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Inactive Financial Institution Letters


[Federal Register: April 4, 2001 (Volume 66, Number 65)]
[Rules and Regulations]               
[Page 17795-17804]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04ap01-4]                         

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FEDERAL RESERVE SYSTEM

12 CFR Part 230

[Regulation DD; Docket No. R-1044]

 
Truth in Savings

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Interim rule; request for comments.

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SUMMARY: The Board is adopting an interim final rule amending 
Regulation DD, which implements the Truth in Savings Act, to establish 
uniform standards for the electronic delivery of disclosures required 
by the act and regulation. The rule provides guidance on the timing and 
delivery of electronic disclosures to ensure consumers have adequate 
opportunity to access and retain the information. (Similar rules are 
being adopted under other consumer financial services and fair lending 
regulations administered by the Board.) Under the rule, depository 
institutions may deliver disclosures electronically if they obtain 
consumers' affirmative consent in accordance with the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act). Amendments 
are also adopted that address electronic advertisements. The rule is 
being adopted as an interim rule to obtain additional public comment. 
An interim rule published in 1999, before enactment of the E-Sign Act, 
is withdrawn.

DATES: The interim rule is effective March 30, 2001; however, to allow 
time for any necessary operational changes, the mandatory compliance 
date is October 1, 2001. Comments must be received by June 1, 2001.

ADDRESSES: Comments, which should refer to Docket No. R-1044, may be 
mailed to Ms. Jennifer J. Johnson, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue, N.W., 
Washington, D.C. 20551 or mailed electronically to 
regs.comments@federalreserve.gov. Comments addressed to Ms. Johnson may 
also be delivered to the Board's mail room between 8:45 a.m. and 5:15 
p.m. weekdays, and to the security control room at all other times. The 
mail room and the security control room, both in the Board's Eccles 
Building, are accessible from the courtyard entrance on 20th Street 
between Constitution Avenue and C Street, N.W. Comments may be 
inspected in room MP-500 in the Board's Martin Building between 9:00 
a.m. and 5:00 p.m., pursuant to the Board's Rules Regarding the 
Availability of Information, 12 CFR part 261.

FOR FURTHER INFORMATION CONTACT: Jane E. Ahrens, Senior Counsel, and 
Deborah J. Stipick, Attorney, Division of Consumer and Community 
Affairs, at (202) 452-2412 or (202) 452-3667.

SUPPLEMENTARY INFORMATION:   

I. Background

    The Truth in Savings Act (TISA), 12 U.S.C. 4301 et seq., requires 
depository institutions to disclose yields, fees, and other terms 
concerning deposit accounts to consumers at account opening, upon 
request, when changes in terms occur, and in periodic statements. It 
also includes rules about advertising for deposit accounts. The Board's 
Regulation DD (12 CFR part 230) implements the act. Credit unions are 
governed by a substantially similar regulation issued by the National 
Credit Union Administration.
    TISA and Regulation DD require a number of disclosures to be 
provided in writing, presuming that depository institutions provide 
paper documents. Under the Electronic Signatures in Global and National 
Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.), however, electronic 
documents and signatures have the same validity as paper documents and 
handwritten signatures.

Board Proposals Regarding Electronic Disclosures

    Over the past few years, the Board has published several interim 
rules and proposals regarding the electronic delivery of disclosures. 
In 1996, after a comprehensive review of Regulation E (Electronic Fund 
Transfers), the Board proposed to amend the regulation to permit 
financial institutions to provide disclosures by sending them 
electronically. (61 FR 19696, May 2, 1996.) Based on comments received 
on the 1996 proposal, on March 25,1998, the Board published an interim 
rule permitting the electronic delivery of disclosures under Regulation 
E (63 FR 14528) and similar proposals under Regulation DD (63 FR 
14533), and other financial services and fair lending regulations 
administered by the Board. The 1998 interim rule and proposed rules 
were similar to the 1996 proposed rule under Regulation E.
    The 1998 proposals and interim rule allowed creditors, depository 
institutions, lessors, and others to provide disclosures electronically 
if the consumer agreed, with few other requirements. For ease of 
reference, this background section uses the terms ``institutions'' and 
``consumers.''
    Industry commenters generally supported the Board's 1998 proposals 
and interim rule, but many of them sought specific revisions and 
additional guidance on how to comply with the disclosure requirements 
in certain transactions and circumstances. In particular, they 
expressed concern that the rule did not specify a uniform method for 
establishing that an ``agreement'' was reached for sending disclosures 
electronically. Consumer advocates, on the other hand, generally 
opposed the 1998 proposals and the interim rule. They believed that 
consumer protections in the proposals were inadequate, especially in 
connection with transactions that are typically consummated in person 
(such as automobile loans and leases, home-secured loans, and door-to-
door credit sales).

September 1999 Proposals

    In response to comments received on the 1998 proposals, the Board 
published revised regulatory proposals in September 1999 under 
Regulations B, E, M, Z, and DD, (64 FR 49688, 49699, 49713, 49722 and 
49740, respectively, September 14, 1999) (collectively, the ``1999 
proposals''), and an interim rule under Regulation DD (64 FR 49846). 
The interim rule under Regulation DD allowed depository institutions to 
deliver disclosures on periodic statements electronically if the 
consumer agrees.
    Generally, the 1999 proposals required institutions to use a 
standardized form containing specific information about the electronic 
delivery of disclosures so that consumers could make informed decisions 
about whether to receive disclosures electronically. If the consumer 
affirmatively consented, most disclosures could be provided 
electronically. To address concerns about potential abuses, the 1999 
proposals generally would have required disclosures to be given in 
paper form when consumers transacted business in person. The proposals 
contained rules for disclosures that are made available to consumers at 
an institution's Internet web site (governing, for example, how long 
disclosures must remain posted at a web site).
    Comments on the September 1999 proposals--The Board received 
letters representing 115 commenters

[[Page 17796]]

expressing views on the revised proposals. Industry commenters 
generally supported the Board's approach establishing federal rules for 
a uniform method of obtaining consumers' consents to the receipt of 
electronic disclosures instead of deferring to state law. Still, many 
sought specific additional guidance and in some cases wanted more 
flexibility. They were concerned about the length of time the proposals 
would have required electronic disclosures to remain available to a 
consumer at an institution's Internet web site or upon request. In 
addition, they believed the proposed rule requiring paper disclosures 
for transactions conducted in person was not sufficiently flexible. 
Consumer advocates believed the 1999 proposals addressed many of their 
concerns about the 1998 proposals. Nevertheless, they urged the Board 
to incorporate greater protections for consumers, such as restricting 
the delivery of electronic disclosures to only those consumers who 
initiate transactions electronically.
    The Board also obtained views through four focus groups with 
individual consumers, conducted in the Washington-Baltimore 
metropolitan area. Participants reviewed and commented on the format 
and content of the proposed sample consent forms, as well as on 
alternative revised forms.

