Truth in Savings

[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

[[Page 49742]]

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

[[Page 49745]]

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.

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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