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4000 - Advisory Opinions
Regulation DD, Truth in Savings: Disclosures in Advertisements
Soliciting Deposits
FDIC--94--54
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
{{2-28-95 p.4909}}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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