Federal Legislation Addressing Electronic Commerce

    On June 30, 2000, the President signed the E-Sign Act, which was 
enacted to encourage the continued expansion of electronic commerce. 
The E-Sign Act generally provides that electronic documents and 
signatures have the same validity as paper documents and handwritten 
signatures. The act contains special rules for the use of electronic 
disclosures in consumer transactions. Consumer disclosures may be 
provided in electronic form only if the consumer affirmatively consents 
after receiving certain information specified in the statute.
    The Board and other government agencies are permitted to interpret 
the E-Sign Act's consumer consent requirements within prescribed 
limits, but may not impose additional requirements for consumer 
consent. In addition, agencies generally may not re-impose a 
requirement for using paper disclosures in particular transactions, 
such as those conducted in person.
    The consumer consent provisions in the E-Sign Act became effective 
October 1, 2000, and did not require implementing regulations. Thus, 
financial institutions are currently permitted to use electronic 
disclosures under Regulations B, E, M, Z and DD if the consumer 
affirmatively consents in the manner required by the E-Sign Act. Under 
section 101(c)(5) of the E-Sign Act, consumers who consented prior to 
the effective date of the act to receive electronic disclosures as 
permitted by any law or regulation, are not subject to the consent 
requirements.

II. The Interim Rule

    The Board is adopting an interim final rule to establish uniform 
standards for the electronic delivery of disclosures required under 
Regulation DD. Consistent with the requirements of the E-Sign Act, 
depository institutions generally must obtain consumers' affirmative 
consent to provide disclosures electronically. The interim rule 
published in 1999, before enactment of the E-Sign Act, is withdrawn.
    The interim rules also establish uniform requirements for the 
timing and delivery of electronic disclosures. Disclosures may be sent 
by electronic mail (e-mail) to an electronic address designated by the 
consumer, or they may be made available at another location, such as an 
Internet web site. If the disclosures are not sent by e-mail, consumers 
must receive a notice alerting them to the availability of the 
disclosures. Disclosures posted on a web site must be available for at 
least 90 days, to allow consumers adequate time to access and retain 
the information. With regard to the timing of electronic disclosures, 
for disclosures that must be provided before the consumer opens an 
account, consumers are required to access the electronic disclosures 
before the account is opened. Under the interim rule, institutions must 
make a good faith attempt to redeliver electronic disclosures that are 
returned undelivered, using the address information available in their 
files. Similar rules are being adopted under Regulations B, E, M and Z.

III. Request for Comment

Interim Rules

    The interim rules include most of the revisions that were part of 
the 1999 proposals and were not affected by the E-Sign Act. The Board 
is adopting these rules with some minor changes discussed below. The 
rules are adopted as interim rules, to allow commenters to present new 
information or views not previously considered in the context of the 
1998 and 1999 proposals. Since the Board's 1999 proposals were issued, 
more institutions have gained experience in offering financial services 
electronically. The Board believes that additional comments, beyond 
those previously considered in connection with the Board's earlier 
proposals, might inform the Board whether any developments in 
technology or industry practices have occurred that warrant further 
changes in the rules. The comment period ends on June 1, 2001. The 
Board expects to adopt final rules on a permanent basis prior to 
October 1, 2001.

Interpreting E-Sign Provisions

    Under section 104(b) of the E-Sign Act, the Board and other 
government agencies are permitted to interpret the act, within 
prescribed limits. The Board may issue rules that interpret how the E-
Sign Act's consumer consent requirements apply for purposes of the laws 
administered by the Board. Also, the Board may, by regulation, exempt a 
particular category of disclosures from the E-Sign Act's consumer 
consent requirements if it will eliminate a substantial burden on 
electronic commerce without creating material risk for consumers.
    The Board requests comment on whether the Board should exercise its 
authority under the E-Sign Act in future rulemakings to interpret the 
consumer consent provisions or other provisions of the act, as they 
affect the Board's consumer protection regulations. Comment is 
requested on whether the statutory provisions relating to consumer 
consent are sufficient, or whether additional guidance is needed. For 
example, is interpretative guidance needed concerning the statutory 
requirement that consumers confirm their consent electronically in a 
manner that reasonably demonstrates they can access information in the 
form to be used by the depository institution? Is clarification needed 
on the effect of consumers' withdrawing their consent, or on requesting 
paper copies of electronic disclosures? Institutions must also inform 
consumers of changes in hardware or software requirements if the change 
creates a material risk that the consumer will not be able to access or 
retain the disclosure. The Board solicits comment on whether regulatory 
standards are needed for determining a ``material risk'' for purposes 
of Regulation DD and other financial services and fair lending laws 
administered by the Board, and if so what standards should apply.
    Under section 104(d) of the E-Sign Act, the Board is authorized to 
exempt specific disclosures from the consumer consent requirements of 
section 101(c) of the E-Sign Act, if the exemption is

[[Page 17797]]

necessary to eliminate a substantial burden on electronic commerce and 
will not increase the material risk of harm to consumers. The Board 
requests comment on whether it should consider exercising this 
exemption authority.

Study on Adapting Requirements to Online Banking and Lending

    The E-Sign Act eliminated legal impediments to the use of 
electronic records and signatures, the Board requests comment on 
whether other legislative or regulatory changes are needed to adapt 
current requirements to online banking and lending and facilitate 
electronic delivery of consumer financial services.
    As an example, under Regulations Z and DD, periodic statements 
inform consumers about their account activity over a period of time, 
typically monthly. The beginning and ending dates of the cycle 
determine costs and other information that must be disclosed. In 
addition, transmittal of the periodic statement triggers important 
consumer protections such as billing error resolution procedures. 
Online banking, however, can provide consumers with up-to-date 
information about their accounts on a continuing basis. Such 
information is a helpful supplement to--but does not comply as a 
substitute for--periodic statements. Should the rules for periodic 
statements be modified for online banking, and if so, how could the 
rules be crafted to maintain for consumers (1) a perspective of the 
cost and activity of an account over time, and (2) protections for 
resolving errors or liability for unauthorized transactions.
    The comments may assist the Board in future efforts to update the 
regulations. The comments may also be used in connection with a study 
required under the Gramm-Leach-Bliley Act of 1999. That act requires 
the federal bank supervisory agencies to conduct a study of banking 
regulations that affect the electronic delivery of financial services 
and to submit to the Congress a report recommending any legislative 
changes that are needed to facilitate online banking and lending.

IV. Section-by-Section Analysis

    Pursuant to its authority under section 269 of TISA, the Board 
amends Regulation DD to establish uniform standards for the use of 
electronic communication to provide disclosures required by this 
regulation. Electronic disclosures can effectively reduce compliance 
costs without adversely affecting consumer protections. The purpose of 
Regulation DD disclosures is to ensure that consumers have meaningful 
information about account terms so that consumers can compare savings 
and investment products. The use of electronic communication may allow 
institutions to provide Regulation DD disclosures to the consumer more 
efficiently. To the extent that a depository institution may make 
electronic disclosures available at its web site instead of providing 
the disclosures directly to the consumer, the Board finds that such an 
exception is warranted pursuant to its authority under section 
269(a)(3) of TISA. Below is a section-by-section analysis of the rules 
for providing disclosures by electronic communication, including 
references to changes in the official staff commentary.

