Regulation DD and Fee Schedule Changes

Issue/Inquiry

The Bank wants to send an updated fee schedule out to its customers for its products and services, as it would like to move forward with implementing the changes. Does it need to send the entire fee schedule, or can it just send a statement notice to customers indicating that the fee schedule has changed and to refer to the Bank’s website or call if they would like a hard copy?

Response Summary

For fee schedule changes affecting deposit accounts, Regulation DD would require advance notice of the changes to be made to consumers, since this would be a change in a term required to be disclosed in the account opening disclosures. The entire fee schedule could be sent, with the changes highlighted, or a notice of the changes could be made in the periodic statement. Notice of changes in the fees for other Bank products and services could also be made in the periodic statement or in the Bank website, but no advance notice would be required.

Response Detail

For changes affecting consumer deposit accounts, Regulation DD requires a depository institution to provide advance notice to affected consumers of any change in a term required to be disclosed in the account opening disclosures, if the change may reduce the annual percentage yield or adversely affect the consumer. The notice must be mailed or delivered at least 30 calendar days before the effective date of the change. 12 CFR §1030.5(a)(1).

Among the account opening disclosures is the amount of any fee that may be imposed in connection with the account (or an explanation of how the fee will be determined) and the conditions under which the fee may be imposed. 12 CFR §1030.4(b)(4). Consequently, advance notice of a change in the deposit account fees would have to be made, if the changes adversely affect consumers.

In its current form, Regulation DD will allow alternatives in fulfilling the notification requirement. As per the official commentary, financial institutions may provide a change-in-terms notice on or with a periodic statement or in another mailing. For example, an institution may note that a particular fee has been changed (also specifying the new amount) or use an accompanying letter that refers to the changed term. If an institution provides notice through revised account disclosures (in this case, a revised fee schedule), the changed terms must be highlighted in some manner. Official Interpretations, 1030.5(a)(1) – 1.

This means that the Bank does not need to provide the entire fee schedule, but could instead provide the notice in the periodic statement or in a letter accompanying the periodic statement, or in a separate mailing. The notice would indicate the nature of the changes in the fee schedule and the effective date, which would be at least 30 days after the date of the notice. If the Bank does send out the revised fee schedule, the changed fees that would have been disclosed in the account-opening disclosures will have to be highlighted.

The disclosures required by Regulation DD, including the subsequent disclosures regarding changed terms, may also be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (“E-Sign Act”) (15 U.S.C. 7001 et seq.). 12 CFR §1030.3(a).

If the consumers are not adversely affected by the changes in deposit-account related fees, no advance notice needs to be made. Reductions in the fees would not adversely affect the consumers, and thus would not require advance notice. The Bank could simply implement the changes, though as a matter of best practice, it would want to notify consumers, as through a notice in the next periodic statement.

For other fees concerning Bank services and products but not related to consumer deposit accounts, the Bank could provide a notice to the consumers of the changes in the periodic statement or in a separate mailing, with instructions to go to a branch office or telephone the Bank for a copy of the complete schedule, or refer to the website to see the complete schedule. Advance notice of the changes would not be required.

This entry was posted on Monday, April 23rd, 2018 at 6:00 am.