Truth in Savings, 21155-21162 [E7-7873]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 72, Number 82 (Monday, April 30, 2007)]
[Proposed Rules]
[Pages 21155-21162]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-7873]


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FEDERAL RESERVE SYSTEM

12 CFR Part 230

[Regulation DD; Docket No. R-1285]


Truth in Savings

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule; request for comments.

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SUMMARY: The Board is proposing to amend Regulation DD, which 
implements the Truth in Savings Act, to withdraw portions of the 
interim final rules for the electronic delivery of disclosures issued 
March 30, 2001. The interim final rules address the timing and delivery 
of electronic disclosures, consistent with the requirements of the 
Electronic Signatures in Global and National Commerce Act (E-Sign Act). 
Compliance with the 2001 interim final rules is not mandatory. Thus, 
removing the interim rules from the Code of Federal Regulations would 
reduce confusion about the status of the provisions and simplify the 
regulation. The Board is also proposing to amend Regulation DD to 
provide that certain disclosures may be provided to a consumer in 
electronic form without regard to the consumer consent and other 
provisions of the E-Sign Act; and that, when an advertisement is 
accessed by the consumer in electronic form, the disclosures must be 
provided in electronic form on or with the advertisement. Similar rules 
are being proposed under other consumer fair lending and financial 
services regulations administered by the Board.

DATES: Comments must be received on or before June 29, 2007.

ADDRESSES: You may submit comments, identified by Docket No. R-1285, by 
any of the following methods:
     Agency Web site: https://www.federalreserve.gov. Follow the 
instructions for submitting comments at https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: regs.comments@federalreserve.gov. Include the 
docket number in the subject line of the message.
     FAX: (202) 452-3819 or (202) 452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at 
https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper form in Room MP-500 of the Board's Martin Building (20th and C 
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: John C. Wood or David A. Stein, 
Counsels, Division of Consumer and Community Affairs, at (202) 452-2412 
or (202) 452-3667. For users of Telecommunications Device for the Deaf 
(TDD) only, contact (202) 263-4869.

SUPPLEMENTARY INFORMATION:

I. Background

    The purpose of the Truth in Savings Act (TISA), 12 U.S.C. 4301 et 
seq., is to enable consumers to make informed decisions about accounts 
at depository institutions. The act requires depository institutions to 
disclose yields, fees, and other terms concerning deposit accounts to 
consumers at account opening, upon request, when changes in terms 
occur, and in periodic statements. It also includes rules about 
advertising for deposit accounts. The Board's Regulation DD (12 CFR 
part 230) implements the act. Credit unions are governed by a 
substantially similar regulation issued by the National Credit Union 
Administration. TISA and Regulation DD require a number of disclosures 
to be provided in writing.

Board Proposals Regarding Electronic Disclosures

    On May 2, 1996, the Board proposed to amend Regulation E 
(Electronic Fund Transfers) to permit financial institutions to provide 
disclosures by sending them electronically (61 FR 19696). Based on 
comments received, in 1998 the Board published an interim rule 
permitting the electronic delivery of disclosures under Regulation E 
(63 FR 14528, March 25, 1998) and proposals under Regulations B (Equal 
Credit Opportunity), M (Consumer Leasing), Z (Truth in Lending), and DD 
(Truth in Savings) (63 FR 14552, 14538, 14548, and 14533, respectively, 
March 25, 1998).

[[Page 21156]]

    Based on comments received on the 1998 proposals, in September 1999 
the Board published revised proposals under Regulations B, E, M, Z, and 
DD (64 FR 49688, 49699, 49713, 49722 and 49740, respectively, September 
14, 1999). At the same time, the Board published an interim rule under 
Regulation DD allowing depository institutions to deliver disclosures 
on periodic statements in electronic form if the consumer agreed (64 FR 
49846, September 14, 1999). While these rulemakings were pending, 
Federal legislation was enacted addressing the use of electronic 
documents and records, including consumer disclosures.

Federal Legislation Addressing Electronic Commerce

    On June 30, 2000, the President signed into law the Electronic 
Signatures in Global and National Commerce Act (the E-Sign Act) (15 
U.S.C. 7001 et seq.). The E-Sign Act provides that electronic documents 
and electronic signatures have the same validity as paper documents and 
handwritten signatures. The E-Sign Act contains special rules for the 
use of electronic disclosures in consumer transactions. Under the E-
Sign Act, consumer disclosures required by other laws or regulations to 
be provided or made available in writing may be provided or made 
available, as applicable, in electronic form if the consumer 
affirmatively consents after receiving a notice that contains certain 
information specified in the statute, and if certain other conditions 
are met.
    The E-Sign Act, including the special consumer notice provisions, 
became effective October 1, 2000, and did not require implementing 
regulations. Thus, financial institutions are currently permitted to 
provide in electronic form any disclosures that are required to be 
provided or made available to the consumer in writing under Regulations 
B, E, M, Z, and DD if the consumer affirmatively consents to receipt of 
electronic disclosures in the manner required by section 101(c) of the 
E-Sign Act.

