CUNA Comment Letter
NCUA's Interim Final Rule on Truth-in-Savings, 12 CFR 707
March 29, 1999
Transmitted by Telephone Facsimile: 703-518-6319
Ms. Becky Baker
Secretary to the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
Re: NCUA's Interim Final Rule on Truth-in-Savings, 12 CFR 707
Dear Ms. Baker:
The Credit Union National Association (CUNA) is pleased to comment on the National Credit Union Administration Board's Request for Comments on an Interim Final Rule to amend the Truth in Savings Regulation, 12 CFR 707. The request appeared in the Federal Register December 29, 1998.
The NCUA Board is seeking comments on three changes required by the Economic Growth and Regulatory Paperwork Reduction Act of 1996. These amendments, which were adopted by Federal Reserve Board and took effect for banks in September 1998, would:
- Eliminate the requirement for disclosures in advance of the maturity date for rollover accounts with maturities of one month (30 or 31 days) or less.
- No longer subject signs inside the premises of a credit union, or the premises of a share or deposit broker, to advertising requirements applying to permissible rates, additional disclosures when the APY is stated, and additional disclosures when a bonus is stated.
- Repeal the civil liability provisions, effective September 30, 2001.
CUNA was a strong proponent of these statutory changes, which removed burdensome and untenable provisions of the Truth in Savings Act. In particular, CUNA advocated removal of the civil liability provisions, which were inconsistent with the goals of a consumer disclosure law, such as the Truth in Savings Act.
Regarding removal of the advance disclosure prior to maturity for one-month rollover accounts, the Federal Reserve Board has taken the position that "one month" may include a term of 31 days as well as 30 days, even though the statutory amendments do not expressly require this result. CUNA supports this interpretation, which the NCUA Board has incorporated into the interim final regulation.
The NCUA Board is also seeking comments on other changes, which have also been adopted by the Federal Reserve Board for banks. These amendments would:
- Permit credit unions to use an annual percentage yield (APY) that is equal to the contract dividend rate for term share accounts that have a maturity of greater than one year and for which dividends do not compound but are distributed to the account holder at least annually. Credit unions must disclose that dividends cannot remain in these accounts and that the distribution of dividends is mandatory.
- Advertisements for these accounts must also include this language. Model disclosures are provided and Appendix A has been revised to demonstrate how the APY for such accounts must be determined.
As provided in the Truth-in-Savings Act, the NCUA Board is required to adopt regulations that are substantially similar to those of the Federal Reserve Board. In August 1998, the Federal Reserve Board changed its Truth in Savings rule, Regulation DD, to allow banks to disclose an APY equal to the contract rate for time accounts that have a maturity of more than one year and require interest distributions, rather than permitting compounding. Without such modifications, the calculation of the APY for these accounts provides a yield that is less than the contract rate. We support the amendments, which we believe simplify APY disclosures for these accounts.
Thank you for the opportunity to express our views on these changes that will significantly reduce the regulatory burden associated with truth in savings compliance.
Mary Mitchell Dunn
Associate General Counsel