Truth in Savings, 47173-47176 [2010-19090]
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Federal Register / Vol. 75, No. 150 / Thursday, August 5, 2010 / Rules and Regulations
individual member income may only be
compared to total median earnings for
individuals for the metropolitan area
where they live or national metropolitan
area, whichever is greater.
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[FR Doc. 2010–19099 Filed 8–4–10; 8:45 am]
BILLING CODE 7535–01–P
NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Part 707
RIN 3133–AD72
Truth in Savings
National Credit Union
Administration (NCUA).
ACTION: Interim final rule with request
for comments.
AGENCY:
On July 22, 2009, NCUA
published a final rule amending part
707, which implements the Truth in
Savings Act, and the official staff
interpretations to the regulation. The
final rule addressed credit unions’
disclosure practices related to overdraft
services, including balances disclosed to
members through automated systems.
This interim final rule amends part 707
and official staff interpretations to
address the application of the July 2009
final rule to retail sweep programs and
the terminology for overdraft fee
disclosures and to make amendments
that conform to the Federal Reserve
Board’s (Federal Reserve) final
Regulation E amendments addressing
overdraft services, adopted in November
2009. This rule also includes a minor
technical correction to sample form
B–12 for formatting purposes.
DATES: This rule is effective September
7, 2010, except for the amendment to
§ 707.11(a)(1(i), which is effective
October 1, 2010. Comments must be
received by October 4, 2010.
ADDRESSES: You may submit comments
by any of the following methods (Please
send comments by one method only):
• NCUA Web Site: https://
www.ncua.gov/news/proposed_regs/
proposed_regs.html. Follow the
instructions for submitting comments.
• E-mail: Address to
regcomments@ncua.gov. Include ‘‘[Your
name] Comments on Interim Final Rule
(Truth in Savings)’’ in the e-mail subject
line.
• Fax: (703) 518–6319. Use the
subject line described above for e-mail.
• Mail: Address to Mary Rupp,
Secretary of the Board, National Credit
Union Administration, 1775 Duke
Street, Alexandria, Virginia 22314–
3428.
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SUMMARY:
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• Hand Delivery/Courier: Same as
mail address.
Public inspection: All public
comments are available on the agency’s
website at https://www.ncua.gov/
RegulationsOpinionsLaws/comments as
submitted, except as may not be
possible for technical reasons. Public
comments will not be edited to remove
any identifying or contact information.
Paper copies of comments may be
inspected in NCUA’s law library, at
1775 Duke Street, Alexandria, Virginia
22314, by appointment weekdays
between 9 a.m. and 3 p.m. To make an
appointment, call (703) 518–6546 or
send an e-mail to OGCMail@ncua.gov.
FOR FURTHER INFORMATION CONTACT:
Justin M. Anderson, Staff Attorney,
Office of General Counsel, National
Credit Union Administration, 1775
Duke Street, Alexandria, Virginia
22314–3428, or telephone: (703) 518–
6540.
SUPPLEMENTARY INFORMATION:
I. Background
The Truth in Savings Act (TISA)
requires NCUA to promulgate
regulations substantially similar to those
promulgated by the Federal Reserve
within 90 days of the effective date of
the Federal Reserve’s rules. 12 U.S.C.
4311(b). In doing so, NCUA is to take
into account the unique nature of credit
unions and the limitations under which
they pay dividends on member
accounts. Id. In compliance with TISA,
NCUA is issuing this interim final rule
with request for comment that is
substantially similar to the Federal
Reserve’s June 2010 final rule. NCUA is
also making technical corrections to the
aggregate overdraft and returned item
fees sample form for formatting
purposes.
On January 29, 2009, the Federal
Reserve published a final rule amending
Regulation DD, its TISA rule, and the
official staff commentary to address
depository institutions’ disclosure
practices related to overdraft services,
including balances disclosed to
consumers through automated systems.
74 FR 5584 (January 29, 2009). NCUA
issued a similar final rule on July 22,
2009. 74 FR 36102 (July 22, 2009). Both
rules had an effective date of January 1,
2010.
In November 2009, the Federal
Reserve adopted a final rule amending
Regulation E, which implements the
Electronic Fund Transfer Act. This final
rule limits a financial institution’s
ability to assess fees for paying ATM
and one-time debit card transactions
pursuant to the institution’s
discretionary overdraft service without
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the consumer’s affirmative consent to
such payment.
Since publication of the Federal
Reserve’s January 2009 final rule,
institutions and others have requested
clarification of particular aspects of the
rule and further guidance regarding
compliance with the rule. In addition,
the Federal Reserve believed
conforming amendments to Regulation
DD were necessary in light of certain
provisions subsequently adopted in the
Regulation E final rule. Accordingly, in
March 2010, the Federal Reserve
proposed to amend Regulation DD and
the official staff commentary. 75 FR
9126 (March 1, 2010). Based on
comments it received, the Federal
Reserve issued a final rule on June 4,
2010. 75 FR 31673 (June 4, 2010).
II. Interim Final Rule
The NCUA Board (the Board) is
adopting interim final revisions to part
707 and the accompanying official staff
interpretations that are substantively
identical to the Federal Reserve’s June
2010 final rule. Like the Federal
Reserve’s approach, the effective date of
this rule will be 30 days from the date
of publication in the Federal Register,
but compliance with the changes to
§ 707.11(a)(1(i) will not be mandatory
until October 1, 2010. This will give
credit unions sufficient time to
implement the necessary system
changes to comply with this rule.
The Board is issuing this rule as an
interim final rule because there is a
strong public interest in having
consumer-oriented rules in places that
are consistent with those recently
promulgated by the Federal Reserve.
Additionally, as discussed above, NCUA
is statutorily required to issue rules
substantially similar to those of the
Federal Reserve within 90 days of the
effective date of the Federal Reserve’s
rules.