The Interim Final Rules

    On March 30, 2001, the Board published for comment interim final 
rules to establish uniform standards for the electronic delivery of 
disclosures required under Regulation DD (66 FR 17795). Similar interim 
final rules for Regulations B, E, M, and Z were published on March 30, 
2001 (66 FR 17322 (M)) and April 4, 2001 (66 FR 17779 (B), 66 FR 17786 
(E), and 66 FR 17329 (Z)). The interim final rules incorporated most of 
the provisions that were part of the 1999 proposals.
    Each of the interim final rules incorporated, but did not 
interpret, the requirements of the E-Sign Act. Depository institutions, 
creditors, and other persons, as applicable, generally were required to 
obtain consumers' affirmative consent to provide disclosures 
electronically, consistent with the requirements of the E-Sign Act.
    The 2001 interim final rule for Regulation DD established uniform 
requirements for the timing and delivery of electronic disclosures. 
Under the interim rule, disclosures could be sent to an e-mail address 
designated by the consumer, or could be made available at another 
location, such as an Internet Web site. If the disclosures were not 
sent by e-mail, institutions would have to provide a notice to 
consumers alerting them to the availability of the disclosures. 
Disclosures posted on a Web site would have to be available for at 
least 90 days to allow consumers adequate time to access and retain the 
information. Institutions also would be required to make a good faith 
attempt to redeliver electronic disclosures that were returned 
undelivered, using the address information available in their files. 
Similar provisions were included in the interim final rules adopted 
under Regulations B, E, M, and Z.
    Commenters on the interim final rules identified significant 
operational and information security concerns with respect to the 
requirement to send the disclosure or an alert notice to an e-mail 
address designated by the consumer. For example, commenters stated that 
some consumers do not have e-mail addresses or may not want personal 
financial information sent to them by e-mail. Commenters also noted 
that e-mail is not a secure medium for delivering confidential 
information and that consumers' e-mail addresses frequently change. The 
commenters also opposed the requirement for redelivery in the event a 
disclosure was returned undelivered. In addition, many commenters 
asserted that making the disclosures available for at least 90 days, as 
required by the interim final rule, would increase costs and would not 
be necessary for consumer protection.
    In August 2001, in response to comments received, the Board lifted 
the previously established October 1, 2001 mandatory compliance date 
for all of the interim final rules. (66 FR 41439, August 8, 2001.) 
Thus, institutions are not required to comply with the interim final 
rules. Since that time, the Board has not taken further action with 
respect to the interim final rules on electronic disclosures in order 
to allow electronic commerce, including electronic disclosure 
practices, to continue to develop without regulatory intervention and 
to allow the Board to gather further information about such practices.

II. The Proposed Rules

    The Board is proposing to amend Regulation DD and the official 
staff commentary by (1) withdrawing portions of the 2001 interim final 
rule on electronic disclosures that restate or cross-reference 
provisions of the E-Sign Act and accordingly are unnecessary; (2) 
withdrawing other portions of the interim final rule that the Board now 
believes may impose undue burdens on electronic banking and commerce 
and may be unnecessary for consumer protection; and (3) retaining the 
substance of certain provisions of the interim final rule that provide 
regulatory relief or guidance regarding electronic disclosures. 
(Similar amendments are also being proposed by the Board, in today's 
issue of the Federal Register, under Regulations B, E, M, and Z.)
    Because compliance with the 2001 interim final rules is not 
mandatory, removing most portions of the interim rules from the Code of 
Federal Regulations, while finalizing other provisions, would reduce 
confusion about the status of the electronic disclosure provisions and 
simplify the regulation. The Board is proposing to adopt certain 
provisions that are identical or similar to provisions in the 2001 
interim final rules in order to enhance the ability of consumers to 
shop for deposit account products online, minimize the information-
gathering burdens on consumers, and provide guidance or eliminate a 
substantial burden on the use of electronic disclosures, as discussed 
further below.
    Since 2001, industry and consumers have gained considerable 
experience with electronic disclosures. During that period, the Board 
has received no indication that consumers have been harmed by the fact 
that compliance with the interim final rules is not mandatory. The 
Board also has reconsidered certain aspects of the interim final rules, 
such as sending disclosures by e-mail, in light of concerns about data 
security, identity theft, and ``phishing'' (i.e., prompting consumers 
to reveal confidential personal or financial information through 
fraudulent e-mail requests that appear to originate from a financial 
institution, government agency, or other trusted entity) that have 
become more pronounced since 2001. Finally, the Board is proposing to 
eliminate certain aspects of the 2001

[[Page 21157]]

