[Federal Register Volume 64, Number 177 (Tuesday, September 14, 1999)]
[Proposed Rules]
[Pages 49740-49752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23140]
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FEDERAL RESERVE SYSTEM
12 CFR Part 230
[Regulation DD; Docket No. R-1044]
Truth in Savings
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Proposed rule.
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SUMMARY: The Board is requesting comment on proposed revisions to
Regulation DD, which implements the Truth in Savings Act (TISA). The
Board previously published a proposed rule that permits depository
institutions to use electronic communication (for example,
communication via personal computer and modem) to provide disclosures
required by the act and regulation, if the consumer agrees to such
delivery. (A similar rule was also proposed under various other
consumer financial services and fair lending regulations administered
by the Board.) In response to comments received on the proposals, the
Board is publishing for comment an alternative proposal on the
electronic delivery of disclosures, together with proposed commentary
that would provide further guidance on electronic communication issues.
DATES: Comments must be received by October 29, 1999.
ADDRESSES: Comments, which should refer to Docket No. R-1044, may be
mailed to Jennifer J. Johnson, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, N.W.,
Washington, DC 20551. Comments addressed to Ms. Johnson may also be
delivered to the Board's mail room between 8:45 a.m. and 5:15 p.m.
weekdays, and to the security control room at all other times. The mail
room and the security control room, both in the Board's Eccles
Building, are accessible from the courtyard entrance on 20th Street
between Constitution Avenue and C Street, N.W. Comments may be
inspected in room MP-500 between 9:00 a.m. and 5:00 p.m., pursuant to
Sec. 261.12, except as provided in Sec. 261.14 of the Board's Rules
Regarding the Availability of Information, 12 CFR 261.12 and 261.14.
FOR FURTHER INFORMATION CONTACT: Michael L. Hentrel, Staff Attorney, or
Jane E. Ahrens, Senior Counsel, Division of Consumer and Community
Affairs, at (202) 452-2412 or (202) 452-3667. Users of
Telecommunications Device for the Deaf (TDD) only, contact Diane
Jenkins at (202) 452-3544.
SUPPLEMENTARY INFORMATION:
I. Background
The Truth in Savings Act (TISA), 12 U.S.C. 4301 et seq., requires
depository institutions to disclose to consumers 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.
The TISA and Regulation DD require a number of disclosures to be
provided in writing, presuming that institutions provide paper
documents. Under many laws that call for information to be in writing,
information in electronic form is considered to be ``written.''
Information produced, stored, or communicated by computer is also
generally considered to be a writing, where visual text is involved.
In May 1996, the Board revised Regulation E (Electronic Fund
Transfers) following a comprehensive review. During that process, the
Board determined that electronic communication for delivery of
information required by federal laws governing financial services could
effectively reduce compliance costs without adversely affecting
consumer protections. Consequently, the Board simultaneously issued a
proposed rule to permit financial institutions to use electronic
communication to deliver disclosures that Regulation E requires to be
given in writing. (61 FR 19696, May 2, 1996.) The 1996 proposal
required that disclosures be provided in a form the consumer may
retain, a requirement that institutions could satisfy by providing
information in a format that may be printed or downloaded. The proposed
rule also allowed consumers to request a paper copy of a disclosure for
up to one year after its original delivery.
Following a review of the comments, on March 25, 1998, the Board
issued an interim rule under Regulation E (the ``interim rule''), 63 FR
14528. The Board also published proposals under Regulations DD (Truth
in Savings), 63 FR 14533, M (Consumer Leasing), 63 FR 14538, Z (Truth
in Lending), 63 FR 14548, and B (Equal Credit Opportunity), 63 FR 14552
(collectively, the ``March 1998 proposed rules''). The rules would
apply to financial institutions, creditors, lessors, and other entities
that are required to give disclosures to consumers and others. (For
ease of reference, this background section uses the terms ``financial
institutions,'' ``institutions,'' and ``consumers.'') The interim rule
and the March 1998 proposed rules were similar to the May 1996 proposed
rule; however, they did not require financial institutions to provide
paper copies of disclosures to a consumer upon request if the consumer
previously agreed to receive disclosures electronically. The Board
believed that most institutions would accommodate consumer requests for
paper copies when feasible or redeliver disclosures electronically; and
the Board encouraged financial institutions to do so.
The March 1998 proposed rules and the interim rule permitted
financial institutions to provide disclosures electronically if the
consumer agreed, with few other requirements. The rule was intended to
provide flexibility and did not specify any particular method for
obtaining a consumer's agreement. Whether the parties had an agreement
would be determined by state law. The proposals and the interim rule
did not preclude a financial institution and a consumer from entering
into an agreement electronically, nor did they prescribe a formal
mechanism for doing so.
The Board received approximately 200 written comments on the
interim rule and the March 1998 proposed rules. The majority of
comments were submitted by financial institutions and their trade
associations. Industry commenters generally supported the use of
electronic communication to deliver information required by the TISA
and Regulation DD. Nevertheless, many sought specific revisions and
additional guidance on how to comply with the disclosure requirements
in particular transactions and circumstances.
Industry commenters were especially concerned about the condition
that a consumer had to ``agree'' to receive information by electronic
communication, because the rule did not specify a method for
establishing that an ``agreement'' was reached. These commenters
believed that relying on state law created uncertainty about what
constitutes an agreement and, therefore, potential liability for
noncompliance. To avoid uncertainty over which state's laws apply, some
commenters urged the Board to adopt a federal minimum standard for
agreements or for informed consent to receive disclosures by
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electronic communication. These commenters believed that such a
standard would avoid the compliance burden associated with tailoring
legally binding ``agreements'' to the contract laws of all
jurisdictions where electronic communications may be sent.
Consumer advocates generally opposed the March 1998 interim rule
and proposed rules. Without additional safeguards, they believed,
consumers may not be provided with adequate information about
electronic communications before an ``agreement'' is reached. They also
believed that promises of lower costs could induce consumers to agree
to receive disclosures electronically without a full understanding of
the implications. To avoid such problems, they urged the Board, for
example, either to require institutions to disclose to consumers that
their account with the institution will not be adversely affected if
they do not agree to receive electronic disclosures, or to permit
institutions to offer electronic disclosures only to consumers who
initiate contact with the institution through electronic communication.
They also noted that some consumers will likely consent to electronic
disclosures believing that they have the technical capability to
retrieve information electronically, but might later discover that they
are unable to do so. They questioned consumers' willingness and ability
to access and retain disclosures posted on Internet websites, and
expressed their apprehension that the goals of federally mandated
disclosure laws will be lost.
Consumer advocates and others were particularly concerned about the
use of electronic disclosures in connection with home-secured loans and
certain other transactions that consumers typically consummate in
person (citing as examples automobile loans and leases, short-term
``payday'' loans, or home improvement financing contracts resulting
from door-to-door sales). They asserted that there is little benefit to
eliminating paper disclosures in such transactions and that allowing
electronic disclosures in those cases could lead to abusive practices.
