Reg DD

Question 1

When must new account disclosures be provided under Reg DD?

Answer 1

Before account opening or before a fee is assessed, whichever is earlier

Question 2

If a customer is not present when an account is opened, when must new account disclosures be provided?

Answer 2

They must be mailed within 10 business days.

Question 3

If a customer opens an account electronically but is not present at the institution, when must new account disclosures be provided?

Answer 3

Before the account is opened or services are provided.

Question 4

For automatically renewing time deposits with maturities longer than 1 month, a disclosure must be sent at least __ ________ days before the renewal or at least __ ________ days before the end of the grace period.

Answer 4

30 calendar

20 calendar

Question 5

For nonautomatically renewing time deposits with maturities longer than 1 year, the notice of maturity must be sent at least __ _______ days in advance of the scheduled maturity date.

Answer 5

10 calendar

Question 6

A change in terms notice must be sent at least __ ______ days before the effective date if there is a change that will reduce the APY or adversely affect the consumer.

Answer 6

30 calendar

Question 7

When is a change in terms notice not required?

Answer 7

For CDs with maturities of 1 month or less.

Question 8

Interest must be calculated on the full amount of the principal in the account each day by one of which two methods?

Answer 8

Daily balance method

Average daily balance method

Question 9

How frequently must institutions compound and credit interest?

Answer 9

Institutions are not required to compound or credit interest in any particular frequency.

Question 10

For electronic advertising, what two things must appear in the same location so they may be viewed simultaneously?

Answer 10

Interest rate & APY

Question 11

What is the record retention requirement for Reg DD?

Answer 11

2 years after the disclosures are made

Question 12

ABC Bank’s Internet Web site has the following statement on the home page: “You won’t believe our sky-high CD rates. Rates start at 1.5 percent.” This statement has a link next to it that takes the viewer to another page with the following information:
• Minimum to open the account: $25,000
• Substantial penalty for early withdrawal
• Principal compounded monthly
• APY = 1.65 percent One of these pieces of information must appear on the home page.

Which one must be on the same page as the advertisement?

a. Minimum to open the account: $25,000
b. Substantial penalty for early withdrawal
c. Principal compounded monthly
d. APY = 1.65 percent

Answer 12

d. APY = 1.65 percent

The other required disclosures may be linked to the triggering term without being in the same location. However, the consumer must be able to view the APY and interest rate simultaneously.

Question 13

Which of the following does NOT require a Truth-in-Savings Act disclosure?

a. An individual holding the account for personal, family, or household purposes
b. Holders of IRA and SEP accounts when invested in covered accounts
c. Holders of accounts under the Uniform Transfer to Minors Act
d. Accounts established for unincorporated, nonbusiness associations

Answer 13

d. Accounts established for unincorporated, nonbusiness associations

Question 14

First National Bank is giving away gifts with all new certificates of deposit over $5,000. How must a portable stereo worth $250 be treated on the account disclosure?

a. It is a bonus and, therefore, is considered to be interest and does not have to be disclosed on the account disclosure.
b. It is interest and must be included in the simple interest rate on the account disclosure.
c. It is neither a bonus nor interest and does not have to be disclosed on the account disclosure.
d. It is a bonus, and not interest, and must be disclosed on the account disclosure.

Answer 14

d. It is a bonus, and not interest, and must be disclosed on the account disclosure.

Gifts are bonuses, not interest. The amount or type of bonus, when the bonus is provided for any minimum balance or time requirement, must be disclosed in account disclosure statements.

Question 15

First National Bank offers a money market account that has a $500 minimum balance and offers tiered interest rates that begin at .75 percent and progress to 1.5 percent, depending on the minimum balance each month. The account has a transaction fee of $5 per month, charged only if the average balance drops below the $500 minimum during the month. If the balance stays above this amount, the customer pays no fee. Which of the following is permissible in an advertisement for the account?

a. Interest rate: 1.25%; annual percentage yield: 1.5%
b. $500 minimum balance required
c. Free money market checking
d. 1.25% interest

Answer 15

b. $500 minimum balance required

The tiered rates must be disclosed. The bank cannot simply disclose the rate available for the highest balances. The account cannot be described as free because a transaction fee applies to it. The rate cannot be expressed solely as an interest rate. The annual percentage yield must be disclosed.

Question 16

When an advertisement states the APY, what other disclosure does Regulation DD require?

a. Interest rate, using that terminology
b. Index for variable rate transactions
c. Minimum balance to obtain the stated APY
d. Advertisement inviting the reader to inquire about other features of the account

Answer 16

c. Minimum balance to obtain the stated APY

Question 17

Of the following statements that describe the requirements of Regulation DD, which statement is true?

a. The act requires the bank to begin accruing interest on interest-bearing accounts no later than the second business day following the day of deposit.
b. The act requires the bank to compound interest no less than monthly.
c. The act requires the bank to send periodic statements on all accounts no less than quarterly.
d. The act requires the disclosure of all fees imposed during the statement period in connection with the account on any periodic statement.

Answer 17

d. The act requires the disclosure of all fees imposed during the statement period in connection with the account on any periodic statement.

This is the only true statement. TISA does not prescribe a particular frequency of compounding interest, nor does it mandate that periodic statements be sent. Interest must begin to accrue no later than prescribed by the Expedited Funds Availability Act.

Question 18

To which of the following potential customers would First National Bank have to make available a Regulation DD account disclosure?

a. National Lumber Company (a local corporation)
b. Rogers and Rogers (a law firm in the form of a partnership)
c. John Jones, DBA Jones Consulting Company (a sole proprietorship)
d. Eva Gilcrest, POD (payable on death) to Jane Gilcrest

Answer 18

d. Eva Gilcrest, POD (payable on death) to Jane Gilcrest

The Truth in Savings Act (and therefore Regulation DD) applies only to natural persons who open an account for other than business purposes. In this case, because both the party opening the account and the beneficiary of the funds are consumers, the account is covered.

Question 19

Which of the following rate disclosure formats would be acceptable in an advertisement of First National Bank’s consumer certificate of deposit?

a. 1 percent annual percentage rate
b. 1.15 percent
c. 1.15 percent annual percentage yield
d. 1 percent interest rate

Answer 19

c. 1.15 percent annual percentage yield

If an advertisement states a rate, it must be the annual percentage yield, using that term. The interest rate may also be disclosed, but not more conspicuously than the APY.

Question 20

Which of the following accurately describes disclosure requirements under Regulation DD?

a. Reference must be made to all required disclosures regardless of whether they apply to a particular deposit account.
b. The effects of closing an account must be disclosed if accrued interest may not be paid to the consumer.
c. Check printing charges must be disclosed for accounts where checks are required.
d. If interest is compounded, the frequency of compounding need not be disclosed if crediting of interest practices is disclosed.

Answer 20

b. The effects of closing an account must be disclosed if accrued interest may not be paid to the consumer.

Question 21

For an automatically renewing time deposit, a notice must be sent before maturity if the term is under one year, what must the notice contain?

Answer 21

When the new rate will be determined and a phone number.

Question 22

For an automatically renewing time deposit, a notice must be sent before maturity if the term is over one year, what must the notice contain (in general terms)?

Answer 22

A complete new disclosure is required (treat it like a new account).

Question 23

Is the bank required to provide a notice for time deposits post-maturity?

Answer 23

No

Question 24

If a bank chooses to send periodic statements, what information must be included on the notice?

Answer 24

• Amount of interest and APY earned
• fees
• length of the period since the last statement
• the total dollar amount of all fees for paying NSF checks for returned items (total them by statement period and YTD)