Generally, we recommend waiting until any existing CDs renew before changing their interest rates or the methods for calculating them, rather than imposing such changes midstream. In addition, we note the following:

30-Day CDs

For consumer savings accounts, Regulation DD generally requires depository institutions to provide at least thirty days’ notice of a change in term that might reduce the annual percentage yield or otherwise adversely affect the consumer. However, time accounts with maturities of one month or less are exempt from this rule, since sending a thirty-day advance notice of a change in terms is impossible during a single 30-day term. Consequently, your bank should not change the interest rate paid on the 30-day CDs until they auto-renew. However, before they renew, you will need to provide new account disclosures that reflect the new method of calculating the variable interest rate, in order to provide your customers the opportunity to not renew their CDs under the new terms. Moreover, you should check your 30-day CD account agreements to see if there are any other notice requirements that might be applicable.

90-Day CDs

For the 90-day CDs, we also recommend waiting until their auto-renewal dates before changing the interest rates or how they are calculated. In our view, unilaterally changing interest rates during a CD’s term when that is not provided for in the CD account agreement can pose a high risk of constituting a breach of contract or even a UDAAP violation.

Regulation DD requires account disclosures to provide how a variable interest rate is determined — either by identifying the index that the rate is tied to or by stating that rate changes are within the institution’s discretion. Here, given that your CD account terms describe the calculation of the interest rate using the 91-Day US Treasury Rate, your account disclosures presumably also provided that the interest rate is determined based on that index. If your bank attempts to switch to a different variable rate method that is not tied to this index, your account disclosures would no longer be accurate. In such cases, we believe that changing the interest rates in the middle of the 90-day CD term could be viewed to be an unfair or deceptive act or practice, particularly since if your customers opted out of this change they likely would incur an early withdrawal penalty.

Regulation DD does allow you to provide in your CD account agreement that you may change the CD rates at your discretion at any time with notice to your customer, but it is unclear to us whether such a provision is in your current CD account agreements. If not, we believe it would be prudent to wait until the auto-renewal of the 90-day variable rate CDs before changing their method of calculating interest. In that case, disclosures of the new terms should be provided at least thirty days before the CDs maturity, or at least twenty days before the end of the grace period if your account agreements provide for grace periods of at least five days.

Notice for Decreasing the Interest Rate at the Bank’s Discretion

Regarding the proposed account terms with a variable rate that may change at the bank’s discretion, whether you will be required to send a thirty-day notice in advance of decreasing the interest rate for the 90-day CDs depends on whether the account meets the definition of a “variable-rate account.” Generally, changes in the interest rate for variable rate accounts during the account term are exempt from the thirty-day notice rule. Under Regulation DD, “variable-rate account” means “an account in which the interest rate may change after the account is opened, unless the institution contracts to give at least 30 calendar days advance written notice of rate decreases.” Therefore, if your new account terms do not require 30 days’ notice of a rate decrease, the account meets the definition of a variable-rate account and your bank is not required to send a thirty-day notice in advance of decreasing the interest rate during the account term. However, we note that your bank still would be required to send pre-maturity disclosures for the 90-day CDs at least thirty days’ in advance of maturity (or at least twenty days before the end of the grace period as discussed above).

For resources related to our guidance, please see:

• 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, 12 CFR 1030.5(a)(2) (“No notice under this section is required for:

(i) Variable-rate changes. Changes in the interest rate and corresponding changes in the annual percentage yield in variable-rate accounts.

*   *   *   *   *

(iii) Short-term time accounts. Changes in any term for time accounts with maturities of one month or less.

• Final Rule, Truth in Savings, 57 Fed. Reg. 43337, 43357 (September 21, 1992) (“As discussed in paragraph (c) of this section, the Board is creating an exception to the advance notice requirements for rollover time accounts with maturities of one month or less. The Board finds a similar exception to be appropriate for the advance notice requirement for changes that occur after an account is opened and prior to the next scheduled maturity date for both rollover and nonrollover time accounts with maturities of one month or less. Requiring institutions to send a 30-day advance change in terms notice for such time accounts is impossible. It would be burdensome for institutions without providing meaningful benefits to consumers holding the time accounts.”)

• Consumer Financial Protection Act of 2010, 12 USC 5536(a) (“It shall be unlawful for (1) any covered person or service provider . . . (B) to engage in any unfair, deceptive, or abusive act or practice.”)

• Regulation DD, 12 CFR 1030.4(b)(1)(ii) (“Account disclosures shall include the following, as applicable: . . . For variable-rate accounts:

(A) The fact that the interest rate and annual percentage yield may change;

(B) How the interest rate is determined

(C) The frequency with which the interest rate may change; and

(D) Any limitation on the amount the interest rate may change.”)