FEDERAL RESERVE SYSTEM 

12 CFR Part 230

[Regulation DD; Docket No. R-0818]

Truth in Savings; Proposed Preemption Determination (Wisconsin)

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule.

SUMMARY: The Board is publishing for comment a proposed determination of the
consistency of Wisconsin's Truth in Savings law with the federal Truth in
Savings Act and Regulation DD. The Board is proposing not to preempt the state
law because it believes the state requirements are not inconsistent with the
federal provisions.

DATES: Comments must be received on or before February 8, 1994.

ADDRESSES: Comments should refer to Docket No. R-0818, and may be mailed to
Mr. William W. Wiles, Secretary, Board of Governors of the Federal Reserve
System, 20th Street and Constitution Avenue, NW., Washington, DC 20551.
Comments also may be delivered to room B-2222 of the Eccles Building between
8:45 a.m. and 5:15 p.m. weekdays, or to the guard station in the Eccles
Building courtyard on 20th Street, NW. (between Constitution Avenue and C
Street) any time. Comments may be inspected in room MP-500 of the Martin
Building between 9 a.m. and 5 p.m. weekdays, except as provided in 12 CFR
261.8 of the Board's rules regarding the availability of information.

FOR FURTHER INFORMATION CONTACT: Kurt Schumacher, Staff Attorney
(202/452-2412) or (202/452-3667), Division of Consumer and Community Affairs,
Board of Governors of the Federal Reserve System. For the hearing impaired
only, Telecommunications Device for the Deaf (TDD), Dorothea Thompson
(202/452-3544), Board of Governors of the Federal Reserve System, 20th & C
Streets, NW., Washington, DC 20551.

SUPPLEMENTARY INFORMATION: (1) General. The Board has received a request for a
determination that certain provisions of Wisconsin law are inconsistent with
the federal Truth in Savings Act and Regulation DD and are therefore
preempted. Section 273 of the Truth in Savings Act (TISA; 12 U.S.C. 4312)
states that the provisions of the act do not supersede any provisions of the
law of any State relating to the disclosure of yields payable or terms for
accounts to the extent such State law requires the disclosure of such yields
or terms for accounts, except to the extent that those laws are inconsistent
with the provisions of this Act, and then only to the extent of the
inconsistency. The act also grants the Board the authority to determine
whether any inconsistencies exist between federal and state law.

Similarly, appendix C to Regulation DD (12 CFR part 230) provides that state
requirements are inconsistent with, and therefore preempted by, the federal
provisions if the state law requires a depository institution to make
disclosures or take actions that contradict the requirements of the federal
law. The appendix specifies that a state law is also inconsistent if it
requires the use of the same term to represent a different amount or a
different meaning than the federal law, requires the use of a term different
from that required in the federal law to describe the same item, or permits a
method of calculating interest on an account different from that required in
the federal law.

The procedure for requesting a determination and the general procedures
followed in making a determination are also contained in appendix C to 12 CFR
part 230. Preemption determinations are generally limited to those provisions
of state law identified in the request for a determination. At the Board's
discretion, however, other state provisions that may be affected by the
federal law may also be addressed.

(2) Discussion of specific request and proposed determination. The Board has
been asked to determine whether specific provisions of Wisconsin Statutes
section 224.08 regarding disclosures for deposit accounts at banks are
inconsistent with the TISA and Regulation DD and are therefore preempted. The
TISA and Regulation DD require depository institutions to give consumers
disclosures before opening a deposit account, and upon a request made by a
consumer. Provisions of the TISA also set out requirements for the payment of
interest on accounts, provide rules for account advertisements and change in
terms notices, and mandate certain information to be provided on periodic
statements for accounts that receive such statements. In addition, the TISA
and Regulation DD establish the concept of an "annual percentage yield'' to
aid consumers in making accurate comparisons between the rates paid on
different accounts.

Section 224.08 of the Wisconsin Statutes requires disclosure statements to be
given for each account offered by a bank, setting forth the following
information: a description of the account, the conditions, if any, on which
the account is offered, the terms of interest offered for the account, and all
fees charged for the account. The disclosure statement under state law may
include a separate interest rate table or fee schedule, or both. Banks must
provide this information at the time of the depositor's initial deposit into
the account, upon any change in any of the information applicable to a
depositor's account (other than a change in the interest rate of a variable
interest rate account if the variability of the interest rate was disclosed at
the time of the initial deposit), and upon request. Finally, the state law
requires that the disclosure statement for an account be accompanied by a
brief description of all other accounts offered by the bank and a statement
that more detailed information is available on request.