Accordingly, consumer advocates and others believed that paper
disclosures should always accompany electronic disclosures in mortgage
loans and certain other transactions, and that consumers should have
the right to obtain paper copies of disclosures upon request for all
types of transactions (deposit account, credit card, loan or lease, and
other transactions).
A final issue raised by consumer advocates was the integrity of
disclosures sent electronically. They stated that there may be
instances when the consumer and the institution disagree on the terms
or conditions of an agreement and consumers may need to offer
electronic disclosures as proof of the agreed-upon terms and to enforce
rights under consumer protection laws. Thus, to assure that electronic
documents have not been altered and that they accurately reflect the
document originally sent, consumer advocates recommended that the Board
require that electronic disclosures be authenticated by an independent
third party.
The Board's Consumer Advisory Council considered the electronic
delivery of disclosures in 1998 and again in 1999. Many Council members
shared views similar to those expressed in written comment letters on
the 1998 proposals. For example, some Council members expressed concern
that the Board was moving too quickly in allowing electronic
disclosures for certain transactions, and suggested that the Board
might go forward with electronic disclosures for deposit accounts while
proceeding more slowly on credit and lease transactions. Others
expressed concern about consumer access and consumers' ability to
retain electronic disclosures. They believed that, without specific
guidance from the Board, institutions would provide electronic
disclosures without knowing whether consumers could retain or access
the disclosures, and without establishing procedures to address
technical malfunctions or nondelivery. The Council also discussed the
integrity and security of electronic documents.
II. Overview of Proposed Revisions
Based on a review of the comments and further analysis, the Board
is requesting comment on a modified proposed rule that is more detailed
than the interim rule and the March 1998 proposed rules. It is intended
to provide specific guidance for institutions that choose to use
electronic communication to comply with Regulation DD's requirements to
provide written disclosures, and ensure effective delivery of
disclosures to consumers through this medium. Though detailed, the
proposal provides flexibility for compliance with the electronic
communication rules. The modified proposal recognizes that some
disclosures may warrant different treatment under the rule. Some
disclosures are generally available to the public--for example, bank
account fee schedules. Under the modified proposal, such disclosures
could be made available electronically without obtaining a consumer's
consent. Where written disclosures are made to consumers who are
transacting business in person, these disclosures generally would have
to be made in paper form.
The Board is soliciting comment on a modified approach that
addresses both industry and consumer group concerns. Under the
proposal, depository institutions would have to provide specific
information about how the consumer can receive and retain electronic
disclosures--through a standardized disclosure statement--before
obtaining consumers' acceptance of such delivery, with some exceptions.
If they satisfy these requirements and obtain consumers' affirmative
consent, depository institutions would be permitted to use electronic
communications. As a general rule an institution would be permitted to
offer the option of receiving electronic disclosures to all consumers,
whether they initially contact the institution by electronic
communication or otherwise. To address concerns about potential abuses,
however, the proposal provides that if a consumer contracts to open a
deposit account in person, initial disclosures must be given in paper
form.
Depository institutions would have the option of delivering
disclosures to an e-mail address designated by the consumer or making
disclosures available at another location such as the institution's
website, for printing or downloading. If the disclosures are posted at
a website location, depository institutions generally must notify
consumers at an e-mail address about the availability of the
information. (Depository institutions may offer consumers the option of
receiving alert notices at a postal address.) The disclosures must
remain available at that site for 90 days.
Disclosures provided electronically would be subject to the ``clear
and conspicuous'' standard, and the existing format, timing, and
retainability rules in Regulation DD. For example, to satisfy the
timing requirement, if disclosures are due at the time a deposit
account is being opened electronically, the disclosure would have to
appear on the screen before the consumer could complete the process.
Depository institutions generally must provide a means for
consumers to confirm the availability of equipment to receive and
retain electronic disclosure documents. A depository institution would
not otherwise have a duty to verify consumers' actual ability to
receive, print or download the disclosures. Some commenters suggested
that institutions should be required to verify delivery by return
receipt. The Board solicits comment on
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the need for such a requirement and the feasibility of that approach.
As previously mentioned, consumer advocates and others have
expressed concerns that electronic documents can be altered more easily
than paper documents. The issue of the integrity and security of
electronic documents affects electronic commerce in general and is not
unique to the written disclosures required under the consumer
protection laws administered by the Board. Consumers' ability to
enforce rights under the consumer protection laws could be impaired in
some cases, however, if the authenticity of disclosures that they
retain cannot be demonstrated. Signatures, notary seals, and other
established verification procedures are used to detect alterations for
transactions memorialized in paper form. The development of similar
devices for electronic communications should reduce uncertainty over
time about the ability to use electronic documents for resolving
disputes.
The Board's rules require institutions to retain evidence of
compliance with Regulation DD. Specific comment is solicited on the
feasibility of complying with a requirement that institutions provide
disclosures in a format that cannot be altered without detection, or
have systems in place capable of detecting whether or not information
has been altered, as well as the feasibility of requiring use of
independent certification authorities to verify disclosure documents.
Elsewhere in today's Federal Register, the Board is publishing
similar proposals for comment under Regulations B, E, M, and Z. In a
separate notice the Board is publishing an interim rule under
Regulation DD, to permit depository institutions to use electronic
communication to deliver disclosures on periodic statements. For ease
of reference, the Board has assigned new docket numbers to the modified
proposals published today.
III. Section-by-Section Analysis
Pursuant to its authority under section 269 of the TISA, the Board
proposes to amend Regulation DD to permit institutions to use
electronic communication to provide the disclosures required by this
regulation to be in writing. Below is a section-by-section analysis of
the rules for providing disclosures by electronic communication,
including references to proposed commentary provisions.
Section 230.2 Definitions
(q) Periodic Statement
The interim rule under Regulation DD permits institutions to use
electronic communication to deliver disclosures on periodic statements.
Comment 230.2(q)-1(ii), which addresses information provided by
computer through home banking services, would be deleted as obsolete.
Section 230.3 General Disclosure Requirements
3(g) Electronic Communication
3(g)(1) Definition
The definition of the term ``electronic communication'' in the
March 1998 proposed rule remains unchanged. Section 230.3(g)(1) limits
the term to a message transmitted electronically that can be displayed
on equipment as visual text, such as a message that is displayed on a
computer monitor screen. Most commenters supported the term as defined
in the March 1998 proposed rule. Some commenters favored a more
expansive definition that would encompass communications such as audio
and voice response telephone systems. Because the proposal is intended
to permit electronic communication to satisfy the statutory requirement
for written disclosures, the Board believes visual text is an essential
element of the definition.
Commenters asked the Board to clarify the coverage of certain types
of communications. A few commenters asked about communication by
facsimile. Facsimiles are initially transmitted electronically; the
information may be received either in paper form or electronically
through software that allows a consumer to capture the facsimile,
display it on a monitor, and store it on a computer diskette or drive.
Thus, information sent by facsimile may be subject to the provisions
governing electronic communication. When disclosures are sent by
facsimile, a depository institution should comply with the requirements
for electronic communication unless it knows that the disclosures will
be received in paper form. Proposed comment 3(g)(1)-1 contains this
guidance.
