. The final rule is narrower than the proposal 
and only applies to institutions that promote the payment of overdrafts 
in advertisements. Section 230.11(a) requires these institutions to 
separately disclose the total fees for paying overdrafts and the total 
fees for returning items unpaid on periodic statements. The disclosures 
must be made for the statement period and for the calendar year to date 
for each account to which the advertisement applies. Section 230.11(b) 
requires institutions that promote the payment of overdrafts in 
advertisements to provide certain additional disclosures about the 
nature of the overdraft service. The Board believes that consolidating 
these rules in a new section will help facilitate compliance with the 
regulation for institutions that choose to promote the payment of 
overdrafts.
11(a) Periodic Statement Disclosures of Fees for Overdrafts and for 
Returned Items Unpaid
    To assist consumers in better understanding the costs associated 
with overdrawing their accounts, the Board proposed to revise the 
requirements for providing cost disclosures on periodic statements. 
Although periodic statements are not required by TISA, an institution 
that provides such statements must disclose any fees or charges imposed 
on the account during the statement period. Under Regulation DD, fees 
must be itemized on a periodic statement by type, for example, by 
separately listing the monthly service charge, ATM fees, and returned 
check fees. When multiple fees of the same type are charged in a single 
period, comment 6(a)(3)-2 in the current staff commentary states that 
institutions have the option of showing each fee as a separate charge 
or, alternatively, aggregating all fees of the same type and disclosing 
a single dollar amount for that category. The Board proposed to add 
Sec.  230.6(a)(3)(ii) to require all institutions to disclose 
separately the total dollar amount of overdraft fees and the total 
dollar amount of returned-item fees on an aggregate basis for the 
statement period and for the calendar year to date. As discussed above, 
under Sec.  230.11(a)(1) of the final rule, only institutions that 
promote the payment of overdrafts in an advertisement are required to 
provide the aggregate fee disclosures on periodic statements. 
Institutions must provide the disclosures for all accounts to which the 
institution's advertisement applies.
    Section 230.11(a)(2) describes certain communications that 
institutions may make concerning the payment of overdrafts that would 
not trigger the new periodic statement disclosures. Sections 
230.11(a)(3) through (5) provide guidance on how an institution can 
comply with the rule after it commences advertising the payment of 
overdrafts, and after an institution acquires accounts through a merger 
or acquisition. Additional comments have

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been added for clarity in response to concerns raised by commenters.
    Consumer representatives that commented believe that consumers need 
better information about the cost of using certain overdraft services, 
but they assert that disclosing aggregate fees for the statement cycle 
and year to date would be insufficient to provide consumers with the 
information necessary to compare the cost of overdraft services with 
the costs of alternative forms of short-term credit such as payday 
loans, tax refund anticipation loans, and traditional overdraft lines 
of credit. They recommend that instead of adopting the proposed 
revisions to Regulation DD, the Board should cover certain overdraft 
services under Regulation Z so that periodic statements would provide 
consumers with an APR.
    Where the institution has not agreed in writing to pay overdrafts, 
a charge assessed against a deposit account for paying an overdraft has 
not been considered a finance charge and disclosures under Regulation Z 
are not required. This exception was established in Regulation Z from 
its inception in 1969. As noted above, the Board's adoption of final 
rules under Regulation DD does not preclude a future determination that 
TILA disclosures would also benefit consumers.
    Industry commenters generally oppose the proposed requirement to 
disclose aggregate totals for overdraft fees and returned-item fees 
because they believe it would be costly and would provide little 
benefit to consumers. Several commenters disagree with the view that 
consumers do not receive sufficient information about the costs 
associated with overdrawing their account, observing that consumers 
receive a schedule of fees at account-opening, notice of fees imposed 
upon each overdraft, and an itemization of fees on periodic statements. 
