We believe it would be highly problematic to change from a compound to a simple interest calculation without obtaining your customers’ consent. We recommend waiting until any CD matures before unilaterally changing the interest calculation method.

We note that as part of your CD account-opening disclosures, Regulation DD requires the disclosure of “the frequency with which interest is compounded and credited,” which you disclosed as daily. Those disclosures must “reflect the terms of the legal obligation of the account agreement . . . .” Since you met this disclosure requirement by disclosing that interest will be compounded daily, without a qualification in the terms that this method of interest could be changed to simple interest during the term of the CD, we do not believe that your bank can change the method of calculating interest without breaching your agreement.

In addition to breach of contract concerns, we believe that charging interest in a way that differs from your initial disclosures or your marketing materials could be viewed as misleading and a potential UDAAP violation.

For resources related to our guidance, please see below:

• Regulation DD — 12 CFR 1030.4(b)(1) and (2) (account disclosures must include interest rate information and the frequency with which interest is compounded and credited)
•  Regulation DD — 12 CFR 1030.3(b) (Disclosures “shall reflect the terms of the legal obligation of the account agreement between the consumer and the depository institution”)