To All Depository Institutions and Others Concerned in the Second Federal Reserve District:
The Federal Reserve Board proposes to amend Regulation DD, which implements the Truth in Savings Act, and the staff commentary to the regulation, to address concerns about the uniformity and adequacy of information provided to consumers when they overdraw their accounts. The Board’s proposal follows the guidance issued recently by the federal financial institutions supervisory agencies (access Circular No. 11602 for details). The proposed amendments, in part, address a specific service offered by depository institutions, commonly referred to as “bounced-check protection” or “courtesy overdraft protection.”
Bounced-check protection is an automated service that is sometimes provided to deposit account consumers as an alternative to a traditional line of credit. To address the concerns about the marketing of bounced check protection services, a proposed revision to the regulation would expand the prohibition against the misleading advertisements to cover communications with current consumers about existing accounts; the staff commentary would provide examples.
Proposed revisions to Regulation DD would require additional fee and other disclosures about automated overdraft services, including in advertisements. The Board also is proposing amendments of general applicability that would require institutions to provide more uniform disclosures about overdraft and returned-item fees.
Comments on the proposal must reach the Board on or before August 6, 2004.
Legal and Compliance Risk Department