What is Regulation DD?
Regulation DD is a directive set forth by the Federal Reserve, mandated to implement the Truth in Savings Act (TISA) passed in 1991. This regulation requires lenders to provide uniform information about fees and interest when opening an account for a consumer.
The objective of Regulation DD is to help consumers make more meaningful comparisons and well-informed decisions about the accounts they choose at depository institutions, through comprehensive disclosures provided at various stages.
Additionally, state laws that are inconsistent with the requirements of this federal act can be overridden. Financial bureaus or bodies like the Consumer Finance Protection Bureau (CFPB) handle these preemption determinations.
Empower Yourself with Regulation DD
Regulation DD is designed to protect and empower individual consumers, specifically those who are non-sophisticated in financial matters. It aids individuals in making educated decisions on where to open financial accounts. Note that the regulation covers depository institutions, excluding credit unions.
Types of accounts under Regulation DD include:
- Savings accounts
- Checking accounts
- Money market accounts
- Certificates of deposit (CDs)
- Variable-rate accounts
- Foreign currency accounts
Financial institutions must disclose crucial information regarding:
- Annual percentage yield
- Interest rates
- Minimum balance requirements
- Account opening disclosures
- Fee schedules
These disclosures must be provided:
- When the account is opened
- Upon consumer request for a disclosure
- When terms and conditions change
- Upon account maturity
The Power of the Truth in Savings Act
Regulation DD enacts the directives laid out in TISA, birthed from the Federal Deposit Insurance Corporation (FDIC) Improvement Act of 1991. TISA seeks to foster healthy competition among institutions and promote economic stability through transparency, empowering consumers with critical decision-making power.
Key Takeaways
- Regulation DD is a Federal Reserve directive enacting the Truth in Savings Act of 1991, ensuring consumers receive transparent information about account terms.
- It assists consumers in making informed decisions about their accounts by mandating specific disclosures from financial institutions.
- Several amendments ensure uniformity and clarity of information presented to consumers.
Regulation DD Rules to Adhere To
Advertising rules apply to individuals, including deposit brokers, who advertise accounts from institutions under the regulation. Marketing practices must be honest, avoiding misleading, inaccurate, or mispresented information. Ads cannot misleadingly describe interest payments as profit.
For example, a deposit broker advertising interest on an account must adhere to these rules, irrespective of who holds the account, whether the consumer or the broker.
Maintaining Accountability with Regulation DD Amendments
Significant amendments to Regulation DD include the 2006 update addressing the uniformity of information provided to consumers regarding overdraft accounts. Further amendments in 2010 mandated compliance with new disclosure norms on aggregate overdraft and returned item fees on periodic statements. Institutions must also offer balance disclosures via automated systems.
Disclosures must be lucid, discernable, and available in a consumer-friendly format, either written or another retainable method. Electronic disclosures can also be given with consumer consent.
Known Regulations and Consumer Provisions
Do Credit Unions Have to Comply?
No, Regulation DD specifically pertains to depository institutions. Non-banks and credit unions are generally unaffected.
Prompt Notifications to Consumers
In cases where a bank makes unfavorable changes, such as fee increments, financial institutions need to provide a 30-day notice to consumers. However, if changes are financially beneficial, like a decrease in fees, no notice is usually required. Temporary favorable changes, however, mandate the adherence to the advance notice rules on change in terms.
Written Notifications
Banks must offer written account disclosures aligning with the legal obligation or contract between the parties. For transparency, these disclosures should be clear and easily understandable, enabling consumers to grasp the account terms.
The Bottom Line
Regulation DD empowers consumers by mandating banks to provide transparent and upfront disclosures. This ensures non-institutional consumers can compare banking terms effectively and make the best decisions for their financial security and mobility.
Related Terms: Federal Reserve, Truth in Savings Act, Annual Percentage Yield, Disclosure Statement, Overdraft Fees.
References
- Consumer Financial Protection Bureau. “Section 1031.1: Authority, Purpose, Coverage, and Effect on State Laws”.
- Consumer Financial Protection Bureau. “Section 1030.2: Definitions”.
- Consumer Financial Protection Bureau. “Section 1030.4: Account Disclosures”.
- Consumer Financial Protection Bureau. “Section 1030.8: Advertising”.
- The Federal Reserve. “Regulation DD: Truth in Savings”, Page 1.
- Consumer Financial Protection Bureau. “Section 1030.3: General Disclosure Requirements”.
- Federal Reserve. “Regulation DD Truth in Savings”.