III. Section-by-Section Analysis
A. Section 707.6(b)—Periodic Statement
Disclosures; Statement Disclosures
Section 707.6(b) describes disclosures
regarding certain charges or fees
required when a credit union provides
a periodic statement to its members. The
Board is making an amendment to
§ 707.6(b) and the related official staff
interpretation. First, the Board is adding
new § 707.6(b)(5) to state explicitly that
the aggregate fee disclosures required by
§ 707.11(a)(1), discussed below, are
among the disclosures required to be
provided on periodic statements for
purposes of § 707.6(b). Second, the
Board is revising comment 6(b)(3)-2 to
eliminate the reference to the promotion
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of the payment of overdrafts because
NCUA’s July 22, 2009 final rule
eliminated the distinction between
credit unions that promote overdraft
fees and those that do not.
B. Section 707.11(a)—Additional
Disclosure Requirements for Overdraft
Services
Although periodic statements are not
required under TISA, § 707.11(a)(1(i)
requires credit unions that provide
periodic statements to disclose the total
dollar amount of all fees or charges
imposed on the account for paying
checks or other items when there are
insufficient or unavailable funds and
the account becomes overdrawn for the
month and calendar year-to-date. 12
CFR 707.11(a)(1)(i). Sample Form B–12
displays this total as ‘‘Total Overdraft
Fees.’’ Section 707.11(a)(1)(ii) requires
credit unions to separately disclose the
total dollar amount of all fees or charges
imposed on the account for returning
items unpaid for the month and
calendar year-to-date. 12 CFR
707.11(a)(1)(ii). Comment 11(a)(1)–3
states that credit unions may use
terminology such as ‘‘returned item fee’’
or ‘‘NSF fee’’ to describe fees for
returning items unpaid. These fee totals
must be disclosed in a tabular format
substantially similar to Sample Form B–
12. 12 CFR 707.11(a)(3).
Some credit unions may use terms
other than ‘‘Overdraft Fee’’ to describe
per item overdraft fees in their account
agreements. Comment 3(a)–3 to part 707
provides that credit unions must use
consistent terminology to describe terms
or features that are required to be
disclosed. Based on this comment and
a similar comment in Regulation DD,
institutions have questioned whether
they may use terminology other than
‘‘Total Overdraft Fees’’ in the periodic
statement aggregate fee disclosure to
describe the total amount of all fees or
charges imposed on the account for
paying overdrafts.
This interim final rule, in conformity
with the Federal Reserve’s recent final
rule, revises § 707.11(a)(1)(i) to clarify
that the periodic statement aggregate fee
disclosure must state the total dollar
amount for all fees or charges imposed
on the account for paying overdrafts,
using the term ‘‘Total Overdraft Fees.’’
This rule also amends comment
11(a)(1)–2 to explain that this provision
supersedes comment 3(a)–3.
Section 707.11(a)(1)(i) requires credit
union to provide a fee total that
includes all overdraft fees, including
any additional daily or sustained
overdraft, negative balance, or similar
fees or charges imposed by the credit
union. See comment 11(a)(1)–2. Thus,
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the use of terminology other than ‘‘Total
Overdraft Fees’’ may not capture the
various fees associated with an overdraft
service. Further, the purpose of the
aggregate fee disclosure is to provide
members who use overdraft services
with additional information about fees
to help them better understand the costs
associated with the service. The Board
believes permitting the use of
terminology other than ‘‘Total Overdraft
Fees’’ could be confusing to members
and potentially undermines their ability
to compare costs, particularly if a
member has accounts at different credit
unions that each use different
terminology.
C. Section 707.11(c)—Disclosure of
Account Balances
Comment 11(c)–2—Retail Sweep
Programs
Section 707.11(c) of NCUA’s TISA
rule addresses the disclosure of account
balance information to a member
through an automated system. Under
§ 707.11(c), credit unions must disclose
a balance that does not include
additional amounts the credit union
may provide to cover an item when
there are insufficient or unavailable
funds in the member’s account,
including under a service to transfer
funds from another account of the
member. The Board adopted this
provision in its July 2009 final rule to
ensure members receive accurate
information about their account
balances and to help avoid member
confusion as to whether an account has
sufficient funds to cover a transaction.
After publication of the final rule,
questions were raised about the
application of this provision to retail
sweep programs. In a retail sweep
program, a credit union establishes two
legally distinct subaccounts, a share
draft subaccount and a share savings
subaccount, which together make up the
member’s account. The credit union
allocates and transfers funds between
the two subaccounts in order to
maximize the balance in the share
savings subaccount while complying
with the monthly limitations on
transfers out of savings accounts under
the Federal Reserve’s Regulation D. 12
CFR 204.2(d)(2).
Retail sweep programs are
distinguishable in several respects from
overdraft protection plans that transfer
funds from a member’s linked accounts.
In particular, retail sweep programs are
generally not established for the
purpose of covering overdrafts. Rather,
a credit union typically establishes
retail sweep programs by agreement
with the member in order for the credit
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union to minimize its transaction
account reserve requirements and, in
some cases, to provide a higher interest
rate than the member would earn on a
transaction account alone. Furthermore,
most retail sweep programs are
structured so that the member (or
person acting on behalf of the member)
cannot independently access the funds
in the share savings subaccount; all
transfers out of, and deposits or
transfers into, the share savings
subaccount component of a retail sweep
program are effected through the share
draft subaccount. Notwithstanding the
establishment of two legally distinct
subaccounts under a retail sweep
program, the periodic statements that
members receive show a single member
account balance and a single account on
which all transactions into and out of
the account are reflected.
By contrast, linked accounts can be
used and funded independently of one
another. For example, a member can
directly make deposits into and
withdrawals from a share savings
account whether or not it is linked to a
share draft account. The link between
accounts under an overdraft protection
program is primarily established for
purposes of providing funds from the
share savings account in the event the
member has insufficient funds in the
share draft account. Additionally, while
retail sweep programs typically do not
impose fees on transfers between the
share subaccount and the share draft
subaccount, credit unions typically
charge fees for transfers from linked
accounts to cover an overdraft.
