12 CFR Part 707 — Truth in Savings

PART 707—TRUTH IN SAVINGS Authority: 12 U.S.C. 4311. Source: 58 FR 50445, Sept. 27, 1993, unless otherwise noted. § 707.1 Authority, purpose, coverage and effect on State laws. (a) Authority. et seq., et seq. (b) Purpose. (c) Coverage. (d) Effect on state laws. [58 FR 50445, Sept. 27, 1993, as amended at 61 FR 68129, Dec. 27, 1996; 74 FR 36103, July 22, 2009] § 707.2 Definitions. For purposes of this part, the following definitions apply: (a) Account (b) Advertisement (1) The availability or terms of, or a deposit in, a new account; and (2) For purposes of §§ 707.8(a) and 707.11 of this part, the terms of, or a deposit in, a new or existing account. (c) Annual percentage yield (d) Average daily balance method (e) Bonus (f) Credit union (g) Daily balance method (h) Dividend dividends (i) Dividend declaration date (j) Dividend period (k) Dividend rate (l) Extraordinary dividends (m) Fixed-rate account (n) Grace period (o) Interest (p) Member (1) A natural person member of the credit union who holds an account primarily for personal, family, or household purposes; (2) A natural person nonmember who holds an account primarily for personal, family, or household purposes, either jointly with a natural person member or in a credit union designated as a low-income credit union, or to whom such an account is offered; and (3) A natural person nonmember who holds a deposit account in a state-chartered credit union pursuant to state law, or to whom such deposit account is offered. The term does not include a natural person who holds an account for another in a professional capacity or an unincorporated nonbusiness association of natural person members. (q) Non-dividend membership benefits (r) Passbook account (s) Periodic statement (t) Potential member (u) Stepped-rate account (v) Term share account (w) Tiered-rate account (x) Variable-rate account [58 FR 50445, Sept. 27, 1993, as amended at 59 FR 13436, Mar. 22, 1994; 59 FR 59899, Nov. 21, 1994; 70 FR 72898, Dec. 8, 2005; 78 FR 32544, May 31, 2013] § 707.3 General disclosure requirements. (a) Form. et seq. (b) General. (c) Relation to Regulation E (12 CFR part 1005). (d) Multiple members. (e) Oral responses to inquiries. (1) For dividend-bearing accounts other than term share accounts, specify a dividend rate and annual percentage yield as of the last dividend declaration date. In the event that disclosures of a dividend rate and annual percentage yield as of the last dividend declaration date might be inaccurate because of known or contemplated dividend rate changes, the credit union may disclose the prospective dividend rate and prospective annual percentage yield. Such prospective dividend rate and prospective annual percentage yield may be disclosed either in lieu of, or in addition to, the dividend rate and annual percentage yield as of the last dividend declaration date. (2) For interest-bearing accounts and for dividend-bearing term share accounts, specify an interest (dividend) rate and annual percentage yield that were offered within the most recent seven calendar days; state that the rate and yield are accurate as of an identified date; and provide a telephone number members may call to obtain current rate information. (f) Rounding and accuracy rules for rates and yields Rounding. (2) Accuracy. (Approved by the Office of Management and Budget under control number 3133-0134) [58 FR 50445, Sept. 27, 1993, as amended at 61 FR 114, Jan. 3, 1996; 66 FR 33162, June 21, 2001; 74 FR 36104, July 22, 2009; 77 FR 71084, Nov. 29, 2012] § 707.4 Account disclosures. (a) Delivery of account disclosures Account opening General. (ii) Timing of electronic disclosures. (2) Requests. (ii) In providing disclosures upon request, the credit union may: (A) Specify rates as follows: ( 1 ( 2 (B) State the maturity of a term share account as either a term or a date. (b) Content of account disclosures. (1) Rate information Annual percentage yield and dividend rate. (B) For dividend-bearing accounts other than term share accounts, a credit union shall specify a dividend rate and annual percentage yield (using those terms) as of the last dividend declaration date. In the event that disclosures of a dividend rate and annual percentage yield as of the last dividend declaration date might be inaccurate because of known or contemplated dividend rate changes, the credit union may disclose the prospective dividend rate and prospective annual percentage yield. Such prospective dividend rate and prospective annual percentage yield may be disclosed either in lieu of, or in addition to, the dividend rate and annual percentage yield as of the last dividend declaration date. (ii) Variable rates. (A) The fact that the dividend rate and annual percentage yield may change; (B) How the dividend rate is determined; (C) The frequency with which the dividend rate may change; and (D) Any limitation on the amount the dividend rate may change. (2) Compounding and crediting Frequency. (ii) Effect of closing an account. (3) Balance information Minimum balance requirements. (A) Open the account; (B) Avoid the imposition of a fee; or (C) Obtain the annual percentage yield disclosed. Except for the balance to open the account, the disclosure shall state how the balance is determined for these purposes. (ii) Balance computation method. (iii) When dividends begin to accrue. (4) Fees. (5) Transaction limitations. (6) Features of term share accounts. (i) Time requirements. (ii) Early withdrawal penalties. (iii) Withdrawal of dividends prior to maturity. (iv) Renewal policies. (7) Bonuses. (8) Nature of dividends. (c) Notice to existing account holders Notice of availability of disclosures. (2) Alternative to notice. (Approved by the Office of Management and Budget under control number 3133-0134) [58 FR 50445, Sept. 27, 1993, as amended at 61 FR 114, Jan. 3, 1996; 63 FR 71574, Dec. 29, 1998; 66 FR 33163, June 21, 2001; 74 FR 36104, July 22, 2009] § 707.5 Subsequent disclosures. (a) Change in terms Advance notice required. (2) No notice required. (i) Variable-rate changes. (ii) Share draft and check printing fees. (iii) Short-term term share accounts. (b) Notice before maturity for term share accounts longer than one month that renew automatically. (1) Maturities of longer than one year. (2) Maturities of one year or less but longer than one month. (i) Provide disclosures as set forth in paragraph (b)(1) of this section; or (ii) Disclose to the member: (A) The date the existing account matures and the new maturity date if the account is renewed; (B) The dividend rate and the annual percentage yield for the new account if they are known (or that those rates have not yet been determined, the date when they will be determined, and a telephone number the member may call to obtain the dividend rate and the annual percentage yield that will be paid for the new account); and (C) Any difference in the terms of the new account as compared to the terms required to be disclosed under § 707.4(b) for the existing account. (c) Notice before maturity for term share accounts longer than one year that do not renew automatically. (Approved by the Office of Management and Budget under control number 3133-0134) [58 FR 50445, Sept. 27, 1993, as amended at 61 FR 114, Jan. 3, 1996; 63 FR 71574, Dec. 29, 1998] § 707.6 Periodic statement disclosures. (a) Rule when statement and crediting periods vary. (b) Statement disclosures. (1) Annual percentage yield earned. (2) Amount of dividends. (3) Fees imposed. (4) Length of period. (5) Aggregate fee disclosure. (Approved by the Office of Management and Budget under control number 3133-0134) [58 FR 50445, Sept. 27, 1993, as amended at 59 FR 59899, Nov. 21, 1994; 61 FR 114, Jan. 3, 1996; 64 FR 66356, Nov. 26, 1999; 66 FR 33163, June 21, 2001; 70 FR 72898, Dec. 8, 2005; 75 FR 47175, Aug. 5, 2010] § 707.7 Payment of dividends. (a) Permissible methods Balance on which dividends are calculated. 1/365 1/366 (2) Determination of minimum balance to earn dividends. (b) Compounding and crediting policies. (c) Date dividends begin to accrue. (Approved by the Office of Management and Budget under control number 3133-0134) [58 FR 50445, Sept. 27, 1993, as amended at 61 FR 114, Jan. 3, 1996] § 707.8 Advertising. (a) Misleading or inaccurate advertisements. (1) Be misleading or inaccurate or misrepresent a credit union's account agreement; or (2) Refer to or describe an account as “free” or “no cost” or contain a similar term if any maintenance or activity fee may be imposed on the account. The word “profit” must not be used in referring to dividends or interest paid on an account. (b) Permissible rates. (c) When additional disclosures are required. (1) Variable rates. (2) Time annual percentage yield is offered. (3) Minimum balance. (4) Minimum opening deposit. (5) Effect of fees. (6) Features of term share accounts. (i) Time requirements. (ii) Early withdrawal penalties. (iii) Required dividend payouts. (d) Bonuses. (1) The “annual percentage yield,” using that term; (2) The time requirements to obtain the bonus; (3) The minimum balance required to obtain the bonus; (4) The minimum balance required to open the account, if it is greater than the minimum balance necessary to obtain the bonus; and (5) When the bonus will be provided. (e) Exemption for certain advertisements Certain media. (i) Broadcast or electronic media, such as television or radio; (ii) Outdoor media, such as billboards; or (iii) Telephone response machines. (2) Indoors signs. (ii) If a sign exempted by paragraph (e)(2) of this section states a rate of return, it shall: (A) State the rate as an “annual percentage yield,” using that term or the term “APY.” The sign shall not state any other rate, except that the dividend rate may be stated in conjunction with the annual percentage yield to which it relates. (B) Contain a statement advising members to contact an employee for further information about applicable fees and terms. (3) Newsletters. (ii) If a newsletter exempted by paragraph (e)(3) of this section states a rate of return, it shall: (A) State the rate as an “annual percentage yield,” using that term or the term “APY.” The newsletter shall not state any other rate, except that the dividend rate may be stated in conjunction with the annual percentage yield to which it relates. (B) Contain a statement advising members to contact an employee for further information about applicable fees and terms. (f) Additional disclosures in connection with the payment of overdrafts. (Approved by the Office of Management and Budget under control number 3133-0134) [58 FR 50445, Sept. 27, 1993, as amended at 59 FR 13436, Mar. 22, 1994; 61 FR 114, Jan. 3, 1996; 63 FR 71575, Dec. 29, 1998; 70 FR 72898, Dec. 8, 2005; 73 FR 30477, May 28, 2008] § 707.9 Enforcement and record retention. (a) Administrative enforcement. (b) Civil liability. (c) Record retention. (Approved by the Office of Management and Budget under control number 3133-0134) [58 FR 50445, Sept. 27, 1993, as amended at 59 FR 13436, Mar. 22, 1994; 61 FR 114, Jan. 3, 1996; 63 FR 71575, Dec. 29, 1998] § 707.10 [Reserved] § 707.11 Additional disclosure requirements for overdraft services. (a) Disclosure of total fees on periodic statements General. (i) The total dollar amount for all fees or charges imposed on the account for paying checks or other items when there are insufficient or unavailable funds and the account becomes overdrawn, using the term “Total Overdraft Fees;” and (ii) The total dollar amount for all fees or charges imposed on the account for returning items unpaid. (2) Totals required. (3) Format requirements. (b) Advertising disclosures for overdraft services Disclosures. (i) The fee or fees for the payment of each overdraft; (ii) The categories of transactions for which a fee for paying an overdraft may be imposed; (iii) The time period by which the member must repay or cover any overdraft; and (iv) The circumstances under which the credit union will not pay an overdraft. (2) Communications about the payment of overdrafts not subject to additional advertising disclosures. (i) An advertisement promoting a service where the credit union's payment of overdrafts will be agreed upon in writing and subject to part 1026 of this title (Regulation Z); (ii) A communication by a credit union about the payment of overdrafts in response to a member-initiated inquiry about share accounts or overdrafts. Providing information about the payment of overdrafts in response to a balance inquiry made through an automated system, such as a telephone response machine, ATM, or a credit union's Internet site, is not a response to a member-initiated inquiry for purposes of this paragraph; (iii) An advertisement made through broadcast or electronic media, such as television or radio; (iv) An advertisement made on outdoor media, such as billboards; (v) An ATM receipt; (vi) An in-person discussion with a member; (vii) Disclosures required by Federal or other applicable law; (viii) Information included on a periodic statement or a notice informing a member about a specific overdrawn item or the amount the account is overdrawn; (ix) A term in a share account agreement discussing the credit union's right to pay overdrafts; (x) A notice provided to a member, such as at an ATM, that completing a requested transaction may trigger a fee for overdrawing an account, or a general notice that items overdrawing an account may trigger a fee; (xi) Informational or educational materials concerning the payment of overdrafts if the materials do not specifically describe the credit union's overdraft service; or (xii) An opt-out or opt-in notice regarding the credit union's payment of overdrafts or provision of discretionary overdraft services. (3) Exception for ATM screens and telephone response machines. (4) Exception for indoor signs. (c) Disclosure of account balances. [70 FR 72898, Dec. 8, 2005, as amended at 74 FR 36104, July 22, 2009; 75 FR 47175, Aug. 5, 2010; 77 FR 71084, Nov. 29, 2012] Appendix A to Part 707—Annual Percentage Yield Calculation The annual percentage yield (APY) measures the total amount of dividends a credit union pays on an account based on the dividend rate and the frequency of compounding. The annual percentage yield is expressed as an annualized rate, based on a 365-day year. (Credit unions may calculate the annual percentage yield based on a 365-day or a 366-day year in a leap year.) Part I of this appendix discusses the annual percentage yield calculations for account disclosures and advertisements, while Part II discusses annual percentage yield earned calculations for statements. The annual percentage yield reflects only dividends and does not include the value of any bonus, as that term is defined in part 707, that may be provided to the member to open, maintain, increase or renew an account. Dividends, interest or other earnings are not to be included in the annual percentage yield if such amounts are determined by circumstances that may or may not occur in the future. These formulas apply to both dividend-bearing and interest-bearing accounts held by credit unions. Part I. Annual Percentage Yield for Account Disclosures and Advertising Purposes In general, the annual percentage yield for account disclosures under §§ 707.4 and 707.5 and for advertising under § 707.8 is an annualized rate that reflects the relationship between the amount of dividends that would be earned by the member for the term of the account and the amount of principal used to calculate those dividends. The amount of dividends that would be earned may be projected based on the most recent past declared rate or an anticipated future rate, whichever the credit union judges to most reasonably approximate the dividends to be earned. Special rules apply to accounts with tiered