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6500 - Consumer Protection


Appendix A to Part 230—Annual Percentage Yield Calculation

The annual percentage yield measures the total amount of interest paid on an account based on the interest rate and the frequency of compounding.1 The annual percentage yield is expressed as an annualized rate, based on a 365-day year.2 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 periodic statements.

Part I. Annual Percentage Yield for Account Disclosures and Advertising Purposes

In general, the annual percentage yield for account disclosures under §§ 230.4 and 230.5 and for advertising under § 230.8 is an annualized rate that reflects the relationship between the amount of interest that would be earned by the consumer for the term of the account and the amount of principal used to calculate that interest. Special rules apply to accounts with tiered and stepped interest rates, and to certain time accounts with a stated maturity greater than one 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. Institutions shall calculate the annual percentage yield based on the actual number of days in the term of the account. For accounts without a stated maturity date (such as a typical savings or transaction account), the calculation shall be based on an assumed term of 365 days. In determining the total interest figure to be used in the formula, institutions shall assume that all principal and interest remain on deposit for the entire term and that no other transactions (deposits or withdrawals) occur during the term.3 For time accounts that are offered in multiples of months, institutions 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 institutions choose to use the latter rule, they must use the same number of days to calculate the dollar amount of interest earned on the account that is used in the annual percentage yield formula (where "Interest" is divided by "Principal").

The annual percentage yield is calculated by use of the following general formula ("APY" is used for convenience in the formulas):

APY = 100 [(1 + Interest/Principal)365/Days in term) – 1]

"Principal" is the amount of funds assumed to have been deposited at the beginning of the account.

"Interest" is the total dollar amount of interest 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 annual percentage yield can be calculated by use of the following simple formula:

APY = 100 (Interest/Principal)

Examples

(1)  If an institution pays $61.68 in interest for a 365-day year on $1,000 deposited into a NOW account, using the general formula above, the annual percentage yield is 6.17%:

APY = 100[(1 + 61.68/1,000)(365/365) – 1]

APY = 6.17%

Or, using the simple formula above (since, as an account without a stated term, the term is deemed to be 365 days):

APY = 100(61.68/1,000)

H APY = 6.17%

(2) If an institution pays $30.37 in interest on a $1,000 six-month certificate of deposit (where the six-month period used by the institution contains 182 days), using the general formula above, the annual percentage yield is 6.18%:

APY = 100[(1 + 30.37/1,000)(365/182) – 1]

APY = 6.18%

B. Stepped-Rate Accounts (Different Rates Apply in Succeeding Periods)

For accounts with two or more interest rates applied in succeeding periods (where the rates are known at the time the account is opened), an institution shall assume each interest rate is in effect for the length of time provided for in the deposit contract.

Examples

(1)  If an institution offers a $1,000 6-month certificate of deposit on which it pays a 5% interest rate, compounded daily, for the first three months (which contain 91 days), and a 5.5% interest rate, compounded daily, for the next three months (which contain 92 days), the total interest for six months is $26.68 and, using the general formula above, the annual percentage yield is 5.39%:

APY = 100[(1 + 26.68/1,000)(365/183) – 1]

APY = 5.39%

(2)  If an institution offers a $1,000 two-year certificate of deposit on which it pays a 6% interest rate, compounded daily, for the first year, and a 6.5% interest rate, compounded daily, for the next year, the total interest for two years is $133.13, and, using the general formula above, the annual percentage yield is 6.45%:

APY = 100[(1 + 133.13/1,000)(365/730) – 1]

APY = 6.45%

C. Variable-Rate Accounts

For variable-rate accounts without an introductory premium or discounted rate, an institution must base the calculation only on the initial interest 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 calculated like a stepped-rate account. Thus, an institution shall assume that: (1) The introductory interest rate is in effect for the length of time provided for in the deposit contract; and (2) the variable interest 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 consumers holding the same account (who are not receiving the introductory interest rate) must be used for the remainder of the year.