Based on the foregoing, the Board
believes that members under a retail
sweep program may reasonably expect
to see a single balance combining the
funds in the share draft subaccount and
the share savings subaccount when they
request an account balance. Members
could be confused if a balance that only
includes funds in the share draft
subaccount were provided because, in
some cases, the balance in the share
draft subaccount could be zero if funds
had been transferred to the share
subaccount at the time of the balance
inquiry. This rule, therefore, adds new
comment 11(c)-2 to clarify that
§ 707.11(c) does not require a credit
union to exclude funds that may be
transferred from another account
pursuant to a retail sweep program from
the member’s balance.
Comment 11(c)–3—Additional Balance
Section 707.11(c) of NCUA’s July
2009 final rule permitted credit unions
to disclose an additional balance
including overdraft funds so long as the
credit union prominently states that the
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balance contains additional overdraft
funds. Comment 11(c)–2 of the final rule
provided guidance on how credit
unions could appropriately identify the
additional funds. The comment,
however, only addressed opt-outs. The
Federal Reserve subsequently adopted
the November 2009 Regulation E final
rule, which requires institutions to
obtain a consumer’s affirmative consent,
or opt-in, to the institution’s overdraft
service, before charging any fees for
paying ATM and one-time debit card
transactions. In light of the final
Regulation E opt-in requirement, the
Board is amending comment 11(c)–2,
redesignated as comment 11(c)–3, to
include references to the opt-in
requirement. References to opt-outs
were retained in some instances because
some credit unions may provide an optout choice with respect to checks, ACH,
and other types of transactions not
subject to the Regulation E final rule
restrictions.
The Board is also extending the
requirement to indicate, when
applicable, that funds in the additional
balance may not be available for all
transactions to circumstances under
which funds from overdraft services
subject to the Federal Reserve’s
Regulation Z or from services that
transfer funds from another account are
not available for all transactions. For
example, if a member has an overdraft
line of credit, but under the terms of the
agreement, the member cannot access
the line of credit when using a debit
card at a point-of-sale transaction, any
additional balance displayed through an
automated system should indicate that
the overdraft funds are not available for
all transactions.
Appendix B: B–12—Aggregate Overdraft
and Returned Item Fees Sample Form
The Board is also making minor
technical corrections to sample form B–
12. These changes are for formatting
purposes and to ensure conformity with
the Federal Reserve’s model disclosure.
47175
By the National Credit Union
Administration Board on July 29, 2010.
Mary F. Rupp,
Secretary of the Board.
D. Effective Date
Because some credit unions may be
using terminology other than ‘‘Total
Overdraft Fees’’ in their aggregate fee
disclosure under § 707.11(a)(1), the
revisions to § 707.11(a)(1)(i) are effective
October 1, 2010, which conforms to the
effective date set by the Federal Reserve.
This effective date also satisfies § 302 of
the Riegle Community Improvement
Development and Regulatory
Improvement Act of 1994, 12 U.S.C.
4802, which requires regulations that
impose additional disclosure
requirements to take effect on the first
day of a calendar quarter beginning on
or after the date on which the
regulations are published in final form,
unless the agency determines, for good
cause published with the regulation,
that the regulation should become
effective before such time. 12 U.S.C.
4802(b). The Board believes that this
effective date is appropriate because the
final § 707.11(a)(1)(i) amendments will
require some credit unions to modify
the disclosures provided to members.
The remaining provisions of the final
rule are effective September 7, 2010.
List of Subjects in 12 CFR Part 707
Advertising, Credit unions, Consumer
protection, Reporting and recordkeeping
requirements, Truth in Savings.
■ For the reasons set forth in the
preamble, NCUA amends 12 CFR part
707, the Model Disclosures, and the
Official Staff Interpretations, as set forth
below:
PART 707—TRUTH IN SAVINGS
1. The authority citation for part 707
continues to read as follows:
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Authority: 12 U.S.C. 4311.
2. Section 707.6 is amended by adding
paragraph (b)(5) to read as follows:
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§ 707.6
III. Regulatory Procedures
Section III of the Supplementary
Information to the July 2009 final rule
sets forth the Board’s analyses under the
Regulatory Flexibility Act (5 U.S.C. 601
et seq.), the Paperwork Reduction Act of
1995 (44 U.S.C. 3506; 5 CFR part 1320
Appendix A.1), the Small Business
Regulatory Enforcement Fairness Act
(Pub. L. 104–121), Executive Order
13132, and the Treasury and General
Government Appropriations Act (Pub.
L. 105–277, 112 Stat. 2681 1998). See 74
FR 36102–36106. Because the final
amendments are clarifications and do
not alter the substance of the analyses
and determinations accompanying that
final rule, the Board continues to rely on
those analyses and determinations for
purposes of this rulemaking.
Periodic statement disclosures.
(b) * * *
(5) Aggregate fee disclosure. If
applicable, the total overdraft and
returned item fees required to be
disclosed by § 707.11(a).
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■ 3. Section 707.11 is amended by
revising paragraph (a)(1)(i) to read as
follows:
§ 707.11 Additional disclosure
requirements for overdraft services.
(a) * * *
(1) * * *
(i) The total dollar amount for all fees
or charges imposed on the account for
paying checks or other items when there
are insufficient or unavailable funds and
the account becomes overdrawn, using
the term ‘‘Total Overdraft Fees;’’ and
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■ 4. Amend Appendix B to part 707, by
revising B–12 to read as follows:
Appendix B to Part 707—Model Clauses
And Sample Forms
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B–12 AGGREGATE OVERDRAFT AND RETURNED ITEM FEES SAMPLE FORM
Total for this period
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Total overdraft fees ..................................................................................................................