and stepped dividend rates, and to certain term share accounts with a stated maturity greater than 1 year. A. General Rules Except as provided in Part I. E. of this appendix, the annual percentage yield shall be calculated by the formula shown below. Credit unions may calculate the annual percentage yield using projected dividends based on either the rate at the last dividend declaration date or the rate anticipated at a future date. The credit union must disclose whichever option it uses to members. Credit unions shall calculate the annual percentage yield based on the actual number of days for the term of the account. For accounts without a stated maturity date (such as a typical share or share draft account), the calculation shall be based on an assumed term of 365 days. In determining the total dividends figure to be used in the formula, credit unions shall assume that all principal and dividends remain on deposit for the entire term, and that no other transactions (deposits or withdrawals) occur during the term. (This assumption shall not be used if a credit union requires, as a condition of the account, that members withdraw dividends during the term. In such a case, the dividends (and annual percentage yield calculation) shall reflect that requirement.) For term share accounts that are offered in multiples of months, credit unions may base the number of days on either the actual number of days during the applicable period, or the number of days that would occur for any actual sequence of that many calendar months. If credit unions choose to use this permissive rule, they must use the same number of days to calculate the dollar amount of dividends that will be earned on the account in the annual percentage yield formula (where “Dividends” are divided by “Principal”.) The annual percentage yield is to be calculated by use of the following general formula ((“APY”) is used for convenience in the formulas): APY = 100 [(1 + Dividends/Principal) (365/Days in term) “Principal” is the amount of funds assumed to have been deposited at the beginning of the account. “Dividends” is the total dollar amount of dividends earned on the Principal for the term of the account. “Days in term” is the actual number of days in the term of the account. When the “days in term” is 365 (that is, where the stated maturity is 365 days or where the account does not have a stated maturity), the APY can be calculated by use of the following simple formula: APY = 100 (Dividends/Principal). Examples: (1) If a credit union would pay $61.68 in dividends for a 365-day year on $1,000 deposited into a share draft account, the APY is 6.17%: APY = 100 [(1 + 61.68/1,000) (365/365) APY = 6.17%. Or, using the simple formula above (since the term is deemed to be 365 days): APY = 100(61.68/1,000) APY = 6.17%. (2) If a credit union pays $30.37 in dividends on a $1,000 six-month term share certificate account (where the six-month period used by the credit union contains 182 days), using the general formula above, the APY is 6.18%: APY = 100 [(1 + 30.37/1,000) (365/182) APY = 6.18%. The APY is affected by the frequency of compounding, i.e., the amount of dividends will be greater the more frequently dividends are compounded for a given nominal rate. When two credit unions are offering the same dividend rate on, for example, a share account, the APY disclosed may be different if the credit unions use a different frequency of compounding. Examples: (1) If a credit union pays $1,268.25 in dividends for a 365-day year on $10,000 deposited into a regular share account earning 12%, and the dividends are compounded monthly, the APY will be 12.68%. APY = 100($1,268.25/10,000) APY = 12.68% (2) However, if a credit union is compounding dividends on a quarterly basis on an account which otherwise has the same terms, the dividends will be $1,255.09 and the APY will be 12.55%. APY = 100 ($1,255.09/10,000) APY = 12.55% B. Stepped-Rate Accounts (Different Rates Apply in Succeeding Periods) For accounts with two or more dividend rates applied in succeeding periods (where the rates are known at the time the account is opened), a credit union shall assume each dividend rate is in effect for the length of time provided for in any share agreement. Examples: (1) If a credit union offers a $1,000 6-month term share (certificate) account on which it pays a 5% dividend rate, compounded daily, for the first three months (which contain 91 days), and a 5.5% dividend rate, compounded daily, for the next three months (which contain 92 days), the total dividends for six months is $26.68, and, using the general formula above, the APY is 5.39%: APY = 100 [(1 + 26.68/1,000) (365/183) APY = 5.39%. (2) If a credit union offers a $1,000 2-year share certificate on which it pays a 6% dividend rate, compounded daily, for the first year, and a 6.5% dividend rate, compounded daily, for the next year, the total dividends for two years is $133.13, and, using the general formula above, the APY is 6.45%: APY = 100 [(1 + 133.13/1,000) (365/730) APY = 6.45%. C. Variable-Rate Accounts For variable-rate accounts without an introductory premium or discounted rate, a credit union must base the calculation only on the initial dividend rate in effect when the account is opened (or advertised), and assume that this rate will not change during the year. Variable-rate accounts with an introductory premium or discount rate must be treated like stepped-rate accounts. Thus, a credit union shall assume that: (1) The introductory simple dividend rate is in effect for the length of time provided for in the account contract; and (2) the variable dividend rate that would have been in effect when the account is opened or advertised (but for the introductory rate) is in effect for the remainder of the year. If the variable rate is tied to an index, the index-based rate in effect at the time of disclosure must be used for the remainder of the year. If the rate is not tied to an index, the rate in effect for existing members holding the same account (who are not receiving the introductory dividend rate) must be used for the remainder of the year. For example, if a credit union offers an account on which it pays a 7% dividend rate, compounded daily, for the first three months (which, for example, contains 91 days), while the variable dividend rate that would have been in effect when the account was opened was 5%, the total dividends for a 365-day year for a $1,000 account balance is $56.52, (based on 91 days at 7% followed by 274 days at 5%). Using the simple formula, the APY is 5.65%: APY = 100 (56.52/1,000) APY = 5.65%. D. Accounts With Tiered Rates (Different Rates Apply to Specified Balance Level) For accounts in which two or more dividend rates paid on the account are applicable to specified balance levels, the credit union must calculate the annual percentage yield in accordance with the method described below that it uses to calculate dividends. In all cases, an annual percentage yield (or a range of annual percentage yields, if appropriate) must be disclosed for each balance tier. For purposes of the examples discussed below, assume the following: Simple dividend rate (Percent) Share balance required to earn rate 5.25 Up to but not exceeding $2,500. 5.50 Above $2,500, but not exceeding $15,000. 5.75 Above $15,000. Tiering Method A Under this method, a credit union pays on the full balance in the account the stated dividend rate that corresponds to the applicable share balance tier. For example, if a member deposits $8,000, the credit union pays the 5.50% dividend rate on the entire $8,000. This is also known as a “hybrid” or “plateau” tiered rate account. When this method is used to determine dividends, only one annual percentage yield will apply to each tier. Within each tier, the annual percentage yield will not vary with the amount of principal assumed to have been deposited. For the dividend rates and account balances assumed above, the credit union will state three annual percentage yields—one corresponding to each balance tier. Calculation of each annual percentage yield is similar for this type of account as for accounts with a single fixed dividend rate. Thus, the calculation is based on the total amount of dividends that would be received by the member for each tier of the account for a year and the principal assumed to have been deposited to earn that amount of dividends. First tier. APY = 100 [(1 + 53.90/1,000) (365/365) APY = 5.39%. Using the simple formula: APY = 100 (53.90/1,000) APY = 5.39%. Second tier. APY = 100(452.29/8,000) APY = 5.65%. Third tier. APY = 100(1,183.61/20,000) APY = 5.92%. Tiering Method B Under this method, a credit union pays the stated dividend rate only on that portion of the balance within the specified tier. For example, if a member deposits $8,000, the credit union pays 5.25% on only $2,500 and 5.50% on $5,500 (the difference between $8,000 and the first tier cutoff of $2,500). This is also known as a “pure” tiered rate account. The credit union that computes dividends in this manner must provide a range that shows the lowest and the highest annual percentage yields for each tier (other than for the first tier, which, like the tiers in Method A, has the same annual percentage yield throughout). The low figure for an annual percentage yield is calculated based on the total amount of dividends earned for a year assuming the minimum highest For the tiering structure assumed above, the credit union would state a total of five annual percentage yields—one figure for the first tier and two figures stated as a range for the other two tiers. First tier. APY = 100 (53.90/1,000) APY = 5.39%. Second tier. APY = 100 (134.75/2,500) APY = 5.39%. For $15,000, dividends are figured on $2,500 at 5.25% dividend rate plus dividends on $12,500 at 5.50% dividend rate. For the high end of the second tier, the annual percentage yield, using the simple formula, is 5.61%: APY = 100 (841.45/15,000) APY = 5.61%. Thus, the annual percentage yield range that would be stated for the second tier is 5.39% to 5.61%. Third tier. APY = 100 (841.45/15,000) APY = 5.61%. Assuming the credit union does not limit the account balance, it may assume any maximum amount for the purposes of computing the annual percentage yield for the high end of the third tier. For an assumed maximum balance amount of $100,000, dividends would be figured on $2,500 at 5.25% dividend rate, plus dividends on $12,500 at 5.50% dividend rate, plus dividends on $85,000 at 5.75% dividend rate. For the high end of the third tier, therefore, the annual percentage yield, using the simple formula, is 5.87%: APY = 100 (5,871.78/100,000) APY = 5.87%. Thus, the annual percentage yield that would be stated for the third tier is 5.61% to 5.87%. If the assumed maximum balance amount is $1,000,000, credit unions would use $985,000 rather than $85,000 in the last calculation. In that case for the high end of the third tier, the annual percentage yield, using the simple formula, is 5.91%: APY = 100 (59,134.22/1,000,000) APY = 5.91% Thus, the annual percentage yield range that would be stated for the third tier is 5.61% to 5.91%. E. Term Share Accounts with a Stated Maturity Greater than One Year that Pay Dividends At Least Annually 1. For term share accounts with a stated maturity greater than one year, that do not compound dividends on an annual or more frequent basis, and that require the member to withdraw dividends at least annually, the annual percentage yield may be disclosed as equal to the dividend rate. Example: If a credit union offers a $1,000 two-year term share account that does not compound and that pays out dividends semi-annually by check or transfer at a 6.00% dividend rate, the annual percentage yield may be disclosed as 6.00%. 2. For term share accounts covered by this paragraph that are also stepped-rate accounts, the annual percentage yield may be disclosed as equal to the composite dividend rate. Example: (1) If a credit union offers a $1,000 three-year term share account that does not compound and that pays out dividends annually by check or transfer at a 5.00% dividend rate for the first year, 6.00% dividend rate for the second year, and 7.00% dividend rate for the third year, the credit union may compute the composite dividend rate and APY as follows: (a) Multiply each dividend rate by the number of days it will be in effect; (b) Add these figures together; and (c) Divide by the total number of days in the term. (2) Applied to the example, the products of the dividend rates and days the rates are in effect are (5.00% × 365 days) 1825, (6.00% × 365 days) 2190, and (7.00% × 365) 2555, respectively. The sum of these products, 6570, is divided by 1095, the total number of days in the term. The composite dividend rate and APY are both 6.00%. Part II. Annual Percentage Yield Earned for Statements The annual percentage yield earned for statements under § 707.6 is an annualized rate that reflects the relationship between the amount of dividends actually earned (accrued or paid and credited) to the member's account during the period and the average daily balance in the account for the period over which the dividends were earned. Pursuant to § 707.6(a), when dividends are paid less frequently than statements are sent, the APY Earned may reflect the number of days over which dividends were earned rather than the number of days in the statement period, e.g., if a credit union uses the average daily balance method and calculates dividends for a period other than the statement period, the annual percentage yield earned shall reflect the relationship between the amount of dividends earned and the average daily balance in the account for the other period, such as a crediting or dividend period. The annual percentage yield shall be calculated by using the following formulas (“APY Earned” is used for convenience in the formulas): A. General Formula APY Earned = 100 [(1 + Dividends earned/Balance) (365/Daysinperiod) “Balance” is the average daily balance in the account for the period. “Dividends earned” is the actual amount of dividends accrued or paid and credited to the account for the period. “Days in period” is the actual number of days over which the dividends disclosed on the statement were earned. Examples: (1) If a credit union calculates dividends for the statement period (and uses either the daily balance or the average daily balance method), and the account had a balance of $1,500 for 15 days and a balance of $500 for the remaining 15 days of a 30-day statement period, the average daily balance for the period is $1,000. Assume that $5.25 in dividends was earned during the period. The annual percentage yield earned (using the formula above) is 6.58%: APY Earned = 100 [(1 + 5.25/1,000) (365/30) APY Earned = 6.58%. (2) Assume a credit union calculates dividends on the average daily balance for the calendar month and provides periodic statements that cover the period from the 16th of one month to the 15th of the next month. The account has a balance of $2,000 September 1 through September 15 and a balance of $1,000 for the remaining 15 days of September. The average daily balance for the month of September is $1,500, which results in $6.50 in dividends earned for the month. The annual percentage yield earned for the month of September would be shown on the periodic statement covering September 16 through October 15. The annual percentage yield earned (using the formula above) is 5.40%: APY Earned = 100 [(1 + 6.50/1,500) (365/30) APY Earned = 5.40%. (3) Assume a credit union calculates dividends on the average daily balance for a quarter (for example, the calendar months of September through November), and provides monthly periodic statements covering calendar months. The account has a balance of $1,000 throughout