Section 230.3  General Disclosure Requirements

3(a) Form
    Section 230.3(a) has been revised to reflect that the disclosures 
provided under Sec. 230.10 for electronic communications are subject to 
the same requirements as other disclosures provided under Regulation 
DD.
3(g) Electronic Communication
    Section 230.3(g) is added to provide a cross reference to rules 
governing the electronic delivery of disclosures in Sec. 230.10.

Section 230.4  Account Disclosures

4(a) Delivery of Account Disclosures
    Depository institutions generally must provide account-opening 
disclosures to consumers before an account is opened or a service is 
provided. Currently, depository institutions may delay delivering TISA 
disclosures if the consumer is not present at the institution when the 
account is opened (or service is provided). The rationale underlying 
the ten-day delay is that the institution cannot provide written 
disclosures is such cases, for example, when an account is opened by 
telephone. Section 230.4(a) provides that in such cases, account-
opening disclosures must be mailed or delivered within ten business 
days.
    Under the 1999 proposal, the delayed timing rule under 
Sec. 230.4(a) did not apply to depository institutions opening accounts 
by ``electronic communication'' (for example, those offered on the 
Internet). Some commenters agreed that the ten-day delay should not 
apply in such cases. Others expressed concern about providing accurate 
disclosures if a consumer ``opens'' an account electronically after 
normal business hours, and account terms change when the institution 
next opens for business.
    The interim final rule, as in the 1999 proposal, provides that 
depository institutions opening accounts by ``electronic 
communication'' (for example, those offered on the Internet) may not 
delay providing disclosures under Sec. 230.4(a). This rule is adopted 
pursuant to the Board's exception authority under Section 269(a)(3) of 
TISA, to carry out the purposes of the statute. The difficulties in 
providing disclosures for accounts opened by mail or telephone are not 
present for requests to open accounts received by electronic 
communication using visual text. Thus, specific disclosures must be 
provided before accounts are opened using electronic communication. 
TISA and Regulation DD do not define when an account is deemed to be 
opened; thus, institutions may establish policies and procedures to 
address after-hours requests to open accounts, to ensure that accurate 
disclosures are provided before the account is deemed by the 
institution to be ``opened.''
    Depository institutions must also provide account disclosures to a 
consumer upon request. Section 230.4(a)(2)(i) provides that if a 
consumer is not present at the institution when a request for account 
disclosures is made, the institution must mail or deliver the 
disclosures within a reasonable time after the institution receives the 
request; ten days is deemed to be a reasonable time. The 1999 proposal 
extended the rule to requests for disclosures made by electronic 
communication. Most commenters agreed that a ten-day period was 
reasonable for responding to electronic requests for disclosures. Some 
stated that having one uniform time period would aid compliance. The 
interim final rule provides that ten days is a reasonable time for 
responding to request for account disclosures made by electronic 
communication. Comment 4(a)(2)(i)-3 has been revised to include this 
guidance.
    Section 230.4(a)(2)(i) is revised to require institutions to mail 
or deliver disclosures in paper form or electronically to consumers who 
are not present at the institution when a request is made. To provide 
disclosures electronically, the institution must send the disclosures 
to the consumer's e-mail address, or send a notice alerting the 
consumer to the location of the disclosures, such as on the 
institution's Internet web site. Posting disclosures on a depository 
institution's web site does not relieve the institution's duty to 
provide the disclosures upon request.

[[Page 17798]]

Comment 4(a)(2)(i)-4 is added to contain this advice.

Section 230.6  Periodic Statement Disclosures

 6(c) Electronic Communication
    Section 230.6(c) was adopted by the Board in 1999 as an interim 
rule allowing the electronic delivery of periodic statements, if the 
consumer agreed. (64 FR 49846, September 14, 1999.) The electronic 
delivery of periodic statements for consumer asset accounts was already 
permissible under an interim rule to Regulation E issued in March 1998. 
The 1999 interim rule allowed institutions to delivery electronically a 
single statement that complied with Regulation E and Regulation DD. The 
interim rule did not specify the manner or form of consumers' consent 
to electronic statements.
    Effective October 1, 2000, the E-Sign Act permits depository 
institutions to provide disclosures to consumers using electronic 
communication, if the depository institution complies with Section 
101(c) of that act. Section 101(c) of the E-Sign Act requires 
depository institutions to provide specific information about the 
electronic delivery of disclosures and obtain the consumer's 
affirmative consent to receive electronic disclosures. As discussed 
below, Sec. 226.10(b) is being adopted to set forth the general rule 
that depository institutions subject to Regulation DD may provide 
disclosures electronically only if the institution complies with 
Section 101(c) of the E-Sign Act. This requirement applies to 
disclosures on periodic statements that are provided electronically, 
and Sec. 230.6(c) is withdrawn accordingly.

Section 230.8  Advertising

8(a) Misleading or Inaccurate Advertisements
    Stating certain account terms in an advertisement for a deposit 
account triggers the disclosure of additional terms. Although 
Regulation DD does not currently address multiple-page advertisements, 
Regulations Z (Truth in Lending) and M (Consumer Leasing) permit 
creditors and lessors to provide required advertising disclosures on 
more than one page, if certain conditions are met. In September 1999, 
the Board proposed consistent approaches under Regulations Z, M, and DD 
for complying with the regulations' advertising requirements in the 
context of electronic advertising. Under the proposal, a depository 
institution that advertises using electronic communication can comply 
with the regulation's advertising requirements if the required terms 
are disclosed in more than one location, under certain conditions. Most 
commenters addressing the issue agreed with the proposed approach.
    Comment 8(a)-9 is adopted as proposed, with technical amendments 
for clarity. If an advertisement using electronic communication 
displays a triggering term (such as a bonus or annual percentage yield) 
the advertisement must clearly refer the consumer to the location where 
the additional required information begins. For example, an 
advertisement that includes a bonus or annual percentage yield may be 
accompanied by a link in close proximity, that directly takes the 
consumer to the additional information.
8(b) Permissible Rates
    Section 230.8(b) permits depository institutions to state an 
interest rate in addition to the APY, as long as the rate is stated in 
conjunction with, but not more conspicuously than, the APY. As 
proposed, both rates must appear at the same location so the consumer 
can view both rates simultaneously. An advertised interest rate with a 
link to another location that contains the related APY would not comply 
with the requirements of Sec. 230.8(b); the interest rate would be the 
only rate readily visible to consumers, and therefore would be more 
conspicuous. Commenters generally agreed with this requirement. Comment 
8(b)-4 is adopted as proposed.
8(e) Exemption for Certain Advertisements
8(e)(1) Certain Media
    Section 230.8(e) exempts from some requirements advertisements made 
through broadcast or electronic media, such as television and radio or 
outdoor billboards. Proposed comment 8(e)(1)(i)-1 provided that this 
exemption would not apply to electronic advertisements using electronic 
communication, such as Internet advertisements, which do not have the 
same time and space constraints as radio or television advertisements.
    Views were mixed on whether advertisements using electronic 
communication should be subject to the broadcast or media exception. 
Many commenters noted that a frequent form of advertisement on the 
Internet is the ``banner'' advertisement and these are often priced 
based on size. Similarly, they noted that space limitations may exist, 
especially on third-party web sites. Accordingly, these commenters 
requested that the Board consider extending a similar exception to 
Internet advertisements that currently exists for television and 
billboards. However, other commenters agreed with the Board's position 
that these types of advertisements (for example Internet advertisements 
with link capability) do not possess the same time and space 
limitations as those that are currently exempted.
    The Board believes that space constraints for advertisements on 
Internet web sites are not significantly different than those for a 
print advertisement (a newspaper, for example). Thus, requiring 
advertisements provided by electronic communication to comply with the 
regulation's advertising requirements is not overly burdensome. 
Accordingly, advertisements made via electronic communication, such as 
advertisements posted on the Internet, are subject to Regulation DD's 
general advertising rules. Comment 8(e)(1)(i)-1 is adopted as proposed.