Many of these commenters also assert that the itemization of fees on 
periodic statements provides a sufficient basis for consumers to 
determine an aggregate total for fees imposed during the statement 
cycle and calendar year to date. Most industry commenters stated that 
the typical industry practice of providing a notice after each 
overdraft is a more effective and timely means of alerting consumers 
about the cost of overdrafts. Some financial institutions oppose 
additional disclosures about overdraft fees on periodic statements 
because, in their view, it would detract from information on the 
periodic statement about other types of fees, such as ATM withdrawal 
fees. A few industry commenters question how an institution can provide 
year-to-date totals that would be reset to zero each January when a 
statement period is not tied to a calendar month.
    Most industry commenters express concern about the cost of 
implementing changes to the way fees are disclosed on periodic 
statements, which would involve changes to data collection and 
reporting systems, as well as training and compliance management costs. 
They note that most institutions' systems do not currently aggregate 
fee data across different statement cycles, which would be necessary to 
disclose year-to-date totals. Some commenters also note that systems 
changes would be needed for some institutions to distinguish between 
fees imposed for paying overdrafts and fees for handling items that are 
returned unpaid. Six financial institutions provided cost estimates. At 
the low end, one institution that stated it uses a third-party vendor 
for data processing estimated the cost at $20,000, while two other 
institutions that outsource data processing estimated the cost to be 
about $300,000. Two institutions (including one with $1.5 billion in 
assets) provided cost estimates between $50,000 and $125,000. Bank of 
America, noting that it operates the largest banking network in the 
United States, estimated that expenses for the initial systems 
modifications for paper statements would exceed $1 million.
    The Board specifically asked for comment on whether the requirement 
to disclose cumulative year-to-date fee totals on periodic statements 
should be limited to institutions that market overdraft services. 
Industry commenters were divided. Several banks that do not promote 
overdraft services supported limiting the rule; these were generally 
larger institutions that stated the proposed revisions should focus on 
institutions whose marketing practices have raised the most concerns. 
These commenters urged the Board to exempt institutions that do not 
market overdraft services from being required to disclose aggregate 
fees for the statement period and year to date. But more industry 
commenters stated that the rule, if adopted, should apply to all 
institutions and not just institutions that market overdraft services. 
Some of these commenters believe a rule based on ``marketing'' would be 
too vague; others assert that if the cost disclosure is useful, it 
would be just as beneficial to consumers regardless of whether the 
service is marketed. One commenter also noted that institutions' 
contracts with third-party vendors may limit the cost of system changes 
from being imposed directly on individual depository institutions if 
the changes must be made by all institutions.
    TISA was enacted, in part, for the purpose of requiring clear and 
uniform disclosures regarding deposit account terms and the fees 
assessable against these accounts. Such disclosures allow consumers to 
make informed judgments about the use of their accounts, including the 
consideration of other available options. In proposing that 
institutions disclose the aggregate amount of fees imposed for 
overdrafts and returned items, the Board sought to ensure that 
consumers are more clearly presented with the overall cost of 
overdrawing their accounts, particularly in light of the fact that 
institutions' payment of overdrafts has become more routine due to the 
use of automated systems, and that many institutions encourage 
consumers to use their overdraft service. Currently, institutions may 
itemize each fee on the periodic statement, including overdraft and 
returned-item fees; the itemized charges may be interspersed among 
other transactions in the account. A periodic statement that itemizes 
each transaction and fee during the statement cycle, without isolating 
the total cost of overdrawing the account, does not present a clear 
picture of the total cost associated with overdrawing the account.
    Fees for paying overdrafts and for returned items are typically 
flat fees unrelated to the amount of the transaction. These amounts may 
be significant when there are multiple overdrafts, although the items 
may represent relatively small dollar amounts. Even when consumers are 
aware that their account is or may become overdrawn, they do not 
necessarily know the number of overdraft items that will be paid or 
returned, or the total fees that will be imposed, both of which are 
determined by the order in which items are presented and the 
institution's policies regarding the order in which items are paid. 