Total returned item fees ..........................................................................................................
5. In Appendix C to part 707,
a. Under Section 707.6(b)(3), the first
two sentences of paragraph 2. are
revised.
■ b. Under Section 707.11(a)(1),
paragraph 2. is revised.
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c. Under Section 707.11(c),
paragraphs 2. and 3. are redesignated as
paragraphs 3. and 4. respectively.
■ d. Under Section 707.11(c), new
paragraph 2. is added.
■ e. Under Section 707.11(c), newly
designated paragraph 3. is revised.
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Total year-to-date
$60.00
$0.00
$150.00
$30.00
Appendix C to Part 707—Official Staff
Interpretations
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Section 707.6—Periodic Statement
Disclosures
(b) Statement Disclosures
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(b)(3) Fees Imposed
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2. Itemizing fees by type. In itemizing fees
imposed more than once in the period, credit
unions may group fees if they are the same
type. (See § 707.11(a)(1) of this part regarding
certain fees that are required to be grouped.)
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Section 707.11—Additional Disclosures
Regarding the Payment of Overdrafts
(a) Disclosure of total fees on periodic
statements
(a)(1) General
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2. Fees for paying overdrafts. Credit unions
must disclose on periodic statements a total
dollar amount for all fees or charges imposed
on the account for paying overdrafts. The
credit union must disclose separate totals for
the statement period and for the calendar
year-to-date. The total dollar amount for each
of these periods includes per-item fees as
well as interest charges, daily or other
periodic fees, or fees charged for maintaining
an account in overdraft status, whether the
overdraft is by check, debit card transaction,
or by any other transaction type. It also
includes fees charged when there are
insufficient funds because previously
deposited funds are subject to a hold or are
uncollected. It does not include fees for
transferring funds from another account of
the member to avoid an overdraft, or fees
charged under a service subject to the Federal
Reserve Board’s Regulation Z (12 CFR part
226). See also comment 11(c)–2. Under
§ 707.11(a)(1)(i), the disclosure must describe
the total dollar amount for all fees or charges
imposed on the account for the statement
period and calendar year-to-date for paying
overdrafts using the term ‘‘Total Overdraft
Fees.’’ This requirement applies
notwithstanding comment 3(a)–2.
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(c) Disclosure of account balances
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2. Retail sweep programs. In a retail sweep
program, a credit union establishes two
legally distinct subaccounts, a share draft
subaccount and a share savings subaccount,
which together make up the member’s
account. The credit union allocates and
transfers funds between the two subaccounts
in order to maximize the balance in the share
savings account while complying with the
monthly limitations on transfers out of
savings accounts under the Federal Reserve
Board’s Regulation D, 12 CFR 204.2(d)(2).
Retail sweep programs are generally not
established for the purpose of covering
overdrafts. Rather, credit unions typically
establish retail sweep programs by agreement
with the member in order for the credit union
to minimize its transaction account reserve
requirements and, in some cases, to provide
a higher interest rate than the member would
earn on a share draft account alone. Section
707.11(c) does not require a credit union to
exclude funds from the member’s balance
that may be transferred from another account
pursuant to a retail sweep program that is
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established for such purposes and that has
the following characteristics:
i. The account involved complies with the
Federal Reserve Board’s Regulation D, 12
CFR 204.2(d)(2),
ii. The member does not have direct access
to the share savings subaccount that is part
of the retail sweep program, and
iii. The member’s periodic statements
show the account balance as the combined
balance in the subaccounts.
3. Additional balance. The credit union
may disclose additional balances
supplemented by funds that may be provided
by the credit union to cover an overdraft,
whether pursuant to a discretionary overdraft
service, a service subject to the Federal
Reserve Board’s Regulation Z (12 CFR part
226), or a service that transfers funds from
another account held individually or jointly
by the member, so long as the credit union
prominently states that any additional
balance includes these additional overdraft
amounts. The credit union may not simply
state, for instance, that the second balance is
the members ‘‘available balance,’’ or contains
‘‘available funds.’’ Rather, the credit union
should provide enough information to
convey that the second balance includes
these amounts. For example, the credit union
may state that the balance includes ‘‘overdraft
funds.’’ Where a member has not opted into,
or as applicable, has opted out of the credit
union’s discretionary overdraft service, any
additional balance disclosed should not
include funds that otherwise might be
available under that service. Where a member
has not opted into, or as applicable, has
opted out of, the credit union’s discretionary
overdraft service for some, but not all
transactions (e.g., the member has not opted
into overdraft services for ATM and one-time
debit card transactions), a credit union that
includes these additional overdraft funds in
the second balance should convey that the
overdraft funds are not available for all
transactions. For example, the credit union
could state that overdraft funds are not
available for ATM and one-time (or everyday)
debit card transactions. Similarly, if funds
are not available for all transactions pursuant
to a service subject to the Federal Reserve
Board’s Regulation Z (12 CFR part 226) or a
service that transfers funds from another
account, a second balance that includes such
funds should also indicate this fact.
[FR Doc. 2010–19090 Filed 8–4–10; 8:45 am]
BILLING CODE 7535–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 25
[Docket No. NM432; Special Conditions No.
25–410–SC]
Special Conditions: Dassault Aviation
Model Falcon 7X; Enhanced Flight
Visibility System (EFVS)
Federal Aviation
Administration (FAA), DOT.
AGENCY:
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Final special conditions; request
for comments.
ACTION:
These special conditions are
issued for certain Dassault Aviation
Model Falcon 7X airplanes. This
airplane will have an advanced,
enhanced flight-visibility system
(EFVS), which is a novel or unusual
design feature consisting of a head-up
display (HUD) system modified to
display forward-looking infrared (FLIR)
imagery. The applicable airworthiness
regulations do not contain adequate or
appropriate safety standards for this
design feature. These special conditions
contain the additional safety standards
that the Administrator considers
necessary to establish a level of safety
equivalent to that established by the
existing airworthiness standards.