For example, if an institution offers an account on which it pays a 7% interest rate, compounded daily, for the first three months (which, for example, contain 91 days), while the variable interest rate that would have been in effect when the account was opened was 5%, the total interest for a 365-day year for a $1,000 deposit is $56.52 (based on 91 days at 7% followed by 274 days at 5%). Using the simple formula, the annual percentage yield is 5.65%:

APY = 100 (56.52/1,000)

APY = 5.65%

D. Tiered-Rate Accounts (Different Rates Apply to Specified Balance Levels)

For accounts in which two or more interest rates paid on the account are applicable to specified balance levels, the institution must calculate the annual percentage yield in accordance with the method described below that it uses to calculate interest. 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:

Interest rate (percent) Deposit 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, an institution pays on the full balance in the account the stated interest rate that corresponds to the applicable deposit tier. For example, if a consumer deposits $8,000, the institution pays the 5.50% interest rate on the entire $8,000.

When this method is used to determine interest, 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 interest rates and deposit balances assumed above, the institution 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 interest rate. Thus, the calculation is based on the total amount of interest that would be received by the consumer for each tier of the account for a year and the principal assumed to have been deposited to earn that amount of interest.

First tier. Assuming daily compounding, the institution will pay $53.90 in interest on a $1,000 deposit. Using the general formula, for the first tier, the annual percentage yield is 5.39%:

APY = 100[(1 + 53.90/1,000)(365/365) – 1]

APY = 5.39%

Using the simple formula:

APY = 100 (53.90/1,000)

APY = 5.39%

Second tier. The institution will pay $452.29 in interest on an $8,000 deposit. Thus, using the simple formula, the annual percentage yield for the second tier is 5.65%:

APY = 100 (452.29/8,000)

APY = 5.65%

Third tier. The institution will pay $1,183.61 in interest on a $20,000 deposit. Thus, using the simple formula, the annual percentage yield for the third tier is 5.92%:

APY = 100 (1,183.61/20,000)

APY = 5.92%

Tiering Method B. Under this method, an institution pays the stated interest rate only on that portion of the balance within the specified tier. For example, if a consumer deposits $8,000, the institution pays 5.25% on $2,500 and 5.50% on $5,500 (the difference between $8,000 and the first tier cut-off of $2,500).

The institution that computes interest 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 range is calculated based on the total amount of interest earned for a year assuming the minimum principal required to earn the interest rate for that tier. The high figure for an annual percentage yield range is based on the amount of interest the institution would pay on the highest principal that could be deposited to earn that same interest rate. If the account does not have a limit on the maximum amount that can be deposited, the institution may assume any amount.

For the tiering structure assumed above, the institution 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. Assuming daily compounding, the institution would pay $53.90 in interest on a $1,000 deposit. For this first tier, using the simple formula, the annual percentage yield is 5.39%:

APY = 100 (53.90/1,000)

APY = 5.39%

Second tier.  For the second tier, the institution would pay between $134.75 and $841.45 in interest, based on assumed balances of $2,500.01 and $15,000, respectively. For $2,500.01, interest would be figured on $2,500 at 5.25% interest rate plus interest on $.01 at 5.50%. For the low end of the second tier, therefore, the annual percentage yield is 5.39%, using the simple formula:

APY = 100 (134.75/2,500)

APY = 5.39%

For $15,000, interest is figured on $2,500 at 5.25% interest rate plus interest on $12,500 at 5.50% interest 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 for the second tier is 5.39% to 5.61%.

Third tier.  For the third tier, the institution would pay $841.45 in interest on the low end of the third tier (a balance of $15,000.01). For $15,000.01, interest would be figured on $2,500 at 5.25% interest rate, plus interest on $12,500 at 5.50% interest rate, plus interest on $.01 at 5.75% interest rate. For the low end of the third tier, therefore, the annual percentage yield (using the simple formula) is 5.61%:

APY = 100 (841.45/15,000)

APY = 5.61%

Since the institution 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, interest would be figured on $2,500 at 5.25% interest rate, plus interest on $12,500 at 5.50% interest rate, plus interest on $85,000 at 5.75% interest rate. For the high end of the third tier, therefore, the annual percentage yield, using the simple formula, is 5.87%.