the 30 days of September, a balance of $2,000 throughout the 31 days of October, and a balance of $3,000 throughout the 30 days of November. The average daily balance for the quarter is $2,000, which results in $21 in dividends earned for the quarter. The annual percentage yield earned would be shown on the periodic statement for November. The annual percentage yield earned (using the formula above) is 4.28%: APY Earned = 100 [(1 + 21/2,000) (365/91) APY Earned = 4.28%. B. Special formula for use where periodic statement is sent more often than the period for which dividends are compounded. Credit unions that use the daily balance method to accrue dividends and that issue periodic statements more often than the period for which dividends are compounded shall use the following special formula: The following definition applies for use in this formula (all other terms are defined under Part II): “Compounding” is the number of days in each compounding period. Assume a credit union calculates dividends for the statement period using the daily balance method, pays a 5.00% dividend rate, compounded annually, and provides periodic statements for each monthly cycle. The account has a daily balance of $1000.00 for a 30-day statement period. The dividend earned of $4.11 for the period, and the annual percentage yield earned (using the special formula above) is 5.00%: APY Earned = 5.00%. [58 FR 50445, Sept. 27, 1993, as amended at 63 FR 71575, Dec. 29, 1998] Appendix B to Part 707—Model Clauses and Sample Forms Table of Contents B-1—Model Clauses for Account Disclosures (§ 707.4(b)) B-2—Model Clauses for Changes in Terms (§ 707.5(a)) B-3—Model Clauses for Pre-Maturity Notices for Term Share Accounts (§ 707.5(b-d)) B-4—Sample Form (Signature Card/ Application for Membership) B-5—Sample Form (Term Share (Certificate) Account) B-6—Sample Form (Regular Share Account Disclosures) B-7—Sample Form (Share Draft Account Disclosures) B-8—Sample Form (Money Market Share Account Disclosures) B-9—Sample Form (Term Share (Certificate) Account Disclosures) B-10—Sample Form (Periodic Statement) B-11—Sample Form (Rate and Fee Schedule) B-12 Aggregate Overdraft and Returned Item Fees Sample Form General Note: Appendix B contains model clauses and sample forms intended for optional use by credit unions to aid in compliance with the disclosure requirements of §§ 707.4 (account disclosures), 707.5 (subsequent disclosures), 707.6 (statement disclosures), and 707.8 (advertisements). Section 269(b) of TISA provides that credit unions that use these clauses and forms will be in compliance with TISA's disclosure provisions. As discussed in the supplementary information to § 707.3(a), this final rule provides for flexibility in designing the format of the disclosures. Credit unions can choose to prepare a single document or brochure that incorporates disclosures for all accounts offered, or to prepare different documents for each type of account. Credit unions may also use inserts to a document, or fill in blanks to show current rates, fees and other terms. In the model clauses, words in parentheses indicate the type of disclosure a credit union should insert in the space provided (for example, a credit union might insert “July 23, 1995” in the blank for a “(date)” disclosure). Brackets and “/” indicate that a credit union must choose the alternative that best describes its practice (for example, “[daily balance/ average daily balance]”). It should be noted that only in sections B-6 through B-10 of this appendix have specific examples of disclosures been given, with dates and figures. Sections B-1 through B-5, and section B-11 provide only unspecific model clauses or blank forms. The Board felt, as articulated in the appendix A to Regulation DD, that a mix of blank clauses and forms and application of the model clauses to real specific situations would benefit those who must comply with TISA. Any references to NCUA Rules and Regulations, the NCUA Standard FCU Bylaws, NCUA Accounting Manual for FCUs, Note also that certain information that appeared in previous versions of the NCUA Accounting Manual for FCUs B-1 Model Clauses for Account Disclosures (§ 707.4(b)) ( a Rate Information (Sec. 707.4(b)(1)) ( i Fixed-Rate Accounts (§ 707.4(b)(1)(i)(A-B)) 1. Interest-bearing Accounts The interest rate on your deposit account is ______% with an annual percentage yield (APY) of ______%. [For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar days and were accurate as of (date). Please call (credit union telephone number) to obtain current rate information.] You will be paid this rate [for (time period)/until (date)/for at least 30 calendar days]. Note: This provision reflects an accurate statement for an interest-bearing account authorized by state law for state-chartered credit unions. While the definition of the term “interest” permits its substitution for the term “dividends,” separate disclosures should be made for interest-bearing accounts. Since account opening disclosures may be provided to potential members requesting account information before opening an account, and members opening new accounts, information is provided indicating that the rate may not be current, but that the potential member or member may call the credit union to obtain up-to-date information. When opening a new account, of course, a credit union could provide the contractual rate alone, and delete the sentences in brackets. Given the definition of fixed-rate account in § 707.2(n), credit unions offering fixed-rate accounts must contract to hold rates steady for at least a 30-day period. Thus, if the 30-day option of the last sentence is not chosen, the period chosen must be longer than 30 days. 2. Dividend-bearing Term Share Accounts The dividend rate on your term share account is ______% with an annual percentage yield (APY) of ______%. [For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar days and were accurate as of (date). Please call (credit union telephone number) to obtain current rate information.] You will be paid this rate [for (time period)/until (date)/for at least 30 calendar days]. Note: This provision reflects an accurate statement for a fixed-rate, dividend-bearing term share account. Interest-bearing term share accounts would use the disclosure in § 1, above. Since account opening disclosures may be provided to potential members requesting account information before opening an account, and members opening new accounts, information is provided indicating that the rate may not be current, but that the potential member or member may call the credit union to obtain up-to-date information. When opening a new account, of course, a credit union could provide the contractual rate alone, and delete the sentences in brackets. Given the definition of fixed-rate account in § 707.2(n), credit unions offering fixed-rate accounts must contract to hold rates steady for at least a 30-day period. Thus, if the 30-day option of the last sentence is not chosen, the period chosen must be longer than 30 days. 3. Other Dividend-bearing Accounts [As of [the last dividend declaration date/ (date)], the dividend rate was ______% with an annual percentage yield (APY) of ______% on your account. /or The prospective dividend rate on your account is ______% with a prospective APY of ______% for the current dividend period.] You will be paid this rate for [(time period)/at least 30 calendar days]. or [As of [the last dividend declaration date/ (date)], the dividend rate was ______% with an annual percentage yield (APY) of ______% on your account. /or The prospective dividend rate on your account is ______% with an annual percentage yield (APY) of ______% for this dividend period.] This rate will not change unless the credit union notifies you at least 30 calendar days prior to any change. Note: Credit unions may disclose the dividend rate and annual percentage yield on accounts as of the last dividend declaration date. This necessitates inclusion of a disclosure of the actual calendar date of the last dividend declaration date. Additionally or alternatively (if the last dividend rate could be inaccurate), credit unions may disclose a prospective dividend rate and a prospective annual percentage yield. Such prospective rates and yields must be estimated in good faith, and must be declared at the proper time if it is at all possible to do so. As for the last sentence in these disclosures, this provision reflects a credit union policy to set prospective dividend rates for the next month (or at least 30 days), quarter or other period. Many credit unions, at their mid-monthly board meeting, set prospective dividend rates for the next month beginning on the 1st day of the month and continuing to the last day of the month. These rates must be formalized or ratified at the end of a dividend period. Given the timing of the board meetings, the time to prepare and mail notices and the 30 day period, it will often take credit unions 45 to 60 days to effectively change rates. For these reasons, the Board strongly suggests that credit unions do not offer fixed-rate, dividend-bearing accounts. ( ii Variable-Rate Accounts (§ 707.4(b)(1)(ii)) 1. Interest-bearing Accounts The interest rate on your deposit account is ______%, with an annual percentage yield (APY) of ______%. [For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar days and were accurate as of (date). Please call (credit union telephone number) to obtain current rate information.] The interest rate and annual percentage yield may change every (time period) based on [(name of index)/the determination of the credit union board of directors]. The interest rate for your account will [never change by more than ______% each (time period)/never be less/more than ______%/never exceed ______% above or fall more than ______% below the initial interest rate]. Note: This disclosure combines the requirements of § 707.4(b)(1)(i) with § 707.4(b)(1)(ii) for interest-bearing accounts. The variable nature of a deposit account usually is based on an external index or is set at the discretion of the board. If another means of rate setting is used, that, instead of the proposed language, must be disclosed. Since account opening disclosures may be provided to potential members requesting account information before opening an account, and members opening new accounts, information is provided indicating that the rate may not be current, but that the potential member or member may call the credit union to obtain up-to-date information. When opening a new account, of course, a credit union could provide the contractual rate alone, and delete the sentences in brackets. Rarely would there be limitations on rate changes, but language is provided for this situation in the last sentence. Of course, it is only to be used if it applies to an account. 2. Dividend-bearing Term Share Accounts The dividend rate on your term share account is ______%, with an annual percentage yield (APY) of ______%. [For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar days and were accurate as of (date). Please call (credit union telephone number) to obtain current rate information.] The dividend rate and annual percentage yield may change every (time period) based on [(name of index)/the determination of the credit union board of directors]. The dividend rate for your account will [never change by more than ______% each (time period)/never be less/more than ______% /never exceed ______% above or fall more than ______% below the initial dividend rate]. Note: This disclosure combines the requirements of § 707.4(b)(1)(i) with § 707.4(b)(1)(ii) for dividend-bearing, variable-rate term share accounts. The variable nature of a deposit account usually is based on an external index or is set at the discretion of the board. If another means of rate setting is used, that, instead of the model language, must be disclosed. Since account opening disclosures may be provided to potential members requesting account information before opening an account, and members opening new accounts, information is provided indicating that the rate may not be current, but that the potential member or member may call the credit union to obtain up-to-date information. When opening a new account, of course, a credit union could provide the contractual rate alone, and delete the sentences in brackets. Rarely would there be limitations on rate changes, but language is provided for this situation in the last sentence. Of course, it is only to be used if it applies to an account. 3. Other Dividend-bearing Accounts [As of [the last dividend declaration date/ (date)], the dividend rate was ______% with an annual percentage yield (APY) of ______% on your account. /or The prospective dividend rate on your account is ______% with an anticipated annual percentage yield (APY) of ______% for the current dividend period.] The dividend rate and annual percentage yield may change every (dividend period) as determined by the credit union board of directors. Note: This language combines the requirements of § 707.4(b)(1)(i) with § 707.4(b)(1)(ii). Credit unions may disclose the dividend rate and annual percentage yield on accounts as of the last dividend declaration date. This necessitates inclusion of a disclosure of the actual calendar date of the last dividend declaration date or use of the phrase “last dividend declaration date”. Additionally or alternatively, credit unions may disclose a prospective dividend rate and a prospective annual percentage yield. Such prospective rates and yields must be estimated in good faith, and must be declared at the proper time if it is at all possible to do so. As for the last sentence in these disclosures, this provision reflects the variable nature of the account. Generally, there is only one variable-rate feature for share accounts: the frequency of dividend period rate changes (e.g., daily, weekly, monthly, quarterly, semi-annually, annually). Normally, there are no contractual limitations on share account earnings (unless imposed by a regulator), nor are earnings based on any internal or external index. If contractual limitations or an index are involved, however, those factors would need to be disclosed (unless a regulator orders otherwise). ( iii Stepped-Rate Accounts (§ 707.4(b)(1)(i)) 1. Interest-bearing Accounts The initial interest rate on your deposit account is ______%. You will be paid that rate [for (time period)/ until (date)]. After that time, the interest rate for your deposit account will be ______% and you will be paid that rate [for (time period)/ until (date)]. The annual percentage yield (APY) for your account is ______%. [For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar days and were accurate as of (date). Please call (credit union telephone number) to obtain current rate information.] You will be paid this rate [for (time period)/until (date)/for at least 30 calendar days]. 2. Dividend-bearing Term Share Accounts The initial dividend rate on your term share account is ______%. You will be paid that rate [for (time period)/ until (date)]. After that time, the dividend rate for your term share account will be ______% and you will be paid that rate [for (time period)/ until (date)]. The annual percentage yield (APY) for your account is ______%. [For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar days and were accurate as of (date). Please call (credit union telephone number) to obtain current rate information.] You will be paid this rate [for (time period)/until (date)/for at least 30 calendar days]. 