3(g)(2) Electronic Communication between Depository Institution and
Consumer
Section 230.3(g)(2) would permit depository institutions to provide
disclosures using electronic communication, if the institution complies
with provisions in new Sec. 230.3(g)(3), discussed below.
1. Presenting Disclosures in a Clear and Conspicuous Format. The
Board does not intend to discourage or encourage specific types of
technologies. Regardless of the technology, however, disclosures
provided electronically must be presented in a clear and conspicuous
format as is the case for all written disclosures under the act and
regulation. See Sec. 230.3(a).
When consumers consent to receive disclosures electronically and
they confirm that they have the equipment to do so, depository
institutions generally would have no further duty to determine that
consumers are able to receive the disclosures. Institutions do have the
responsibility of ensuring sure the proper equipment is in place in
instances where the institution controls the equipment. Proposed
comment 3(g)(2)-1 contains this guidance.
2. Providing Disclosures in a Form the Consumer May Keep. As with
other written disclosures, information provided by electronic
communication must be in a form the consumer can retain. Under the
March 1998 proposals and the interim rule, a depository institution
would satisfy this requirement by providing information that can be
printed or downloaded. The modified proposal adopts the same approach
but also provides that the information must be sent to a specified
location to ensure that consumers have an adequate opportunity to
retain the information.
Consumers communicate electronically with depository institutions
through a variety of means and from various locations. Depending on the
location (at home, at work, in a public place such as a library), a
consumer may not have the ability at a given time to preserve TISA
disclosures presented on-screen. Therefore, when a depository
institution provides disclosures by electronic communication, to
satisfy the retention requirements, the institution must send the
disclosures to a consumer's e-mail address or other location where
information may be retrieved at a later date. Proposed comment 3(g)(2)-
2 contains this guidance; see also the discussion under
Sec. 230.3(g)(4), below. In instances where an institution controls an
electronic terminal used to provide electronic disclosures, an
institution may provide equipment for the consumer to print a paper
copy in lieu of sending the information to the consumer's e-mail
address or posting the information at another location such as the
institution's website. See proposed comment 3(g)(2)-1.
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3. Timing. Institutions must ensure that electronic disclosures
comply with all relevant timing requirements of the regulation. For
example, account-opening disclosures must be provided before an account
is opened or a service is provided. The rule ensures that consumers
have an opportunity to read important information about costs and other
terms before opening an account or agreeing to have a service provided.
To illustrate the timing requirements for electronic communication,
assume that a consumer is interested in opening a checking account and
uses a personal computer at home to access a bank's website on the
Internet. The institution provides disclosures to the consumer about
the use of electronic communication (the Sec. 230.3(g)(3) disclosures
discussed below) and the consumer responds affirmatively. If the
institution's procedures permit the consumer to open the account at
that time, disclosures required under Sec. 230.4 would have to be
provided. Thus, the disclosures must automatically appear on the screen
or the consumer must be required to access the information before the
account is opened (or before the consumer pays any fees). The timing
requirements for providing account-opening disclosures would not be met
if, in this example, the bank permitted the consumer to open a deposit
account and sent disclosures to an e-mail address thereafter. Proposed
comment 3(g)(2)-3 contains this guidance.
On the other hand, assume that a consumer desires to open an
account and the institution delays processing of the consumer's request
to open the account until the required disclosures have been delivered
by e-mail. In that case the information would not have to also appear
on the screen; delivery to the consumer's e-mail address would be
sufficient. In either case, the consumer must be given the opportunity
to receive the disclosures before opening the account.
3(g)(2)(ii) In-Person Exception
The proposal contains an exception to the general rule allowing
information required by Regulation DD to be provided by electronic
communication; where the exception applies, paper disclosures would be
required. The exception, contained in Sec. 230.3(g)(2)(ii), seeks to
address concerns about potential abuses where consumers are transacting
business in person but are offered disclosures in electronic form. In
such transactions, there is a general expectation that consumers would
be given paper copies of disclosures along with paper copies of other
documents evidencing the transaction.
Under Sec. 230.3(g)(2)(ii), if a consumer opens an account in
person, the depository institution must provide account-opening
disclosures in paper form. For example, if a consumer opens a deposit
account at a depository institution and is provided with TISA account
disclosures at that time, the institution would be required to provide
those disclosures in paper form; directing the consumer to disclosures
posted on the institution's website would not be sufficient. An
institution also complies if a consumer opens an account on the
Internet and is sent disclosures electronically at or around that time,
even though the institution's procedures require the consumer to visit
the institution at a later time to complete the transaction (for
example, to complete a signature card). Proposed comment 3(g)(2)(ii)-1
contains this guidance. If a consumer makes a request in person for
account disclosures pursuant to Sec. 230.4(a)(2), the disclosures also
must be provided in paper form.
3(g)(3) Disclosure Notice
Section 230.3(g)(3) would identify the specific steps required
before an institution can use electronic communication to satisfy the
regulation's disclosure requirements. Proposed Model Forms B-10 and B-
11 and proposed Sample Forms B-13 and B-14, are published to aid
compliance with these requirements.
3(g)(3)(i) Notice by Depository Institution
Section 230.3(g)(3)(i) outlines the information that depository
institutions must provide before electronic disclosures can be given.
The depository institution must: (1) describe the information to be
provided electronically and specify whether the information is also
available in paper form or whether the account is offered only with
electronic disclosures; (2) identify the address or location where the
information will be provided electronically; and if it will be
available at a location other than the consumer's e-mail address,
specify for how long and where it can be obtained once that period
ends; (3) specify any technical requirements for receiving and
retaining information sent electronically, and provide a means for the
consumer to confirm the availability of equipment meeting those
requirements; and (4) provide a toll-free telephone number and, at the
institution's option, an electronic or a postal address for questions
about receiving electronic disclosures, or for updating consumers'
electronic addresses, and for seeking assistance with technical or
other difficulties (see proposed comments to 3(g)(3)(i)). The Board
requests comment on whether other information should be disclosed
regarding the use of electronic communication and on any format changes
that might improve the usefulness of the notice for consumers.
The Board also solicits comment on the benefits of requiring an
annual notice in paper form to consumers who receive disclosures by
electronic communication. The notice would contain general information
about receiving electronic disclosures including, for example, a
reminder of the toll-free telephone number where consumers may contact
the institution if they have questions regarding their electronic
disclosures. The Board solicits comment on whether an annual notice is
feasible for all types of accounts covered by Regulation DD.
Under the proposal, the Sec. 230.3(g)(i) disclosures must be
provided, as applicable, before the depository institution uses
electronic communication to deliver any information required by the
regulation. The approach of requiring a standardized disclosure
statement addresses, in several ways, the concern that consumers may be
steered into using electronic communication without fully understanding
the implications. Under this approach, the specific disclosures that
would be delivered electronically must be identified, and consumers
must be informed whether there is also an option to receive the
information in paper form. Consumers must provide an e-mail address
where one is required. Technical requirements must also be stated, and
consumers must affirm that their equipment meets the requirements, and
that they have the capability of retaining electronic disclosures by
downloading or printing them (see proposed comment 3(g)(3)-1). Thus,
the Sec. 230.3(g)(3)(i) disclosures should allow consumers to make
informed judgments about receiving electronic disclosures.