APY = 100 (5,871.79/100,000)

APY = 5.87%

Thus, the annual percentage yield range that would be stated for the third tier is 5.61% to 5.87%.

If the assumed maximum balance amount is $1,000,000 instead of $100,000, the institution 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 (59134.22/1,000,000)

APY = 5.91%

Thus, the annual percentage yield range that would be stated for the third tier is 5.61% to 5.91%.

E.  Time Accounts with a Stated Maturity Greater than One Year that Pay Interest At Least Annually

1.  For time accounts with a stated maturity greater than one year that do not compound interest on an annual or more frequent basis, and that require the consumer to withdraw interest at least annually, the annual percentage yield may be disclosed as equal to the interest rate.

Example

(1)  If an institution offers a $1,000 two-year certificate of deposit that does not compound and that pays out interest semi-annually by check or transfer at a 6.00% interest rate, the annual percentage yield may be disclosed as equal to the interest rate.

Example

(1)  If an institution offers a $1,000 three-year certificate of deposit that does not compound and that pays out interest annually solely by check or transfer at a 5.00% interest rate for the first year, 6.00% interest rate for the second year, and 7.00% interest rate for the third year, the institution may compute the composite interest rate and APY as follows:

(a)  Multiply each interest 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 interest rates and days the rates are in effect are (5.00% × 365 days) 1825, (6.00% × 365 days) 2190, and (7.00% × 365 days) 2555, respectively. The sum of these products, 6570, is divided by 1095, the total number of days in the term. The composite interest rate and APY are both 6.00%.

Part II. Annual Percentage Yield Earned for Periodic Statements

The annual percentage yield earned for periodic statements under § 230.6(a) is an annualized rate that reflects the relationship between the amount of interest actually earned on the consumer's account during the statement period and the average daily balance in the account for the statement period. Pursuant to § 230.6(b), however, if an institution uses the average daily balance method and calculates interest for a period other than the statement period, the annual percentage yield earned shall reflect the relationship between the amount of interest earned and the average daily balance in the account for that other period.

The annual percentage yield earned shall be calculated by using the following formulas ("APY Earned" is used for convenience in the formulas):

A.  General formula.

APY Earned = 100 [(1 + Interest earned/Balance)(365/Days in period) – 1]

"Balance" is the average daily balance in the account for the period.

"Interest earned" is the actual amount of interest earned on the account for the period.

"Days in period" is the actual number of days for the period.

Examples

(1)  Assume an institution calculates interest for the statement period (and uses either the daily balance or the average daily balance method), and the account has 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. The interest earned (under either balance computation method) is $5.25 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) – 1]

APY Earned = 6.58%

(2)  Assume an institution calculates interest 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 interest 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 [(6.50/1,500)(365/30) – 1]

APY Earned = 5.40%

(3)  Assume an institution calculates interest 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 interest 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) – 1]

APY Earned = 4.28%

B.  Special formula for use where periodic statement is sent more often than the period for which interest is compounded.

Institutions that use the daily balance method to accrue interest and that issue periodic statements more often than the period for which interest is compounded shall use the following special formula:

APY Earned =

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 an institution calculates interest for the statement period using the daily balance method, pays a 5.00% interest rate, compounded annually, and provides periodic statements for each monthly cycle. The account has a daily balance of $1,000 for a 30-day statement period. The interest earned is $4.11 for the period, and the annual percentage yield earned (using the special formula above) is 5.00%:

APY Earned=5.00%

[Codified to 12 C.F.R. Part 230, Appendix A]

[Appendix A amended at 57 Fed. Reg. 46480, October 9, 1992, effective September 21, 1992; 58 Fed. Reg. 15082, March 19, 1993; 60 Fed. Reg. 5130, January 26, 1995, effective January 18, 1995; 63 Fed. Reg. 40638, July 30, 1998, effective August 28, 1998]

Appendix B to Part 230—Model Clauses and Sample Forms

Table of contents

B--1--Model Clauses for Account Disclosures (Section 230.4(b))

B--2--Model Clauses for Change in Terms (Section 230.5(a))