Coverage of Institutions

The requesting party submits that state law is inconsistent with Truth in
Savings and Regulation DD because the state law covers only state-chartered
banks, and not other depository institutions such as savings associations and
national banks. The federal law covers all depository institutions, whether
state-chartered or not (and includes deposit brokers that offer deposit
accounts for the purpose of the advertising rules). The Board believes that
state law disclosures are not inconsistent with federal provisions, and
therefore are not preempted, simply because coverage under the state
provisions is more limited than under the federal law.

Content and Format of Disclosures

The requesting party asks the Board for a determination that the content of
the state law disclosures is inconsistent with the federal law. The state law
permits disclosures to be more general than the federal law allows for
example, by mandating only a statement of the "terms of interest offered for
the account,'' and not requiring an "annual percentage yield'' to be given,
using that term. However, the Board believes that state law does not prohibit
institutions from being more specific in fulfilling their state disclosure
requirements. Therefore, institutions can comply with the state provisions
while still complying with the more detailed federal requirements.

Similarly, the requesting party suggests that preemption of the state law is
warranted based on the format of the required state disclosures. Wisconsin law
requires that each account disclosure include a "brief description'' of all
other accounts offered by the bank, along with a statement that more detailed
information is available upon request. The federal law contains no similar
requirement. The Board believes that banks are able to comply with this
provision of the Wisconsin law without contradicting the requirements of the
federal law, and therefore that preemption is not warranted based on the state
requirement.

Change in Terms Notice

The requesting party believes that the change in terms provision of the
Wisconsin law is inconsistent with the federal law and should be preempted for
three reasons. First, the state law requires redisclosure of all state law
disclosures (presumably including the "brief statement'' of all other accounts
offered by the institution). In contrast, Regulation DD requires notice to
consumer account-holders only of the specific provision that is being changed.
Second, state law requires a change in terms notice to be sent upon "any''
change to a depositor's account that was initially required to be disclosed
(except a change in the interest rate for a variable rate account). The
federal law requires a change in terms notice only where the change reduces
the annual percentage yield or adversely affects the consumer (see section
230.5(a)). Third, state law redisclosure is required "upon'' any change in the
account. The Truth in Savings act and Regulation DD generally require a change
in terms notice at least 30 days prior to the effective date of the change.

As stated above, the Board believes a state law is not inconsistent simply
because it requires more information than federal law requires, or because the
state law requires disclosures in cases where the federal law requires none. A
bank can comply with the advance change in terms required under federal law by
providing the more detailed information in the instances required by the state
law. While Regulation DD allows new account disclosures to be sent in
substitution for a notice containing only the changed terms of an account, in
order to comply with the federal law these disclosures must specifically bring
the changed terms to the consumer's attention (for example, by highlighting
them in some way). The state and federal laws have different requirements in
this regard, but the Board does not believe they are inconsistent.

Finally, the Board believes the state law requirement that a bank redisclose
all applicable information "upon'' any change in a term that was initially
disclosed is not inconsistent with the federal provision requiring at least 30
days advance notice of the effective date of the change. The office of the
Wisconsin Commissioner of Banking, the state enforcement agency for
state-chartered banks in Wisconsin, has indicated to Board staff that
institutions providing the redisclosures required under state law at least 30
days in advance of the effective date of the change, as the federal provisions
require, would comply with the state law.®1¯  Therefore, as Wisconsin banks
are able to comply with both the federal and state laws the Board proposes to
determine that this provision is not preempted by the federal law.

®1¯  Even if state law required that re-disclosures be sent less than 30 days
in advance of the effective date of any change, this provision would not
violate federal law because a bank could send a notice at each of the
applicable times, therefore complying with both federal and state provisions
without contradicting the requirements of the other.

(3) Comment requested. The Board requests comment on its proposal to deny a
determination that provisions of the Wisconsin law found in Wisconsin Statutes
section 224.08 are inconsistent with the federal Truth in Savings law, and it
therefore proposes to determine that the state provisions are not preempted by
the federal law. Comment letters should refer to Docket No. R-0818. After the
close of the comment period and analysis of the comments received, notice of
final action on the proposal will be published in the Federal Register.

Regulatory Flexibility Act Analysis and Paperwork Reduction Act.

The Board believes that the proposed rule would not have a significant adverse
impact on institutions' costs, including those of small institutions.

List of Subjects in 12 CFR Part 230

Advertising, Banks, Banking, Consumer protection, Deposit accounts, Interest,
Interest rates, Federal Reserve System, Truth in Savings.

By order of the Board of Governors of the Federal Reserve System, December 3,
1993.

William W. Wiles,

Secretary of the Board.

[FR Doc. 93-30064 Filed 12-13-93; 8:45 am]

BILLING CODE 6210-01-F