Section 230.10  Electronic Communication

10(a) Definition
    As adopted, the definition of the term ``electronic communication'' 
remains substantially unchanged from the 1999 proposals. Section 
230.10(a) limits the term to a message transmitted electronically that 
can be displayed on equipment as visual text; an example is a message 
displayed on a personal computer monitor screen. Thus, audio and voice 
response telephone systems are not included. Because the rule permits 
the use of electronic communication to satisfy the statutory 
requirement for written disclosures that must be clear and conspicuous, 
the Board believes visual text is an essential element of the 
definition. Institutions that accommodate vision-impaired consumers by 
providing disclosures that do not use visual text must also provide 
disclosures using visual text.
    Some commenters asked for clarification that the definition was not 
intended to preclude the use of devices other than personal computers, 
which also can display visual text. The equipment on which the text 
message is received is not limited to a personal computer, provided the 
visual display used to deliver the disclosures meets the ``clear and 
conspicuous'' format requirement, discussed below.
10(b) General Rule
    Effective October 1, 2000, the E-Sign Act permits depository 
institutions to provide disclosures using electronic

[[Page 17799]]

communication, if the depository institution complies with the consumer 
consent requirements in Section 101(c). Under section 101(c) of the E-
Sign Act, depository institutions must provide specific information 
about the electronic delivery of disclosures before obtaining the 
consumer's affirmative consent to receive electronic disclosures. The 
consent requirements in the E-Sign Act are similar but not identical to 
the Board's 1999 proposal. Accordingly, Sec. 230.10(b) sets forth the 
general rule that depository institutions subject to Regulation DD may 
provide disclosures electronically if the institution complies with 
section 101(c) of the E-Sign Act.
    The E-Sign Act authorizes the use of electronic disclosures. The 
act does not affect any requirement imposed under TISA other than a 
provision that requires disclosures to be in paper form, and the act 
does not affect the content or timing of disclosures. Electronic 
disclosures are subject to the regulation's format, timing and 
retainability rules and the clear and conspicuous standard. Comment 
10(b)-1 contains this guidance.
Presenting Disclosures in a Clear and Conspicuous Format
    Electronic disclosures must be clear and conspicuous, as is the 
case for all written disclosures under TISA and the Regulation DD. See 
Secs. 230.3(a). An institution must provide electronic disclosures 
using a clear and conspicuous format. Also, in accordance with the E-
Sign Act: (1) The institution must disclose the requirements for 
accessing and retaining disclosures in that format; (2) the consumer 
must demonstrate the ability to access the information electronically 
and affirmatively consent to electronic delivery; and (3) the 
institution must provide the disclosures in accordance with the 
specified requirements. Comment 10(b)-2 contains this guidance.
    Comments posed a few questions about the applicability of the clear 
and conspicuous standard to particular situations. Some asked whether 
electronic advertisements or other unrelated promotional information 
may appear on the same screen as mandatory disclosures that are posted 
on an Internet web site. Except to the extent required by the 
regulation, disclosures do not have to be provided separately from 
other information. Advertisements should not be integrated into the 
text of the disclosure in a manner that violates the clear and 
conspicuous standard.
    Commenters also had questions about the use of navigational tools 
with electronic disclosures. For example, some believed that such tools 
might be helpful in directing consumers to related information that 
explains the terminology used in the disclosures. Many Internet web 
sites use navigational tools that are conspicuous through the use of 
bold text, larger fonts, different colors, underlining, or other 
methods of highlighting. Such tools are not per se prohibited so long 
as they are not used in a manner that would violate the clear and 
conspicuous standard.
Providing Timely Disclosures
    Disclosures delivered electronically must comply with existing 
timing requirements under TISA and Regulation DD. See Sec. 230.4(a). 
Commenters on the Board's 1999 proposals requested specific guidance 
that an electronic disclosure would be considered timely based on the 
time it is sent by e-mail or posted on an Internet web site, regardless 
of when the consumer receives or reads the disclosure.
    Under the final rule, consistent with rules for disclosures that 
are sent by postal mail, disclosures provided by e-mail are timely when 
they are sent by the required time. Disclosures posted periodically at 
an Internet web site are timely if, by the required time, the 
depository institution both makes the disclosures available at that 
location and, in accordance with Sec. 230.10(d)(2), sends a notice 
alerting the consumer that the disclosures have been posted. For 
example, under Sec. 230.5, institutions must give advance notice to 
affected customers at least 30 calendar days in advance of certain 
changes. For a change in terms notice posted on the Internet, an 
institution must both post the notice and notify consumers of its 
availability at least 30 days in advance of the change. Comment 10(b)-
3(ii) contains this guidance.
    Certain disclosures must be provided before the consumer opens an 
account or a service is provided. When a depository institution permits 
the consumer to open an account on-line, the consumer must be required 
to access the disclosures required under Sec. 230.4 before the account 
is opened. A link to the disclosures satisfies the timing rule if the 
consumer cannot bypass the disclosure before opening the account. Or, 
the disclosures in this example must automatically appear on the 
screen, even if multiple screens are required to view the entire 
disclosure. Comment 10(b)-3(i) contains this guidance, as proposed.
    Some industry commenters believed that requiring disclosures to 
automatically appear or be accessed by the consumer is cumbersome and 
unnecessary. Some commenters suggested that the Board allow the 
required disclosures to be accessible via a clearly marked navigational 
tool; they believe that once the tool is provided, the disclosure 
should be deemed to have been provided to the consumer.
    TISA and Regulation DD require that depository institutions provide 
or send disclosures to consumers. It is not sufficient for institutions 
to provide a bypassable navigational tool that merely gives consumers 
the option of receiving disclosures. Such an approach reduces the 
likelihood that consumers actually receive the disclosures. The interim 
final rule ensures that consumers actually see the disclosures provided 
electronically so that they have the opportunity to read them before 
opening an account.
    Commenters on the various proposals requested guidance on the 
depository institution's duty in cases where an automated teller 
machine (ATM) or other automated equipment controlled by the depository 
institution malfunctions or otherwise fails to operate properly and 
cannot provide timely disclosures. Where the depository institution 
controls the equipment and disclosures are required at that time, an 
institution might not be liable for failing to provide timely 
disclosures if the defense in section 271(c) of TISA is available.
Providing Disclosures in a Form the Consumer May Keep
    Under TISA and Regulation DD, disclosures required to be in writing 
also must be in a form the consumer can retain. (See Sec. 230.3(a)) 
Electronic disclosures are subject to this requirement. Comment 10(b)-4 
contains guidance on this requirement.
    Consumers may communicate electronically with depository 
institutions through a variety of means and from various locations. 
Depending on the location (at home, at work, in a public place such as 
a library), a consumer may not have the ability at a given time to 
preserve TISA disclosures presented on-screen. To ensure that consumers 
have an adequate opportunity to access and retain the disclosures, the 
depository institution also must send them to the consumer's designated 
e-mail address or make them available at another location, for example, 
on the depository institution's Internet web site, where the 
information may be retrieved at a later date.
    Where the depository institution controls the equipment providing 
the electronic disclosures (for example, an ATM or computer terminal 
located in the depository institution's lobby), the

