RSK.IQ Question of the Week 10/15/18

Regulation DD and Change of Name of Deposit Account Product


The Bank is converting many of its deposit products from one product to another.  A Change in Terms letter will be mailed regarding five such product changes. For two products, the only change to the customer is the name of the product. These are noninterest-bearing accounts with no service charges and no minimum balance requirements. Is the Bank is required to send a 30-day advance notice to these customers?

Response Summary

For changes to existing deposit accounts, Regulation DD requires prior notice to be given for changes to any terms required to be disclosed at account opening. Since the name of the deposit account product is not among the information required to be disclosed at account opening, prior notice does not have to be given regarding this change. As a matter of best practice, the customer should be notified of the change when it goes into effect, as through a note on the account statement.

Response Detail

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 shall be mailed or delivered at least 30 calendar days before the effective date of the change. 12 CFR §1030.5(a)(1).

For new accounts, the account opening disclosures would provide the following information:

  • Annual percentage yield and interest rate
  • For variable rate accounts:
    • The fact that the interest rate and annual percentage yield may change
    • How the interest rate is determined
    • The frequency with which the interest rate may change
    • Any limitation on the amount the interest rate may change
  • The frequency with which interest is compounded and credited, and if consumers will forfeit interest if they close the account before accrued interest is credited, a statement that interest will not be paid in such cases.
  • Any minimum balance required to open the account, avoid the imposition of a fee; or obtain the annual percentage yield disclosed.
  • An explanation of the balance computation method used to calculate interest on the account and a statement of when interest begins to accrue on noncash deposits.
  • 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.
  • Any limitations on the number or dollar amount of withdrawals or deposits;
  • For time accounts:
    • The maturity date
    • A statement that a penalty will or may be imposed for early withdrawal, how it is calculated, and the conditions for its assessment
    • Effect of withdrawal of interest prior to maturity
    • A statement of whether the account will renew automatically at maturity, whether there is a grace period if it will, and whether interest will be paid after maturity if it will not and the customer does not renew the account
  • The amount or type of any bonus, when the bonus will be provided, and any minimum balance and time requirements to obtain the bonus. 12 CFR §1030.4(b).

Regulation DD does not require the name of the account product to be disclosed at account opening. Since the only change in this case will concern the name of the deposit account product, but not the terms of the account that were required to be disclosed at account opening, it will not be necessary to send prior notice to the customers before the change goes into effect. As a matter of best practice, notification should be provided to the customers, but this can be done through such means as a note on the account statement.

This entry was posted on Monday, October 15th, 2018 at 9:23 am.

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