B--3--Model Clauses for Pre-Maturity Notices for Time Accounts (Section 230.5(b)(2) and   230.5(d))

B--4--Sample Form (Multiple Accounts)

B--5--Sample Form (Now Account)

B--6--Sample Form (Tiered Rate Money Market Account)

B--7--Sample Form (Certificate of Deposit)

B--8--Sample Form (Certificate of Deposit Advertisement)

B--9--Sample Form (Money Market Account Advertisement)

B--1--Model Clauses for Account Disclosures

(a)  Rate information

(i)  Fixed-rate accounts

The interest rate on your account is _______% with an annual percentage yield of _______%. You will be paid this rate [for (time period)/ until (date)/ for at least 30 calendar days].

(ii)  Variable-rate accounts

The interest rate on your account is _______% with an annual percentage yield of _______%.

Your interest rate and annual percentage yield may change.

Determination of Rate

The interest rate on your account is based on (name of index) [plus/minus a margin of _______].

or

At our discretion, we may change the interest rate on your account.

Frequency of Rate Changes

We may change the interest rate on your account [every (time period)/at any time].

Limitations on Rate Changes

The interest rate for your account will never change by more than _______% each (time period).

The interest rate will never be (less/more) than _______%.

or

The interest rate will never [exceed _______% above/drop more than _______% below] the interest rate initially disclosed to you.

(iii)  Stepped-rate accounts

The initial interest rate for your account is _______%. You will be paid this rate [for (time period)/until (date)]. After that time, the interest rate for your account will be _______%, and you will be paid this rate [for (time period)/until (date)]. The annual percentage yield for your account is _______%.

(iv)  Tiered-rate accounts

Tiering Method A

•  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 of ____________________________________________ %.

•  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 annual percentage yield of ____________________________________________ %.

•  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 of ____________________________________________ %.

Tiering Method B

•  An interest rate of ____________________________________________ % will be paid only for that portion of your [daily balance/average daily balance] that is greater than $ ____________________________________________ . The annual percentage yield for this tier will range from ____________________________________________ % to ____________________________________________ %, depending on the balance in the account.

•  An interest rate of ____________________________________________ % will be paid only for that portion of your [daily balance/average daily balance] that is greater than $ ____________________________________________ , but less than $ ____________________________________________ . The annual percentage yield for this tier will range from ____________________________________________ % to ____________________________________________ %, depending on the balance in the account.

•  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 of ____________________________________________ %.

(b)  Compounding and crediting

(i)  Frequency

Interest will be compounded [on a _______ basis/every (time period)]. Interest will be credited to your account [on a _______ basis/every (time period)].

(ii)  Effect of closing an account

If you close your account before interest is credited, you will not receive the accrued interest.

(c)  Minimum balance requirements

(i)  To open the account

You must deposit $ ____________________________________________ to open this account.

(ii) to avoid imposition of fees

A minimum balance fee of $ ____________________________________________ will be imposed every (time period) if the balance in the account falls below $ ____________________________________________ any day of the (time period).

A minimum balance fee of $ ____________________________________________ will be imposed every (time period) if the average daily balance for the (time period) falls below $ ____________________________________________ . The average daily balance is calculated by adding the principal in the account for each day of the period and dividing that figure by the number of days in the period.

(iii)  To obtain the annual percentage yield disclosed

You must maintain a minimum balance of $ ____________________________________________ in the account each day to obtain the disclosed annual percentage yield.

You must maintain a minimum average daily balance of $ ____________________________________________ to obtain the disclosed annual percentage yield. The average daily balance is calculated by adding the principal in the account for each day of the period and dividing that figure by the number of days in the period.

(d)  Balance computation method

(i)  Daily balance method

We use the daily balance method to calculate the interest on your account. This method applies a daily periodic rate to the principal in the account each day.

(ii)  Average daily balance method

We use the average daily balance method to calculate interest on your account. This method applies a periodic rate to the average daily balance in the account for the period.

or

The average daily balance is calculated by adding the principal in the account for each day of the period and dividing that figure by the number of days in the period.