DATES: The effective date of these
special conditions is July 27, 2010. We
must receive your comments by August
25, 2010.
ADDRESSES: You must mail two copies
of your comments to: Federal Aviation
Administration, Transport Airplane
Directorate, Attn: Rules Docket (ANM–
113), Docket No. NM432, 1601 Lind
Avenue, SW., Renton, Washington
98055–4056. You may deliver two
copies to the Transport Airplane
Directorate at the above address. You
must mark your comments: Docket No.
NM432. Comments may be inspected in
the Rules Docket weekdays, except
Federal holidays, between 7:30 a.m. and
4 p.m.
FOR FURTHER INFORMATION CONTACT: Dale
Dunford, FAA, Transport Standards
Staff, ANM–111, Transport Airplane
Directorate, Aircraft Certification
Service, 1601 Lind Avenue, SW.,
Renton, Washington 98055–4056;
telephone (425) 227–2239; fax (425)
227–1320; e-mail:
dale.dunford@faa.gov.
SUPPLEMENTARY INFORMATION: The FAA
has determined that notice of and
opportunity for prior public comment
on these special conditions is
impracticable and would significantly
delay issuance of the design approval
and thus delivery of the affected aircraft.
These particular special conditions were
recently issued and only three nonsubstantive comments were received
during the public-comment period. The
FAA therefore finds that good cause
exists for making these special
conditions effective upon issuance.
SUMMARY:
Comments Invited
We invite interested people to take
part in this rulemaking by sending
written comments, data, or views. The
most helpful comments reference a
E:\FR\FM\05AUR1.SGM
05AUR1
Agencies
[Federal Register Volume 75, Number 150 (Thursday, August 5, 2010)]
[Rules and Regulations]
[Pages 47173-47176]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-19090]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 707
RIN 3133-AD72
Truth in Savings
AGENCY: National Credit Union Administration (NCUA).
ACTION: Interim final rule with request for comments.
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SUMMARY: On July 22, 2009, NCUA published a final rule amending part
707, which implements the Truth in Savings Act, and the official staff
interpretations to the regulation. The final rule addressed credit
unions' disclosure practices related to overdraft services, including
balances disclosed to members through automated systems. This interim
final rule amends part 707 and official staff interpretations to
address the application of the July 2009 final rule to retail sweep
programs and the terminology for overdraft fee disclosures and to make
amendments that conform to the Federal Reserve Board's (Federal
Reserve) final Regulation E amendments addressing overdraft services,
adopted in November 2009. This rule also includes a minor technical
correction to sample form B-12 for formatting purposes.
DATES: This rule is effective September 7, 2010, except for the
amendment to Sec. 707.11(a)(1(i), which is effective October 1, 2010.
Comments must be received by October 4, 2010.
ADDRESSES: You may submit comments by any of the following methods
(Please send comments by one method only):
NCUA Web Site: https://www.ncua.gov/news/proposed_regs/proposed_regs.html. Follow the instructions for submitting comments.
E-mail: Address to regcomments@ncua.gov. Include ``[Your
name] Comments on Interim Final Rule (Truth in Savings)'' in the e-mail
subject line.
Fax: (703) 518-6319. Use the subject line described above
for e-mail.
Mail: Address to Mary Rupp, Secretary of the Board,
National Credit Union Administration, 1775 Duke Street, Alexandria,
Virginia 22314-3428.
Hand Delivery/Courier: Same as mail address.
Public inspection: All public comments are available on the
agency's website at https://www.ncua.gov/RegulationsOpinionsLaws/comments as submitted, except as may not be possible for technical
reasons. Public comments will not be edited to remove any identifying
or contact information. Paper copies of comments may be inspected in
NCUA's law library, at 1775 Duke Street, Alexandria, Virginia 22314, by
appointment weekdays between 9 a.m. and 3 p.m. To make an appointment,
call (703) 518-6546 or send an e-mail to OGCMail@ncua.gov.
FOR FURTHER INFORMATION CONTACT: Justin M. Anderson, Staff Attorney,
Office of General Counsel, National Credit Union Administration, 1775
Duke Street, Alexandria, Virginia 22314-3428, or telephone: (703) 518-
6540.
SUPPLEMENTARY INFORMATION:
I. Background
The Truth in Savings Act (TISA) requires NCUA to promulgate
regulations substantially similar to those promulgated by the Federal
Reserve within 90 days of the effective date of the Federal Reserve's
rules. 12 U.S.C. 4311(b). In doing so, NCUA is to take into account the
unique nature of credit unions and the limitations under which they pay
dividends on member accounts. Id. In compliance with TISA, NCUA is
issuing this interim final rule with request for comment that is
substantially similar to the Federal Reserve's June 2010 final rule.
NCUA is also making technical corrections to the aggregate overdraft
and returned item fees sample form for formatting purposes.
On January 29, 2009, the Federal Reserve published a final rule
amending Regulation DD, its TISA rule, and the official staff
commentary to address depository institutions' disclosure practices
related to overdraft services, including balances disclosed to
consumers through automated systems. 74 FR 5584 (January 29, 2009).
NCUA issued a similar final rule on July 22, 2009. 74 FR 36102 (July
22, 2009). Both rules had an effective date of January 1, 2010.
In November 2009, the Federal Reserve adopted a final rule amending
Regulation E, which implements the Electronic Fund Transfer Act. This
final rule limits a financial institution's ability to assess fees for
paying ATM and one-time debit card transactions pursuant to the
institution's discretionary overdraft service without the consumer's
affirmative consent to such payment.