3. Other Dividend-bearing Accounts [As of [the last dividend declaration date/ (date)], the initial dividend rate on your account was ______%. /or The prospective dividend rate on your account is ______%.] You will be paid that rate [for (time period)/ until (date)]. After that time, the prospective dividend rate for your share account will be ______% and you will be paid such rate [for (time period)/ until (date)]. The annual percentage yield (APY) for your account is ______%. You will be paid this rate for [(time period)/at least 30 calendar days]. Note: Stepped-rate accounts are accounts with two or more rates that take effect in succeeding periods. The applicable rates and time periods are known ( iv Tiered-Rate Accounts (§ 707.4(b)(1)(i)) 1. Interest-bearing Accounts Tiering Method A 1* If your [daily balance/average daily balance] is $______ or more, the interest rate paid on the entire balance in your account will be ______%, with an annual percentage yield (APY) of ______%. 2* If your [daily balance/average daily balance] is more than $______, but less than $______, the interest rate paid on the entire balance in your account will be ______%, with an APY of ______%. 3* If your [daily balance/average daily balance] is $______ or less, the interest rate paid on the entire balance will be ______% with an APY of ______%. [For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar days and were accurate as of (date). Please call (credit union telephone number) to obtain current rate information.] [ Fixed-rate Variable-rate Note: Tiering Method A pays the stated interest rate that corresponds to the applicable deposit tier on the full balance in the account. This example contemplates a two-tier system. The option (1, 2 or 3) most closely matching the terms of the account should be chosen as the appropriate disclosure. For tiered-rate accounts, a disclosure may be added about the currency of the rate, as is provided in the first set of brackets. A disclosure regarding the fixed-rate or variable-rate nature of the account must be added, as is provided in the last set of brackets. Tiering Method B 1* An interest rate of ________% will be paid only on the portion of your [daily balance/average daily balance] that is greater than $________. The annual percentage yield (APY) for this tier will range from ________% to ________%, depending on the balance in the account. 2* An interest rate of ________% will be paid only on the portion of your [daily balance/average daily balance] that is greater than $________, but less than $________. The annual percentage yield (APY) for this tier will range from ________% to ________%, depending on the balance in the account. 3* If your [daily balance/average daily balance] is $________ or less, the interest rate paid on the entire balance will be ________%, with an annual percentage yield (APY) of ________%. [For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar days and were accurate as of (date). Please call (credit union telephone number) to obtain current rate information.] [ Fixed-rate Variable-rate Note: Tiering Method B pays different stated interest rates corresponding to applicable deposit tiers, on the applicable balance in each tier of the account. For example, a credit union might pay 3% interest on account funds of $500 or below, and pay 4% interest on the portion of the same account that exceeds $500. The example contemplates an account with two tiers, but additional tiers are possible. The option (1, 2 or 3) most closely matching the terms of the account should be chosen as the appropriate disclosure. For tiered-rate accounts, a disclosure may be added about the currency of the rate, as is provided in the first set of brackets. Tiered-rate accounts can be either fixed-rate or variable-rate accounts. The last sentence offers an option of either fixed-rate or variable-rate disclosure. Thus, the disclosures outlined above will be made in addition to either: (i) Disclosure of the period the fixed-rates are in effect or (ii) the variable-rate disclosures. Tiered-rate accounts are also subject to the requirement for disclosure of the balance computation method, see 2. Dividend-bearing Term Share Accounts Tiering Method A 1* If your [daily balance/average daily balance] is $________ or more, the dividend rate paid on the entire balance in your account will be ________%, with an annual percentage yield (APY) of ________%. 2* If your [daily balance/average daily balance] is more than $________, but less than $________, the dividend rate paid on the entire balance in your account will be ________%, with an APY of ________%. 3* If your [daily balance/average daily balance] is $________ or less, the dividend rate paid on the entire balance will be ________% with an APY of ________%. [For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar days and were accurate as of (date). Please call (credit union telephone number) to obtain current rate information.] [ Fixed-rate Variable-rate Note: Tiering Method A pays the stated dividend rate that corresponds to the applicable account balance tier on the full balance in the account. This example contemplates a two-tier system. The option (1, 2 or 3) most closely matching the terms of the account should be chosen as the appropriate disclosure. For tiered-rate accounts, a disclosure may be added about the currency of the rate, as is provided in the first set of brackets. A disclosure regarding the fixed-rate or variable-rate nature of the account must be added, as is provided in the last set of brackets. Tiering Method B 1* A dividend rate of ________% will be paid only on the portion of your [daily balance/average daily balance] that is greater than $________. The annual percentage yield (APY) for this tier will range from ________% to ________%, depending on the balance in the account. 2* A dividend rate of ________% will be paid only on the portion of your [daily balance/average daily balance] that is greater than $________, but less than $________. The annual percentage yield (APY) for this tier will range from ________% to ________%, depending on the balance in the account. 3* If your [daily balance/average daily balance] is $________ or less, the dividend rate paid on the entire balance will be ________%, with an annual percentage yield (APY) of ________%. [For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar days and were accurate as of (date). Please call (credit union telephone number) to obtain current rate information.] [ Fixed-rate Variable-rate Note: Tiering Method B pays different stated dividend rates corresponding to applicable account balance tiers, on the applicable balance in each tier of the account. For example, a credit union might pay 3% dividend on account funds of $500 or below, and pay 4% dividend on the portion of the same account that exceeds $500. The example contemplates an account with two tiers, but additional tiers are possible. The option (1, 2 or 3) most closely matching the terms of the account should be chosen as the appropriate disclosure. For tiered-rate accounts, a disclosure may be added about the currentness of the rate, as is provided in the first set of brackets. Tiered-rate accounts can be either fixed-rate or variable-rate accounts. The last sentence offers an option of either fixed-rate or variable-rate disclosure. Thus, the disclosures outlined above will be made in addition to either: (i) Disclosure of the period the fixed-rates are in effect or (ii) the variable-rate disclosures. Tiered-rate accounts are also subject to the requirement for disclosure of the balance computation method, see 3. Other Dividend-bearing Accounts Tiering Method A 1* [As of [the last dividend declaration date/ (date)], if your [daily balance/average daily balance] was $________ or more, the dividend rate paid on the entire balance in your account was ________%, with an annual percentage yield (APY) of ________%. /or If your [daily balance/average daily balance] is $________ or more, a prospective dividend rate of ________% will be paid on the entire balance in your account with a prospective annual percentage yield (APY) of ________% for this dividend period.] 2* [As of [the last dividend declaration date/ (date)], if your [daily balance/average daily balance] was more than $________, but was less than $________, the dividend rate paid on the entire balance in your account was ________%, with an annual percentage yield (APY) of ________%. /or If your [daily balance/average daily balance] is more than $________, but is less than $________, a prospective dividend rate of ________% will be paid on the entire balance in your account with a prospective annual percentage yield (APY) of ________% for this dividend period.] 3* [As of the last dividend declaration date/ (date)], if your [daily balance/average daily balance] was $________ or less, the dividend rate paid on the entire balance in your account will be ________% with an annual percentage yield (APY) of ________%. /or If your [daily balance/average daily balance] is $________ or less, the prospective dividend rate of ________% will be paid on the entire balance in your account with a prospective annual percentage yield (APY) of ________% for this dividend period. [ Fixed-rate Variable-rate Note: Tiering Method A pays the stated dividend rate that corresponds to the applicable deposit tier on the full balance in the account. This example contemplates a two-tier system. The option (1, 2 or 3) most closely matching the terms of the account should be chosen as the appropriate disclosure. For tiered-rate accounts, a disclosure may be added about the prospective rate. Note that the prospective rate disclosure options match the required tiered-rate disclosures based on the previous dividend declaration date. A disclosure regarding the fixed-rate or variable-rate nature of the account must be added, as is provided in the last set of brackets. Tiering Method B 1* [As of [the last dividend declaration date/ (date)], a dividend rate of ________% was paid only on the portion of your [daily balance/average daily balance] that was greater than $________. The annual percentage yield (APY) for this tier ranged from ________% to ________%, depending on the balance in the account. /or A prospective dividend rate of ________% will be paid only on the portion of your [daily balance/average daily balance] that is greater than $________ with a prospective annual percentage yield (APY) ranging from ________% to ________%, depending on the balance in the account, for this dividend period.] 2* [As of [the last dividend declaration date/ (date)], a dividend rate of ________% was paid only on the portion of your [daily balance/average daily balance] that was greater than $________ but less than $________. The annual percentage yield (APY) for this tier ranged from ________% to ________%, depending on the balance in the account. /or A prospective dividend rate of ________% will be paid only on the portion of your [daily balance/average daily balance] that is greater than $________, but less than $________] with a prospective annual percentage yield (APY) ranging from ________% to ________%, depending on the balance in the account, for this dividend period.] 3* [As of [the last dividend declaration date/ (date)], if your [daily balance/average daily balance] was $________ or less, the dividend rate paid on the entire balance was ________%, with an annual percentage yield (APY) of ________%. /or If your [daily balance/average daily balance] was $______ or less, the prospective dividend rate paid on the entire balance in your account will be ______% with a prospective annual percentage yield (APY) of ______% for this dividend period. Note: Tiering Method B pays different stated dividend rates corresponding to applicable account tiers, on the applicable balance in each tier of the account. For example, a credit union might pay a 3% dividend on account funds of $500 or below, and pay a 4% dividend on the portion of the same account that exceeds $500. The example contemplates an account with two tiers, but additional tiers are possible. The option (1, 2 or 3) most closely matching the terms of the account should be chosen as the appropriate disclosure. Note that the prospective rate disclosure options match the required tiered-rate disclosures based on the previous dividend declaration date. Tiered-rate accounts can be either fixed-rate or variable-rate accounts. The last sentence offers an option of either fixed-rate or variable-rate disclosures. Thus, the disclosures outlined above must be made in addition to either: (i) Disclosure of the period the fixed-rates are in effect or (ii) the variable-rate disclosures. Tiered-rate accounts are also subject to the requirement for disclosure of the balance computation method, see paragraph (e) to this appendix. ( b Nature of Dividends (§ 707.4(b)(8)) Dividends are paid from current income and available earnings, after required transfers to reserves at the end of a dividend period. Note: The Board of Directors declares dividends based on current income and available earnings of the credit union after providing for the required reserves at the end of the month. The dividend rate and annual percentage yield shown may reflect either the last dividend declaration date on the account or the earnings the credit union anticipates having available for distribution. This disclosure only applies to share and share draft (as opposed to deposit) accounts and should be grouped with the Rate Information to make the disclosures more meaningful. This disclosure also does not apply to term share accounts for reasons discussed in the supplementary information regarding §§ 707.3(e) and 707.4(b)(8). ( c Compounding and Crediting (§ 707.4(b)(2)) [Dividends/Interest] will be compounded (frequency) and will be credited (frequency). and, if applicable: If you close your [share/deposit] account before [dividends/interest] [are/is] paid, you will not receive the accrued [dividends/interest]. and, if applicable (for dividend-bearing accounts): For this account type, the dividend period is (frequency), for example, the beginning date of the first dividend period of the calendar year is (date) and the ending date of such dividend period is (date). All other dividend periods follow this same pattern of dates. The dividend declaration date follows the ending date of a dividend period, and for the example is (date). Note: Where the word “(frequency)” appears, time periods must be inserted to coincide with those specified in board resolutions of each credit union's board of directors. A disclosure of dividend period was added to § 707.4(b)(2)(i) in the final rule to assist members in knowing when dividend rate and APY disclosures would be given by a credit union using the optional statement rule of § 707.6(a). The dividend declaration date is important for purposes of § 707.4(a)(2)(ii), request disclosures, § 707.4(b)(2), account opening disclosures, and § 707.8(c)(2), advertising disclosures. The Board believes that this is critical information for dividend-bearing accounts, but that provision by an example (whether of the first dividend period of the year, or of any randomly chosen dividend period) is favorable to providing a list of such dates for the entire year or for a period of years (although these methods would also be permissible). As noted in the supplementary information to § 707.2(j), dividend declaration date, the dividend period and actual dividend distribution date may vary. Thus, it is possible for crediting periods and dividend periods not to coincide, though the Board believes that credit unions should make every effort to attempt to coordinate the two periods. ( d Minimum Balance Requirements (§ 707.4(b)(3)(i)) (i) To open the account The minimum balance required to open this account is $________. or, for first share account at a credit union The minimum required to open this account is the purchase of a (par value of a share) share in the credit union. (ii) To