Some commenters requested clarification of whether a depository
institution may use electronic communication to provide some required
disclosures while using paper for others. The proposed rule would
permit institutions to do so; the disclosure given under
Sec. 230.3(g)(3)(i) must specify which TISA disclosures will be
provided electronically.
Commenters requested further guidance on a depository institution's
obligation under the regulation if the consumer chooses not to receive
information by electronic communication. A depository institution could
offer a consumer the
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option of receiving disclosures in paper form, but it would not be
required to do so. A depository institution could establish accounts or
services for which disclosures are given only by electronic
communication. Section 230.3(g)(3)(i)(A) would require institutions to
tell consumers whether or not they have the option to receive
disclosures in paper form. Section 230.3(g)(i)(D) would require
depository institutions to provide a toll-free number that consumers
could use to inform institutions if they wish to discontinue receiving
electronic disclosures. In such cases, the institution must inform the
consumer whether the deposit account is also available with disclosures
in paper form. Proposed sample disclosure statements in which the
consumer has an option to receive electronic or paper disclosures (Form
B-13) or electronic disclosures only (Form B-14) are contained in
appendix B.
3(g)(3)(ii) Response by Consumer
Proposed Sec. 230.3(g)(3)(ii) would require a means for the
consumer to affirmatively indicate that disclosures may be provided
electronically. Examples include a signature (for requests made in
paper form) or a ``check box'' on a computer screen or a signature line
(for requests made in paper form). The requirement is intended to
ensure that consumers' consent is established knowingly and
voluntarily, and that consent to receive electronic disclosures is not
inferred from consumers' use of the account or acceptance of general
account terms. See proposed comment 3(g)(3)(ii)-1.
3(g)(3)(iii) Changes
Depository institutions would be required to notify consumers about
changes to the information provided in the notice required by
Sec. 230.3(g)(3)(i)--for example, if technical upgrades to software are
required. Proposed comment 3(g)(3)(iii)-1 contains this guidance.
The notice must include the effective date of the change and be
provided before that date. Proposed comment 3(g)(3)(iii)-2 would
provide that the notice must be sent a reasonable period of time before
the effective date of the change. Although the number of days that
constitutes reasonable notice may vary, depending on the type of change
involved, the comment would provide institutions with a safe harbor:
fifteen days' advance notice would be considered a reasonable time in
all cases. The same time period is stated in similar proposals under
Regulations B, Z, and E published in today's Federal Register. Comment
is requested on whether a safe harbor of 15 days is an appropriate time
period, and whether a uniform period for changes involving electronic
communication is desirable. An alternative approach would adopt notice
requirements that are consistent with change-in-terms requirements
under the respective regulations. Under this approach, for example, the
safe harbor would be 21 days under Sec. 205.8 for Regulation E, 15 days
under Sec. 226.9 for Regulation Z, and 30 days under Sec. 230.5 for
Regulation DD. Proposed comment 3(g)(3)(iii)-3 contains guidance on
delivery requirements for the notice of change.
The notice of a change must also include a toll-free telephone
number or, at the institution's option, an address for questions about
receiving electronic disclosures. For example, a consumer may call
regarding problems related to a change, such as an upgrade to computer
software that is not provided to the institution. Consumers may also
use the toll-free number if they wish to discontinue receiving
electronic disclosures. In such cases, the institution must inform
consumers whether the account is also available with disclosures in
paper form. (See proposed comments 3(g)(3)(iii)-4 through -6.)
If the change involves providing additional disclosures by
electronic communication, institutions generally would be required to
provide the notice in Sec. 230.3(g)(3)(i) and obtain the consumer's
consent. That notice would not be required if the institution
previously obtained the consumer's consent to the additional
disclosures in its initial notice by disclosing the possibility and
specifying which disclosures might be provided electronically in the
future. Comment is specifically requested on this approach. A list of
additional disclosures may be necessary to ensure that consumers'
consent is informed and knowing (provided it does not cause confusion).
3(g)(4) Address or Location To Receive Electronic Communication
Proposed Sec. 230.3(g)(4) identifies addresses and locations where
institutions using electronic communication may send information to the
consumer. Institutions may send information to a consumer's electronic
address, which is defined in proposed comment 3(g)(4)(i)-1 as an e-mail
address that the consumer also may use for receiving communications
from parties other than the depository institution. For periodic
statements, for example, a depository institution's responsibility to
provide disclosures by electronic communication will be satisfied when
the information is sent to the consumer's e-mail address in accordance
with the applicable proposed rules concerning delivery of disclosures
by electronic communication.
Guidance accompanying the March 1998 proposed rule provided that an
institution would not meet delivery requirements by simply posting
information to an Internet site such as the institution's ``home page''
without appropriate notice on how consumers can access the information.
Industry commenters wanted to retain the flexibility of posting
disclosures on an Internet website. They did not object to providing a
separate notice alerting consumers about the disclosures' availability
but requested more guidance on the issue. Consumer advocates and others
expressed concern that the mere posting of information inappropriately
places the responsibility to obtain disclosures on consumers, and
undermines the purpose of the delivery requirements of the regulation.
The Board recognizes that currently, because of security and
privacy concerns associated with data transmissions, a number of
institutions may choose to provide disclosures at their websites, where
the consumer may retrieve them under secure conditions. Under
Sec. 230.3(g)(4), a depository institution may make disclosures
available to a consumer at a location other than the consumer's
electronic address. The institution must notify the consumer when the
information becomes available and identify the account involved. The
notice must be sent to the electronic mail address designated by the
consumer; the depository institution may, at its option, permit the
consumer to designate a postal address. A proposed model form (Model
Form B-12) is published below; see also proposed comment 3(g)(4)(ii)-1.
The Board believes it would be inconsistent with the TISA to
require a consumer to initiate a search--for example, to search the
website of each institution with which an account is held--to determine
whether a disclosure has been provided. The proposed approach ensures
that a consumer would not be required to check an institution's website
repeatedly, for example, to learn whether the institution posted a
change in a term that affects a deposit account held by the consumer.
The requirements of the regulation would be met only if the
required disclosure is posted on the website and the consumer is
notified of its availability in a timely fashion. For
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example, depository institutions must provide a change-in-terms notice
to consumers at least 30 days in advance of the change. (12 CFR
230.5(a).) For a change-in-terms notice posted on the Internet, an
institution must both post the notice and notify consumers of its
availability at least 30 days in advance of the change.
Commenters sought guidance on how long disclosures posted at a
particular location must be available to consumers. There is a variety
of circumstances when a consumer may not be able immediately to access
the information due to illness, travel, or computer malfunction, for
example. Under Sec. 230.3(g)(4), institutions must post information
that is sent to a location other than the consumer's e-mail address for
90 days. Proposed comment 3(g)(4)(ii)-2 contains this guidance.