[[Page 17800]]

depository institution must ensure that the consumer has the 
opportunity to retain the required information. Comment 10(b)-5 
contains this guidance.
10(c) When Consent Is Required
    Under the E-Sign Act, consumers must affirmatively consent before 
they receive electronic disclosures ``relating to a transaction'' if 
the disclosures are required by law or regulation to be in writing. 
Section 230.10(c) is added to provide that certain disclosures are not 
deemed to be related to a transaction for purposes of the E-Sign Act's 
consumer consent provision. These include disclosures in connection 
with advertisements (Sec. 230.8) and disclosures about deposit accounts 
that are provided upon request (Sec. 230.4(a)(2)). Advertising 
disclosures are available to the general public. Consumers receiving 
disclosures on request may not open an account; those that do open an 
account will ultimately receive account opening disclosures subject to 
the consent requirements.
10(d) Address or Location To Receive Electronic Communication
    Consistent with the 1999 proposals, the interim rule provides that 
depository institutions may deliver electronic disclosures by sending 
them to a consumer's e-mail address. Alternatively, the rule provides 
that depository institutions may make the disclosures available at 
another location such as an Internet web site. If the depository 
institution makes a disclosure available at such a location, the 
depository institution effectively delivers the disclosure by sending a 
notice alerting the consumer when the disclosure can be accessed and 
making the disclosure available for at least 90 days. The time period 
for keeping disclosures available at a location such as a depository 
institution's Internet web site under the interim rule differs from the 
1999 proposals, based on commenters' concerns as discussed below.
10(d)(1)
    For purposes of Sec. 226.10(d), a consumer's electronic address is 
an e-mail address that is not limited to receiving communications 
transmitted solely by the depository institution, as proposed. This 
guidance is contained in comment 10(d)(1)-1.
    An electronic address would not include systems that permit 
communication only between the consumer and the depository institution, 
for example, home-banking programs that allow consumers to communicate 
directly with a depository institution on-line with the use of a 
computer and modem. These systems, like a depository institution's web 
site accessed via the Internet, give consumers access to information 
about their accounts at a location controlled by the depository 
institution. In both cases, the depository institution determines how 
long disclosures will be available to the consumer. Consumers who 
receive disclosures at their e-mail address may choose when to review, 
and for how long to retain, account information. Consumers who receive 
disclosures by contacting a depository institution's site, however, 
need to be alerted when the information is first available in order to 
ensure that they have the opportunity to access the information before 
it is removed. Thus, disclosures provided using systems such as home-
banking programs are treated in the same manner as disclosures made 
available at an Internet web site, and a notice alerting the consumer 
when disclosures are posted must be sent, by e-mail or to a postal 
address, at the depository institution's option.
10(d)(2)
    Under Sec. 230.10(d)(2)(i) of the interim rule, for disclosures 
made available at an Internet web site, a notice alerting the consumer 
when disclosures are posted must be sent, by e-mail (or to a postal 
address, at the depository institution's option). Section 
230.10(d)(2)(i) requires that the alert notice identify the account 
involved and the address or other location where the disclosure is 
available. Comment 10(d)(2)-1 provides guidance on the level of detail 
required in identifying the account.
    As proposed, under Sec. 230.10(d)(2)(ii) the interim rule, 
disclosures provided at an Internet web site must remain available for 
at least 90 days. The requirement seeks to ensure that consumers have 
adequate time to access and retain a disclosure under a variety of 
circumstances, such as when a consumer may not be able for an extended 
period of time to access the information due to computer malfunctions, 
travel, or illness. The 90-day period is uniform for all disclosures, 
for ease of compliance. Comment 10(d)(2)-2 is added to provide that 
during this period, the actual disclosures must be available to the 
consumer, but the institution has discretion to determine whether they 
should be available at the same location for the entire period.
    Some industry commenters believed the 90-day time period is 
reasonable and feasible. About an equal number of commenters believed 
it was too burdensome and costly; some of these commenters suggested 
periods that ranged from 30 to 60 days.
    The 1999 proposals provided that after the 90-day time period, 
disclosures would be available upon consumers' request, generally for 
24 months, in the same format as initially provided to the consumer. 
The 24-month period is consistent with a depository institution's duty 
to retain records that evidence their compliance. Consumer advocates 
supported the proposed retention period; some recommended that 
disclosures should be available upon request for the length of the 
contractual relationship with the consumer.
    Industry commenters strongly opposed the 24-month period. Many 
believed that keeping copies of electronic disclosures actually 
provided to consumers for that period of time would be costly and 
burdensome. Moreover, industry commenters believed that once a consumer 
has accessed the disclosures, the consumer rather than the depository 
institution should have the duty to retain them for future reference. 
They also noted that under existing record retention requirements 
applicable to paper disclosures, a depository institution need only 
demonstrate compliance with the rules, but need not retain copies of 
the actual disclosures provided to consumers.
    The requirement for depository institutions to retain the 
disclosures in the format provided duplicate disclosures upon request 
for 24 months has not been adopted. A depository institution's duty to 
retain evidence of compliance for 24 months remains unchanged.
10(d)(3) Exceptions
    Section 230.10(d)(3) is added to make clear that the requirements 
of paragraphs (i) and (ii) of Sec. 230.10(d)(2) do not apply to 
disclosures in certain advertisements (Sec. 230.8), and that paragraph 
(ii) of Sec. 230.10(d)(2) does not apply to disclosures made available 
upon a consumer's request (Sec. 230.4(a)).
10(e) Redelivery
    Industry commenters on the 1998 proposal asked for clarification 
that sending the electronic disclosures complies with the regulation, 
and that institutions are not required to confirm that the consumer 
actually received them. Consumer advocates asked that institutions be 
required to verify the delivery of disclosures by return receipt, in 
the case of e-mail. In the 1999

