Triggering terms & disclosures

Question: Is it a change in terms triggering a disclosure if we allow the depositor to convert the term of a renewable certificate of deposit? If not, what should we disclose to the customer.

Answer: Regulation DD requires an advance notice for a change in terms that will adversely affect the consumer or reduce the APY. Whether this option would produce either effect depends on the consumer's action. For example, a consumer might choose a shorter term and thus reduce their APY. The safest approach would be to treat these as disclosable changes.

If these are all time accounts with a maturity of longer than one month, your notice of change in terms can be combined with the maturity/renewal notice. The best (and easiest) practice would be to include this new option as a prominent part of the maturity notice. In fact, giving the customer a form with the disclosure, or with any new CD having this option, makes it possible for the consumer to exercise the option with least effort.

Copyright © 2002 Compliance Action. Originally appeared in Compliance Action, Vol. 7, No. 8, 7/02