Under the modified proposal, institutions that post information at
a location other than the consumer's e-mail address are required--after
the 90 day period--to make disclosures available to consumers upon
request for a period of not less than two years from the date
disclosures are required to be made, consistent with the record
retention requirements under Sec. 230.9(c). The Board requests comment
on this approach, including suggestions for alternative means for
providing consumers continuing access to disclosures.
Section 230.4 Account Disclosures
4(a) Delivery of Account Disclosures--(1) Account Opening.
Account-opening disclosures required under Sec. 230.4(a) set forth
the terms and conditions of the account. These disclosures inform the
consumers of the types and amount of any fees that may be imposed and
the interest rate and annual percentage yield that will be paid on the
account. Section 230.4(a)(1) requires that account disclosures be
provided before an account is opened or a service is provided,
whichever is earlier; Sec. 230.4(a)(2) requires that account
disclosures be provided upon request.
Section 266(b) of TISA and Sec. 230.4(a)(1) of the regulation
provide that if the consumer is not physically present at the
institution when an initial deposit is accepted (and the disclosures
have not been furnished previously) the institution shall mail or
deliver the disclosures no later than ten days after the account is
opened or the service is provided. The rationale underlying the ten-day
delay is that the institution cannot provide written disclosures before
an account is opened in some instances (such as when an account is
opened by telephone). Similarly, Sec. 230.4(a)(2) provides that if the
consumer is not present at the institution when the request for account
disclosures is made, the institution must mail or deliver the
disclosures within a reasonable time after the institution receives the
request; comment 4(a)(2)(i)-3 clarifies that ten days is a reasonable
time.
The Board indicated in the March 1998 proposed rule that the ten-
day delay did not apply to accounts opened by electronic communication,
such as on the Internet. The difficulties associated with an account
opening by telephone, for example, do not exist for accounts opened
electronically; thus, depository institutions would be required to
provide account-opening disclosures before the account is opened or a
service is provided, when an account is opened using electronic
communication.
Views were mixed on the Board's interpretation that the ten-day
delay in providing disclosures would not apply to accounts opened
electronically. Many commenters were opposed to the Board's position.
These commenters believed that it would be difficult to furnish
transaction-specific disclosures before the account is opened. For
example, interest rates may change after the consumer submits account
information but before the account is opened in accord with the
institution's procedures. Other commenters supported the Board's
position. They believed that all of the information that would be
available to a consumer present in a depository institution is
available to a consumer via a website controlled by the depository
institution. A few commenters stated that it would not be overly
burdensome to provide required disclosures on a website.
Based on the comments received and further analysis, the modified
proposals address an institution's duties when a consumer is not
physically present at the institution and uses electronic communication
to open an account or request a service, or to request account
disclosures. Section 230.4(a)(1)(ii) is proposed under the Board's
exception authority in section 269(a)(3) of the act and would require
institutions to provide account disclosures before an account is opened
or a service is provided; the ten-day delay would not apply. Proposed
Sec. 230.4(a)(2)(i) would provide that institutions must respond to
requests within a reasonable period after receiving the request and may
provide account disclosures electronically to a consumer's electronic
mail address or in paper form. The requirements of Sec. 230.3(g)(3)
would not apply to such requests. Comment is also requested on whether,
in the context of electronic communication, the ten-day time period
provided in comment 4(a)(2)(i)-3 for responding to requests for account
disclosures is reasonable.
Section 230.8 Advertising
8(a) Misleading or Inaccurate Advertisements
Section 230.8 provides that advertising certain terms triggers the
disclosure of other account terms. Although Regulation DD does not
address multi-page advertisements, Regulations Z (Truth in Lending) and
M (Consumer Leasing) permit creditors to provide required advertising
disclosures on more than one page, if certain conditions are met.
Elsewhere in today's Federal Register, the Board is proposing guidance
to creditors and lessors on how to comply with rules on multi-page
advertising in the context of electronic advertisements. Consistent
with the approach taken for Regulations Z and M, the Board believes
that a depository institution that advertises electronically can comply
with the regulation's advertising requirements if the required terms
are disclosed at more than one location, under certain conditions. If a
triggering term (such as a bonus or an annual percentage yield) appears
at a location that does not contain other required disclosures, the
location with the triggering term must clearly refer the consumer to
the page or location that sets forth clearly and conspicuously all
additional required disclosures. Proposed comment 8(a)-9 contains this
guidance.
8(b) Permissible Rates
Section 230.8(b) provides that an advertisement may state an
interest rate, as long as the interest rate is stated in conjunction
with, but not more conspicuously than, the annual percentage yield to
which it relates. Proposed comment 8(b)-4 contains guidance on how this
rule applies to rates stated in an electronic advertisement.
8(e) Exemption for Certain Advertisements
Section 230.8(e) exempts advertisements made through broadcast or
electronic media, such as television and radio, from several of the
advertising disclosures. The Board provided guidance on the scope of
the exemption in the supplementary information to the March 1998
proposed rule. The Board stated that the ``electronic media'' exemption
would
[[Page 49746]]
not apply to advertisements made electronically, such as those posted
on the Internet.
The rationale for the broadcast and electronic media exemption is
that these media have time or space constraints that make it extremely
burdensome to provide the required disclosures. The Board believes that
advertisements posted on the Internet generally do not have these
constraints. A few commenters disagreed. They stated that there are
space constraints on ``non-proprietary'' websites and urged the Board
to apply the exemption to third-party websites. The Board believes,
however, that space constraints on a non-proprietary website are not
significantly different than those for a print advertisement. Thus,
advertisements made electronically such as advertisements posted on the
Internet are subject to Regulation DD's general advertising rules.
Proposed comment 8(e)(1)(i)-1 contains this guidance.
Appendix B to Part 230--Model Clauses and Sample Forms
The Board solicits comment on three proposed model forms and two
sample forms for use by depository institutions to aid compliance with
the disclosure requirements of Secs. 230.3(g)(3) and (g)(4). Model
Forms B-10 and B-11 would implement Sec. 230.3(g)(3), regarding the
notice that depository institutions must give prior to using electronic
communication to provide required disclosures. Model Form B-12 would
implement Sec. 230.3(g)(4), regarding notices to consumers about the
availability of electronic disclosures at locations such as the
depository institution's website. Use of any modified version of these
forms would be in compliance as long as the institution does not delete
information required by the regulation or rearrange the format so as to
affect the substance, clarity, or meaningful sequence of the
disclosure. For example, institutions that combine Regulation E and
Regulation DD disclosures on a deposit account can modify the model
form to provide a single disclosure statement about electronic delivery
of those disclosures.
Sample Form B-13 illustrates the disclosures under Sec. 230.3(g)(3)
for a deposit account. The sample assumes that the institution also
offers paper disclosures for consumers who choose not to receive
electronic disclosures. Sample Form B-14 assumes that consumers must
accept electronic disclosures if they want to open the deposit account.