Since publication of the Federal Reserve's January 2009 final rule,
institutions and others have requested clarification of particular
aspects of the rule and further guidance regarding compliance with the
rule. In addition, the Federal Reserve believed conforming amendments
to Regulation DD were necessary in light of certain provisions
subsequently adopted in the Regulation E final rule. Accordingly, in
March 2010, the Federal Reserve proposed to amend Regulation DD and the
official staff commentary. 75 FR 9126 (March 1, 2010). Based on
comments it received, the Federal Reserve issued a final rule on June
4, 2010. 75 FR 31673 (June 4, 2010).
II. Interim Final Rule
The NCUA Board (the Board) is adopting interim final revisions to
part 707 and the accompanying official staff interpretations that are
substantively identical to the Federal Reserve's June 2010 final rule.
Like the Federal Reserve's approach, the effective date of this rule
will be 30 days from the date of publication in the Federal Register,
but compliance with the changes to Sec. 707.11(a)(1(i) will not be
mandatory until October 1, 2010. This will give credit unions
sufficient time to implement the necessary system changes to comply
with this rule.
The Board is issuing this rule as an interim final rule because
there is a strong public interest in having consumer-oriented rules in
places that are consistent with those recently promulgated by the
Federal Reserve. Additionally, as discussed above, NCUA is statutorily
required to issue rules substantially similar to those of the Federal
Reserve within 90 days of the effective date of the Federal Reserve's
rules.
III. Section-by-Section Analysis
A. Section 707.6(b)--Periodic Statement Disclosures; Statement
Disclosures
Section 707.6(b) describes disclosures regarding certain charges or
fees required when a credit union provides a periodic statement to its
members. The Board is making an amendment to Sec. 707.6(b) and the
related official staff interpretation. First, the Board is adding new
Sec. 707.6(b)(5) to state explicitly that the aggregate fee
disclosures required by Sec. 707.11(a)(1), discussed below, are among
the disclosures required to be provided on periodic statements for
purposes of Sec. 707.6(b). Second, the Board is revising comment
6(b)(3)-2 to eliminate the reference to the promotion
[[Page 47174]]
of the payment of overdrafts because NCUA's July 22, 2009 final rule
eliminated the distinction between credit unions that promote overdraft
fees and those that do not.
B. Section 707.11(a)--Additional Disclosure Requirements for Overdraft
Services
Although periodic statements are not required under TISA, Sec.
707.11(a)(1(i) requires credit unions that provide periodic statements
to disclose the total dollar amount of all fees or charges imposed on
the account for paying checks or other items when there are
insufficient or unavailable funds and the account becomes overdrawn for
the month and calendar year-to-date. 12 CFR 707.11(a)(1)(i). Sample
Form B-12 displays this total as ``Total Overdraft Fees.'' Section
707.11(a)(1)(ii) requires credit unions to separately disclose the
total dollar amount of all fees or charges imposed on the account for
returning items unpaid for the month and calendar year-to-date. 12 CFR
707.11(a)(1)(ii). Comment 11(a)(1)-3 states that credit unions may use
terminology such as ``returned item fee'' or ``NSF fee'' to describe
fees for returning items unpaid. These fee totals must be disclosed in
a tabular format substantially similar to Sample Form B-12. 12 CFR
707.11(a)(3).
Some credit unions may use terms other than ``Overdraft Fee'' to
describe per item overdraft fees in their account agreements. Comment
3(a)-3 to part 707 provides that credit unions must use consistent
terminology to describe terms or features that are required to be
disclosed. Based on this comment and a similar comment in Regulation
DD, institutions have questioned whether they may use terminology other
than ``Total Overdraft Fees'' in the periodic statement aggregate fee
disclosure to describe the total amount of all fees or charges imposed
on the account for paying overdrafts.
This interim final rule, in conformity with the Federal Reserve's
recent final rule, revises Sec. 707.11(a)(1)(i) to clarify that the
periodic statement aggregate fee disclosure must state the total dollar
amount for all fees or charges imposed on the account for paying
overdrafts, using the term ``Total Overdraft Fees.'' This rule also
amends comment 11(a)(1)-2 to explain that this provision supersedes
comment 3(a)-3.
Section 707.11(a)(1)(i) requires credit union to provide a fee
total that includes all overdraft fees, including any additional daily
or sustained overdraft, negative balance, or similar fees or charges
imposed by the credit union. See comment 11(a)(1)-2. Thus, the use of
terminology other than ``Total Overdraft Fees'' may not capture the
various fees associated with an overdraft service. Further, the purpose
of the aggregate fee disclosure is to provide members who use overdraft
services with additional information about fees to help them better
understand the costs associated with the service. The Board believes
permitting the use of terminology other than ``Total Overdraft Fees''
could be confusing to members and potentially undermines their ability
to compare costs, particularly if a member has accounts at different
credit unions that each use different terminology.
C. Section 707.11(c)--Disclosure of Account Balances
Comment 11(c)-2--Retail Sweep Programs
Section 707.11(c) of NCUA's TISA rule addresses the disclosure of
account balance information to a member through an automated system.
Under Sec. 707.11(c), credit unions must disclose a balance that does
not include additional amounts the credit union may provide to cover an
item when there are insufficient or unavailable funds in the member's
account, including under a service to transfer funds from another
account of the member. The Board adopted this provision in its July
2009 final rule to ensure members receive accurate information about
their account balances and to help avoid member confusion as to whether
an account has sufficient funds to cover a transaction.
After publication of the final rule, questions were raised about
the application of this provision to retail sweep programs. In a retail
sweep program, a credit union establishes two legally distinct
subaccounts, a share draft subaccount and a share savings subaccount,
which together make up the member's account. The credit union allocates
and transfers funds between the two subaccounts in order to maximize
the balance in the share savings subaccount while complying with the
monthly limitations on transfers out of savings accounts under the
Federal Reserve's Regulation D. 12 CFR 204.2(d)(2).
