What Is Regulation DD?
Regulation DD is a directive set forth by the Federal Reserve. Regulation DD was enacted to implement the Truth in Savings Act (TISA), which was passed in 1991 and requires lenders to provide certain uniform information about fees and interest when opening an account for a customer. Regulation DD (and the TISA) helps consumers make more informed decisions about the accounts they open at financial institutions.
Key Takeaways
- Regulation DD is a Federal Reserve directive enacted to implement theTruth in Savings Act.
- It was designed to help consumers make more informed decisions about the financial accounts they open.
- Banks and other financial institutions are required to provide consumers with disclosures about things such as account opening procedures and interest rates.
- Several amendments were implemented to include uniformity of information given to consumers and disclosures made through automated systems.
Understanding Regulation DD
Regulation DD applies to accounts opened by individuals—not to corporate or other organizational accounts—and is designed to protect and empower banking customers. Regulation DD helps individuals make intelligent decisions about where to open financial accounts. The regulation applies to depository institutions except credit unions. Institutions provide customers with disclosures at various times, including when an account is first opened.
The types of accounts the regulation is intended to assist consumers with include savings accounts, checking accounts, money market accounts, certificates of deposit (CDs), variable-rate accounts, and accounts denominated in a foreign currency.
Financial institutions are required under Regulation DD to disclose information to consumers regarding annual percentage yield, interest rates, minimum balance requirements, account opening disclosures, and fee schedules. Disclosures are provided to consumers:
- When the account is open
- When the consumer requests a disclosure
- When there are changes to the terms and conditions of the account
- When and if the account matures
Regulation DD applies only to accounts opened by individuals but not to corporate or other organizational accounts.
Regulation DD and the Truth in Savings Act (TISA)
As noted above, Regulation DD implements the TISA. This act was part of theFederal Deposit Insurance Corporation (FDIC)Improvement Act that passed the same year—in 1991. The act was meant to promote healthy competition between institutions and create economic stability. It also directs banks to be more transparent about some of their policies, giving consumers more power to decide where they want to do their banking business.
It's important to note that state laws that are inconsistent with the requirements of Regulation DD and the TISA are pre-empted to the extent of the inconsistency. There is a procedure for requesting a preemption determination from the Consumer Finance Protection Bureau (CFPB).
Credit unions and non-banks are not required to abide by Regulation DD.
Regulation DD Rules and Amendments
Rules
Advertising rules set forth apply to individuals who advertise the types of accounts offered by the institutions subject to the regulation. This includes deposit brokers. The marketing rules restrict institutions from advertising in any way that may mislead consumers, present inaccurate information, or otherwise misrepresent the contract for the deposit account. The ads cannot use the term profit when referencing the interest paid on an account.
For example, if a deposit broker places an ad to offer consumers interest in an account, the advertising rules apply to the advertisem*nt regardless of whether the account is held by the consumer or the broker.
Amendments
Regulation DD was amended in 2006 to address the concerns about the uniformity of information provided to consumers when deposit accounts are overdrawn. In 2010, other amendments were added directing depository institutions to comply with rule changes governing disclosures on periodic statements for aggregate overdraft and returned item fees. The amendments also featured a rule on providing balance disclosures to consumers made through automated systems.
Regulation DD stipulates that disclosures provided to consumers must be clear and conspicuous and must be made available in writing or another form the consumer can keep. The disclosures must also clearly identify when these disclosures for different accounts have been combined.
Disclosures must reflect the terms of the legal obligation established for the accounts in question and the agreement between the consumer and the institution. These disclosures can be rendered in electronic form with the consumer's approval.
Do Credit Unions Have to Comply With Regulation DD?
No. Regulation DD only applies to accounts issued by depository institutions. Non-banks and credit unions are not affected.
When Does a Bank Have to Notify Me of Changes?
It depends. For changes unfavorable to the consumer—for example, increases in fees for bank services—Regulation DD requires financial institutions to provide the consumer with at least 30 days’ notice.For changes that are favorable to the consumer—decreasing or eliminating fees—no notice is required on the institution's part. However, if favorable changes are temporary, the financial institution must comply with the requirements for advance notice of a change in terms.
Does a Bank Have to Notify Me in Writing?
The financial institution must provide, in writing, account disclosures that reflect the legal obligation, or the contract between the parties; and these disclosures must be in a form that consumers can retain. The information must be presented clearly and conspicuously, so that consumers can understand the account terms.
The Bottom Line
Regulation DD offers consumers protection by requiring banks to provide transparent, upfront disclosures that help non-institutional consumers compare terms at different banks in order to make the best decisions for themselves about where to open an account.