interim final rule, such as provisions regarding the availability and 
retention of electronic disclosures, as unnecessary in light of current 
industry practices.
    The 2001 interim final rule allowed depository institutions to 
provide certain disclosures to consumers electronically without regard 
to the consumer consent or other provisions of the E-Sign Act. These 
included disclosures in connection with advertisements and disclosures 
about deposit accounts that are provided upon request. The Board 
reasoned that these disclosures, which would be available to the 
general public while shopping for deposit products, did not ``relate to 
a transaction,'' which is a prerequisite for triggering the E-Sign 
consumer consent provisions, and thus were not subject to those 
provisions. Some commenters on the interim final rules did not agree 
with the Board's rationale. Upon further consideration, the Board does 
not believe it is necessary to determine whether or not these 
disclosures are related to a transaction. This proposal does not make 
such determinations.
    Instead, pursuant to the Board's authority under section 269 of 
TISA, as well as under section 104(d) of the E-Sign Act,\1\ the Board 
is proposing to specify the circumstances under which certain 
disclosures may be provided to a consumer in electronic form, rather 
than in writing as generally required by Regulation DD, without 
obtaining the consumer's consent under section 101(c) of the E-Sign 
Act. The proposed rule would also clarify, as discussed in detail 
below, that certain disclosures must be provided to the consumer in 
electronic form on or with an advertisement that is accessed by the 
consumer in electronic form.
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    \1\ Section 269 of TISA provides that regulations prescribed by 
the Board under TISA ``may provide for such adjustments and 
exceptions * * * as, in the judgment of the Board, are necessary or 
proper to carry out the purposes of [TISA], * * * or to facilitate 
compliance with the requirements of [TISA].'' Section 104(d) of the 
E-Sign Act authorizes federal agencies to adopt exemptions for 
specified categories of disclosures from the E-Sign notice and 
consent requirements, ``if such exemption is necessary to eliminate 
a substantial burden on electronic commerce and will not increase 
the material risk of harm to consumers.'' For the reasons stated in 
this Federal Register notice, the Board believes that these criteria 
are met in the case of the advertising disclosures and the 
disclosures provided to a consumer upon request. In addition, the 
Board believes TISA section 269 authorizes the Board to permit 
institutions to provide disclosures electronically, rather than in 
paper form, independent of the E-Sign Act.
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    The Board continues to believe that depository institutions should 
not be required to obtain the consumer's consent in order to provide 
advertising disclosures to the consumer in electronic form if the 
consumer accesses the advertisement containing those disclosures in 
electronic form, such as at an Internet Web site. Similarly, the Board 
continues to believe that institutions should not be required to follow 
the E-Sign consent requirements in order to provide account disclosures 
upon request to consumers electronically (although under the proposal, 
the institution could provide the disclosures in electronic form only 
if the consumer agrees).
    The Board believes that consumers would not be harmed, and in fact 
would benefit, by having timely access to disclosures in electronic 
form when they are shopping for deposit account products online or 
viewing online deposit account advertising. The Board also believes 
that consumers' ability to shop for deposit accounts online and compare 
the terms of various offers could be substantially diminished if 
consumers had to consent in accordance with the E-Sign Act in order to 
access advertisements or obtain account disclosures. Applying the 
consumer consent provisions of the E-Sign Act to these disclosures 
could impose substantial burdens on electronic commerce and make it 
more difficult for consumers to gather information and shop for deposit 
accounts.
    At the same time, the Board recognizes that consumers who shop or 
apply for deposit accounts online may not want to receive other 
disclosures electronically. Therefore, with respect to, for example, 
account-opening disclosures, periodic statements, and change-in-terms 
notices, depository institutions would be required to provide written 
disclosures or obtain the consumer's consent in accordance with the E-
Sign Act to provide such disclosures in electronic form.
    Finally, the Board is proposing to delete, as unnecessary, certain 
provisions that restate or cross-reference the E-Sign Act's general 
rules regarding electronic disclosures (including the consumer consent 
provisions) and electronic signatures because the E-Sign Act is a self-
effectuating statute. The proposed revisions to Regulation DD and the 
official staff commentary are described more fully below in the 
Section-by-Section Analysis.
    The Board solicits comment on all aspects of this proposal. 
Specifically, the Board seeks comment on the appropriateness of 
eliminating certain provisions and retaining other provisions contained 
in the 2001 interim final rule.

III. Section-by-Section Analysis

12 CFR Part 230 (Regulation DD)

Section 230.3 General Disclosure Requirements

    Section 230.3(a) prescribes the form of disclosures required for 
deposit accounts, and generally requires depository institutions to 
provide the disclosures in writing and in a form that the consumer may 
keep. The Board proposes to revise Sec.  230.3(a) to clarify that 
institutions may provide disclosures to consumers in electronic form, 
subject to compliance with the consumer consent and other applicable 
provisions of the E-Sign Act. Some institutions may provide disclosures 
to consumers both in paper and electronic form and rely on the paper 
form of the disclosures to satisfy their compliance obligations. For 
those institutions, the duplicate electronic form of the disclosures 
may be provided to consumers without regard to the consumer consent or 
other provisions of the E-Sign Act because the electronic form of the 
disclosure is not used to satisfy the regulation's disclosure 
requirements.
    Section 230.3(a) would also be revised to provide that the 
disclosures required by Sec. Sec.  230.4(a)(2) (disclosures provided 
upon request) and 230.8 (advertising) may be provided to the consumer 
in electronic form, under the circumstances set forth in those 
sections, without regard to the consumer consent or other provisions of 
the E-Sign Act.
    Section 230.8 requires that if certain information is stated in a 
deposit account advertisement, or if an advertisement promotes the 
payment of overdrafts, the advertisement must also include specified 
disclosures. The Board believes that, for a deposit account 
advertisement accessed by the consumer in electronic form, permitting 
institutions to provide the required disclosures in electronic form 
without regard to the consumer consent and other provisions of the E-
Sign Act will eliminate a potential significant burden on electronic 
commerce without increasing the risk of harm to consumers. This 
approach will facilitate shopping for deposit products by enabling 
consumers to receive important disclosures at the same time they access 
an advertisement without first having to provide consent in accordance 
with the requirements of the E-Sign Act. Requiring consumers to follow 
the consent procedures set forth in the E-Sign Act in order to access 
an online advertisement is potentially burdensome and could discourage

