IBA Compliance Connection

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We recently reclassified some of our money market accounts and sent the affected customers notice of the change. We also lowered the required minimum balance for all of these accounts so that the reclassified customers would not have to maintain higher balances after the change than under their previous account type. However, we did not send notice to our existing money market account customers advising them of the lowered minimum balance requirement. Are we correct that Regulation DD requires notice of a change only if it will adversely affect a customer? One customer informed us they would have preferred to know about the change.

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admin

Yes, you are correct that Regulation DD requires advance notice only for a change in a term that will adversely affect the customer.

Regulation DD requires banks to disclose any minimum balance required to (1) open an account, (2) avoid the imposition of a fee, or (3) obtain the annual percentage yield disclosed. If there is a change in a term that affects a minimum balance requirement, banks are required to send advance notice only “if the change may reduce the annual percentage yield or adversely affect the consumer.”

Since reducing the minimum balance requirement benefits your customers and would not reduce the annual percentage yield, we do not believe you were required under Regulation DD to send your customers notice of the change. However, we recommend checking the notice provisions of your account agreements to confirm there are no additional notice requirements that may apply. Additionally, as a courtesy to your customers, you may choose to include notice of the reduced minimum balance requirement in the next periodic statement.

For resources related to our guidance, please see:

  • Regulation DD, 12 CFR 1030.4(b)(3)(i)(A) (“Account disclosures shall include the following, as applicable: . . . Any minimum balance required to: (1) Open the account; (2) Avoid the imposition of a fee; or (3) Obtain the annual percentage yield disclosed.”)
  • Regulation DD, 12 CFR 1030.5(a)(1) (“A depository institution shall give advance notice to affected consumers of any change in a term required to be disclosed under §1030.4(b) of this part if the change may reduce the annual percentage yield or adversely affect the consumer. The notice shall include the effective date of the change. The notice shall be mailed or delivered at least 30 calendar days before the effective date of the change.”)
  • Regulation DD, Official Interpretations, 12 CFR 1030, Paragraph 5(a)(1), Comment 4 (“Examples of changes not requiring an advance change-in-terms notice are: . . . The expiration of one year in a promotion described in the account opening disclosures to ‘waive $4.00 monthly service charges for one year.’”)
  • Regulation DD, Official Interpretations, 12 CFR 1030, Paragraph 5(a)(1), Comment 1 (“Institutions may provide a change-in-term notice on or with a periodic statement or in another mailing.”)