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4000 - Advisory Opinions

Regulation DD, Truth in Savings: Disclosures in Advertisements Soliciting Deposits


November 30, 1994

Mark A. Mellon, Senior Attorney

This is in response to your letter of November 17, 1994 pertaining to disclosures in advertisements soliciting deposits which are required by Regulation DD, 12 C.F.R. Part 230, Truth in Savings ("Regulation DD"). You enclose sample advertisements of your firm soliciting investments in certificates of deposit ("CDs"). You request that I review the advertisements to see if they comply with Regulation DD requirements.

Your firm solicits funds from investors for purposes of placing the funds with depository institutions in CDs. As such, you are a "deposit broker" as that term is defined in section 29(g) of the Federal Deposit Insurance Act (12 U.S.C. § 1831f(g)). As a deposit broker, you are subject to the Truth in Savings Act (the "TISA'') (12 U.S.C. §§ 4301 et seq.) and its implementing regulation, Regulation DD.

Section 270 of the TISA (12 U.S.C. § 4309) provides that the TISA shall be enforced by the "appropriate Federal banking agency'' for insured depository institutions. The FDIC is the appropriate Federal banking agency for state chartered banks which are not members of the Federal Reserve System. I must therefore caution you that my opinion is only applicable to solicitations by your firm on the behalf of such entities.

The advertisement which you state has been revised to comply with Regulation DD appears to satisfy the requirement that the rate of return on a deposit account must be stated as an "annual percentage yield" or "APY". See 12 C.F.R. § 230.8(b). The other requirements which must be satisfied under Regulation DD with respect to advertisements soliciting deposits also appear to have been met with one exception. There is no statement that fees could reduce the earnings on this account. See 12 C.F.R. § 230.8(c)(5). You should add language to that effect to your firm's advertisements.

You are correct in your understanding that depository institutions and deposit brokers must comply with Regulation DD requirements for the disclosure of APYs in advertisements which solicit deposits. This is true even though the current formula for calculating APYs set forth in Appendix A of Regulation DD does not take account of situations where interest is paid monthly to a depositor rather than remaining on deposit for the entire term of the CD. Regulation DD does not prohibit a depository institution or a deposit broker, however, from including language in an advertisement, as you have done in your own, that indicates this fact and explains the disparity between listed APYs and interest rates.

I hope that this letter has been responsive to your query. Please do not hesitate to contact me if you should have any questions about this or any other matter.

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