[[Page 21158]]

consumers from shopping for deposit products online. Moreover, because 
these consumers are viewing the advertisement online, there appears to 
be little, if any, risk that the consumer will be unable to view the 
disclosures online as well.
    Similarly, Sec.  230.4(a)(2) requires that depository institutions 
provide account disclosures, containing account terms, to consumers 
upon request. If a consumer is not present at the depository 
institution and requests the account disclosures, it would appear 
unnecessary and burdensome to require the consumer to go through the E-
Sign consent procedures before the request could be satisfied, as long 
as the consumer requests that the disclosures be provided 
electronically. Applying the E-Sign consent procedures in this context 
could discourage consumers from requesting account disclosures.
    Section 230.3(g) in the 2001 interim final rule refers to Sec.  
230.10, the section of the interim final rule setting forth general 
rules for electronic disclosures. Because the Board is proposing to 
delete Sec.  230.10, as discussed further below, the Board also 
proposes to delete Sec.  230.3(g).

Section 230.4 Account Disclosures

    Depository institutions generally must provide account-opening 
disclosures to consumers before an account is opened or a service is 
provided. Depository institutions may delay delivering the disclosures 
if the consumer is not present at the institution when the account is 
opened (or service is provided). Section 230.4(a)(1) provides that in 
such cases, account-opening disclosures must be mailed or delivered 
within ten business days. The rationale underlying the ten-day delay is 
that the institution cannot provide written disclosures when, for 
example, an account is opened by telephone. The 2001 interim final rule 
provided that depository institutions opening accounts by electronic 
communication (for example, on the Internet) may not delay providing 
disclosures under Sec.  230.4(a)(1). The difficulties in providing 
disclosures for accounts opened by mail or telephone are not present 
for requests to open accounts received by electronic communication 
using visual text. Thus, specific disclosures must be provided before 
accounts are opened using electronic communication. The interim final 
rule added new paragraph (ii) to Sec.  230.4(a)(1) to effectuate this 
requirement. The Board continues to believe that the rationale 
underlying Sec.  230.4(a)(1)(ii) is valid; accordingly, the Board 
proposes to retain the provision as added by the interim final rule, 
with minor wording changes.
    Depository institutions must also provide account disclosures to a 
consumer upon request. Section 230.4(a)(2)(i) provides that if a 
consumer is not present at the institution when a request for account 
disclosures is made, the institution must mail or deliver the 
disclosures within a reasonable time after the institution receives the 
request; ten days is deemed to be a reasonable time. The 2001 interim 
final rule extended these provisions to requests for disclosures made 
by electronic communication. Specifically, the interim final rule 
revised Sec.  230.4(a)(2)(i) to allow institutions to mail or deliver 
disclosures in either paper form or electronically to consumers who are 
not present at the institution when they make their request. Under the 
interim final rule, to provide the requested disclosures 
electronically, the institution must send the disclosures to the 
consumer's e-mail address, or send a notice alerting the consumer to 
the location of the disclosures, such as on the institution's Internet 
web site. Comment 4(a)(2)(i)-3 was revised and comment 4(a)(2)(i)-4 was 
added to provide guidance.
    The Board continues to believe that it is appropriate to allow 
institutions to respond by paper mail, or by electronic means provided 
the consumer agrees, if the consumer is not present at the institution 
when the request is made, without following the E-Sign consent 
provisions. Accordingly, the Board proposes to retain the changes made 
to Sec.  230.4(a)(2)(i) and the accompanying commentary by the interim 
final rule, with some revisions for clarification and to provide 
greater flexibility for both institutions and consumers.

Section 230.8 Advertising

    Section 230.8 contains requirements for advertisements for deposit 
accounts, including the requirement that if an advertisement includes 
certain ``trigger terms'' (such as a bonus or the annual percentage 
yield), the advertisement must also include certain disclosures. The 
Board proposes to add new comment 8(a)-11, to clarify that if a 
consumer accesses an advertisement for deposit accounts in electronic 
form, the disclosures required on or with the advertisement must be 
provided to the consumer in electronic form on or with the 
advertisement. A consumer accesses an advertisement in electronic form 
when, for example, the consumer views the advertisement on his or her 
home computer. On the other hand, if a consumer receives a written 
advertisement in the mail, the institution would not satisfy its 
obligation to provide Sec.  230.8 disclosures at that time by including 
a reference in the advertisement to the Web site where the disclosures 
are located.
    Comment 8(a)-9, as added by the interim final rule, provides that 
in an electronic advertisement, the required disclosures need not be 
shown on each page where a ``trigger term'' appears, as long as each 
such page includes a cross-reference to the page where the required 
disclosures appear. For example, if a ``trigger term'' appears on a 
particular web page, the additional disclosures may appear in a table 
or schedule on another web page if there is a clear reference to the 
page or location where the table or schedule begins (which may be 
accomplished, for example, by including a link). The Board proposes to 
retain comment 8(a)-9, allowing the use of links or other cross-
references in electronic deposit account advertisements, with minor 
wording changes.
    The Board proposes to add new comment 8(a)-12 to clarify that the 
rules regarding advertising disclosures provided in electronic form 
also apply to the disclosures described in Sec.  230.11(b), which are 
incorporated by reference in Sec.  230.8(f).
    Section 230.8(b) permits institutions to state an interest rate in 
addition to the APY, as long as the rate is stated in conjunction with, 
but not more conspicuously than, the APY. In the 2001 interim final 
rule, comment 8(b)-4 was added to state that in an advertisement using 
electronic communication, the consumer must be able to view both rates 
simultaneously, and that this requirement is not satisfied if the 
consumer can view the APY only by use of a link that takes the consumer 
to another web location. The Board proposes to delete comment 8(b)-4 as 
unnecessary. The requirement to state the simple annual rate or 
periodic rate in conjunction with, and not more conspicuously than, the 
APY, continues to apply to electronic advertisements no less than to 
advertisements in other media. Requiring the consumer to scroll to 
another part of the page, or access a link, in order to view the APY 
would likely not satisfy this requirement.
    Section 230.8(e) exempts from some disclosure requirements 
advertisements made through broadcast or electronic media, such as 
television and radio or outdoor billboards. The interim final rule 
added comment 8(e)(1)(i)-1 to provide that this exemption would not 
apply to advertisements using electronic communication, such as 
Internet advertisements, which do not have the