[[Page 17801]]

proposals, the Board solicited comment on the need for and the 
feasibility of such a requirement.
    Consumer advocates believe that e-mail systems are not yet 
sufficiently reliable and that safeguards are necessary to ensure that 
consumers actually receive disclosures. Industry commenters stated that 
a return receipt requirement would be costly and burdensome, and would 
require depository institutions to monitor return receipts in every 
case to determine that individual consumers received the disclosures.
    Section 101(c) of the E-Sign Act requires that consumers consent 
electronically, or confirm their consents electronically, in a manner 
that reasonably demonstrates that the consumer can access the 
information that the institution will be providing. This requirement 
seeks to verify at the outset that the consumer is actually capable of 
receiving the information in the electronic format being used by the 
institution. After the consumer consents, the E-Sign Act also requires 
the institution to notify consumers of changes that materially affect 
consumers' ability to access electronic disclosures.
    The interim rule does not impose a verification requirement because 
the cost and burden associated with verifying delivery of all 
disclosures would not be warranted. When electronic disclosures are 
returned undelivered, however, Sec. 230.10(e) imposes a duty to attempt 
redelivery (either electronically or to a postal address) based on 
information in the institution's own files. Unlike paper disclosures 
delivered by the postal service, there generally is no commonly-
accepted mechanism for reporting a change in electronic address or for 
forwarding e-mail. Where a depository institution actually knows that 
the delivery of an electronic disclosure did not take place, the 
institution should take reasonable steps to effectuate delivery in some 
way. For example, if an e-mail message to the consumer (containing an 
alert notice or other disclosure) is returned as undeliverable, the 
redelivery requirement is satisfied if the institution sends the 
disclosure to a different e-mail address or postal address that the 
institution has on file. Sending the disclosures a second time to the 
same electronic address would not be sufficient if the institution has 
a different address for the consumer on file. Comment 10(e)-1 provides 
this guidance.
    This redelivery requirement is limited to situations where the 
electronic communication cannot be delivered and does not apply to 
situations where the disclosure is delivered but, for example, cannot 
be read by the consumer due to technical problems with the consumer's 
software. A depository institution's duty to redeliver a disclosure 
under Sec. 230.10(e) does not affect the timeliness of the disclosure. 
Depository institutions comply with the timing requirements of the 
regulation when a disclosure is initially sent in a timely manner, even 
though the disclosure is returned undelivered and the depository 
institution is required under Sec. 230.10(e) to take reasonable steps 
to attempt redelivery.
10(f) Entities Other Than a Depository Institution
    The requirements of Sec. 230.8 apply to advertisements by deposit 
brokers. Section 230.10(f) is added to clarify that deposit brokers who 
are required to comply with Regulation DD may use electronic 
communication to do so, provided the requirements of Sec. 230.10 are 
satisfied.
Additional Issues
Document Integrity
    The interim rule does not impose document integrity standards. 
Consumer advocates and others have expressed concerns that electronic 
documents can be altered more easily than paper documents. They say 
that consumers' ability to enforce rights under the consumer protection 
laws could be impaired, in some cases, if the authenticity of 
disclosures they retain cannot be demonstrated.
    Institutions are generally required to retain evidence of 
compliance with the Board's consumer regulations. Accordingly, the 
Board requested comment on the feasibility of requiring institutions to 
have systems in place capable of detecting whether or not information 
has been altered, or to use independent certification authorities to 
verify disclosure documents.
    Consumer advocates strongly supported document integrity 
requirements (including the use of certification authorities) that 
would apply to all-electronic disclosures. Signatures, notary seals, 
and verification procedures such as recordation are used to protect 
against alterations for transactions memorialized in paper form. 
Consumer advocates believe that comparable verification procedures are 
needed for electronic disclosures as well.
    Industry commenters opposed mandatory document integrity standards 
for electronic disclosures. Because the technology in this area is 
still evolving, they believed that mandatory standards would be 
premature. Others believed that imposing document integrity standards 
or requiring the use of certification authorities would be costly to 
implement.
    The Board recognizes the concerns about document integrity, but 
believes it is not practicable at this time to impose document 
integrity standards for consumer disclosures or mandate the use of 
independent certification authorities. Effective methods may be too 
costly. Other less costly methods may deter alterations in some cases, 
but would not necessarily ensure document integrity.
    Moreover, the issue of document integrity affects electronic 
commerce generally and is not unique to the written disclosures 
required under the consumer protection laws administered by the Board. 
Section 104(b)(3) of the E-Sign Act authorizes federal or state 
regulatory agencies to specify performance standards to assure the 
accuracy, record integrity, and accessibility of records that are 
required to be retained, but prohibits the agencies from requiring the 
use of a particular type of software or hardware in order to comply 
with record retention requirements. Technology is likely to develop to 
protect electronic contracts and other legal documents. Thus, it seems 
premature for the Board to specify any particular standards or methods 
for consumer disclosure at this time.

V. Form of Comment Letters

    Comment letters should refer to Docket No. R-1044, and, when 
possible, should use a standard typeface with a font size of 10 or 12. 
This will enable the Board to convert the text to machine-readable form 
through electronic scanning, and will facilitate automated retrieval of 
comments for review. Also, if accompanied by an original document in 
paper form, comments may be submitted on 3\1/2\ inch computer diskettes 
in any IBM-compatible DOS-or Windows-based format.

VI. Regulatory Flexibility Analysis

    The Board has reviewed these interim amendments to Regulation DD in 
accordance with section 3(a) of the Regulatory Flexibility Act (5 
U.S.C. Sec. 604), the Board has reviewed these interim amendments to 
Regulation DD. Two of the three requirements of a final regulatory 
flexibility analysis under the Act are (1) a succinct statement of the 
need for and the objectives of the rule and (2) a summary of the issues 
raised

[[Page 17802]]

by the public comments, the agency's assessment of those issues, and a 
statement of the changes made in the final rule in response to the 
comments. These two areas are discussed above.
    The third requirement of the analysis is a description of 
significant alternatives to the rule that would minimize the rule's 
economic impact on small entities and reasons why the alternatives were 
rejected. This interim final rule is designed to provide depository 
institutions with an alternative method of providing disclosures; the 
rule will relieve compliance burden by giving depository institutions 
flexibility in providing disclosures required by the regulation. 
Overall, the costs of providing electronic disclosures are not expected 
to have significant impact on small entities. The expectation is that 
providing electronic disclosures may ultimately reduce the costs 
associated with providing disclosures.