(e)  Accrual of interest on noncash deposits interest begins to accrue no later than the business day we receive credit for the deposit of noncash items (for example, checks).

or

Interest begins to accrue on the business day you deposit noncash items (for example, checks).

(f)  Fees

The following fees may be assessed against your account:

_____________________ $ ____________________________________________ 

_____________________ $ ____________________________________________ 

_____________________ $ ____________________________________________ 

____________________________________________ (conditions for imposing fee) $ ____________________________________________ 

_______ % of_______ .

(g)  Transaction limitations

The minimum amount you may [withdraw/write a check for] is $ _______ .

You may make _______ [deposits into/withdrawals from] your account each (time period).

You may not make [deposits into/withdrawals from] your account until the maturity date.

(h)  Disclosures relating to time accounts

(i)  Time requirements

Your account will mature on (date).

Your account will mature in (time period).

(ii)  Early withdrawal penalties

We [will/may] impose a penalty if you withdraw [any/all] of the [deposited funds/principal] before the maturity date. The fee imposed will equal ____________________________________________ days/week[s]/month[s] of interest.

or

We [will/may] impose a penalty of $ ____________________________________________ if you withdraw [any/all] of the [deposited funds/principal] before the maturity date.

If you withdraw some of your funds before maturity, the interest rate for the remaining funds in your account will be ____________________________________________ % with an annual percentage yield of ____________________________________________ %.

(iii)  Withdrawal of interest prior to maturity

The annual percentage yield assumes interest will remain on deposit until maturity. A withdrawal will reduce earnings.

(iv)  Renewal policies

(1)  Automatically renewable time accounts

This account will automatically renew at maturity.

You will have [ _______ calendar/business] days after the maturity date to withdraw funds without penalty.

There is no grace period following the maturity of this account to withdraw funds without penalty.

(2)  Non-automatically renewable time accounts

This account will not renew automatically at maturity. If you do not renew the account, your deposit will be placed in [an interest-bearing/a noninterest-bearing account].

(v)  Required interest distribution.

This account requires the distribution of interest and does not allow interest to remain in the account.

(i)  Bonuses

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) ____________________________________________ ].

B--2--Model Clauses for Change in Terms

On (date), the cost of (type of fee) will increase to $ ____________________________________________ .

On (date), the interest rate on your account will decrease to ____________________________________________ % with an annual percentage yield of ____________________________________________ %.

On (date), the minimum [daily balance/average daily balance] required to avoid imposition of a fee will increase to $ ____________________________________________ .

B--3--Model Clauses for Pre-Maturity Notices for Time Accounts

(a)  Automatically renewable time accounts with maturities of one year or less but longer than one month.

Your account will mature on (date).

If the account renews, the new maturity date will be (date).

The interest rate for the renewed account will be ____________________________________________ % with an annual percentage yield of ____________________________________________ %.

or

The interest rate and annual percentage yield have not yet been determined. They will be available on (date). Please call (phone number) to learn the interest rate and annual percentage yield for your new account.

(b)  Non-automatically renewable time accounts with maturities longer than one year

Your account will mature on (date).

If you do not renew the account, interest [will/will not] be paid after maturity.

B--4--SAMPLE FORM (MULTIPLE ACCOUNTS)

______________ BANK ABC DISCLOSURE OF ACCOUNT TERMS ______________

This disclosure contains information about your:

X NOW Account

•  Your interest rate and annual percentage yield may change. At our discretion, we may change the interest rate on your account daily. The interest rate for your account will never be less than 2.00%.

•  Interest begins to accrue on the business day you deposit noncash items (for example, checks).

•  Interest is compounded daily and credited on the last day of each month. If you close your account before interest is credited, you will not receive the accrued interest.

•  We use daily balance method to calculate the interest on your account. This method applies a daily periodic rate to the principal in the account each day.

____________________________________________ Passbook Savings Account

•  The interest rate on your account will be paid for at least 30 days.

•  Interest begins to accrue on the business day you deposit noncash items (for example, checks).

•  Interest is compounded daily and credited on the last day of each month. If you close your account before interest is credited, you will not receive the accrued interest.

