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Circular Letters

Circular Letter 5662

June 1 , 2005

To: All Member Banks and Others Concerned in the Third Federal Reserve District

Attention: Chief Executive Officer and Chief Compliance Officer

Subject: REGULATION DD: TRUTH IN SAVINGS; FINAL RULE

Summary:

The Board of Governors of the Federal Reserve System has published final amendments to Regulation DD, which implements the Truth in Savings Act, and the regulation’s official staff commentary to improve the uniformity and adequacy of information provided to consumers when they overdraw their deposit accounts. The final amendments, in part, address a specific service provided by many depository institutions to pay checks and allow other transactions when there are insufficient funds in an account. This service is often referred to as “bounced-check protection” or “courtesy overdraft protection.”

Depository institutions sometimes provide overdraft services to deposit account customers as an alternative to a traditional overdraft line of credit. To address concerns about the marketing of this service, the final rule expands the regulation’s prohibition against misleading advertisements to cover institutions’ communications with current customers about their existing accounts. The staff commentary provides examples of advertisements that would ordinarily be misleading.

Other revisions to Regulation DD require additional disclosures about fees and other terms for overdraft services, including in advertisements. To assist consumers in understanding the financial impact of overdrawing their accounts, the final rule requires institutions that promote the payment of overdrafts in an advertisement to disclose on periodic statements the total dollar amount imposed for overdraft fees and the total dollar amount imposed for returned-item fees, both for the statement period and for the calendar year to date.

The Federal Register External Link notice, published May 24, 2005.

Date: The final rule is effective July 1, 2006.

For Further Information: Elizabeth A. Eurgubian, Attorney, or Ky Tran-Trong or Krista P. DeLargy, Senior Attorneys, Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, at (202) 452-3667 or 452-2412.

For users of Telecommunications Device for the Deaf (“TDD”) only, contact (202) 263-4869.