Additional Issues Raised by Electronic Communication
Preemption
A few commenters suggested that any final rule issued by the Board
permitting electronic disclosures should explicitly preempt any state
law requiring paper disclosures. Under Appendix C of the regulation,
state laws are preempted if they are inconsistent with the act and
regulation and only to the extent of the inconsistency. The proposed
rule would provide depository institutions with the option of giving
required disclosures by electronic communication as an alternative to
paper. There is no apparent inconsistency with the act and regulation
if state laws require paper disclosures. The Board, however, will
review preemption issues that are brought to the Board's attention.
Appendix C outlines the Board's procedures for determining whether a
specific law is preempted, which will guide the Board in any
determination requested by a state, depository institution, or other
interested party following publication of a final rule regarding
electronic communication.
IV. Form of Comment Letters
Comment letters should refer to Docket No. R-1044, and, when
possible, should use a standard typeface with a type size of 10 or 12
characters per inch. This will enable the Board to convert the text to
machine-readable form through electronic scanning, and will facilitate
automated retrieval of comments for review. Also, if accompanied by an
original document in paper form, comments may be submitted on 3\1/2\
inch computer diskettes in any IBM-compatible DOS or Windows-based
format.
V. Initial Regulatory Flexibility Analysis
In accordance with section 3(a) of the Regulatory Flexibility Act,
the Board has reviewed the proposed amendments to Regulation DD.
Although the proposal would add disclosure requirements with respect to
electronic communication, overall, the proposed amendments are not
expected to have any significant impact on small entities. A depository
institution's use of electronic communication to provide disclosures
required by the regulation is optional. The proposed rule would give
depository institutions flexibility in providing disclosures. A final
regulatory flexibility analysis will be conducted after consideration
of comments received during the public comment period.
VI. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3506; 5 CFR 1320 Appendix A.1), the Board reviewed the proposed rule
under the authority delegated to the Board by the Office of Management
and Budget (OMB). 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 number. The OMB
control number is 7100-0271.
The collection of information requirements relevant to this
proposed rulemaking are in 12 CFR Part 230. This information is
mandatory (12 U.S.C. 4301 et seq.) to evidence compliance with the
requirements of the Regulation DD and the Truth in Savings Act (TISA).
The revised requirements would be used to ensure adequate disclosure of
basic terms, costs, and rights relating to services affecting consumers
holding deposit accounts and receiving certain disclosures by
electronic communication. The respondents/recordkeepers are for-profit
depository institutions, including small businesses. Institutions are
also required to retain records for 24 months. This regulation applies
to all types of depository institutions, not just state member banks;
however, under Paperwork Reduction Act regulations, the Federal Reserve
accounts for the burden of the paperwork associated with the regulation
only for state member banks. Other agencies account for the paperwork
burden on their respective constituencies under this regulation.
The proposed revisions would allow institutions the option of using
electronic communication (for example, via personal computer and modem)
to provide disclosures required by the regulation. Although the
proposal would add disclosure requirements with respect to electronic
communication, the optional use of electronic communication would
likely reduce the paperwork burden of depository institutions. With
respect to state member banks, it is estimated that there are 988
respondents/recordkeepers and an average frequency of 87,071 responses
per respondent each year. Therefore, the current amount of annual
burden is estimated to be 1,464,216 hours. There is estimated to be no
additional annual cost burden and no capital or start-up cost.
Because the records would be maintained at state member banks and
the notices are not provided to the Federal Reserve, no issue of
confidentiality under the Freedom of Information Act arises; however,
any
[[Page 49747]]
information obtained by the Federal Reserve may be protected from
disclosure under exemptions (b)(4), (6), and (8) of the Freedom of
Information Act (5 U.S.C. 522(b)(4), (6) and (8)). The disclosures and
information about error allegations are confidential between
institutions and the customer.
The Federal Reserve requests comments from institutions, especially
state member banks, that will help to estimate the number and burden of
the various disclosures that would be made in the first year this
proposed regulation would be effective. Comments are invited on: (a)
the cost of compliance; (b) ways to enhance the quality, utility, and
clarity of the information to be disclosed; and (c) ways to minimize
the burden of disclosure on respondents, including through the use of
automated disclosure techniques or other forms of information
technology. Comments on the collection of information should be sent to
the Office of Management and Budget, Paperwork Reduction Project (7100-
0271), Washington, DC 20503, with copies of such comments sent to Mary
M. West, Federal Reserve Board Clearance Officer, Division of Research
and Statistics, Mail Stop 97, Board of Governors of the Federal Reserve
System, Washington, DC 20551.
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 proposed changes to
Regulation DD. New language is shown inside bold-faced arrows and
deletions are shown in 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 is amended by adding a new paragraph (g) to read
as follows:
Sec. 230.3 General disclosure requirements.
* * * * *
(g) Electronic communication. (1) Definition. Electronic
communication means a message transmitted electronically between a
consumer and a depository institution in a format that allows visual
text to be displayed on equipment such as a personal computer monitor.
(2) Electronic communication between depository institution and
consumer. (i) General. Except as provided in paragraph (g)(2)(ii) of
this section, a depository institution that has complied with paragraph
(g)(3) of this section may provide by electronic communication any
information required by this regulation to be in writing.
(ii) In-person exception. When a consumer opens a deposit account
or requests a service in person, disclosures required under
Sec. 230.4(a)(1) shall be provided in paper form, unless the consumer
previously initiated the process of opening the account by electronic
communication and disclosures were provided in compliance with
paragraphs (g)(3)(i) and (g)(3)(ii) of this section at or around that
time. A depository institution shall also provide account disclosures
in paper form to a consumer who makes a request in person pursuant to
Sec. 230.4(a)(2).
(3) Disclosure notice. The disclosure notice required by this
paragraph shall be provided in a manner substantially similar to the
applicable model form set forth in Appendix B of this part (Model Forms
B-10 and B-11).
(i) Notice by depository institution. A depository institution
shall:
(A) Describe the information to be provided electronically and
specify whether the information is also available in paper form or
whether the account is offered only with electronic disclosures;
(B) Identify the address or location where the information will be
provided electronically; and if it is made available at a location
other than the consumer's electronic address, how long the information
will be available, and how it can be obtained once that period ends;
(C) Specify any technical requirements for receiving and retaining
information sent electronically, and provide a means for the consumer
to confirm the availability of equipment meeting those requirements;
and
(D) Provide a toll-free telephone number and, at the institution's
option, an address for questions about receiving electronic
disclosures, for updating consumers' electronic addresses, and for
seeking technical or other assistance related to electronic
communication.
(ii) Response by consumer. A depository institution shall provide a
means for the consumer to accept or reject electronic disclosures.
(iii) Changes. (A) A depository institution shall notify affected
consumers of any change to the information provided in the notice
required by paragraph (g)(3)(i) of this section. The notice shall
include the effective date of the change and must be provided before
that date. The notice shall also include a toll-free telephone number,
and, at the institution's option, an address for questions about
receiving electronic disclosures.