•  We use the daily balance method to calculate the interest on your account. This method applies a daily periodic rate to the principal in the account each day.

Additional disclosures for your account are included on the attached sheets.

____________________________________________ Money Market Account

•  Your interest rate and annual percentage yield may change. At our discretion, we may change the interest rate on your account daily. The interest rate on your account will never be less than 3.00%.

•  You may make six (6) transfers from your account, but only three (3) may be payments by check to third parties.

•  Interest begins to accrue on the business day you deposit noncash items (for example, checks).

•  Interest is compounded daily and credited on the last day of each month. If you close your account before interest is credited, you will not receive the accrued interest.

•  We use the daily balance method to calculate the interest on your account. This method applies a daily periodic rate to the principal in the account each day.

____________________________________________ Certificates of Deposit

•  The interest rate for your account will be paid until the maturity date of your certificate (_______ ).

•  Interest is compounded daily and will be credited to your account monthly.

•  Interest begins to accrue on the business day you deposit noncash items (for example, checks).

•  This account will automatically renew at maturity. You will have ten (10) calendar days from the maturity date to withdraw your funds without being charged a penalty.

•  After the account is opened, you may not make deposits into or withdrawals from this account until the maturity date.

•  We use the daily balance method to calculate the interest on your account. This method applies a daily periodic rate to the principal in the account each day.

•  If any of the deposit is withdrawn before the maturity date, a penalty as shown below will be imposed:

  Term Early Withdrawal Penalty
3-month CD  30 days interest
6-month CD  90 days interest
1-year CD 120 days interest
2-year CD 180 days interest

Additional disclosures for your account are included on the attached sheets.

(Fee Schedule Insert)

BANK ABC
FEE SCHEDULE

NOW Account

•  Monthly minimum balance fee if the daily balance drops below $500 any day of the month $ 7.50

Passbook Savings Account

•  Monthly minimum balance fee if the daily balance drops below $100 any day of the month $ 6.00

•  You may make three (3) withdrawals per quarter   Each subsequent withdrawal $ 2.00

Money Market Account

•  Monthly minimum balance fee if the daily balance drops below $1,000 any day of the month $ 5.00

Other Account Fees

•  Deposited checks returned $ 5.00

•  Balance inquiries (at a branch or at an ATM) $ 1.00

•  Check printing Diamond  (Fee depends on style of check ordered)

•  Your check returned for insufficient funds (per check) Diamond  $16.00

•  Stop payment request (per request) Diamond  $12.50

•  Certified check (per check) $10.00

 Diamond Fee does not apply to Passbook Savings Accounts or Certificates of Deposit.

Additional disclosures for your account are included on the attached sheet.
.

(Rate Sheet Insert)

BANK ABC
RATE SHEET

ACCOUNT TYPE MINIMUM DEPOSITTO OPEN ACCOUNTACCOUNT MINIMUM BALANCE*TO OBTAINANNUAL PERCENTAGE YIELD INTERESTRATE ANNUAL PERCENTAGEYIELD
NOW $   500 $ 2,500 4.00% 4.08%
PASSBOOK SAVINGS $   100 $   500 3.50% 3.56%
MONEY MARKET $ 1,000 $ 1,000 4.15% 4.24%
3-MONTH CD $ 1,000 $ 1,000 4.20% 4.29%
6-MONTH CD $ 1,000 $ 1,000 4.25% 4.34%
1-YEAR CD $ 1,000 $ 1,000 5.20% 5.34%
2-YEAR CD $ 1,000 $ 1,000 5.80% 5.97%


*Daily balance (the amount of principal in the account each day)

B--5--SAMPLE FORM (NOW ACCOUNT)

BANK XYZ
DISCLOSURE OF INTEREST, FEES AND ACCOUNT TERMS
NOW ACCOUNT

Fee schedule

•  Monthly minimum balance fee if the daily balance drops below $1,000 any day of the month$  7.00

•  Fee to stop payment of a check$ 12.50

•  Fee for check returns (insufficient funds--per check)$ 16.00

•  Certified check (per check)$ 10.00

•  Fee for initial check printing (per 200)$ 12.00

(Cost for check printing varies depending on the style of checks ordered.)

