[Federal Register Volume 59, Number 89 (Tuesday, May 10, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11152]
[[Page Unknown]]
[Federal Register: May 10, 1994]
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FEDERAL RESERVE SYSTEM
12 CFR Part 230
[Regulation DD; Docket No. R-0818]
Truth in Savings; Final Preemption Determination (Wisconsin)
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule.
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SUMMARY: The Board is publishing a final determination that Wisconsin's
Truth in Savings law is not inconsistent with the federal Truth in
Savings Act and Regulation DD, and therefore is not preempted.
EFFECTIVE DATE: May 11, 1994.
FOR FURTHER INFORMATION CONTACT: Kurt Schumacher, Staff Attorney,
Division of Consumer and Community Affairs, at (202) 452-2412 or (202)
452-3667; for the hearing impaired only contact Dorothea Thompson,
Telecommunications Device for the Deaf, at (202) 452-3544.
SUPPLEMENTARY INFORMATION:
(1) General
Section 273 of the Truth in Savings Act (12 U.S.C. 4312) states
that the act does not supersede provisions of the law of any State
relating to the disclosure of yields payable or account terms, except
to the extent that those laws are inconsistent with the provisions of
the federal statute, and then only to the extent of the inconsistency.
The act also grants the Board the authority to determine whether any
inconsistencies exist between federal and state law.
Regulation DD (12 CFR part 230), which implements the act, provides
the standards for preemption determinations in appendix C. State
requirements are inconsistent with, and therefore preempted by, the
federal provisions if the state law requires a depository institution
to make disclosures or take actions that contradict the requirements of
the federal law. A state law is also inconsistent if it requires the
use of the same term to represent a different amount or a different
meaning than the federal law, requires the use of a term different from
that required in the federal law to describe the same item, or permits
a method of calculating interest on an account different from that
required in the federal law.
Preemption determinations for the act are issued under authority
delegated to the Director of the Division of Consumer and Community
Affairs, as set forth in the Board's Rules Regarding Delegation of
Authority (12 CFR 265.9(c)(5), as amended December 15, 1993, 58 FR
65539).
(2) Discussion of Specific Request and Final Determination
The Board was asked to determine whether specific provisions of
Wisconsin Statutes section 224.08 regarding disclosures for deposit
accounts at banks are inconsistent with the act and Regulation DD and
are therefore preempted. The Board published a proposed determination
on December 14, 1993 (58 FR 65293), stating that the provisions of the
Wisconsin law found in Wisconsin Statutes section 224.08 are not
inconsistent with the federal Truth in Savings law, and therefore are
not preempted by the federal law.
The act and Regulation DD require depository institutions to give
consumers disclosures before opening a deposit account and upon a
request made by a consumer. The act also sets out requirements for the
payment of interest on accounts, provides rules for account
advertisements and change in terms notices, and mandates certain
information to be provided on periodic statements for accounts that
receive such statements. In addition, the act and Regulation DD provide
for an ``annual percentage yield'' to aid consumers in making
comparisons between the rates paid on different accounts.
Section 224.08 of the Wisconsin Statutes requires disclosure
statements to be given for each account offered by a bank, setting
forth the following information: a description of the account, the
conditions (if any) on which the account is offered, the terms of
interest offered for the account, and all fees charged for the account.
The disclosure statement under state law may include a separate
interest rate table or fee schedule, or both. Banks must provide this
information at the time of the depositor's initial deposit into the
account, upon any change in any of the information applicable to a
depositor's account (other than a change in the interest rate of a
variable interest rate account if the variability of the interest rate
was disclosed at the time of the initial deposit), and upon request.
Finally, the state law requires that the disclosure statement for an
account be accompanied by a brief description of all other accounts
offered by the bank and a statement that more detailed information is
available on request.
The Board received three comment letters on its proposal, all
opposing the Board's proposed determination and requesting that the
Board preempt the Wisconsin law based on inconsistencies with the
federal provisions. After careful review, the Board has made a final
determination not to preempt the Wisconsin law for the reasons
discussed below.
Coverage of Institutions
The requesting party suggested that state law is inconsistent with
the act and Regulation DD because the state law covers only state-
chartered banks, whereas the federal law covers all depository
institutions, including savings associations and national banks. The
Board has determined that a state law providing for more limited
coverage than federal law is not inconsistent with the act, and
therefore is not preempted.
