Question regarding the TISA disclosure and renewal term for an automatically renewable CD.

We are offering certain CD specials that include promotional rates for the initial term. For example, 18 month CD with 2% APY. Upon the first renewal, the CD will automatically convert to our standard 18 Month CD product, which has all the same terms as the Promo product, except for the interest rate and APY.

On the "18 Month CD Special" TISA disclosure, could you indicate that the each renewal term will be the same as the original term since both are 18 month products with all the same conditions except for the difference in interest rate and APY?

Does the fact that these are two different products in our system (18 month promo CD and 18 month standard CD ) trigger any other disclosure/re-disclosure requirements on the TISA?


Thanks in advance!

You have to send a full disclosure in advance of each rollover when the term of the CD is more than one year, and that full disclosure should be the same on you'd provide if you were opening anew the account with the terms that will be in effect for the new term. The only items you can omit are the interest rate and APY (if you give the customer the phone number to be called to obtain that info when it's determined). See Reg DD § 1030.5(b)(1).

So I don't think you buy anything by disclosing that info about subsequent terms at the time the initial deposit is accepted.

I remember when we were working with an ABA group in Chicago back when Reg DD was still a proposal, we built the full disclosure requirement into our comments because we knew the customers would not have, let alone remember, the info we provided over a year earlier.

John,

If we add the TIS information to the bottom of the CD renewal notice for a 2 year CD, for example, will that be sufficient or should we enclose the TIS disclosure and indicate on it the rate/APY is not yet known?

I'm reviewing something that I'm not sure we can approve, as presented, because it's not a full TIS disclosure as provided today to new customers.

If the info on the CD renewal notice includes all the info (other than rate and APY) that you have to provide in a full new-account disclosure for a 2 yr term CD, including the date the new term of the account will mature, you're fine. It doesn't have to be a separate document. Whichever approach you use, you have to provide a date when the rates will be determined and a telephone number to call to get the rate information.

Question regarding renewal notices for CDs greater than 1 year . . . does your system generate the required notices to include all the disclosures or do you have another method of getting the information to the customer?

One of the issues that is not quite clear in the Regulation is that are the notice requirements based on the length of the initial CD opening, or is it based on the CD renewal length?

Not sure there is any question - it is the current account.

(1) Maturities of longer than one year. If the maturity is longer than one year, the institution shall provide account disclosures set forth in Sec. 1030.4(b) of this part for the new account, along with the date the existing account matures.

The renewed account? Sorry, "current" leads to the same confusion.

Basically, let's say you had an 18-month CD that auto-renewed into a 6-month CD. Is it mandatory to provide the initial account opening disclosure, or can you do the notice/disclosure with just the stuff mentioned in 12 CFR 1030.5(b)(2)(ii)?

The requirement relates to the notice to be given at maturity of an auto-renewing CD account. For an account that has a term of over one year, the maturity notice must include a full disclosure -- essentially as if the rollover will be a new account -- except that the interest rate and APY can be omitted if not yet determined and a statement included that those rates haven't yet been determined, including the date when they will be determined, and a phone number to call to obtain the interest rate and APY to be paid on the new account.

The reason behind the requirement for a full new disclosure prior to maturity of roll-over CDs is the likelihood that the consumer won't still have or won't remember the disclosure provided for the existing (maturing) account after more than one year. So the consumer gets a whole disclosure package for the renewed CD.

Ok, thank you. So, sounds like the understanding is it is based on the renewed CD, which, if less than one-year, then would only need the 1030.5(b)(2)(ii) stuff.

Just to confirm your question.

When the 18 month CD matures - you are the customer a full disclosure also noting that the new term is 6 months, (Because the 18-month term is longer than a year).

When the 6-month CD matures, then you would only need to provide 1030.5(b)(ii) assuming that nothing else changed. The rule is based on the length of the term that just matured.

Okay, thank you for the detailed explanation. That is how I understood it myself, but Randy seemed to be saying otherwise, depending on how "current" is understood, and I think I misinterpreted what John was saying. Thank you for clearly addressing the example I presented.

I wanted to add a related question to this thread, as it keeps coming up among internal discussions. The question; when a CD with a term of over 30 days is going to autorenew, does the bank always have to provide the new CD's maturity date with the advance maturity notification? Or is the new maturity date something that can be deferred until a later date, like the APY and interest rate? Assuming it can't be deferred, could the bank provide a term rather than a date (i.e. Your current CD matures on XX/XX/XXXX and your new 24 month CD begins on XX/XX/XXXX)?