Thus, consumers may not be aware of the total amount of fees being 
imposed and the amount by which the account is overdrawn until the next 
periodic statement is received. The Board believes disclosure of the 
aggregate costs may better enable consumers to consider their approach 
to account management and determine whether the account's terms and 
features are suited to their needs or whether other types of accounts 
or services would be more appropriate.
    The Board is also mindful, however, of the compliance costs 
associated with the proposed rule. Limiting the rule to

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institutions that advertise the payment of overdrafts avoids imposing 
compliance burdens on institutions that pay overdrafts infrequently, 
such as institutions that only pay overdrafts on an ad hoc basis. 
Requiring institutions to provide aggregate fee disclosures if they 
promote the payment of overdrafts would provide better cost information 
for consumers who are encouraged to overdraw their accounts and who are 
most likely to benefit from the aggregate fee disclosures.
    There may be consumers who use overdraft services frequently even 
though their institution does not market the service; however, a rule 
based on individual consumer behavior is more difficult to administer. 
Accordingly, under Sec.  230.11(a)(1), the requirement for disclosing 
aggregate fees for paying overdrafts and for returning items unpaid is 
limited to institutions that promote the payment of overdrafts in an 
advertisement. The total dollar amount for paying overdrafts includes 
all fees or charges imposed by an institution for paying overdrafts or 
other items when there are insufficient funds and the account becomes 
overdrawn. The final rule also clarifies that the required disclosures 
must be provided for the statement period and for the calendar year to 
date, for any account to which the advertisement applies. Institutions 
that do not promote the payment of overdrafts and have merely automated 
their traditional practice of paying overdrafts on an ad hoc basis are 
not covered by Sec.  230.11(a)(1). These institutions may continue to 
itemize fees on periodic statements but whether they itemize fees or 
group them together by type, institutions must distinguish between fees 
for paying overdrafts and fees for returning unpaid items. Institutions 
that do not promote the payment of overdrafts may also group like fees 
together and provide a total for the statement period on a voluntary 
basis, consistent with the current rules.
    The definition of ``advertisement'' is broad and includes ``a 
commercial message appearing in any medium, that promotes directly or 
indirectly the availability'' the terms of a deposit account. Thus, the 
rules for overdraft services would cover any type of promotion, 
regardless of the advertisement's content, format or the marketing 
channel used. For example, messages posted on a depository 
institution's Internet site would be covered, as would promotional e-
mail messages and messages printed on an institution's periodic 
statement. Oral messages communicated in a telephone solicitation would 
also be covered. See comment 11(a)(1)-1(i).
    To ease compliance, the final rule specifies certain types of 
communications and practices that would not trigger the requirement for 
disclosing aggregate fees on periodic statements. See Sec.  
205.11(a)(2). The safe harbors seek to provide additional certainty to 
institutions in determining whether compliance with the rule is 
required in particular circumstances. For example, the safe harbors 
clarify that an institution is not promoting the payment of overdrafts 
when providing information about the status of the account or a 
particular transaction, such as when notifying a consumer that the 
account has become overdrawn or when including the amount the account 
is overdrawn on a periodic statement. Similarly, an institution is not 
deemed to be promoting the payment of overdrafts when it provides 
notice to a consumer, such as at an ATM, that completing a requested 
transaction may trigger a fee for overdrawing the account, or when it 
provides a general notice that items overdrawing an account may trigger 
a fee.
    An institution also is not promoting overdraft services by 
providing legally required disclosures, by discussing in a deposit 
account agreement the institution's right to pay overdrafts, or by 
providing educational materials that do not specifically describe the 
institution's overdraft service (such as the brochure on ``bounce 
protection'' published by the Federal financial regulatory agencies). 
The rules for overdraft services also would not apply to advertisements 
for overdraft lines of credit covered by TILA and Regulation Z.