Content and Format of Disclosures
The requesting party asked the Board to determine that the content
of the state law disclosures is inconsistent with the federal law. The
state law permits disclosures to be more general than the federal law
allows--for example, by mandating only a statement of the ``terms of
interest offered for the account,'' and not requiring an ``annual
percentage yield'' to be given, using that term. However, state law
does not prohibit institutions from being more specific in fulfilling
their state disclosure requirements. Therefore, the Board believes
institutions can comply with the state provisions while still complying
with the more detailed federal requirements.
Similarly, the requesting party suggested that preemption of the
state law is warranted, based on the format of the required state
disclosures because Wisconsin law requires that each account disclosure
include a ``brief description'' of all other accounts offered by the
bank along with a statement that more detailed information is available
upon request. The federal law contains no similar requirement, and in
fact permits an institution to combine disclosures for all of its
accounts, as long as it is clear which disclosures are applicable to
the consumer's account (12 CFR 230.3(a)). However, Regulation DD
provides a very narrow preemption standard: preemption is appropriate
only where a state law requires a depository institution to make
disclosures or take actions that contradict the requirements of the
federal law. The Board believes that banks are able to comply with
Wisconsin law without contradicting the requirements of the federal
law. Thus, preemption of the state requirement to provide information
about other available accounts is not warranted.
Moreover, the Wisconsin Commissioner of Banking, the state
enforcement agency for Wisconsin-chartered banks, has provided an
interpretation to the Board stating that banks would comply with this
provision of the Wisconsin law by providing disclosures in keeping with
the federal law. The agency has stated that the ``brief description''
of other accounts was intended as an accommodation to banks to provide
something less than full disclosures for each available account; thus,
banks would not violate state law if they provide full account
disclosures for all accounts offered by the institution, as federal law
allows. Finally, agency officials confirmed that they would not require
the statement that more detailed information is available upon request
if full account disclosures are provided for all accounts in compliance
with the requirements of Regulation DD.
Change in Terms Notice
The requesting party asked that the Board find the provision of the
Wisconsin law requiring a change in terms notice to be inconsistent
with the federal law and therefore preempted for three reasons. First,
the state law requires redisclosure of all state law disclosures when
any term is changed. In contrast, federal law requires notice to
consumer account-holders only of the specific term being changed.
Second, state law requires a change in terms notice to be sent upon any
change to a depositor's account that was initially required to be
disclosed (except a change in the interest rate for a variable rate
account). Federal law requires such a notice only for a change that
reduces the annual percentage yield or adversely affects the consumer.
See Sec. 230.5(a). Third, state law redisclosure is required upon any
change in the account. Federal law generally requires a change in terms
notice at least 30 days prior to the effective date of the change.
As stated above, the Board believes the state Truth in Savings law
is not inconsistent simply because the state law requires more
information than federal law requires, or because the state law
requires disclosures in cases where the federal law is silent. A
Wisconsin-chartered bank can comply with the advance change in terms
notice required under federal law while providing the more detailed
disclosures required by the state law. The Board notes that Regulation
DD allows institutions to comply with change in terms requirements by
sending new account disclosures if the changed terms are specifically
brought to the consumer's attention (for example, by highlighting them
in some way). Although state and federal laws have different
requirements in this regard, the Board believes that they are not
inconsistent, given that a bank can comply with both requirements
without violating either.
Finally, the Board has determined that the state law requirement
that a bank redisclose all applicable information ``upon'' any change
in a term that was initially disclosed is not inconsistent with the
federal provision requiring at least 30 days advance notice of the
effective date of the change. As stated in the Board's proposed
determination, State officials have indicated to the Board that
institutions providing the disclosures required under state law at
least 30 days in advance of the effective date of the change, as the
federal provisions require, would comply with the state law. As
Wisconsin banks are therefore able to comply with both the federal and
state laws, the Board has determined that this provision is not
preempted by the federal law.
(3) Regulatory Flexibility Analysis and Paperwork Reduction Act
The determination that State law is not preempted is not likely to
have a significant impact on institutions' costs, including those of
small institutions.
List of Subjects in 12 CFR Part 230
Advertising, Banks, Banking, Consumer protection, Deposit accounts,
Interest, Interest rates, Federal Reserve System, Truth in savings.
By order of the Board of Governors of the Federal Reserve
System, May 4, 1994.
William W. Wiles,
Secretary of the Board.
[FR Doc. 94-11152 Filed 5-9-94; 8:45 am]
BILLING CODE 6210-01-P