[[Page 21159]]

same time and space constraints as radio or television advertisements. 
The Board continues to believe that space constraints for 
advertisements on Internet web sites are not significantly different 
than those for a print advertisement (a newspaper, for example). Thus, 
requiring advertisements provided by electronic means to comply with 
the regulation's advertising requirements is not overly burdensome. 
Accordingly, the Board proposes to retain comment 8(e)(1)(i)-1 with 
minor wording changes.

Section 230.10 Electronic Communication

    Section 230.10 was added by the 2001 interim final rule to address 
the general requirements for electronic communications. The Board 
proposes to delete Sec.  230.10 from Regulation DD and the accompanying 
sections of the staff commentary.
    In the interim rule, Sec.  230.10(a) defines the term ``electronic 
communication'' to mean a message transmitted electronically that can 
be displayed on equipment as visual text, such as a message displayed 
on a personal computer monitor screen. The deletion of Sec.  230.10(a) 
would not change applicable legal requirements under the E-Sign Act.
    Sections 230.10(b) and (c) incorporate by reference provisions of 
the E-Sign Act, such as the provision allowing disclosures to be 
provided in electronic form and the requirement to obtain the 
consumer's affirmative consent before providing disclosures in 
electronic form. The deletion of these provisions will have no impact 
on the general applicability of the E-Sign Act to Regulation DD 
disclosures. Section 230.10(f) was added in the interim final rule to 
clarify that persons, other than depository institutions, that are 
required to comply with Regulation DD may use electronic disclosures. 
This provision is unnecessary because the E-Sign Act is a self-
effectuating statute and permits any person to use electronic records 
subject to the conditions set forth in the Act.
    Sections 230.10(d) and (e) address specific timing and delivery 
requirements for electronic disclosures under Regulation DD, such as 
the requirement to send disclosures to a consumer's e-mail address (or 
post the disclosures on a Web site and send a notice alerting the 
consumer to the disclosures), and to make a good faith attempt to 
redeliver an e-mailed disclosure or notice returned undelivered. The 
Board no longer believes that these additional provisions are necessary 
or appropriate. Electronic disclosures have evolved since 2001, as 
industry and consumers have gained experience with them. Although many 
institutions offer e-mail alert notices to consumers in connection with 
online services, some consumers may choose not to receive notifications 
by e-mail and the Board sees no reason to require e-mail alert notices 
in all cases. In addition, the Board has reconsidered certain aspects 
of the interim final rules, such as sending disclosures by e-mail, in 
light of concerns about data security, identity theft, and phishing 
that have become more pronounced since 2001.
    With regard to the requirement to attempt to redeliver returned 
electronic disclosures, as the commenters noted, institutions would be 
required to search their files for an additional e-mail address to use, 
and might be required to use a postal mail address for redelivery if no 
additional e-mail address was available. The Board believes that both 
requirements would likely be unduly burdensome. In addition, the 
concerns that have been raised about the requirement to use e-mail for 
the initial delivery of a disclosure or notice apply equally to the use 
of e-mail for an attempted redelivery.
    Under the proposed rule, the Board would not require depository 
institutions to maintain disclosures posted on a Web site for at least 
90 days as provided in the 2001 interim final rule for several reasons. 
First, based on a review of industry practices, it appears that many 
institutions maintain disclosures posted on an Internet Web site for 
several months, and, in a number of cases, for more than a year. For 
example, it appears that institutions that offer online periodic 
statements to consumers typically make those statements available 
without charge for six months or longer in electronic form. This 
practice has developed even though Regulation DD does not currently 
require institutions to maintain disclosures for any specific period of 
time. Second, the Board believes that an appropriate time period 
consumers may want electronic disclosures to be available may vary 
depending upon the type of disclosure, and is reluctant to establish 
specific time periods depending on the disclosures. Nevertheless, while 
the Board is not proposing to require disclosures to be maintained on 
an Internet Web site for any specific time period, the general 
requirements of Regulation DD continue to apply to electronic 
disclosures, such as the requirement to provide disclosures to 
consumers at certain specified times and in a form that the consumer 
may keep. Although these general requirements apply to electronic 
disclosures, the Board does not believe that the 90-day time period set 
out in Sec.  230.10(d) of the 2001 interim final rule is needed to 
ensure that institutions satisfy these requirements when they provide 
electronic disclosures. The Board, however, will monitor institutions' 
electronic disclosure practices with regard to the ability of consumer 
to retain Regulation DD disclosures and will consider further 
regulatory action if it appears necessary.
    The official staff commentary to Sec.  230.10 of the interim final 
rule provides guidance on the provisions set forth in Sec.  230.10 such 
as delivery of disclosures or alert notices by e-mail, redelivery if 
disclosures or a notice is returned undelivered, and retention of 
disclosures on a web site for 90 days. As noted above, because the 
Board is proposing to delete Sec.  230.10 of the regulation, the Board 
also proposes to delete the accompanying provisions of the official 
staff commentary.