avoid imposition of fees You must maintain a minimum daily balance of $________ in your account to avoid a service fee. If, during any (time period), your account balance falls below the required minimum daily balance, your account will be subject to a service fee of $________ for that (time period). or You must maintain a minimum average daily balance of $________ in your account to avoid a service fee. If, during any (time period), your average daily balance is below the required minimum, your account will be subject to a service fee of $________ for that (time period). (iii) To obtain the annual percentage yield disclosed You must maintain a minimum daily balance of $________ in your account each day to obtain the disclosed annual percentage yield. or You must maintain a minimum average daily balance of $________ in your account to obtain the disclosed annual percentage yield. (iv) Absence of minimum balance requirements No minimum balance requirements apply to this account. (v) Par value The par value of a share in this credit union is $________. Note: Where the words “(time period)” appear, time periods should be inserted to coincide with those specified in board resolutions of each credit union's board of directors. As the supplementary information to § 707.4(b)(3)(i) explains, the par value of a share to establish membership is a critical disclosure to be made to potential members of credit unions. The par value disclosure is required by § 707.4(b)(3)(i) as being analogous to a minimum balance account opening requirement. ( e Balance Computation Method (§ 707.4(b)(3)(ii)) (i) Daily Balance Method [Dividends/Interest] [are/is] calculated by the daily balance method which applies a daily periodic rate to the balance in the account each day. (ii) Average Daily Balance Method [Dividends/Interest] [are/is] calculated by the average daily balance method which applies a periodic rate to the average daily balance in the account for the period. The average daily balance is calculated by adding the balance in the account for each day of the period and dividing that figure by the number of days in the period. Note: Any explanation of balance computation method must contain enough information for members to grasp the means by which dividends or interest will be calculated on their accounts. Using a shorthand form, such as “day in/day out” for the daily balance method or “average balance” for the average daily balance method, without more information, is insufficient. In addition, any disclosure based on the equivalency of the two allowable methods, such as stating that the average daily balance method was the same as the daily balance method, is impermissible and misleading. ( f Accrual of Dividends/Interest on Noncash Deposits (§ 704.4(b)(3)(iii)) [Dividends/Interest] will begin to accrue on the business day you [place/deposit] noncash items (e.g. checks) to your account. or [Dividends/Interest] will begin to accrue no later than the business day we receive provisional credit for the [placement/deposit] of noncash items (e.g. checks) to your account. Note: Accrual information is not included in the explanation of balance computation method required by § 707.4(b)(4)(ii). In addition, the disclosures required by TISA do not affect the substantive requirements of the EFAA and Regulation CC. The EFAA and Regulation CC control, and any modifications to them should occasion credit unions to revisit this disclosure with a view to revising it to reflect current law. ( g Fees and Charges (§ 707.4(b)(4)) The following fees and charges may be assessed against your account: (Service/explanation)—$______. (Service/explanation)—$______. Note: Fees and charges may be disclosed in an account disclosure, or separately in a Rate and Fee Schedule (see section B-11 of this appendix). In either event, the disclosure should also specify when the fee will be assessed by using phrases such as “per item,” “per month,” or “per inquiry.” ( h Transaction Limitations (§ 707.4(b)(5)) The minimum amount you may [withdraw/write a draft for] is $________ During any statement period, you may not make more than six withdrawals or transfers to another credit union account of yours or to a third party by means of a preauthorized or automatic transfer or telephonic order or instruction. No more than three of the six transfers may be made by check, draft, debit card, if applicable, or similar order to a third party. If you exceed the transfer limitations set forth above in any statement period, your account will be subject to [closure by the credit union/a fee of $________. Note: This paragraph satisfies the requirements of § 707.4(b)(6) with respect to the Federal Reserve Board's Regulation D limitations on share accounts and money market accounts. These are some of the more common limitations applicable. The credit union reserves the right to require a member intending to make a withdrawal from any account (except a share draft account) to give written notice of such intent not less than seven days and up to 60 days before such withdrawal. Note: This disclosure is limited to federal credit unions with Bylaws containing this limitation. See Standard Federal Credit Union Bylaws, ( i Disclosures Related to Term Share Accounts (§ 707.4(b)(6)) (i) Time requirements Your account will mature on (date). or Your account will mature after (time period). (ii) Early withdrawal penalties We [will/may] impose a penalty if you withdraw [any/all] of the [funds/principal] in your account before the maturity date. The penalty will equal [________ [days'/weeks'/months'] [dividends/interest] on your account. or We [will/may] impose a penalty of $__________ if you withdraw [any/all] of the [funds/principal] before the maturity date. If you withdraw some of your funds before maturity, the [dividend/interest] rate for the remaining funds in your account will be ______%, with an annual percentage yield of ______%. Note: In most cases, the dividend rate and annual percentage yield on the funds remaining in the account after early withdrawal are the same as before the withdrawal. Accordingly, the disclosure of dividend rate and annual percentage yield after withdrawal is required only if the dividend rate and APY will change. (iii) Withdrawal of Dividends/Interest Prior to Maturity The annual percentage yield is based on an assumption that [dividends/interest] will remain in the account until maturity. A withdrawal will reduce earnings. Note: This disclosure may be used if the credit union compounds dividends/interest and allows withdrawal of accrued dividends/interest before maturity. This disclosure alerts members that the annual percentage yield is based on an assumption that the dividends/interest remain on deposit until maturity. (iv) Renewal Policies 1. Automatically Renewable Term Share Accounts Your term share account will automatically renew at maturity. You will have a grace period of ________ [calendar/business] days after the maturity date to withdraw the funds in the account without being charged an early withdrawal penalty. or Your term share account will automatically renew at maturity. There is no grace period following the maturity of this account. 2. Non-Automatically Renewable Term Share Accounts This account will not renew automatically at maturity. If you do not renew the account, your account will [continue to earn/no longer earn] [dividends/interest] after the maturity date. Note: These disclosures should agree with the necessary pre-maturity notices for term share accounts in B-3 of this appendix. (v) Required dividend distribution. This account requires the distribution of dividends and does not allow dividends to remain in the account. ( j Bonuses (§ 704.4(b)(7)) You will [be paid/receive] [$__________/(description of item)] as a bonus [when you open the account/on (date)]. You must maintain a minimum [daily balance/average daily balance] of $__________ to obtain the bonus. To earn the bonus, [$__________/your entire principal] must remain on deposit [for (time period)/until (date)]. Note: These disclosures follow the requirements of § 707.4(b)(7) and should be used as applicable. Further information may also be added, especially if it clarifies the conditions and timing of receiving the bonus, or better informs the member about the bonus. B-2 Model Clauses for Changes in Terms (§ 707.5( a On (date), the (type of fee) will increase to $__________. On (date), the [dividend/interest] rate on your account will decrease to ______%, with an annual percentage yield (APY) of ______%. On (date), the [minimum daily balance/average daily balance] required to avoid imposition of a fee will increase to $__________. Note: These examples apply to the more common changes necessitating a change in terms notice. However, any change, amendment or modification reducing the APY or adversely affecting the members holding such accounts must be disclosed. For such changes not contemplated by the model clauses, the Board recommends the use of as simple language as possible to convey the change, along with cross-referencing to the particular sections or paragraph numbers of the account opening disclosures, when to do so will assist members in reviewing and understanding the change. B-3 Model Clauses for Pre-Maturity Notices for Term Share Accounts (§ 707.5( b-c ( a Maturity Date Your term share account will mature on __________. ( b Nonrenewal Unless your term share account is renewed, it will not accrue further [dividends/interest] after the maturity date. ( c Rate Information The [dividend/interest] rate and annual percentage yield that will apply to your term share account if it is renewed have not yet been determined. That information will be available on ________. After that date, you may call the credit union during regular business hours at (telephone number) to find out the [dividend/interest] rate and annual percentage yield (APY) that will apply to your term share account if it is renewed. Note: Pre-maturity notices should follow the requirements of § 707.5(b-d) as closely as possible. Care should be taken to explain any grace periods used. See discussion of use of alternative timing in supplementary information to § 707.2(o) and § 707.5(b-d). B-4 Sample Form (Signature Card/Application for Membership) Application for Membership/Account Signature Card ACCOUNT NUMBER __________ __________ __________ (last name) (first name) (middle name) (street address) (apartment number) __________ ______ ________ (city) (state) (zip code) ____________ ____________ (home telephone number) (business telephone number) ____-____-________ __________ (Social Security # or TIN) (date of birth) ______________ ________________ (mother's maiden name) (employer, occupation) I hereby make application for membership in and agree to conform to the Bylaws, as amended, of __________ Credit Union (the “Credit Union”). I certify that: I am within the field of membership of this Credit Union; the information provided on this application is true and correct; and my signature on this card applies to all accounts under my name at this Credit Union. I also agree to be bound to the terms and conditions of any account that I have in the Credit Union now or in the future. (signature of applicant) This application approved________(date) by the (Check one) ( ) Board ( ) Exec. Committee ( ) Membership Officer Signed: (Secretary; Exec. Cmte. Member, or Membership Officer) Note: This form is modeled on NCUA Form FCU 150, Application for Membership, as discussed in the Accounting Manual for FCUs, B-5 Sample Form (Term Share (Certificate) Account) Term Share Certificate Date Issued Account Number Certificate Number Social Security Number This is to certify that (name(s)) __________________ [is/ are] the owner(s) of a term share certificate account in the __________ Credit Union (the “Credit Union”) in the amount of __________ Dollars ($__________). This term share certificate account may be redeemed on (maturity date) __________ only upon presentation of the certificate to the Credit Union. The dividend rate of this certificate account is ____% with an annual percentage yield of ____%. The annual percentage yield and dividend rate assume that dividends are to be [check one] ( ) added to principal/( ) paid to regular share account number __________/ ( ) mailed to owner(s). This account is subject to all terms and conditions stated in the Term Share Certificate Account Disclosures, as they may be amended from time to time, and incorporates the same by reference into this agreement. Authorized signature Authorized signature Note: This form is modeled on NCUA Form FCU 107SCP, Credit Union Share Certificate, as discussed in the Accounting Manual for FCUs, B-6 Sample Form (Regular Share Account Disclosures) Regular Share Account Disclosures 1. Rate information. 2. Compounding and crediting. 3. Minimum balance requirements. 4. Balance computation method. 5. Accrual of dividends. 6. Fees and charges. a. Statement copies—$5.00 per statement. b. Account inquiries—$3.00 per inquiry. c. Dormant account fee—$10.00 per month. d. Wire transfers—$8.00 per transfer. e. Minimum balance service fee—$5.00 per quarter. f. Share transfer—$1.00 per transfer. g. Excessive share withdrawals $1.00 per item. 7. Transaction limitations. 8. Nature of dividends. 9. Bylaw Requirements. 10. Par value of shares; Dividend period. 11. National Credit Union Share Insurance Fund. 12. Other Terms and Conditions. Note: This form is modeled on the share account disclosures in the Accounting Manual for FCUs, NCUA Standard FCU Bylaws, NCUA Standard FCU Bylaws. B-7 Sample Form (Share Draft Account Disclosures) Share Draft Account Disclosures 1. Rate information. 2. Compounding and crediting. 3. No Minimum balance requirements apply to this account. 4. Balance computation method. 5. Accrual of dividends. 6. Fees and charges. a. Statement copies—$5.00 per statement. b. Account inquiries—$3.00 per inquiry. c. Dormant account fee—$10.00 per month. d. Wire transfers—$8.00 per transfer. e. Overdrafts/Returned Items—$5.00 per draft. f. Share transfer—$1.00 per transfer. g. Excessive share withdrawals—$1.00 per item. h. Certified checks—$5.00 per check. i. Stop Payment Order—$5.00 per order. j. Check Printing Fee—$12.00 per 200 checks (varies depending on style of check ordered). 7. No transaction limitations apply to this account. 8. Nature of dividends. 9. Bylaw Requirements. 10. Par value of shares; Dividend period. 11. National Credit Union Share Insurance Fund. 12. Other Terms and Conditions. Note: This form is modeled on the share account disclosures in the Accounting Manual for FCUs, B-8 Sample Form (Money Market Share Account Disclosures) Money Market Share Account Disclosures 1. Rate information. 2. Compounding and crediting. 3. Minimum balance requirements. 4. Balance computation method. 5. Accrual of dividends. 6. Fees and charges. a. Statement copies—$5.00 per statement. b. Account inquiries—$3.00 per inquiry. c. Dormant account fee—$10.00 per month. d. Wire transfers—$8.00 per transfer. e. Minimum balance service fee—$5.00 per (time period). f. Share transfer—$1.00 per transfer. g. Excessive share withdrawals—$1.00 per item. h. Certified checks—$5.00 per check. i. Stop Payment Order—$5.00 per order. j. Check Printing Fee—$12.00 per 200 checks (varies depending on style of check ordered). 7. Transaction limitations. 8. Nature of dividends. 9. Bylaw Requirements. 10. Par value of shares; Dividend period. 