Rate information

•  The interest rate for your account is 4.00% with an annual percentage yield of 4.08%. Your interest rate and annual percentage yield may change. At our discretion, we may change the interest rate for your account at any time. The interest rate for your account will never be less than 2% each year.

Minimum balance requirements

•  You must deposit $500 to open this account.

•  You must maintain a minimum balance of $2,500 in the account each day to obtain the annual percentage yield listed above.

Balance computation method

•  We use the daily balance method to calculate the interest on your account. This method applies a daily periodic rate to the principal in the account each day.

Compounding and crediting

•  Interest for your account will be compounded daily and credited to your account on the last day of each month.

Accrual of interest on deposits other than cash

•  Interest begins to accrue on the business day you deposit noncash items (for example, checks).

B--6--SAMPLE FORM (TIERED-RATE MONEY MARKET ACCOUNT)

BANK ABC
DISCLOSURE OF INTEREST, FEES AND ACCOUNT TERMS
MONEY MARKET ACCOUNT

Fee schedule

•  Check returned for insufficient funds (per check)  $16.00

•  Stop payment request (per request)  $12.50

•  Certified check (per check)  $10.00

•  Check printing (Fee depends on style of checks ordered)

Rate information

•  If your daily balance is $15,000 or more, the interest rate paid on the entire balance in your account will be 5.75% with an annual percentage yield of 5.92%.

•  If your daily balance is more than $2,500, but less than $15,000, the interest rate paid on the entire balance in your account will be 5.50% with an annual percentage yield of 5.65%.

•  If your daily balance is $2,500 or less, the interest rate paid on the entire balance will be 5.25% with an annual percentage yield of 5.39%.

•  Your interest rate and annual percentage yield may change. At our discretion, we may change the interest rate for your account at any time. The interest rate for your account will never be less than 2.00%.

•  Interest begins to accrue on the business day you deposit noncash items (for example, checks).

•  Interest is compounded daily and credited on the last day of each month.

Minimum balance requirements

•  You must deposit $1,000 to open this account.

•  A minimum balance fee of $5.00 will be imposed every month if the balance in your account falls below $1,000 any day of the month.

Balance computation method

•  We use the daily balance method to calculate the interest on your account. This method applies a daily periodic rate to the principal in the account each day.

Transaction limitations

•  You may make six (6) transfers from your account, but only three (3) may be payments by check to third parties.

B--7--SAMPLE FORM (CERTIFICATE OF DEPOSIT)

XYZ SAVINGS BANK
1 YEAR CERTIFICATE OF DEPOSIT

Rate information

The interest rate for your account is 5.20% with an annual percentage yield of 5.34%. You will be paid this rate until the maturity date of the certificate. Your certificate will mature on September 30, 1993. The annual percentage yield assumes interest remains on deposit until maturity. A withdrawal will reduce earnings.

Interest for your account will be compounded daily and credited to your account on the last day of each month.

Interest begins to accrue on the business day you deposit any noncash item (for example, checks).

Minimum balance requirements

You must deposit $1,000 to open this account.

You must maintain a minimum balance of $1,000 in your account every day to obtain the annual percentage yield listed above.

Balance computation method

We use the daily balance method to calculate the interest on your account. This method applies a daily periodic rate to the principal in the account each day.

Transaction limitations

After the account is opened, you may not make deposits into or withdrawals from the account until the maturity date.

Early withdrawal penalty

If you withdraw any principal before the maturity date, a penalty equal to three months interest will be charged to your account.

Renewal policy

This account will be automatically renewed at maturity. You have a grace period of ten (10) calendar days after the maturity date to withdraw the funds without being charged a penalty.

B--8--SAMPLE FORM (CERTIFICATE OF DEPOSIT ADVERTISEMENT)

BANK XYZ

ALWAYS OFFERS YOU COMPETITIVE CD RATES!!

CERTIFICATES OF DEPOSIT ANNUAL PERCENTAGEYIELD (APY)
5 YEAR 6.31%
4 YEAR 6.07%
3 YEAR 5.72%
2 YEAR 5.52%
1 YEAR 4.54%
6 MONTH 4.34%
90 DAY 4.21%
APYs are offered on accounts opened from 5/9/93 through 5/18/93.