Retail sweep programs are distinguishable in several respects from
overdraft protection plans that transfer funds from a member's linked
accounts. In particular, retail sweep programs are generally not
established for the purpose of covering overdrafts. Rather, a credit
union typically establishes retail sweep programs by agreement with the
member in order for the credit union to minimize its transaction
account reserve requirements and, in some cases, to provide a higher
interest rate than the member would earn on a transaction account
alone. Furthermore, most retail sweep programs are structured so that
the member (or person acting on behalf of the member) cannot
independently access the funds in the share savings subaccount; all
transfers out of, and deposits or transfers into, the share savings
subaccount component of a retail sweep program are effected through the
share draft subaccount. Notwithstanding the establishment of two
legally distinct subaccounts under a retail sweep program, the periodic
statements that members receive show a single member account balance
and a single account on which all transactions into and out of the
account are reflected.
By contrast, linked accounts can be used and funded independently
of one another. For example, a member can directly make deposits into
and withdrawals from a share savings account whether or not it is
linked to a share draft account. The link between accounts under an
overdraft protection program is primarily established for purposes of
providing funds from the share savings account in the event the member
has insufficient funds in the share draft account. Additionally, while
retail sweep programs typically do not impose fees on transfers between
the share subaccount and the share draft subaccount, credit unions
typically charge fees for transfers from linked accounts to cover an
overdraft.
Based on the foregoing, the Board believes that members under a
retail sweep program may reasonably expect to see a single balance
combining the funds in the share draft subaccount and the share savings
subaccount when they request an account balance. Members could be
confused if a balance that only includes funds in the share draft
subaccount were provided because, in some cases, the balance in the
share draft subaccount could be zero if funds had been transferred to
the share subaccount at the time of the balance inquiry. This rule,
therefore, adds new comment 11(c)-2 to clarify that Sec. 707.11(c)
does not require a credit union to exclude funds that may be
transferred from another account pursuant to a retail sweep program
from the member's balance.
Comment 11(c)-3--Additional Balance
Section 707.11(c) of NCUA's July 2009 final rule permitted credit
unions to disclose an additional balance including overdraft funds so
long as the credit union prominently states that the
[[Page 47175]]
balance contains additional overdraft funds. Comment 11(c)-2 of the
final rule provided guidance on how credit unions could appropriately
identify the additional funds. The comment, however, only addressed
opt-outs. The Federal Reserve subsequently adopted the November 2009
Regulation E final rule, which requires institutions to obtain a
consumer's affirmative consent, or opt-in, to the institution's
overdraft service, before charging any fees for paying ATM and one-time
debit card transactions. In light of the final Regulation E opt-in
requirement, the Board is amending comment 11(c)-2, redesignated as
comment 11(c)-3, to include references to the opt-in requirement.
References to opt-outs were retained in some instances because some
credit unions may provide an opt-out choice with respect to checks,
ACH, and other types of transactions not subject to the Regulation E
final rule restrictions.
The Board is also extending the requirement to indicate, when
applicable, that funds in the additional balance may not be available
for all transactions to circumstances under which funds from overdraft
services subject to the Federal Reserve's Regulation Z or from services
that transfer funds from another account are not available for all
transactions. For example, if a member has an overdraft line of credit,
but under the terms of the agreement, the member cannot access the line
of credit when using a debit card at a point-of-sale transaction, any
additional balance displayed through an automated system should
indicate that the overdraft funds are not available for all
transactions.
Appendix B: B-12--Aggregate Overdraft and Returned Item Fees Sample
Form
The Board is also making minor technical corrections to sample form
B-12. These changes are for formatting purposes and to ensure
conformity with the Federal Reserve's model disclosure.
D. Effective Date
Because some credit unions may be using terminology other than
``Total Overdraft Fees'' in their aggregate fee disclosure under Sec.
707.11(a)(1), the revisions to Sec. 707.11(a)(1)(i) are effective
October 1, 2010, which conforms to the effective date set by the
Federal Reserve. This effective date also satisfies Sec. 302 of the
Riegle Community Improvement Development and Regulatory Improvement Act
of 1994, 12 U.S.C. 4802, which requires regulations that impose
additional disclosure requirements to take effect on the first day of a
calendar quarter beginning on or after the date on which the
regulations are published in final form, unless the agency determines,
for good cause published with the regulation, that the regulation
should become effective before such time. 12 U.S.C. 4802(b). The Board
believes that this effective date is appropriate because the final
Sec. 707.11(a)(1)(i) amendments will require some credit unions to
modify the disclosures provided to members. The remaining provisions of
the final rule are effective September 7, 2010.
III. Regulatory Procedures
Section III of the Supplementary Information to the July 2009 final
rule sets forth the Board's analyses under the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.), the Paperwork Reduction Act of 1995 (44
U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Small Business
Regulatory Enforcement Fairness Act (Pub. L. 104-121), Executive Order
13132, and the Treasury and General Government Appropriations Act (Pub.
L. 105-277, 112 Stat. 2681 1998). See 74 FR 36102-36106. Because the
final amendments are clarifications and do not alter the substance of
the analyses and determinations accompanying that final rule, the Board
continues to rely on those analyses and determinations for purposes of
this rulemaking.
By the National Credit Union Administration Board on July 29,
2010.
Mary F. Rupp,
Secretary of the Board.
List of Subjects in 12 CFR Part 707
Advertising, Credit unions, Consumer protection, Reporting and
recordkeeping requirements, Truth in Savings.
0
For the reasons set forth in the preamble, NCUA amends 12 CFR part 707,
the Model Disclosures, and the Official Staff Interpretations, as set
forth below:
PART 707--TRUTH IN SAVINGS
0
1. The authority citation for part 707 continues to read as follows:
Authority: 12 U.S.C. 4311.
0
2. Section 707.6 is amended by adding paragraph (b)(5) to read as
follows:
Sec. 707.6 Periodic statement disclosures.
(b) * * *
(5) Aggregate fee disclosure. If applicable, the total overdraft
and returned item fees required to be disclosed by Sec. 707.11(a).