    The safe harbors also provide relief in circumstances where 
institutions would have practical difficulties in complying with the 
rule. In particular, there are safe harbors for consumer-initiated and 
face-or-face discussions to relieve institutions of the burden of 
monitoring individual conversations and responses; this also enables 
institutions to respond to consumers' direct questions about their 
accounts without concern that the discussion might trigger additional 
disclosure requirements. The final rule clarifies that institutions are 
within the safe harbor when responding (whether by telephone, 
electronically, or otherwise) to consumer-initiated inquiries about 
deposit accounts and overdrafts. The revised final rule also explains 
the limits of this safe harbor; the safe harbor for consumer-initiated 
inquiries does not apply to institutions' automated systems that are 
programmed to provide information about the institution's overdraft 
service, such as an ATM machine, a telephone response machine, or the 
institution's Internet site. In these cases, the consumer initiates the 
contact, but the institution has control over the pre-programmed 
message that provides information about available overdraft limits, and 
thus, the same compliance issues as individual inquiries are not 
presented.
    Section 230.11(a)(3) addresses the timing of the aggregate fee 
disclosures after an institution begins promoting the payment of 
overdrafts. An institution must make the disclosures under Sec.  
230.11(a)(1) for accounts to which the advertisement applies, starting 
with the first statement period that begins after the institution 
advertises the payment of overdrafts. For example, if a consumer's 
statement period typically closes on the 15th of each month, an 
institution that promotes the payment of overdrafts with respect to the 
consumer's account on July 1, 2006 must provide the aggregate fee 
disclosures on subsequent periodic statements for that consumer 
beginning with the statement reflecting the period from July 16, 2006, 
through August 15, 2006. In calculating and disclosing total fees for 
the year-to-date, institutions have the option of including fees 
imposed since the beginning of the calendar year, or starting with the 
first full statement period that begins after the institution 
advertises the payment of overdrafts with respect to the consumer's 
account.
    Comment 11(a)(3)-1 explains that only institutions that continue to 
advertise the payment of overdrafts on or after the mandatory 
compliance date of July 1, 2006 will be required to provide aggregate 
fee periodic statement disclosures for their consumers. Under Sec.  
230.11(a)(4) of the final rule, an institution is no longer required to 
provide the disclosures under Sec.  230.11(a)(1) two years after the 
institution last promotes its overdraft service with respect to that 
account, when the likely effect of the advertisement on consumers' use 
is presumably dissipated.
    Where an institution acquires deposit accounts, for example, by 
merging with or acquiring another institution, under Sec.  230.11(a)(5) 
the acquiring institution must thereafter provide the aggregate fee 
disclosures required by Sec.  230.11(a)(1) only if the acquiring 
institution promotes the payment of overdrafts with respect to the 
acquired accounts. If disclosures are required for the acquired 
accounts, the acquiring institution may, but is not required, to 
include fees imposed prior to the acquisition in the aggregate totals. 
Comment 11(a)(5)-1 explains that if the acquiring institution does not 
advertise the payment of overdrafts, or its advertisements do not

[[Page 29590]]

apply to the acquired accounts, the institution need not provide the 
aggregate fee disclosures for the acquired accounts even if the 
depository institution that previously held the accounts advertised the 
payment of overdrafts for those accounts.
    In response to commenters' requests for clarification, additional 
guidance has been added to the staff commentary. Comment 11(a)(1)-1 
provides examples of circumstances in which an institution would 
trigger the periodic statement requirements. For example, an 
institution promotes the payment of overdrafts by stating an overdraft 
limit or includes the amount of funds available for overdrafts on a 
periodic statement. See comment 11(a)-1(ii). Similarly, an institution 
promotes the payment of overdrafts if it states an overdraft limit or 
includes the dollar amount of the overdraft limit in an account balance 
disclosed on an ATM receipt or by a telephone response system. See 
comment 11(a)-1(iii). Comment 11(a)(1)-3 provides that an institution 
does not promote the payment of overdrafts, however, if it promotes a 
service providing for the transfer of funds from another deposit 
account of the consumer to avoid creating an overdraft.