IV. Solicitation of Comments Regarding the Use of ``Plain Language''

    Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the 
Board to use ``plain language'' in all proposed and final rules 
published after January 1, 2000. The Board invites comments on whether 
the proposed rules are clearly stated and effectively organized, and 
how the Board might make the proposed text easier to understand.

V. Initial Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
generally requires an agency to perform an assessment of the impact a 
rule is expected to have on small entities.
    However, under section 605(b) of the RFA, 5 U.S.C. 605(b), the 
regulatory flexibility analysis otherwise required under section 604 of 
the RFA is not required if an agency certifies, along with a statement 
providing the factual basis for such certification, that the rule will 
not have a significant economic impact on a substantial number of small 
entities. Based on its analysis and for the reasons stated below, the 
Board believes that this proposed rule will not have a significant 
economic impact on a substantial number of small entities. A final 
regulatory flexibility analysis will be conducted after consideration 
of comments received during the public comment period.
    1. Statement of the objectives of the proposal. The Board is 
proposing revisions to Regulation DD to withdraw the 2001 interim final 
rule on electronic communication and to allow depository institutions 
to provide certain

[[Page 21160]]

disclosures to consumers in electronic form on or with an advertisement 
that is accessed by the consumer in electronic form, or if the consumer 
requests the disclosure, without regard to the consumer consent and 
other provisions of the E-Sign Act. The Board is also proposing to 
clarify that other Regulation DD disclosures may be provided to 
consumers in electronic form in accordance with the consumer consent 
and other applicable provisions of the E-Sign Act.
    TISA was enacted to enhance economic stabilization, improve 
competition between depository institutions, and strengthen the ability 
of consumers to make informed decisions regarding deposit accounts. 12 
U.S.C. 4301. It is the purpose of TISA to require the clear and uniform 
disclosure of rates of interest payable on deposit accounts and the 
fees that are assessable against deposit accounts, so that consumers 
can make a meaningful comparison between the competing claims of 
institutions. TISA authorizes the Board to prescribe regulations to 
carry out the purposes of the statute. 12 U.S.C. 4308. The Act 
expressly states that the Board's regulations may contain ``such 
classifications, differentiations, or other provisions, * * *, as in 
the judgment of the Board, are necessary or proper to carry out the 
purposes of [the Act], to prevent circumvention or evasion of [the 
Act], or to facilitate compliance with [the Act].'' 12 U.S.C. 4308(a). 
The Board believes that the revisions to Regulation DD discussed above 
are within Congress's broad grant of authority to the Board to adopt 
provisions that carry out the purposes of the statute. These revisions 
facilitate informed decisions about deposit accounts by consumers in 
circumstances where a consumer accesses a deposit account 
advertisement, or requests deposit account disclosures, in electronic 
form.
    2. Small entities affected by the proposal. The ability to provide 
advertising disclosures in electronic form on or with an advertisement 
that is accessed by the consumer in electronic form, or to provide 
disclosures in electronic form if requested to do so by the consumer, 
applies to all depository institutions, regardless of their size. 
Accordingly, the proposed revisions would reduce burden and compliance 
costs for small entities by providing relief, to the extent the E-Sign 
Act applies in these circumstances. The number of small entities 
affected by this proposal is unknown.
    3. Other Federal rules. The Board believes no federal rules 
duplicate, overlap, or conflict with the proposed revisions to 
Regulation DD.
    4. Significant alternatives to the proposed revisions. The Board 
solicits comment on any significant alternatives that may provide 
additional ways to reduce regulatory burden associated with this 
proposed rule.