The minimum balance to open an account and obtain the APY is $1,000.

A penalty may be imposed for early withdrawal.

For more information call:

202-123-1234

B--9--SAMPLE FORM (MONEY MARKET ACCOUNT ADVERTISEMENT)

BANK XYZ
ALWAYS OFFERS YOU COMPETITIVE RATES!!

MONEY MARKET ACCOUNTS ANNUAL PERCENTAGEYIELD (APY)
Accounts with abalance of $5,000 or less 5.07%
Accounts with abalance over $5,000 5.57%
APYs are accurateas of April 30, 1993 *The rates may change after theaccount is opened.

Fees could reduce the earnings on the account.

For more information call:

202-123-1234

B–10 Aggregate Overdraft and Returned Item Fees Sample Form

Total Forthis period TotalYear-to-Date
Total Overdraft Fees $60.00 $150.00
Total Returned Item Fees $ 0.00 $ 30.00

[Codified to 12 C.F.R. Part 230, Appendix B]

[Appendix B amended at 60 Fed. Reg. 5131, January 26, 1995, effective January 18, 1995; amended at 74 Fed. Reg. 5593, January 29, 2009, effective January 1, 2010; 74 Fed. Reg. 17769, April 17, 2009, effective January 1, 2010]


Appendix C to Part 230—Effect on State Laws

(a)  Inconsistent Requirements

State law requirements that are inconsistent with the requirements of the act and this part are preempted to the extent of the inconsistency. A state law is inconsistent if it requires a depository institution to make disclosures or take actions that contradict the requirements of the federal law. A state law is also contradictory if it requires the use of the same term to represent a different amount or a different meaning than the federal law, requires the use of a term different from that required in the federal law to describe the same item, or permits a method of calculating interest on an account different from that required in the federal law.

(b)  Preemption Determinations

A depository institution, state, or other interested party may request the Board to determine whether a state law requirement is inconsistent with the federal requirements. A request for a determination shall be in writing and addressed to the Secretary, Board of Governors of the Federal Reserve System, Washington, DC 20551. Notice that the Board intends to make a determination (either on request or on its own motion) will be published in the Federal Register, with an opportunity for public comment unless the Board finds that notice and opportunity for comment would be impracticable, unnecessary, or contrary to the public interest and publishes its reasons for such decision. Notice of a final determination will be published in the Federal Register and furnished to the party who made the request and to the appropriate state official.

(c)  Effect of Preemption Determinations

After the Board determines that a state law is inconsistent, a depository institution may not make disclosures using the inconsistent term or take actions relying on the inconsistent law.

(d)  Reversal of Determination

The Board reserves the right to reverse a determination for any reason bearing on the coverage or effect of state or federal law. Notice of reversal of a determination will be published in the Federal Register and a copy furnished to the appropriate state official.

[Codified to 12 C.F.R. Part 230, Appendix C]

Appendix D to Part 230—Issuance of Staff Interpretations

Officials in the Board's Division of Consumer and Community Affairs are authorized to issue official staff interpretations of this part. These interpretations provide the protections afforded under section 271(f) of the act. Except in unusual circumstances, interpretations will not be issued separately but will be incorporated in an official commentary to this part, which will be amended periodically. No staff interpretations will be issued approving depository institutions' forms, statements, or calculation tools or methods.

[Codified to 12 C.F.R. Part 230, Appendix D]

1The annual percentage yield reflects only interest and does not include the value of any bonus (or other consideration worth $10 or less) that may be provided to the consumer to open, maintain, increase or renew an account. 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. Go back to Text

2Institutions may calculate the annual percentage yield based on a 365-day or a 366-day year in a leap year. Go back to Text

3This assumption shall not be used if an institution requires, as a condition of the account, that consumers withdraw interest during the term. In such a case, the interest (and annual percentage yield calculation) shall reflect that requirement. Go back to Text


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Last updated March 2, 2012 regs@fdic.gov