(B) In addition to the notice under paragraph (g)(3)(iii)(A) of
this section, if the change involves providing additional disclosures
by electronic communication, a depository institution shall provide the
notice in paragraph (g)(3)(i) of this section and obtain the consumer's
consent. A notice is not required under paragraph (g)(3)(i) of this
section if the institution's initial notice states that additional
disclosures may be provided electronically in the future and specifies
which disclosures could be provided.
(4) Address or location to receive electronic communication. A
depository institution that uses electronic communication to provide
information required by this regulation shall:
(i) Send the information to the consumer's electronic address; or
(ii) Post the information for at least 90 days at a location such
as a website, and send a notice to the consumer when the information
becomes available. Thereafter the information shall be available upon
request for a period of not less than two years from the date
disclosures are required to be made. The notice required by paragraph
(g)(4)(ii) shall identify the account involved, shall be sent to an
electronic address designated by the consumer (or to a postal address,
at the institution's option), and shall be substantially similar to the
model form set forth in Appendix B of this part (Model Form B-
12).
3. Section 230.4 is amended by revising paragraph (a)(1) and
paragraph (a)(2)(i) to read as follows:
Sec. 230.4 Account disclosures
(a) Delivery of account disclosures. (1) Account opening. (i)
General. A depository institution shall provide
account disclosures to a consumer before an account is opened or a
service is provided, whichever is earlier. An institution is deemed to
have provided a service when a fee required to be disclosed is
assessed. Except as provided in paragraph (a)(1)(ii) of this
section, if [If] the consumer is not present at the
institution when the account is opened or the service is provided and
has not already received the disclosures, the institution shall mail or
deliver the disclosures no later than 10 business days after the
account
[[Page 49748]]
is opened or the service is provided, whichever is earlier.
(ii) Electronic communication. If a consumer is not
present at the institution and uses electronic communication to open an
account or request a service, the disclosures required under paragraph
4(a)(1) of this section must be provided before an account is opened or
a service is provided.
(2) Requests. (i) A depository institution shall provide account
disclosures to a consumer upon request. If the consumer is not present
at the institution when a request is made, 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 at the consumer's electronic address. The requirements
of Sec. 230.3(g)(3) shall not apply.
* * * * *
4. Appendix B to Part 230 is amended by:
a. Adding entries for appendices B-10 through B-14 to the table of
contents at the beginning of the appendix; and
b. Adding new Appendices B-10, B-11, B-12, B-13, and B-14.
The additions read as follows:
Appendix B to Part 230--Model Disclosure Clauses and Sample Forms
* * * * *
B-10--Model Disclosures for Electronic Communication
(Sec. 230.3(g)(3)) (Disclosures Available in Paper Form or
Electronically)
B-11--Model Disclosures for Electronic Communication
(Sec. 230.3(g)(3)) (Disclosures Available Only Electronically)
B-12--Model Notice for Delivery of Information Posted at Certain
Locations (Sec. 230.3(g)(4))
B-13--Sample Form for Electronic Communication (Sec. 230.3(g)(3))
(Disclosures Available in Paper Form or Electronically)
B-14--Sample Form for Electronic Communication (Sec. 230.3(g)(3))
(Disclosures Available Only Electronically)
B-10 MODEL DISCLOSURES FOR ELECTRONIC COMMUNICATION
(Sec. 230.3(g)(3)) (Disclosures Available in Paper or Electronically)
You can choose to receive important information required by the
Truth in Savings Act in paper or electronically.
Read this notice carefully and keep a copy for your records.
You can choose to receive the following information in
paper form or electronically: (description of specific disclosures
to be provided electronically).
How would you like to receive this information
{time} I want paper disclosures.
{time} I want electronic disclosures.
[We may provide the following additional disclosures
electronically in the future: (description of specific
disclosures).]
[If you choose electronic disclosures, this
information will be available at: (specify location) for ____ days.
After that, the information will be available upon request (State
how the consumer can obtain the information). When the information
is posted, we will send you a message at the electronic mail address
you designate here: (consumer's electronic mail address).]
[If you choose electronic disclosures this information will be
sent to the electronic mail address that you designate here:
(consumer's electronic mail address).]
To receive this information you will need: (list
hardware and software requirements).
Do you have access to a computer that satisfies these
requirements?
{time} Yes {time} No
Do you have access to a printer, or the ability to
download information, in order to keep copies for your records?
{time} Yes {time} No
To update your electronic address, if you have
questions about receiving disclosures, or need technical or other
assistance concerning these disclosures, contact us at (telephone
number).
B-11 MODEL DISCLOSURES FOR ELECTRONIC COMMUNICATION (Sec. 230.3(g)(3))
(Disclosures Available Only Electronically)
You will receive important information required by the Truth in
Savings Act electronically.
Read this notice carefully and keep a copy for your records.
The following information will be provided
electronically: (description of specific disclosures to be provided
electronically).
This deposit account is not available unless you accept
electronic disclosures.
[We may provide the following additional disclosures
electronically in the future: (description of specific
disclosures).]
[If you choose electronic disclosures, this information
will be available at: (specify location) for ____ days. After that,
the information will be available upon request (state how the
consumer can obtain the information). When the information is
posted, we will send you a message at the electronic mail address
you designate here: (consumer's electronic mail address).]
[If you choose electronic disclosures this information will be
sent to the electronic mail address that you designate here:
(consumer's electronic mail address).]
To receive this information you will need: (list
hardware and software requirements).
Do you have access to a computer that satisfies these
requirements?
{time} Yes {time} No
Do you have access to a printer, or the ability to
download information, in order to keep copies for your records?
{time} Yes {time} No
Do you want this deposit account with electronic disclosures?
{time} Yes {time} No
To update your electronic address, if you have
questions about receiving disclosures, or need technical or other
assistance concerning these disclosures, contact us at (telephone
number).
B-12 MODEL NOTICE FOR DELIVERY OF INFORMATION POSTED AT CERTAIN
LOCATIONS (Sec. 230.3(g)(4))
Information about your (identify account) is now available at
[website address or other location]. The information discusses
(describe the disclosure). It will be available for ____ days.
BILLING CODE 6210-01-P
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BILLING CODE 6210-01-C-
[[Page 49751]]
5. In Supplement I to Part 230 in Section 230.2--Definitions, under
(q) Periodic Statement, paragraph 1.ii. is removed and paragraph 1.iii.
is redesignated as paragraph 1.ii.
6. In Supplement I to Part 230, under Section 230.3-- General
disclosure requirements, a new paragraph (g) Electronic communication,
is added to read as follows:
Supplement I to Part 230--Official Staff Interpretations
* * * * *
Section 230.3 General disclosure requirements
* * * * *
(g) Electronic communication
(g)(1) Definition
1. Coverage. Information transmitted by facsimile may be
received in paper form or electronically, although the party
initiating the transmission may not know at the time the disclosures
are sent which form will be used. A depository institution that
provides disclosures by facsimile should comply with the
requirements for electronic communication unless the depository
institution knows that the disclosures will be received in paper
form.