1030.5(b)(2) seems to make it clear that if the CD has a term of over 30 days but less that one year, and it autorenews, then the advance maturity notice needs to include the new CD's maturity date. 1030.5(b)(1) requires all new account disclosures to be provided in advance when a CD with a term over 1 year autorenews. Obviously new account disclosures require the new maturity date.

I see no other option than to provide the new CD's maturity date with the advance notification. But due to some system limitations and constant pushback, I wanted to see if anyone else had a different opinion or method of addressing this.

Yes.

We have two buckets of CDs (30 days and 18 mos) that we want to move to 90 days and 24 months, respectively. Prior to next renewal on these, can we just send full new disclosures for 90 day and 24 month CDs to these customers instead of treating the less than one year and greater than one year differently?

Also for the timing, can it be sent 20 days prior to the end of the grace period or does it have to be 30 days prior to maturity?

Yes, you can always play by the more than one year rule for any time deposit account with a term of more than a month. Also yes on the timing. Twenty days before end of a grace period of at least five calendar days or 30 calendar days before maturity, at the bank's option.

Thanks, John. It is sufficient just to include the new maturity date or do we have to state somewhere that the 18 mo CD is now renewing at 24 mos?

You must always disclose the new maturity DATE.

Somewhat of a related additional question.... is the redisclosure of the TISA based only on the term of the CD (maturity greater than one year) or is it also based on the amount of the CD ($100,000.00 or greater)

Term only. In this case, size does not matter.

Jumping in here. We have designed a full disclosure to be sent along with our Renewal Advice for all of our CD products with terms of one year. We based it on the format of the original TISA.

Do I need to include the account number and maturity date on the full disclosure, or can we refer the customer to the Renewal Advice?

This is what we included in the full TISA, but I would like to avoid having to fill in the account number and new maturity date to make the process more efficient.

Account Number - *Would need to be filled in
New Maturity Date - *Would need to be filled in
Interest Rate
APY
Frequency of Rate Change
Compounding and Crediting
Withdrawal of Interest Before Maturity
Effect of Closing and Account
Minimum Balance Requirement
Balance to Obtain the APY
Balance Computation Method
Early Withdrawal Penalty
Additions to Account
Renewal Policy & Terms
Renewal Interst Calculation

OFFICIAL INTERPRETATION OF SECTION
Section 1030.3--General Disclosure Requirements


(a) Form.

1. Design requirements. Disclosures must be presented in a format that allows consumers to readily understand the terms of their account. Institutions are not required to use a particular type size or typeface, nor are institutions required to state any term more conspicuously than any other term. Disclosures may be made:

vi. On more than one document, as long as the documents are provided at the same time.

Perfect! Thanks Randy!

One last thing on this. On the original TISA, we include the 7 days' interest penalty for early withdrawal within 6 days after the date of deposit in addition to the 30 or 90 day penalty that applies based on the term of the CD. We do not permit additional deposits. I'm assuming I can leave the 7 days' interest penalty out of the renewal TISA as it would not apply. Is this accurate?

Another question about auto-renewal CD's. On the initial TIS, do you need to specify what the renewal term will be? or is just saying the account will automatically renew at maturity?

We have some "Special" term CD's that renew at a shorter term, but most renew at the same term as the original CD.

The renewal terms will be disclosed in the notification required by 1030.5(b).

Is it best practice to keep the re-disclosure of the TIS for these CDs that are auto renewing and over a year old? Some are saying it's not necessary to image the re-disclosure due to our procedures indicating that we are mailing the re-disclosure, along with the renewal notice, to the customer. Some others feel it's best to image the re-disclosure to prove that we did produce it.

Also, how are others handling CDs that are 1 year? Should these CDs fall in with the CDs that are over a year? Better to disclose than not.

OFFICIAL INTERPRETATION OF SECTION
Section 1030.9--Enforcement and Record Retention
(c) Record retention.

2. Methods of retaining evidence. Institutions must be able to reconstruct the required disclosures or other actions. They need not keep disclosures or other business records in hard copy. Records evidencing compliance may be retained on microfilm, microfiche, or by other methods that reproduce records accurately (including computer files).

CD maturities of one year or less but longer than one month fall under 1030.5(b)(2)