VI. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (PRA) (44 
U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the rule 
under the authority delegated to the Board by the Office of Management 
and Budget (OMB). The collection of information that is required by 
this proposed rule is found in 12 CFR part 230. The Federal Reserve may 
not conduct or sponsor, and an organization is not required to respond 
to, this information collection unless it displays a currently valid 
OMB control number. The OMB control number is 7100-0271.
    Section 269 of the Truth in Savings Act (TISA)(12 U.S.C. 4308) 
authorizes the Board to issue regulations to carry out the provisions 
of TISA. TISA and Regulation DD require depository institutions to 
disclose yields, fees, and other terms concerning deposit accounts to 
consumers at account opening, upon request, and when changes in terms 
occur. Depository institutions that provide periodic statements are 
required to include information about fees imposed, interest earned, 
and the annual percentage yield earned during those statement periods. 
The act and regulation mandate the methods by which institutions 
determine the account balance on which interest is calculated. They 
also contain rules about advertising deposit accounts. To ease the 
compliance cost (particularly for small entities), model clauses and 
sample forms are appended to the regulation. Depository institutions 
are required to retain evidence of compliance for twenty-four months, 
but the regulation does not specify types of records that must be 
retained. This information collection is mandatory. Since the Federal 
Reserve does not collect any information, no issue of confidentiality 
arises.
    Regulation DD applies to all depository institutions except credit 
unions. Credit unions are covered by a substantially similar rule 
issued by the National Credit Union Administration. The Federal Reserve 
accounts for the paperwork burden associated with Regulation DD only 
for Federal Reserve-regulated institutions. Federal Reserve-regulated 
institutions are defined by Regulation DD as: State member banks, 
branches and agencies of foreign banks (other than Federal branches, 
Federal agencies, and insured state branches of foreign banks), 
commercial lending companies owned or controlled by foreign banks, and 
organizations operating under section 25 or 25A of the Federal Reserve 
Act. Other Federal agencies account for the paperwork burden imposed on 
the depository institutions for which they have administrative 
enforcement authority. The annual burden is estimated to be 232,443 
hours for 1,172 Federal Reserve-regulated institutions that are deemed 
respondents for purposes of the PRA.
    As mentioned in the Preamble, Sec. Sec.  230.4 and 230.8 would be 
revised to clarify the disclosure requirements. The Federal Reserve 
estimates that 1,172 respondents would take approximately 1.5 minutes 
per transaction to comply with the existing disclosure requirements in 
Sec.  230.4 and estimates the annual burden to be 14,650 hours. The 
Federal Reserve estimates that 1,172 respondents would take 
approximately 30 minutes per month to comply with the existing 
disclosure requirements in Sec.  230.8 and estimates the annual burden 
to be 7,032 hours. The Federal Reserve requests specific comment on 
whether the revisions in this proposed rule would change the burden on 
respondents.
    Comments are invited on: a. Whether the collection of information 
is necessary for the proper performance of the Federal Reserve's 
functions; including whether the information has practical utility; b. 
the accuracy of the Federal Reserve's estimate of the burden of the 
information collection, including the cost of compliance; c. ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and d. ways to minimize the burden of information collection 
on respondents, including through the use of automated collection 
techniques or other forms of information technology. Comments on the 
collections of information should be sent to Secretary, Board of 
Governors of the Federal Reserve System, Washington, DC 20551, with 
copies of such comments to be sent to the Office of Management and 
Budget, Paperwork Reduction Project (7100-0271), Washington, DC 20503.

List of Subjects in 12 CFR Part 230

    Advertising, Banks, banking, Consumer protection, Federal Reserve 
System, Reporting and recordkeeping requirements, Truth in Savings.

Text of Proposed Revisions

    Certain conventions have been used to highlight the proposed 
changes to

[[Page 21161]]

Regulation DD. New language is shown inside bold-faced arrows, while 
language that would be removed is set off with bold-faced brackets.
    For the reasons set forth in the preamble, the Board proposes to 
amend Regulation DD, 12 CFR part 230, as set forth below:

PART 230--TRUTH IN SAVINGS (REGULATION DD)

    1. The authority citation for part 230 continues to read as 
follows:

    Authority: 12 U.S.C. 4301 et seq.

    2. Section 230.3 would be amended by revising paragraph (a) and 
removing paragraph (g), to read as follows:


Sec.  230.3  General disclosure requirements.

    (a) Form. Depository institutions shall make the disclosures 
required by Sec. Sec.  230.4 through 230.6 and Sec.  230.10 of this 
part, as applicable, clearly and conspicuously, in writing, and in a 
form the consumer may keep. [rtrif]The disclosures required by this 
part may be provided to the consumer in electronic form, subject to 
compliance with the consumer consent and other applicable provisions of 
the Electronic Signatures in Global and National Commerce Act (E-Sign 
Act) (15 U.S.C. 7001 et seq.). The disclosures required by Sec. Sec.  
230.4(a)(2) and 230.8 may be provided to the consumer in electronic 
form without regard to the consumer consent or other provisions of the 
E-Sign Act in the circumstances set forth in those sections.[ltrif] 
Disclosures for each account offered by an institution may be presented 
separately or combined with disclosures for the institution's other 
accounts, as long as it is clear which disclosures are applicable to 
the consumer's account.
* * * * *
    [(g) Electronic communication. For rules governing the electronic 
delivery of disclosures, including the definition of electronic 
communication, see Sec.  230.10.]
    3. Section 230.4 would be amended by revising paragraphs (a)(1)(ii) 
and (a)(2)(i), to read as follows:


Sec.  230.4  Account disclosures.

