Federal Reserve System May 2005 – Federal Register Recent Federal Regulation Documents

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

The Board requests comment on potential modifications to the method for calculating the target return on equity (ROE) in the private-sector adjustment factor (PSAF). The PSAF imputes the costs that would have been incurred and profits that would have been earned had the Federal Reserve Banks' priced services been provided by a private firm. The Monetary Control Act of 1980 (MCA) requires that the Federal Reserve set fees for its services to recover, over the long run, its actual costs of providing the services, as well as the imputed costs and profits. The Board reviews its method for calculating the PSAF periodically to assess whether it is still appropriate in light of the changing business and regulatory environment, industry practices, and accounting standards. Specifically, the Board requests comment on possible changes to the current method to compute a target rate of return on equity capital, including changes to the analytical models and peer group institutions used. The Board's method for setting its overall level of equity capital would continue to be based on the Federal Deposit Insurance Corporation (FDIC) guidelines for a well-capitalized institution for insurance premium purposes.

The Board of Governors of the Federal Reserve System (Board) has adopted final amendments to its Regulation A to reflect the Board's approval of an increase in the primary credit rate at each Federal Reserve Bank. The secondary credit rate at each Reserve Bank automatically increased by formula as a result of the Board's primary credit rate action.