* * * * *
0
3. Section 707.11 is amended by revising paragraph (a)(1)(i) to read as
follows:
Sec. 707.11 Additional disclosure requirements for overdraft
services.
(a) * * *
(1) * * *
(i) The total dollar amount for all fees or charges imposed on the
account for paying checks or other items when there are insufficient or
unavailable funds and the account becomes overdrawn, using the term
``Total Overdraft Fees;'' and
* * * * *
0
4. Amend Appendix B to part 707, by revising B-12 to read as follows:
Appendix B to Part 707--Model Clauses And Sample Forms
* * * * *
B-12 Aggregate Overdraft and Returned Item Fees Sample Form
----------------------------------------------------------------------------------------------------------------
Total for this period Total year-to-date
----------------------------------------------------------------------------------------------------------------
Total overdraft fees.......................................... $60.00 $150.00
Total returned item fees...................................... $0.00 $30.00
----------------------------------------------------------------------------------------------------------------
0
5. In Appendix C to part 707,
0
a. Under Section 707.6(b)(3), the first two sentences of paragraph 2.
are revised.
0
b. Under Section 707.11(a)(1), paragraph 2. is revised.
0
c. Under Section 707.11(c), paragraphs 2. and 3. are redesignated as
paragraphs 3. and 4. respectively.
0
d. Under Section 707.11(c), new paragraph 2. is added.
0
e. Under Section 707.11(c), newly designated paragraph 3. is revised.
Appendix C to Part 707--Official Staff Interpretations
* * * * *
Section 707.6--Periodic Statement Disclosures
(b) Statement Disclosures
* * * * *
[[Page 47176]]
(b)(3) Fees Imposed
* * * * *
2. Itemizing fees by type. In itemizing fees imposed more than
once in the period, credit unions may group fees if they are the
same type. (See Sec. 707.11(a)(1) of this part regarding certain
fees that are required to be grouped.) * * *
* * * * *
Section 707.11--Additional Disclosures Regarding the Payment of
Overdrafts
(a) Disclosure of total fees on periodic statements
(a)(1) General
* * * * *
2. Fees for paying overdrafts. Credit unions must disclose on
periodic statements a total dollar amount for all fees or charges
imposed on the account for paying overdrafts. The credit union must
disclose separate totals for the statement period and for the
calendar year-to-date. The total dollar amount for each of these
periods includes per-item fees as well as interest charges, daily or
other periodic fees, or fees charged for maintaining an account in
overdraft status, whether the overdraft is by check, debit card
transaction, or by any other transaction type. It also includes fees
charged when there are insufficient funds because previously
deposited funds are subject to a hold or are uncollected. It does
not include fees for transferring funds from another account of the
member to avoid an overdraft, or fees charged under a service
subject to the Federal Reserve Board's Regulation Z (12 CFR part
226). See also comment 11(c)-2. Under Sec. 707.11(a)(1)(i), the
disclosure must describe the total dollar amount for all fees or
charges imposed on the account for the statement period and calendar
year-to-date for paying overdrafts using the term ``Total Overdraft
Fees.'' This requirement applies notwithstanding comment 3(a)-2.
* * * * *
(c) Disclosure of account balances
* * * * *
2. Retail sweep programs. In a retail sweep program, a credit
union establishes two legally distinct subaccounts, a share draft
subaccount and a share savings subaccount, which together make up
the member's account. The credit union allocates and transfers funds
between the two subaccounts in order to maximize the balance in the
share savings account while complying with the monthly limitations
on transfers out of savings accounts under the Federal Reserve
Board's Regulation D, 12 CFR 204.2(d)(2). Retail sweep programs are
generally not established for the purpose of covering overdrafts.
Rather, credit unions typically establish retail sweep programs by
agreement with the member in order for the credit union to minimize
its transaction account reserve requirements and, in some cases, to
provide a higher interest rate than the member would earn on a share
draft account alone. Section 707.11(c) does not require a credit
union to exclude funds from the member's balance that may be
transferred from another account pursuant to a retail sweep program
that is established for such purposes and that has the following
characteristics:
i. The account involved complies with the Federal Reserve
Board's Regulation D, 12 CFR 204.2(d)(2),
ii. The member does not have direct access to the share savings
subaccount that is part of the retail sweep program, and
iii. The member's periodic statements show the account balance
as the combined balance in the subaccounts.
3. Additional balance. The credit union may disclose additional
balances supplemented by funds that may be provided by the credit
union to cover an overdraft, whether pursuant to a discretionary
overdraft service, a service subject to the Federal Reserve Board's
Regulation Z (12 CFR part 226), or a service that transfers funds
from another account held individually or jointly by the member, so
long as the credit union prominently states that any additional
balance includes these additional overdraft amounts. The credit
union may not simply state, for instance, that the second balance is
the members ``available balance,'' or contains ``available funds.''
Rather, the credit union should provide enough information to convey
that the second balance includes these amounts. For example, the
credit union may state that the balance includes ``overdraft
funds.'' Where a member has not opted into, or as applicable, has
opted out of the credit union's discretionary overdraft service, any
additional balance disclosed should not include funds that otherwise
might be available under that service. Where a member has not opted
into, or as applicable, has opted out of, the credit union's
discretionary overdraft service for some, but not all transactions
(e.g., the member has not opted into overdraft services for ATM and
one-time debit card transactions), a credit union that includes
these additional overdraft funds in the second balance should convey
that the overdraft funds are not available for all transactions. For
example, the credit union could state that overdraft funds are not
available for ATM and one-time (or everyday) debit card
transactions. Similarly, if funds are not available for all
transactions pursuant to a service subject to the Federal Reserve
Board's Regulation Z (12 CFR part 226) or a service that transfers
funds from another account, a second balance that includes such
funds should also indicate this fact.
[FR Doc. 2010-19090 Filed 8-4-10; 8:45 am]
BILLING CODE 7535-01-P