11. National Credit Union Share Insurance Fund. 12. Other Terms and Conditions. Note: This form is modeled on the share account disclosures in the Accounting Manual for FCUs, § 5150.7 and on the share draft account disclosures in section B-7 of this appendix. The disclosures are for a variable-rate, tiered-rate (method A, option 1), average daily balance method dividend calculation, money market share account in a FISCU with a $500 minimum balance to open the account and to avoid service fees. For purposes of this example, the account was opened on January 29, 1995. Other terms are self-explanatory. The dividend rate paid and annual percentage yield disclosures will reflect the prospective dividend rate for a given dividend period. Note that the contents of Item 9, Bylaw requirements, must be tailored to the specific bylaws of a FISCU or NICU. Also note the high par value amount in Item 10. B-9 Sample Form (Term Share (Certificate) Account Disclosures) Term Share (Certificate) Account Disclosures 1. Rate information. see 2. Compounding and crediting. 3. Minimum balance requirements. 4. Balance computation method. 5. Accrual of dividends. 6. Fees and charges. a. Statement copies—$5.00 per statement. b. Account inquiries—$3.00 per inquiry. c. Share transfer—$1.00 per transfer. 7. Transaction limitations. 8. Maturity date. 9. Early withdrawal penalties. 10. Renewal policies. 11. Bonus. 12. [Reserved] 13. Bylaw Requirements. 14. Par value of shares; Dividend period. 15. National Credit Union Share Insurance Fund. 16. Other Terms and Conditions. Note: Even though this disclosure if for an account at a FISCU, this form is modeled on the share account disclosures in the Accounting Manual for FCUs, B-10 Sample Form (Periodic Statement) Periodic Statement Member Name Account Number [Transaction account activity by date.] [Average daily balance of $1,500 for the month, daily compounding.] Your account earned $6.72, with an annual percentage yield earned of 5.40%, for the statement period from May 1 through and including May 31. In addition, your account earned $15 in extraordinary dividends for this period. Any fees assessed against your account are shown in the body of the periodic statement and are identified by the code at the bottom margin of this statement. Service Charge Codes SC-1 Stop Payment Order Fee SC-2 Statement Copy Fee SC-3 Draft Return Fee SC-4 Transfer from Shares SC-5 Microfilm Copy SC-6 Share Draft Printing Fee SC-7 Dormant Account Fee SC-8 Wire Transfer Fee SC-9 Excessive Share Withdrawal Fee SC-10 ______________________ Other Transactions D Dividends EC Error Correction OR Overdraft Returned OL Overdraft Loan OS Overdraft Share Transfer Note: This form is modeled on the share draft statement of account, Form FCU 107G-SD, in the Accounting Manual for FCUs, B-11 Sample Form (Rate and Fee Schedule) Rate and Fee Schedule This Rate and Fee Schedule for all Accounts sets forth certain conditions, rates, fees and charges applicable to your regular share, share draft, and money market accounts at the __________ Federal Credit Union as of __________ [insert date of delivery to member]. This schedule is incorporated as part of your account agreement with the __________ Federal Credit Union. Regular Share Dividend Rate as of Last Dividend Declaration Date ______%. Annual Percentage Yield as of Last Dividend Declaration Date ______%. Prospective Dividend Rate ______%. Prospective Annual Percentage Yield ______%. Dividends Compounded [Annually, Semiannually, Quarterly, Monthly, Weekly, Daily]. Dividends Credited—At close of a dividend period. Dividend Period [Annually, Semiannually, Quarterly, Monthly, Weekly, Daily]. Minimum Opening Deposit $5.00 par value share. Minimum Monthly Balance [None, $ amount]. Share Draft Dividend Rate as of Last Dividend Declaration Date ______%. Annual Percentage Yield as of Last Dividend Declaration Date ______%. Prospective Dividend Rate ______%. Prospective Annual Percentage Yield ______%. Dividends Compounded [Annually, Semiannually, Quarterly, Monthly, Weekly, Daily]. Dividends Credited—At close of a dividend period. Dividend Period [Annually, Semiannually, Quarterly, Monthly, Weekly, Daily]. Minimum Opening Deposit [None, $ amount]. Minimum Monthly Balance [None, $ amount]. Money Market Dividend Rate as of Last Dividend Declaration Date ______%. Annual Percentage Yield as of Last Dividend Declaration Date ______%. Prospective Dividend Rate ______%. Prospective Annual Percentage Yield ______%. Dividends Compounded [Annually, Semiannually, Quarterly, Monthly, Weekly, Daily]. Dividends Credited—At close of a dividend period. Dividend Period [Annually, Semiannually, Quarterly, Monthly, Weekly, Daily]. Minimum Opening Deposit [None, $ amount]. Minimum Monthly Balance [None, $ amount]. The following fees may be assessed in connection with your accounts: Fees Applicable to All Accounts Returned item fee—$____.00 per item. Account reconciliation fee—$____.00 per hour. Statement copies fee—$____.00 per statement. Certified draft fee—$____.00 per draft. Wire transfer fee—$____.00 per transfer. Account inquiry fee—$____.00 per inquiry. Dormant account fee—$____.00 per month. Minimum balance service fee—$____.00 per day. Share transfer fee—$____.00 per transfer. Excessive share withdrawals fee—$____.00 per item. Share Draft Account Fees Monthly service fee—$____.00 per month. Overdraft transfers fee—$____.00 per overdraft. Drafts returned insufficient funds fee—$____.00 per draft. Stop payment order fee—$____.00 per order. Draft copy fee—$____.00 per copy. Check printing fee—$____.00 per 200 drafts. Money Market Share Account Fees Monthly service fee—$____.00 per month. Check printing fee—$____.00 per 200 drafts. Note: This illustration is for use of an FCU. The information provided on a Rate and Fee Schedule can be presented in any format. To ensure that it is a part of the account agreement, if used, it should be incorporated by reference into the appropriate share account disclosures. The figures used are illustrative only. B-12 Aggregate Overdraft and Returned Item Fees Sample Form Total for this period Total year-to-date Total overdraft fees $60.00 $150.00 Total returned item fees $0.00 $30.00 [58 FR 50445, Sept. 27, 1993, as amended at 59 FR 13436, 13437, Mar. 22, 1994; 63 FR 71575, Dec. 29, 1998; 72 FR 30246, May 31, 2007; 74 FR 36104, July 22, 2009; 75 FR 47175, Aug. 5, 2010; 77 FR 71084, Nov. 29, 2012; 85 FR 62212, Oct. 2, 2020] Appendix C to Part 707—Official Staff Interpretations Introduction 1. Official status. Section 707.1—Authority, Purpose, Coverage, and Effect on State Laws (c) Coverage 1. Foreign applicability. 2. Persons who advertise accounts. 3. Nonautomated credit unions. (d) Effect on State Laws 1. Preemption of state laws/Inconsistent requirements. 2. Preemption determinations. 3. Effect of preemption determinations. 4. Reversal of determination. Section 707.2—Definitions (a) Account 1. Covered accounts. i. Dividend-bearing and interest-bearing accounts. ii. Non-dividend-bearing and non-interest-bearing accounts. iii. Accounts opened as a condition of obtaining a credit card. iv. Escrow accounts with a consumer purpose, such as an account established by a member to escrow rental payments, pending resolution of a dispute with the member's landlord. v. Accounts held by a parent or custodian for a minor under a state's Uniform Gift to Minors Act (or Uniform Transfers to Minors Act). vi. Individual retirement accounts (IRAs) and simplified employee pension (SEP) accounts. vii. Payable-on-Death (POD) or “Totten trust” accounts. 2. Other accounts. not i. Mortgage escrow accounts for collecting taxes and property insurance premiums. ii. Accounts established to make periodic disbursements on construction loans. iii. Trust accounts opened by a trustee pursuant to a formal written trust agreement (not merely declarations of trust on a signature card such as a “Totten trust,” or an IRA or SEP account). iv. Accounts opened by an executor in the name of decedent's estate. v. Accounts of individuals operating businesses as sole proprietors. vi. Certificates of indebtedness. Some credit unions borrow funds from their members through a certificate of indebtedness that sets forth the terms and conditions of the repayment of the borrowing, such as federal credit unions do through 12 CFR 701.38. Such an account does not represent an account in a credit union and is not covered by part 707. vii. Unincorporated nonbusiness association accounts. 3. Other investments. i. Government securities. ii. Mutual funds. iii. Annuities. iv. Securities or obligations of a credit union. v. Contractual arrangements such as repurchase agreements, interest rate swaps, and bankers acceptances. vi. Purchases of U.S. Savings Bonds through a credit union. vii. Services offered through a group purchasing plan or a credit union service organization (CUSO). 4. Options. 5. Use of synonyms. i. The term “checking account” may be used to describe share draft accounts. ii. The term “money market account” may be used to describe money market share accounts. iii. The term “savings account” may be used to describe regular share and share accounts. iv. The terms “share certificate,” “certificate account,” or “certificate” may be used to describe share certificates and other dividend-bearing term share accounts. v. However, under no circumstances may a credit union describe a share account as a deposit account, or vice versa. For example, the term “certificate of deposit” or “CD” may not be used to describe share certificates and other dividend-bearing term share accounts. Similarly, the terms “time account” (used in Regulation DD, 12 CFR 1030.2(u)) and “time deposit” (used in Federal Reserve Board's Regulation D, 12 CFR 204.2(c)) may not be used to describe term share accounts. (b) Advertisement 1. Covered messages. i. Telephone solicitations. ii. Messages on automated teller machine (ATM) screens (including any printout). iii. Messages on a computer screen in a credit union's lobby (including any printout) other than a screen viewed solely by the credit union's employee. iv. Messages in a newspaper, magazine, or promotional flyer or on radio or television. v. Messages promoting an account that are provided along with information about the member's existing account at a credit union and that promote another account at the credit union (such as account promotional messages on the periodic statement). 2. Other messages. not i. Rate sheets published in newspapers, periodicals, or trade journals (unless the credit union or share and deposit broker that offers accounts at the credit union pays a fee to have the information included or otherwise controls publication). ii. Telephone conversations initiated by a member or potential member about an account. iii. An in-person discussion with a member about the terms for a specific account. iv. For purposes of § 707.8(b) of this part through § 707.8(e) of this part, information given to members about existing accounts, such as current rates recorded on a voice-response machine or notices for automatically renewable time account sent before renewal. v. Information about a particular transaction in an existing account. vi. Disclosures required by Federal or other applicable law. vii. A share account agreement. (c) Annual Percentage Yield. 1. General. 2. How Annual Percentage Yield Differs from Annual Percentage Yield Earned. (d) Average Daily Balance Method 1. General. (e) Board. 1. General. (f) Bonus 1. General. 2. Examples. i. A credit union offers $25 to potential members for becoming a member and opening an account. The $25 could be provided by check, cash, or direct deposit. ii. A credit union offers $25 to a member with only a regular share account to open a share draft account. The $25 could be provided by check, cash, or direct deposit. iii. A credit union offers a portable radio with a value of $20 to members and potential members for opening a share draft account. iv. A credit union pays the final installment deposit for a holiday club account if over $10. 3. Examples not comprising bonuses. not i. Discount coupons distributed by credit unions for use at restaurants or stores. ii. A credit union offers $20 to any member if the member is responsible for encouraging a potential member to open an account. The $20 is not a bonus because the $20 is not paid to the individual opening the account. Any item, including cash, given or offered to a third party (that is not a joint member or joint owner in an account being opened) in exchange for a member or potential member opening (or a member renewing or adding to) an account is not a bonus. iii. A credit union offers $25 to a member if the member can locate his name in the body of a newsletter. iv. Life savings benefits. Many credit unions offer life savings benefits to beneficiaries of deceased members. Because the benefit accrues to a third party, such life savings plans offered are not bonuses. v. A credit union offers to pay annual membership dues in a benevolent organization for a class of members. 4. De minimis rule. de minimis de minimis. de minimis i. Disability insurance premiums on a share account valued at an amount of $10 or less per year. ii. Coffee mugs, T-shirts or other merchandise with a market value of $10 or less per year. 5. Aggregation. 6. Waiver or reduction of a fee or absorption of expenses. i. Waiving a safe deposit box rental fee for one year for members who open a new account. ii. Waiving fees for travelers checks for members, and waiving check and share draft printing fees. iii. Nondiscriminatorily waiving all fees for a particular class of members, such as seniors or minors. iv. Discounts on interest rates charged for loans at the credit union. v. Rebates of loan interest already paid by a member. vi. Discounts on application fees charged for loans at the credit union. vii. Packaged, linked, or tied-account services. 7. Non-dividend membership benefits. (g) Credit Union 1. General. (h) Daily Balance Method 1. General. (i) Dividend and Dividends 1. General. 2. Procedure. 3. When available. 4. Sample dividend resolutions. Resolution of Board of Directors for the Declaration of Dividends A. I, ________________, certify that I am Secretary of ________________ Credit Union Board of Directors, and that the following is a correct copy of the resolution for declaring dividend adopted by the ________________ Credit Union at a meeting of the Board of Directors duly and properly held on __________________, 19____. This resolution appears in the minutes of this meeting and has not been rescinded or modified. B. Resolved, that (1) The Board of Directors has developed a nondiscriminatory dividend policy, by establishing dividend periods, dividend credit determination dates, dividend distribution dates, any associated penalties (if applicable), and the method of dividend computation for each type of share account; (2) The required transfers to reserves have been made; and (3) Sufficient and available prior and/or current earnings are available at the end of this dividend period. C. Resolved, further, that the Board of Directors now formally makes a dividend declaration in accordance with the Credit Union's dividend policy and authorizes that on ________________, 19____, dividends must be paid to members by a credit to the appropriate share account, payment by share draft or by a combination of the two methods. D. I further certify that the Board of Directors of this Credit Union has, and at the time of adoption of this resolution had, full power and lawful authority to adopt the foregoing resolutions and that this resolution revokes any prior resolution. In witness whereof, this is my signature and the date on which I signed this Resolution. Signature Date [Attach list of accounts with dividend rates for each type of account.] (ii) The following resolution may be used where the dividend rates are set before the close of a dividend period. Resolution of Board of Directors for the Declaration of Dividends A. I, ________________, certify that I am the Secretary of ________________ Credit Union, and that the following is a correct copy of the resolution for declaring dividends adopted by the ________________ Credit Union at a meeting of the Board of Directors duly and properly held on ____________________, 19____. This resolution appears in the minutes of that meeting and has not been rescinded or modified. B. Resolved, that the Board of Directors has adopted a nondiscriminatory dividend policy, by establishing dividend periods, dividend credit determination dates, dividend distribution dates, any associated penalties (if applicable) and the method of dividend computation for each type of share account. C. Resolved, that it is the policy and practice of the Board of Directors to meet periodically to establish prospective dividend rates for each type of dividend-bearing share account. D. Resolved, that if the required transfers to reserves have been made and there are sufficient and available prior and/or current earnings available at the end of a dividend period, the officers of the Credit Union are authorized to pay dividends at the rate prospectively established by the Board of Directors for each account for the dividend period. The officers may pay the dividends without any further action of the Board of Directors. The act of paying the dividends shall constitute the declaration of the dividends and shall be a ratification of the prospective dividend rate. In witness whereof, this is my signature and the date on which I signed this Resolution. Signature Date [Attach list of accounts with prospective dividend rates for each type of account.] 