VII. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506; 5 CFR 1320 Appendix A.1), the Board reviewed the rule under the 
authority delegated to the Board by the Office of Management and 
Budget. The Federal Reserve may not conduct or sponsor, and an 
organization is not required to respond to, this information collection 
unless it displays a currently valid OMB control number. The OMB 
control number is 7100-0271.
    The collection of information that is revised by this rulemaking is 
found in 12 CFR part 230 and in Appendix B. This information is 
mandatory (15 U.S.C. 4301 et seq.) to evidence compliance with the 
requirements of the Regulation DD and the Truth in Savings Act (TISA). 
The respondents/recordkeepers are for-profit financial institutions, 
including small businesses. Institutions are required to retain records 
for twenty-four months. This regulation applies to all types of 
depository institutions, not just state member banks. However, under 
Paperwork Reduction Act regulations, the Federal Reserve accounts for 
the burden of the paperwork associated with the regulation only for 
state member banks. Other agencies account for the paperwork burden on 
their respective constituencies under this regulation.
    The revisions provide that depository institutions may deliver 
disclosures electronically upon obtaining consumers affirmative consent 
in accordance with the E-Sign Act. The revisions provide guidance to 
institutions on the timing and delivery of electronic disclosures, to 
ensure that consumers have adequate opportunity to access and retain 
the information. With respect to state member banks, it is estimated 
that there are 1,000 respondent/recordkeepers and an average frequency 
of 87,071 responses per respondent each year. Current annual burden is 
estimated to be 1,482,000 hours. No comments specifically addressing 
the burden estimate were received, therefore, the numbers remain 
unchanged. There is estimated to be no additional cost burden and no 
capital or start up cost associated with the interim rule.
    Because the records would be maintained at state member banks and 
the notices are not provided to the Federal Reserve, no issue of 
confidentiality arises under the Freedom of Information Act.
    The Board has a continuing interest in the public's opinions of the 
Federal Reserve's collections of information. At any time, comments 
regarding the burden estimate, or any other aspect of this collection 
of information, including suggestions for reducing the burden, may be 
sent to: Secretary, Board of Governors of the Federal Reserve System, 
20th and C Streets, NW., Washington, DC 20551; and to the Office of 
Management and Budget, Paperwork Reduction Project (7100-0271), 
Washington, DC 20503.

VIII. Solicitation of Comments Regarding the Use of ``Plain 
Language''

    Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the 
Board to use ``plain language'' in all proposed and final rules 
published after January 1, 2000. The Board invites comments on whether 
the interim rule is clearly stated and effectively organized, and how 
the Board might make the rule easier to understand.

List of Subjects in 12 CFR Part 230

    Advertising, Banks, banking, Consumer protection, Federal Reserve 
System, Reporting and record keeping requirements, Truth in Savings.

    For the reasons set forth in the preamble, the Board amends 
Regulation DD, 12 CFR part 230, as set forth below:

PART 230--TRUTH IN SAVINGS (REGULATION DD)

    1. The authority citation for part 230 continues to read as 
follows:


    Authority: 12 U.S.C. 4301 et seq.


    2. Section 230.3 is amended by revising paragraph (a) and adding a 
new paragraph (g) as follows:


Sec. 230.3  General disclosure requirements.

    (a) Form. Depository institutions shall make the disclosures 
required by Secs. 230.4 through 230.6 and Sec. 230.10 of this part, as 
applicable, clearly and conspicuously, in writing, and in a form the 
consumer may keep. Disclosures for each account offered by an 
institution may be presented separately or combined with disclosures 
for the institution's other accounts, as long as it is clear which 
disclosures are applicable to the consumer's account.
* * * * *
    (g) Electronic communication. For rules governing the electronic 
delivery of disclosures, including the definition of electronic 
communication, see Sec. 230.10.0
    3. Section 230.4 is amended by revising paragraph (a)(1) and 
paragraph (a)(2)(i) to read as follows:


Sec. 230.4  Account disclosures.

    (a) Delivery of account disclosures. (1) Account opening. (i) 
General. A depository institution shall provide account disclosures to 
a consumer before an account is opened or a service is provided, 
whichever is earlier. An institution is deemed to have provided a 
service when a fee required to be disclosed is assessed. Except as 
provided in paragraph (a)(1)(ii) of this section, if the consumer is 
not present at the institution when the account is opened or the 
service is provided and has not already received the disclosures, the 
institution shall mail or deliver the disclosures no later than 10 
business days after the account is opened or the service is provided, 
whichever is earlier.
    (ii) Electronic communication. If a consumer who is not present at 
the institution uses electronic communication (as defined in 
Sec. 230.10) to open an account or request a service, the disclosures 
required under paragraph (a)(1) of this section must be provided before 
an account is opened or a service is provided.
    (2) Requests. (i) A depository institution shall provide account 
disclosures to a consumer upon request. If a consumer who is not 
present at the institution makes a request, the institution shall mail 
or deliver the disclosures within a reasonable time after it receives 
the request and may provide the disclosures in paper form, or 
electronically if the consumer provides an electronic mail address.
* * * * *


Sec. 230.6  [Amended]

    4. Section 230.6 is amended by removing paragraph (c).

[[Page 17803]]


    5. Add a new Sec. 230.10 to read as follows:


Sec. 230.10  Electronic communication.

    (a) Definition. ``Electronic communication'' means a message 
transmitted electronically between a depository institution and a 
consumer in a format that allows visual text to be displayed on 
equipment, for example, a personal computer monitor.
    (b) General rule. In accordance with the Electronic Signatures in 
Global and National Commerce Act (the E-Sign Act) (15 U.S.C. 7001 et 
seq.) and the rules of this part, a depository institution may provide 
by electronic communication any disclosure required by this part to be 
in writing.
    (c) When consent is required. Under the E-Sign Act, a depository 
institution is required to obtain a consumer's affirmative consent when 
providing disclosures related to a transaction. For purposes of this 
requirement, the disclosures required under Secs. 230.4(a)(2) and 230.8 
are deemed not to be related to a transaction.
    (d) Address or location to receive electronic communication. A 
depository institution that uses electronic communication to provide 
disclosures required by this part shall:
    (1) Send the disclosure to the consumer's electronic address; or
    (2) Make the disclosure available at another location such as an 
Internet web site; and
    (i) Alert the consumer of the disclosure's availability by sending 
a notice to the consumer's electronic address (or to a postal address, 
at the depository institution's option). The notice shall identify the 
account involved (if applicable) and the address of the Internet web 
site or other location where the disclosure is available; and
    (ii) Make the disclosure available for at least 90 days from the 
date the disclosure first becomes available or from the date of the 
notice alerting the consumer of the disclosure, whichever comes later.
    (3) Exceptions. A depository institution need not comply with 
paragraph (d)(2)(ii) of this section for disclosures required under 
Sec. 230.4(a)(2), and need not comply with paragraphs (d)(2)(i) and 
(ii) of this section for disclosures required under Sec. 230.8.
    (e) Redelivery. When a disclosure provided by electronic 
communication is returned to a depository institution undelivered, the 
depository institution shall take reasonable steps to attempt 
redelivery using information in its files.
    (f) Entities other than a depository institution. A person other 
than a depository institution that is required to comply with this part 
may use electronic communication in accordance with the requirements of 
this section, as applicable.