    (a) * * *
    (1) * * *
    (ii) [rtrif]Timing of disclosures where electronic means are 
used[ltrif][Electronic communication]. If a consumer who is not present 
at the institution uses [rtrif]electronic means (for example, an 
Internet Web site)[ltrif][electronic communication (as defined in Sec.  
230.10)] to open an account or request a service, the disclosures 
required under paragraph (a)(1) of this section must be provided before 
[rtrif]the[ltrif] [an] account is opened or [rtrif]the[ltrif] [a] 
service is provided.
    (2) Requests. (i) A depository institution shall provide account 
disclosures to a consumer upon request. If a consumer who is not 
present at the institution makes a request, the institution shall mail 
or deliver the disclosures within a reasonable time after it receives 
the request and may provide the disclosures in paper form, or 
electronically if the consumer [rtrif]agrees[ltrif] [provides an 
electronic mail address].
* * * * *


Sec.  230.10  [Removed and Reserved]

    4. Section 230.10 would be removed and reserved.
    5. In Supplement I to Part 230, the following amendments would be 
made:
    a. In Section 230.4--Account disclosures, under (a)(2)(i), 
paragraphs 3. and 4. would be revised.
    b. In Section 230.8--Advertising, under (a) Misleading or 
inaccurate advertisements, paragraph 9. would be revised and new 
paragraphs 11. and 12. would be added.
    c. In Section 230.8--Advertising, under (b) Permissible rates, 
paragraph 4. would be removed.
    d. In Section 230.8--Advertising, under (e)(1)(i), paragraph 1. 
would be revised.
    e. Section 230.10 would be removed and reserved.
    The amendments read as follows:

Supplement I to Part 230--Official Staff Interpretations

* * * * *

Section 230.4--Account Disclosures

(a) Delivery of Account Disclosures

* * * * *

(a)(2) Requests

(a)(2)(i)

* * * * *
    3. Timing for response. Ten business days is a reasonable time 
for responding to requests for account information that consumers do 
not make in person, including requests made by electronic 
[communication][rtrif]means (such as by electronic mail)[ltrif].
    4. [Requests by electronic communication] [rtrif]Use of 
electronic means[ltrif].
    [Posting disclosures on a depository institution's Web site 
generally does not relieve the institution's duty to provide 
disclosures upon request. If the consumer provides an e-mail 
address, the institution may provide the disclosures electronically, 
but the institution must either send the disclosures by e-mail or 
send a notice to the consumer's e-mail address pursuant to Sec.  
230.10(d)(2)(i) to inform the consumer where the disclosures are 
posted.]
    [rtrif]If a consumer who is not present at the institution makes 
a request for account disclosures, including a request made by 
telephone, e-mail, or via the institution's web site, the 
institution may send the disclosures in paper form or, if the 
consumer agrees, may provide the disclosures electronically, such as 
to an e-mail address that the consumer provides for that purpose, or 
on the institution's Web site, without regard to the consumer 
consent or other provisions of the E-Sign Act. The regulation does 
not require an institution to provide, nor a consumer to agree to 
receive, disclosures in electronic form.[ltrif]
* * * * *

Section 230.8--Advertising

(a) Misleading or Inaccurate Advertisements

* * * * *
    9. Electronic advertising. If an [rtrif]electronic advertisement 
(such as an advertisement appearing on an Internet Web site)[ltrif] 
[advertisement using electronic communication] displays a triggering 
term (such as a bonus or annual percentage yield) the advertisement 
must clearly refer the consumer to the location where the additional 
required information begins. For example, an advertisement that 
includes a bonus or annual percentage yield may be accompanied by a 
link that directly takes the consumer to the additional information.
* * * * *
    [rtrif]11. Electronic form of disclosures. For an advertisement 
that is accessed by the consumer in electronic form, the disclosures 
required under this section must be provided to the consumer in 
electronic form on or with the advertisement. Providing the 
disclosures at a different time or place, or in paper form, would 
not comply. Conversely, if a consumer views a paper advertisement, 
the required disclosures must be provided in paper form on or with 
the advertisement. For example, if a consumer receives an 
advertisement in the mail, the creditor would not satisfy its 
obligation to provide the disclosures at that time by including a 
reference in the advertisement to the web site where the disclosures 
are located.
    12. Additional disclosures in connection with the payment of 
overdrafts. The rule in Sec.  230.3(a), providing that disclosures 
required by Sec.  230.8 may be provided to the consumer in 
electronic form without regard to E-Sign Act requirements, applies 
to the disclosures described in Sec.  230.11(b), which are 
incorporated by reference in Sec.  230.8(f).[ltrif]

(b) Permissible rates

* * * * *
    [4. Electronic communication. An interest rate may be stated 
only if it is provided in conjunction with, but not more 
conspicuously than, the annual percentage yield to which it relates. 
In an advertisement using electronic communication, the consumer 
must be able to view both rates simultaneously. This requirement is 
not satisfied if the consumer can view the annual percentage yield 
only by use of a link that connects the consumer to information 
appearing at another location.]
* * * * *

[[Page 21162]]

(e)(1) Certain Media

(e)(1)(i)

    1. Internet advertisements. The exemption for advertisements 
made through broadcast or electronic media does not extend to 
[advertisements made by electronic communication, such as] 
advertisements posted on the Internet or sent by e-mail.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, April 20, 2007.
Jennifer J. Johnson,
Secretary of the Board.
 [FR Doc. E7-7873 Filed 4-27-07; 8:45 am]
BILLING CODE 6210-01-P