5. Referencing. (j) Dividend Declaration Date 1. General. i. “As of 3/15/95” (the date the board of directors last met and declared the last paid dividend). ii. “As of 3/31/95” (the last day of the last dividend period upon which a dividend has been paid). iii. “For the period 1/1/95 to 3/31/95” (the last dividend period upon which a dividend has been paid). iv. “For the first quarter of 1995” (the last dividend period upon which a dividend has been paid). v. “For April 1995” (the last dividend period upon which a dividend has been paid). vi. “As of the last dividend declaration date” (the last dividend period upon which a dividend has been paid). (k) Dividend Period 1. General. (l) Dividend Rate 1. General. 2. Referencing. (m) Extraordinary Dividends 1. General. 2. Use of synonym. (n) Fixed-Rate Account 1. General. e.g., (o) Grace Period 1. General. (p) Interest 1. General. 2. Differences between dividends and interest. 3. Referencing. (q) Member 1. Professional capacity. i. Attorney-client trust accounts. ii. Trust, estate and court-ordered accounts. iii. Landlord-tenant security accounts. 2. Other accounts. not 3. Retirement plans. (r) Non-Dividend Membership Benefits 1. General. 2. Examples. i. Food, refreshments, and drawings and raffles at annual meetings, member functions, and branch openings. ii. Travel club benefits. iii. Prizes offered at annual meetings, such as U.S. Savings Bonds, a deposit of funds into the winner's account, trips, and other gifts. Such prizes are not bonuses because they are offered as an incentive to increase attendance at the annual meeting, and not to entice members to open, maintain, or renew accounts or increase an account balance. iv. Life savings benefits. (s) Passbook Account 1. Relation to Regulation E. (t) Periodic Statement 1. General. 2. Examples. i. Additional statements provided solely upon request. ii. General service information such as a quarterly newsletter or other correspondence that describes available services and products. (u) Potential Member 1. General. 2. Verification of eligibility. 3. Nonmembers. (v) State 1. General. (w) Stepped-Rate Account 1. General. 2. Example. (x) Term Share Account 1. Relation to the Federal Reserve Board's Regulation D. 2. Club accounts. (y) Tiered-Rate Account 1. General. 2. Example. 3. Term share accounts. 4. Minimum balance accounts. (z) Variable-Rate Account 1. General. 2. Differences between fixed-rate and variable-rate accounts. i. Additional account disclosures are required (§ 707.4(b)(1)(ii)); ii. Rate decreases are exempted from change-in-terms requirements (§ 707.5(a)(2)(i)); and iii. Advertising notice required (§ 707.8(c)(1)). Fixed-rate accounts require a contract term obligating the credit union to a 30-day advance, written notice to members before decreasing the dividend rate on the account. Term changes adversely affecting the member and rate decreases cannot take effect until 30 days after such fixed-rate change-in-terms notices are mailed or delivered to members (§ 707.5(a)). Section 707.3—General Disclosure Requirements (a) Form 1. General. 2. Design requirements. i. In any order. ii. In combination with other disclosures or account terms. iii. In combination with disclosures for other types of accounts, as long as it is clear to members and potential members which disclosures apply to their account. iv. On more than one page and on the front and reverse sides. v. By using inserts to a document or filling in blanks. vi. On more than one document, as long as the documents are provided at the same time. 3. Consistent terminology. (b) General 1. Terms and conditions. 2. Specificity of legal obligation. 3. Foreign language. (c) Relation to Regulation E 1. General rule. i. A credit union changes a term that triggers a notice under Regulation E, and the timing and disclosure rules of Regulation E for sending change-in-terms notices. ii. A member adds an ATM access feature to an account, and the credit union provides disclosures pursuant to Regulation E, including disclosure of fees before the member receives ATM access. (See 12 CFR 1005.7.) iii. A credit union complying with the timing rules of Regulation E discloses at the same time fees for electronic services (such as balance inquiry fees imposed if the inquiry is made at an ATM) that are required to be disclosed by this regulation, but not by Regulation E. iv. A credit union relies on Regulation E's rules regarding disclosures of limitations on the frequency and amount of electronic fund transfers, including security-related exceptions. But any limitation on the number of “intra-institutional transfers” to or from the member's other accounts at the credit union during a given time period must be disclosed, even though intra-institutional transfers are exempt from Regulation E. (d) Multiple Members 1. General. (e) Oral Response to Inquiries 1. Application of rule. 2. Relation to advertising. 3. Existing accounts. (f) Rounding and Accuracy Rules for Rates and Yields (f)(1) Rounding 1. Permissible rounding. (f)(2) Accuracy 1. Annual percentage yield and annual percentage yield earned. 2. Dividend rate. Section 707.4—Account Disclosures (a) Delivery of Account Disclosures (a)(1) Account Opening 1. New accounts. i. A term share account that does not automatically rollover is renewed by a member. ii. A member changes the term for a renewable term share account (from a one-year term share account to a six-month term share account, for instance) (see comment 5(b)-5 regarding disclosure alternatives). iii. A credit union transfers funds from an account to open a new account not at the member's request, unless the credit union previously gave account disclosures and any change-in-terms notices for the new account (e.g., funds in a money market share account are transferred by a credit union to open a new account for the member, such as a share draft account, because the member exceeded transaction limitations on the money market share account). iv. A credit union accepts a deposit from a member to an account that the credit union had previously deemed to be “closed,” under applicable federal or state law, for the purpose of treating accrued, but uncredited, dividends as forfeited dividends. New account numbers are not required by this requirement. 2. Acquired accounts. 3. Combination disclosures. (a)(2) Requests (a)(2)(i) 1. Inquiries versus requests. 2. General requests. 3. Timing for response. 4. Use of electronic means. (a)(2)(ii)(A)(2) 1. Recent rates. (a)(2)(ii)(B) 1. Term. (b) Content of Account Disclosures (b)(1) Rate Information (b)(1)(i) Annual Percentage Yield and Dividend Rate 1. Rate disclosures. 2. Fixed-rate accounts. 3. Tiered-rate accounts. 4. Stepped-rate accounts. 5. Minimum balance accounts. (b)(1)(ii) Variable Rates (b)(1)(ii)(B) 1. Determining dividend rates. i. Identify the index and specific margin, if the dividend rate is tied to an index. ii. State that rate changes are within the credit union's discretion, if the credit union does not tie changes to an index. (b)(1)(ii)(C) 1. Frequency of rate changes. (b)(1)(ii)(D) 1. Limitations. (b)(2) Compounding and Crediting (b)(2)(i) Frequency 1. General. 2. Dividend period. (b)(2)(ii) Effect of Closing an Account 1. Deeming an account closed. NCUA Standard FCU Bylaws, (b)(3) Balance Information (b)(3)(i) Minimum Balance Requirements 1. Par value. 2. Disclosures. (b)(3)(ii) Balance Computation Method 1. Methods and periods. (b)(3)(iii) When dividends begin to accrue 1. Additional information. (b)(4) Fees 1. Types of fees. i. Maintenance fees, such as monthly service fees. ii. Fees related to share deposits or withdrawals. iii. Fees for special services, such as stop payment fees, fees for balance inquiries or verification of share and deposits, fees associated with checks returned unpaid, fees for regularly sending to members share drafts that otherwise would be held by the credit union, and overdraft line of credit access fees (if charged against the share account). iv. Fees to open or to close an account. v. Fees imposed upon dormant or inactive accounts. 2. Other fees. i. Fees for services offered to members and nonmembers alike, such as fees for certain travelers checks, for wire transfers and automated clearinghouse (ACH) transfers, to process credit card cash advances, or to handle U.S. Savings Bond Redemption (even if different amounts are charged to members and nonmembers). ii. Incidental fees, such as fees associated with state escheat laws, garnishment or attorneys fees, to change names on an account, to generate a midcycle periodic statement, to wrap loose coins, for photocopying, for statements returned to the credit union because of a wrong address, and locator fees. 3. Amount of fees. i. “$4.00 monthly service fee”. ii. $7.00 and up” or “fee depends on style of checks ordered” for check printing fees. 4. Tied-accounts. 5. Regulation E statements. 6. Fees for overdrawing an account. (b)(5) Transaction Limitations 1. General rule. i. Limits on the number of share drafts or checks that may be written on an account for a given time period. ii. Limits on withdrawals or share deposits during the term of a term share account. iii. Limitations required by Regulation D, such as the number of withdrawals permitted from money market share accounts by check to third parties each month (credit unions need not disclose reservation of right to require a notice for withdrawals from accounts required by federal or state law). (b)(6) Features of Term Share Accounts (b)(6)(i) Time Requirements 1. “Callable” term share accounts. (b)(6)(ii) Early Withdrawal Penalties 1. General. 2. Examples. i. Monetary penalties, such as a specific dollar amount ( e.g., e.g., ii. Adverse changes to terms such as the lowering of the dividend rate, annual percentage yield, or reducing the compounding or crediting frequency for funds remaining in shares or on deposit. iii. Reclamation of bonuses. 3. Relation to rules for IRAs or similar plans. 4. Disclosing penalties. (b)(6)(iv) Renewal Policies 1. Rollover term share accounts. 2. Nonrollover term share accounts. (b)(7) Bonuses 1. General. (b)(8) Nature of Dividends 1. General. 2. State-chartered credit unions with interest-bearing deposit accounts. (c) Notice to Existing Accountholders 1. General. 2. Form of the notice. 3. Timing. 4. Early compliance. Section 707.5—Subsequent Disclosures (a) Change in Terms (a)(1) Advance Notice required 1. Form of notice. 2. Effective date. 3. Terms that change upon the occurrence of an event. 4. Examples. i. The termination of employment for employee-members for whom account maintenance or activity fees were waived during their employment by the credit union. ii. The expiration of one year in a promotion described in the account opening disclosures to “waive $4.00 monthly service charges for one year”. (a)(2) No Notice Required (a)(2)(ii) Check Printing Fees 1. Increase in fees. (b) Notice Before Maturity for Term Share Accounts Longer Than One Month That Renew Automatically. 1. Maturity dates on nonbusiness days. 2. Disclosing when rates will be determined. i. A specific date, such as “October 28”. ii. A date that is easily discernible, such as “the Tuesday prior to the maturity date stated on the notice” or “as of the maturity date stated on this notice”. 3. Alternative timing rule. 4. Club accounts. 5. Renewal of a term share account. i. If the change is initiated by the credit union, the disclosure requirements of this paragraph apply. (Section 707.5(a) applies if the change becomes effective prior to the maturity of the existing term share account.) ii. If the change is initiated by the member, the account opening disclosure requirements of § 707.4(b) apply. (If the notice required by this paragraph has been provided, credit unions may give new account disclosures or disclosures that reflect the new term.) 6. Example. (b)(1) Maturities of Longer Than One Year 1. Highlighting changed terms. (c) Notice Before Maturity for Term Share Accounts Longer Than One Year That Do not Renew Automatically 1. Subsequent account. Section 707.6—Periodic Statement Disclosures (a) Rule When Statement and Crediting Periods Vary 1. General. 2. Regulation E interim statements. 3. Combined statements. i. The information is limited to information such as the account number, the type of account, balance information, accountholders' names, and social security or tax identification number; and ii. The credit union also provides members a periodic statement complying with this section for the account (the money market share account or regular share account, in the example). 4. Other information. i. Dividend rates and corresponding periodic rates to the dividend rate applied to balances during the statement period. ii. The dollar amount of dividends earned year-to-date. iii. Bonuses paid (or any de minimis iv. Fees for other products, such as safe deposit boxes. v. Accounts not covered by the periodic statement disclosure requirements (passbook and term share accounts) may disclose any information on the statement related to such accounts, so long as such information is accurate and not misleading. 5. When statement and crediting periods vary. 6. Length of the period. 7. Dividend period more frequent than statement period. 8. Additional voluntary disclosures. (b) Statement Disclosures (b)(1) Annual Percentage Yield Earned 1. Ledger and collected balances. (b)(2) Amount of Dividends or Interest 1. Definition of earned. 2. Accrued interest. 3. Terminology. 4. Closed accounts. 5. Extraordinary dividends. (b)(3) Fees Imposed 1. General. 2. Itemizing fees by type. See i. Monthly maintenance and excess-activity fees. ii. “Transfer” fees, if different dollar amounts are imposed, such as $.50 for deposits and $1.00 for withdrawals. iii. Fees for electronic fund transfers and fees for other services, such as balance-inquiry or maintenance fees. iv. Fees for paying overdrafts and fees for returning checks or other items unpaid. 3. Identifying fees. i. Credit unions may use a code to identify a particular fee if the code is explained on the periodic statement or in documents accompanying the statement. ii. Credit unions using debit slips may disclose the date the fee was debited on the periodic statement and show the amount and type of fee on the dated debit slip. 4. Relation to Regulation E. (b)(4) Length of Period 1. General. 