    Comment 11(a)(1)-2 explains that the aggregate fee disclosures must 
be provided on periodic statement for all accounts to which an 
advertisement promoting the payment of overdrafts applies. Accordingly, 
if an institution specifies the types of accounts for which the 
overdraft service applies, the institution is not required to provide 
the disclosures for other types of accounts offered by the institution. 
An institution is required to provide the new aggregate fee disclosures 
for all of its accounts, however, if the institution generally promotes 
the payment of overdrafts without specifying the accounts to which the 
advertisement applies.
    Comment 11(a)(1)-4 clarifies that the total dollar amount disclosed 
for fees charged to the account for paying overdrafts includes per-item 
fees as well as interest charges, daily or other periodic fees, and 
fees charged for maintaining an account in overdraft status. It also 
includes fees charged when there are insufficient funds because 
previously deposited funds are subject to a hold or are uncollected. 
The disclosure would not include, however, fees for transferring funds 
from another account to avoid an overdraft, or fees charged in 
connection with a line of credit where the institution agrees in 
writing to pay items that overdraw the account and the service is 
subject to the Board's Regulation Z.
    Comment 11(a)(1)-5 clarifies that in disclosing fees for returning 
items unpaid, an institution should not include fees imposed when the 
account holder deposits items that are returned.
    In some cases, an institution may provide a statement for the 
current period reflecting that fees imposed during a previous period 
were waived and credited to the account. In response to commenters' 
request for clarification, comment 11(a)(1)-6 provides that such 
adjustments should not affect the total disclosed for fees imposed 
during the current statement period. The comment also notes, however, 
that institutions may, but are not required to, reflect the adjustment 
in the fee total for the calendar year to date.
    In response to commenters' suggestions, comment 11(a)(1)-7 provides 
guidance on how depository institutions may disclose the year-to-date 
fee totals when the institution's statement cycle does not coincide 
with the calendar month. In such cases, the institution may disclose a 
year-to-date total by aggregating fees for 12 monthly cycles, starting 
with the cycle that begins during January. Alternatively, the 
institution may provide a year-to-date total based on the calendar 
year.
    Comment 11(a)(1)-8 provides that institutions that promote the 
payment of overdrafts may continue to itemize overdraft and returned 
item fees on periodic statements as an additional voluntary disclosure 
in addition to the disclosures required by Sec.  230.11(a)(1).
11(b) Advertising Disclosures for Overdraft Services
    TISA and Regulation DD require additional information to be 
provided if an advertisement for a deposit account refers to a specific 
rate of interest, yield, or rate of earnings. 12 U.S.C. 4302; Sec.  
230.8(c). Advertisements for bonuses on deposit accounts also trigger 
additional information. Sec.  230.8(d). TISA authorizes the Board to 
exempt ``broadcast and electronic media and outdoor advertising from 
stating some additional information, if the Board finds the disclosures 
to be unnecessarily burdensome.'' 12 U.S.C. 4302(b). These limited 
disclosure rules are implemented in Sec.  230.8(e)(1). The exemptions 
for broadcast and electronic media do not extend to advertisements 
posted on the Internet or sent by e-mail.
    A principal concern about institutions' promotion of the payment of 
overdrafts is that consumers may be led to believe that the service 
represents a traditional line of credit. Some advertisements of 
overdraft services focus on the dollar amount of the overdraft limit, 
which may mislead some consumers to believe that a line of credit for 
that amount will be provided. Other advertisements create the 
impression that the payment of overdrafts can be relied upon to obtain 
short-term extensions of credit from time to time (up to a given 
amount) at minimal cost. These promotions may mislead or confuse 
consumers regarding the nature, costs, terms, and limitations of the 
service. This problem may be magnified somewhat because marketed 
overdraft services are relatively new.
    Additional disclosures in advertising could reduce the potential 
that some consumers would be misled, and enable consumers to compare 
the terms offered by different financial institutions. Accordingly, the 
Board proposed to add Sec.  230.8(f) to require that the following 
disclosures be included in advertisements for ``automated'' overdraft 
services not subject to Regulation Z: (1) The fee for overdrawing an 
a