    6. In Supplement I to Part 230, the following amendments are made:
    a. Under Section 230.2 Definitions, under (q) Periodic statement, 
paragraph ii. is removed and paragraph iii. is redesignated as 
paragraph ii.
    b. Under Section 230.4 Account disclosures, under (a)(2) Requests, 
under (a)(2)(i), paragraph 3. is revised and a new paragraph 4. is 
added.
    c. Under Section 230.8 Advertising, under (a) Misleading or 
inaccurate advertisements, a new paragraph 9. is added.
    d. Under Section 230.8 Advertising, under (b) Permissible rates, a 
new paragraph 4. is added.
    e. Under Section 230.8 Advertising, under (e)(1) Certain media, a 
new heading (e)(1)(i), and a new paragraph 1. are added.
    f. A new Section 230.10 Requirements for electronic communication 
is added at the end of Supplement I.
    The amendments read as follows:
* * * * *

Supplement I to Part 230--Official Staff Interpretations

* * * * *

Section 230.4  Account Disclosures

(a) Delivery of Account Disclosures

* * * * *

(a)(2) Requests

(a)(2)(i)

* * * * *
    3. Timing for response. Ten business days is a reasonable time 
for responding to requests for account information that consumers do 
not make in person, including requests made by electronic 
communication.
    4. Requests by electronic communication. Posting disclosures on 
a depository institution's web site generally does not relieve the 
institution's duty to provide disclosures upon request. If the 
consumer provides an e-mail address, the institution may provide the 
disclosures electronically, but the institution must either send the 
disclosures by e-mail or send a notice to the consumer's e-mail 
address pursuant to Sec. 230.10(d)(2)(i) to inform the consumer 
where the disclosures are posted.
* * * * *

Section 230.8  Advertising

(a) Misleading or Inaccurate Advertisements

* * * * *
    9. Electronic advertising. If an advertisement using electronic 
communication displays a triggering term (such as a bonus or annual 
percentage yield) the advertisement must clearly refer the consumer 
to the location where the additional required information begins. 
For example, an advertisement that includes a bonus or annual 
percentage yield may be accompanied by a link that directly takes 
the consumer to the additional information.

(b) Permissible Rates

* * * * *
    4. Electronic communication. An interest rate may be stated only 
if it is provided in conjunction with, but not more conspicuously 
than, the annual percentage yield to which it relates. In an 
advertisement using electronic communication, the consumer must be 
able to view both rates simultaneously. This requirement is not 
satisfied if the consumer can view the annual percentage yield only 
by use of a link that connects the consumer to information appearing 
at another location.
* * * * *

(e)(1) Certain Media

(e)(1)(i)

    1. Internet advertisements. The exemption for advertisements 
made through broadcast or electronic media does not extend to 
advertisements made by electronic communication, such as 
advertisements posted on the Internet or sent by e-mail.
* * * * *

Section 230.10  Electronic Communication

(b) General Rule

    1. Relationship to the E-Sign Act. The E-Sign Act authorizes the 
use of electronic disclosures. It does not affect any requirement 
imposed under this part other than a provision that requires 
disclosures to be in paper form, and it does not affect the content 
or timing of disclosures. Electronic disclosures are subject to the 
regulation's format, timing, and retainability rules and the clear 
and conspicuous standard. For example, to satisfy the clear and 
conspicuous standard for disclosures, electronic disclosures must 
use visual text.
    2. Clear and conspicuous standard. An institution must provide 
electronic disclosures using a clear and conspicuous format. Also, 
in accordance with the E-Sign Act:
    i. The institution must disclose the requirements for accessing 
and retaining disclosures in that format;
    ii. The consumer must demonstrate the ability to access the 
information electronically and affirmatively consent to electronic 
delivery; and
    iii. The institution must provide the disclosures in accordance 
with the specified requirements.
    3. Timing and effective delivery. i. When a consumer opens an 
account on-line. When a consumer opens an account on-line, the 
consumer must be required to access the disclosures required under 
Sec. 230.4 before the account is opened or a service is provided, 
whichever is earlier. A link to the disclosures satisfies the timing 
rule if the consumer cannot bypass the disclosures before opening 
the account. Or the disclosures in this example must automatically 
appear on the screen, even if multiple screens are required to view 
the entire disclosure. The institution is not required to confirm 
that the consumer has read the disclosure.

[[Page 17804]]

    ii. For disclosures provided periodically. Disclosures provided 
by mail are timely based on when the disclosures are sent. 
Disclosures posted at an Internet web site, such as periodic 
statements or change-in-terms and other notices, are timely when the 
institution has both made the disclosures available and sent a 
notice alerting consumer that the disclosures have been posted. For 
example, under Sec. 230.5, institutions must give advance notice to 
affected customers at least 30 calendar days in advance of certain 
changes. For a change in terms notice posted on the Internet, an 
institution must both post the notice and notify consumers of its 
availability at least 30 days in advance of the change.
    4. Retainability of disclosures. Depository institutions satisfy 
the requirement that disclosures be in a form that the consumer may 
keep if electronic disclosures are delivered in a format that is 
capable of being retained (such as by printing or storing 
electronically). The format must also be consistent with the 
information required to be provided under 101(c)(1)(C)(i) of the E-
Sign Act 15 U.S.C. 7001(c)(1)(C)(i)) about the hardware and software 
requirements for accessing and retaining electronic disclosures.
    5. Disclosures provided on depository institution's equipment. A 
depository institution that controls the equipment providing 
electronic disclosures to consumers (for example, a computer 
terminal located in a depository institution's lobby or at a public 
kiosk) must ensure that the equipment satisfies the regulation's 
requirements to provide timely disclosures in a clear and 
conspicuous format and in a form that the consumer may keep. For 
example, if disclosures are required at the time of an on-line 
transaction, the disclosures must be sent to the consumer's e-mail 
address or must be posted at another location such as the 
institution's Internet web site, unless the institution provides a 
printer that automatically prints the disclosures.

(d) Address or Location To Receive Electronic Communication

(d)(1)

    1. Electronic address. A consumer's electronic address is an e-
mail address that is not limited to receiving communications 
transmitted solely by the depository institution.

(d)(2)

    1. Identifying account involved. A depository institution may 
identify a specific account in a variety of ways and is not required 
to identify an account by reference to the account number. For 
example, where the consumer has only one deposit account, and no 
confusion would result, the depository institution may refer to 
``your deposit account.'' If the consumer has two accounts, the 
depository institution may, for example, differentiate accounts by 
using terms such as ``primary account'' and ``secondary account'' or 
by using a truncated account number.
    2. 90-day rule. The actual disclosures provided to consumer must 
be available for at least 90 days, but the institution has 
discretion to determine whether they should be available at the same 
location for the entire period.

(e) Redelivery

    1. E-mail returned as undeliverable. If an e-mail to the 
consumer (containing an alert notice or other disclosure) is 
returned as undeliverable, the redelivery requirement is satisfied 
if, for example, the depository institution sends the disclosure to 
a different e-mail address or postal address that the depository 
institution has on file for the consumer. Sending the disclosures a 
second time to the same electronic is not sufficient if the 
depository institution has a different address for the consumer on 
file.

    By order of the Board of Governors of the Federal Reserve 
System, March 27, 2001.
Robert deV. Frierson,
Associate Secretary of the Board.
[FR Doc. 01-8149 Filed 4-3-01; 8:45 am]
BILLING CODE 6210-01-P

Last Updated 05/11/2001 communications@fdic.gov