2. Opening or closing an account mid-cycle. Section 707.7—Payment of Dividends (a) Permissible Methods 1. Prohibited calculation methods. i. The “rollback” method, also known as the “grace period” or “in by the 10th” method, where credit unions pay dividends on the lowest balance in the account for the period. ii. The “increments of par value” method, where credit unions only pay dividends on full shares in an account, e.g., a credit union with $5 par value shares pays dividends on $20 of a $24 account balance. iii. The “ending balance” method, where credit unions pay dividends on the balance in the account at the end of the period. iv. The “investable balance” method, where credit unions pay dividends on a percentage of the balance, excluding an amount credit unions set aside for reserve requirements. v. The “low balance” method, where credit unions pay dividends on the lowest balance in the account for any day in that period. 2. Use of 365-day basis. 1/365 1/360 3. Periodic dividend payments. 1/12 1/12 4. Leap year. 1/366 1/365 5. Maturity of term share accounts. i. During any grace period offered by a credit union for an automatically renewable term share account, if the member decides during that period not to renew the account. ii. Following the maturity of nonrollover term share accounts. iii. When the maturity date falls on a holiday, and the member must wait until the next business day to obtain the funds. 6. Dormant accounts. 7. Insufficient funds. 8. Account drawn below par value of a share. NCUA Standard FCU Bylaws, (a2) Determination of Minimum Balance To Earn Dividends 1. General. 2. Daily balance accounts. 3. Average daily balance accounts. 4. Beneficial method. i. A credit union using the daily balance method to calculate dividends and requiring a $500 minimum daily balance could choose to pay dividends on the account (for those days the minimum balance is not met) as long as the member maintained an average daily balance throughout the month of $400. ii. A credit union using the average daily balance method to calculate dividends and requiring a $400 minimum average daily balance could choose to pay dividends on the account as long as the member maintained a daily balance of $500 for at least half of the days in the period. iii. A credit union using either the daily balance method or average daily balance method to calculate dividends that requires: (A) a $500 daily balance; or (B) a $400 average daily balance to pay dividends on the account. 5. Paying on full balance. 6. Negative balances prohibited. i. The daily or average daily balance on which dividends will be paid. ii. Whether any minimum balance to earn dividends is met. (See commentary to appendix A, Part II, which prohibits credit unions from using negative balances in calculating the dividends figure for the annual percentage yield earned.) 7. Club accounts. 8. Minimum balances not affecting dividends. (b) Compounding and Crediting Policies 1. General. 2. Withdrawals prior to crediting date. 3. Closed accounts. NCUA Standard FCU Bylaws, (c) Date Dividends Begin To Accrue 1. Relation to Regulation CC. 2. Ledger and collected balances. 3. Withdrawal of principal. Section 707.8—Advertising (a) Misleading or Inaccurate Advertisements 1. General. 2. Indoor signs. i. For a tiered-rate account, it also provides the upper and lower dollar amounts of the tier corresponding to the advertised annual percentage yield. ii. For a term share account, it also provides the term required to obtain the advertised annual percentage yield. 3. “Free” or “no cost” accounts. i. Any fee imposed if a minimum balance requirement is not met, or if the member exceeds a specified number of transactions. ii. Transaction and service fees that members reasonably expect to be imposed on an account on a regular basis (see comments 4(b)(4)-1 and 2). iii. A flat fee, such as a monthly service fee. iv. Fees imposed to deposit, withdraw or transfer funds, including per-check or per-transaction charges (for example, $.25 for each withdrawal, whether by check, in person). 4. Other fees. not i. Fees that are not required to be disclosed under § 707.4(b)(4). ii. Check printing fees of any type. iii. Fees for obtaining copies of checks, whether or not the original checks have been truncated or returned to the member periodically. iv. Balance inquiry fees. v. Fees assessed against a dormant account. vi. Fees for using an ATM. vii. Fees for electronic transfer services that are not required to obtain an account, such as preauthorized transfers or home electronic credit union services. viii. Stop payment fees and fees for share drafts or checks returned unpaid. 5. Similar terms. 6. Specific account services. 7. Free for limited time. 8. Conditions not related to share accounts. 9. Electronic advertising. 10. Examples. i. Representing an overdraft service as a “line of credit,” unless the service is subject to 12 CFR part 1026 (Regulation Z). ii. Representing that the credit union will honor all checks or authorize payment of all transactions that overdraw an account, with or without a specified dollar limit, when the credit union retains discretion at any time not to honor checks or authorize transactions. iii. Representing that members with an overdrawn account can maintain a negative balance when the terms of the account's overdraft service require members promptly to return the share account to a positive balance. iv. Describing a credit union's overdraft service solely as protection against bounced checks when the credit union also permits overdrafts for a fee for overdrawing their accounts by other means, such as ATM withdrawals, debit card transactions, or other electronic fund transfers. v. Advertising an account-related service for which the credit union charges a fee in an advertisement that also uses the word “free” or “no cost” or a similar term to describe the account, unless the advertisement clearly and conspicuously indicates that there is a cost associated with the service. If the fee is a maintenance or activity fee under § 707.8(a)(2) of this part, however, an advertisement may not describe the account as “free” or “no cost” or contain a similar term even if the fee is disclosed in the advertisement. 11. Additional disclosures in connection with the payment of overdrafts. (b) Permissible Rates 1. Tiered-rate accounts. 2. Stepped-rate accounts. 3. Representative examples. i. Provide a representative example of the annual percentage yields offered, clearly described as such. For example, if a credit union offers a $25 bonus on all term share accounts and the annual percentage yield will vary depending on the term selected, the credit union may provide a disclosure of the annual percentage yield as follows: “For example, our 6-month share certificate currently pays a 3.15% annual percentage yield.” ii. Indicate that various rates are available, such as by stating short-term and longer-term maturities along with the applicable annual percentage yields: “We offer share certificates with annual percentage yields that depend on the maturity you choose. For example, our one-month share certificate earns a 2.75% APY. Or, earn a 5.25% APY for a three-year share certificate.” (c) When Additional Disclosures are Required 1. Trigger terms. i. “One, three, and five year share certificates available”. ii. “Bonus rates available”. iii. “1% over our current rate,” so long as the rates are not determinable from the advertisement. (c)(2) Time Annual Percentage Yield is Offered 1. Specified recent date. 2. Reference to date of publication. (c)(5) Effect of Fees 1. Scope. (c)(6) Features of Term Share Accounts (c)(6)(i) Time Requirements 1. Club accounts. (c)(6)(ii) Early Withdrawal Penalties 1. Discretionary penalties. (d) Bonuses 1. General reference to “bonus.” (e) Exemption for Certain Advertisements (e)(1) Certain Media (e)(1)(i) 1. Internet advertisements. 2. Internet advertisements. (e)(1)(iii) 1. Tiered-rate accounts. (e)(2) Indoor Signs (e)(2)(i) 1. General. (e)(3) Newsletters 1. General. 2. Permissible Distribution. i. Mailing newsletters to existing members. ii. Distributing newsletters at a function reasonably limited to members, such as an annual meeting or member picnic. iii. Displaying or offering newsletters at a credit union lobby, branch, or office. 3. Impermissible Distribution. Section 707.9—Enforcement and Record Retention (c) Record Retention 1. Evidence of required actions. i. Established and maintained procedures for paying dividends and providing timely disclosures as required by the regulation, and ii. Retained sample disclosures for each type of account offered to members, such as account-opening disclosures, copies of advertisements, and change-in-term notices; and information regarding the dividend rates and annual percentage yields offered. 2. Methods of retaining evidence. 3. Payment of dividends. Section 707.10 [Reserved] Section 707.11—Additional Disclosures Regarding the Payment of Overdrafts (a) Disclosure of total fees on periodic statements (a)(1) General. 1. Transfer services. 2. Examples of credit unions advertising the payment of overdrafts. i. Promotes the credit union's policy or practice of paying some overdrafts, unless the service would be subject to 12 CFR part 1026 (Regulation Z), in advertisements using broadcast media, brochures, telephone solicitations ,or electronic mail, or on Internet sites, ATM screens or receipts, billboards, or indoor signs. But see, Sec. 707.11(a)(2) of this part regarding communications about the payment of overdrafts that would not trigger periodic statement disclosures; ii. Includes a message on a periodic statement informing the member of an overdraft limit or the amount of funds available for overdrafts. For example, a credit union that includes a message on a periodic statement informing the member of a $500 overdraft limit or that the member has $300 remaining on the overdraft limit, is promoting an overdraft service; iii. Discloses an overdraft limit or includes the dollar amount of an overdraft limit in a balance disclosed by any means, including on an ATM receipt or on an automated system, such as a telephone response machine, ATM screen, or the credit union's Internet site. 3. Fees for paying overdrafts. See also 4. Fees for returning items unpaid. 5. Waived fees. 6. Totals for the calendar year to date. 7. Itemization of fees. (a)(3) Time period covered by disclosures 1. Periodic statement disclosures. (a)(5) Acquired accounts (b) Advertising disclosures in connection with overdraft services 1. Examples of credit unions promoting the payment of overdrafts. i. Promotes the credit union's policy or practice of paying overdrafts, unless the service would be subject to 12 CFR part 1026 (Regulation Z). This includes advertisements using print media such as newspapers or brochures, telephone solicitations, electronic mail, or messages posted on an Internet site. But see, § 707.11(b)(2) of this part for communications that are not subject to the additional advertising disclosures; ii. Includes a message on a periodic statement informing the member of an overdraft limit or the amount of funds available for overdrafts. For example, a credit union that includes a message on a periodic statement informing the member of a $500 overdraft limit or that the member has $300 remaining on the overdraft limit, is promoting an overdraft service. iii. Discloses an overdraft limit or includes the dollar amount of an overdraft limit in a balance disclosed on an automated system, such as a telephone response machine, ATM screen, or the credit union's Internet site. See, however, § 707.11(b)(3) of this part. 2. Transfer services. 3. Electronic media. 4. Fees. 5. Categories of transactions. 6. Time period to repay. 7. Circumstances for nonpayment. 8. Advertising an account as “free.” (c) Disclosure of account balances 1. Balance that does not include additional amounts. 2. Retail sweep programs. i. The account involved complies with the Federal Reserve Board's Regulation D, 12 CFR 204.2(d)(2), ii. The member does not have direct access to the share savings subaccount that is part of the retail sweep program, and iii. The member's periodic statements show the account balance as the combined balance in the subaccounts. 3. Additional balance. e.g., 4. Automated systems. Appendix A to Part 707—Annual Percentage Yield Calculation Part I. Annual Percentage Yield for Account Disclosures and Advertising Purposes 1. Rounding for calculations. i. The daily rate applied to a balance carried to five or more decimals. For example; .008219178%, 3.00% for a 365 day year, would be rounded to no less than .00822%. ii. The daily dividends or interest earned carried to five or more decimals. For example; $.08219178082, daily dividends on $1,000 at 3% for a 365 day year, would be rounded to no less than $.08219. 2. Exponents in a leap year. 3. First tier of a tiered-rate account. 4. Term Share Accounts Opened in Midterm. Part II. Annual Percentage Yield Earned for Periodic Statements 1. Balance method. 2. Negative balances prohibited. A. General Formula 1. Accrued but uncredited dividends. i. May not be included in the balance for statements that are issued at the same time or less frequently than the account's compounding and crediting frequency. For example, if monthly statements are sent for an account that compounds dividends daily and credits dividends monthly, the balance may not be increased each day to reflect the effect of daily compounding. Assume a credit union will pay $13.70 in dividends on $100,000 for the first day, $6.85 in dividends on $50,013.70 for the second day, and $3.43 in dividends on $25,020.55 for the third day. The sum of each days balance is $175,000 (does not include accrued, but uncredited, dividends amounts $13.70, $6.85, and $3.43), thereby resulting in an average daily balance for the three days of $58,333.33. ii. Must be included in the balance for succeeding statements if a statement is issued more frequently than compounded dividends is credited on an account. For example, if monthly statements are sent for an account that compounds dividends daily and credits dividends quarterly, the balance for the second monthly statement would include dividends that had accrued for the prior month. Assume a credit union will pay $411.78 in dividends on 30 days of $100,000, $427.28 in dividends on 31 days of $100,411.78, and $415.23 in dividends on 30 days of $100,839.06. The balance (average daily balance in the account for the period) for the second 31 days is $100,411.78. 2. Rounding. 3. Compounding frequency using the average daily balance method. B. Special Formula for Use Where Periodic Statement is Sent More Often Than the Period for Which Dividends are Compounded 1. Statements triggered by Regulation E. 2. Days in compounding period. Appendix B to Part 707—Model Clauses and Sample Forms 1. Modifications. 2. Format. 3. Disclosures for opening accounts. 4. Compliance with Regulation E. 5. Duplicate disclosures. 6. Guide to model clauses. 7. Sample forms. [59 FR 59899, Nov. 21, 1994, as amended at 60 FR 21699, May 3, 1995; 61 FR 68129, Dec. 27, 1996; 63 FR 71575, Dec. 29, 1998; 66 FR 33163, June 21, 2001; 70 FR 72899, Dec. 8, 2005; 72 FR 30246, May 31, 2007; 74 FR 36105, July 22, 2009; 75 FR 47175, Aug. 5, 2010; 77 FR 71085, Nov. 29, 2012; 85 FR 62212, Oct. 2, 2020]

Related documents

• 12 CFR Part 305 — XXX#634995
• 50 CFR Part 600 — Magnuson-Stevens Act Provisions#512148
• 50 CFR Part 622 — Fisheries of the Caribbean, Gulf of America, and South Atlantic#512149
• 50 CFR Part 635 — Atlantic Highly Migratory Species#512150
• 50 CFR Part 648 — Fisheries of the Northeastern United States#512151