(g)(2) Electronic communication between depository institution and
consumer
1. Disclosures provided on institution's equipment. Institutions
that control equipment providing electronic disclosures to consumers
(for example, computer terminals in an institution's lobby or kiosks
located in public places) must ensure that the equipment satisfies
the regulation's requirements to provide disclosures in a clear and
conspicuous format and in a form the consumer may retain. A
depository institution that controls the equipment may provide a
printer for the consumers' use in lieu of sending the information to
the consumer's electronic mail address or posting the information at
another location such as the institution's website.
2. Retainability. Institutions must provide electronic disclosures
in a retainable format (for example, they can be printed or
downloaded). Consumers may communicate electronically with depository
institutions through a variety of means and from various locations.
Depending on the location (at home, at work, in a public place such as
a library), a consumer may not have the ability at a given time to
preserve TISA disclosures presented on-screen. To ensure that consumers
have an adequate opportunity to retain the disclosures, the institution
also must send them to the consumer's designated electronic mail
address or to another location, for example, on the institution's
website, where the information may be retrieved at a later date.
3. Timing and delivery. When a consumer opens an account on the
Internet or by other electronic means, in order to meet the timing and
delivery requirements, institutions must ensure that disclosures
applicable at that time appear on the screen and are in a retainable
format. The delivery requirements would not be met if disclosures do
not either appear on the screen or if the consumer is allowed to open
an account before receiving the disclosures. For example, an
institution can provide a link to electronic disclosures appearing on a
separate page as long as consumers cannot bypass the link and they are
required to access the disclosures before completing the opening of the
account.
(g)(2)(ii) In-person exception
1. Account-opening disclosures in paper form. If a consumers
opens a deposit account in person, the depository institution
generally must provide account-opening disclosures in paper form.
For example, if a consumer visits a depository institution's branch
office to open a deposit account, account-opening disclosures are
required before the consumer opens an account or a service is
provided and they must be provided in paper form; directing the
consumer to disclosures posted on the institution's website would
not be sufficient. If, however, a consumer makes a request on the
Internet to open an account, a depository institution may send
disclosures electronically at or around that time even though the
depository institution's procedures require the consumer to visit a
branch office at a later time to complete the agreement (for
example, to execute a signature card).
(g)(3) Disclosure notice
1. Consumer's affirmative responses. Even though a consumer
accepts electronic disclosures in accordance with
Sec. 230.3(g)(3)(ii), a depository institution may deliver
disclosures by electronic communication only if the consumer
provides an electronic address where one is required, and responds
affirmatively to questions about technical requirements, access to a
printer or the ability to download information; (see sample forms B-
13 and B-14 in appendix B to this part).
(g)(3)(i) Notice by depository institution
1. Toll-free telephone number. The number must be toll-free for
nonlocal calls made from an area code other than the one used in the
institution's dialing area. Alternatively, a depository institution
may provide any telephone number that allows a consumer to call for
information and reverse the telephone charges.
2. Institution's address. Depository institutions have the
option of providing either an electronic or postal address for
consumers' use in addition to the toll-free telephone number.
3. Discontinuing electronic disclosures. Consumers may use the
toll-free number (or optional address) if they wish to discontinue
receiving electronic disclosures. In such cases, the institution
must inform consumers whether the account is also available with
disclosures in paper form.
(g)(3)(ii) Response by consumer
1. Nature of consent. Consumers must agree to receive
disclosures by electronic communication knowingly and voluntarily.
An agreement to receive electronic disclosures is not implied from
consumers' use of an account or acceptance of general account terms.
(g)(3)(iii) Changes
1. Examples. Examples of changes include a change in technical
requirements, such as upgrades to software packages affecting the
institution's disclosures provided on the Internet.
2. Timing for notices. A notice of a change must be sent a
reasonable period of time before the effective date of the change.
The length of a reasonable notice period may vary, depending on the
type of change involved; however fifteen days is a reasonable time
for providing notice in all cases.
3. Delivery of notices. An institution meets the delivery
requirements if the notice of a change is sent to the address
provided by the consumer for receiving other disclosures. For
example, if the consumer provides an electronic address to receive
notices about periodic statements posted at the institution's
website, the same electronic address may be used for the change
notice. The consumer's postal address must be used, however, if the
consumer consented to additional disclosures by electronic
communication when receiving the notice under Sec. 230.3(g)(3)(i)
but provided a postal address to receive periodic statements in
paper form.
4. Toll-free number. See comment 3(g)(3)(i)-1.
5. Institution's address. See comment 3(g)(3)(i)-2
6. Consumer inquiries. Consumers may use the toll-free telephone
number (or optional address) for questions or assistance with
problems related to a change, such as an upgrade to computer
software that is not provided by the institution. Consumers may also
use the toll-free number if they wish to discontinue receiving
electronic disclosures; in such cases, the institution must inform
consumers whether the account is also available with disclosures in
paper form.
(g)(4) Address or location to receive electronic communication
(g)(4)(i)
1. Electronic address. A consumer's electronic address is an
electronic mail address that may be used by the consumer for
receiving communications transmitted by parties other than the
depository institution.
(g)(4)(ii)
1. Identifying account involved. A depository institution is not
required to identify an account by reference to the account number.
For example, where the consumer does not have multiple accounts, and
no confusion would result, the institution may refer to ``your
checking account,'' or when the consumer has multiple accounts the
institution may use a truncated account number.
[[Page 49752]]
2. Availability. Information that is not sent to a consumer's
electronic mail address must be available for at least 90 days from
the date the information becomes available or from the date the
notice required by Sec. 230.3(g)(4)(ii) is sent to the consumer,
whichever occurs later.
7. In Supplement I to Part 230, under Sec. 230.8--Advertising,
the following amendments are made:
a. Under (a) Misleading or inaccurate advertisements, a new
paragraph 9. is added;
b. Under (b) Permissible rates, a new paragraph 4. is added; and
c. Under (e)(1) Certain Media, a new heading (e)(1)(i), and a
new paragraph 1. are added.
The additions read as follows:
* * * * *
Section 230.8 Advertising
(a) Misleading or inaccurate advertisements
* * * * *
9. Electronic advertising. A depository institution
that provides a multi-page advertisement electronically may display
a triggering term (such as a bonus or an annual percentage yield) at
one location, as long as the consumer is clearly referred--for
example, by clicking an icon that directly connects the consumer--to
the location that sets forth clearly and conspicuously the
additional disclosures required by the regulation. For example, the
icon could instruct the consumer to ``click here for additional cost
information.''
* * * * *
(b) Permissible rates
* * * * *
4. Electronic communication. An interest rate may be
stated in conjunction with, but not more conspicuously than, the
annual percentage yield to which it relates. In an advertisement
using electronic communication, both rates must appear in the same
location so that both rates may be viewed simultaneously. This
requirement is not satisfied if the annual percentage yield can be
viewed only by use of a link that connects the consumer to
information appearing at another location.
* * * * *
(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.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, August 31, 1999.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 99-23140 Filed 9-13-99; 8:45 am]
BILLING CODE 6210-01-P
