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Reg DD Compliance - Interest Payment

Answered by: 
Randy Carey

Question: 
Is the following method of interest payment in compliance with Reg DD if fully disclosed to a customer? "In order to earn the APY disclosed for the account you opened, you must not drop below the minimum balance requirements listed under your account type in the Product Brochure at any time during the month. Interest will be forfeited if the balance falls below the required minimum on any day of the month."
Answer: 

It violates Reg DD because it appears you are referring to a daily balance method. OSC 230.7(a)(2) Determination of minimum balance to earn interest: 1. Daily balance accounts. Institutions that require a minimum balance may choose not to pay interest for days when the balance drops below the required minimum, if they use the daily balance method to calculate interest.

First published on BankersOnline.com 11/27/06

First published on 11/27/2006

Filed under: 
Compliance
Lending
Filed under compliance as: 
IT
Filed under lending as: 
Interest

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