We would like to offer a promotional money market account with an introductory interest rate period that would expire on the same date for all customers. As a hypothetical example, if a customer opens an account today, the introductory rate would expire in two months, but if another customer opens an account a month later, the introductory rate would expire in just one month. In other words, the APY will change daily as we count down to the introductory rate’s expiration date. How should we advertise the annual percentage yield (APY)?

We believe that your bank could advertise the APY “as of a specified date,” provided that the APY is updated appropriately (possibly daily, depending on the medium in which your advertisement appears).

Because the introductory APY for these accounts will expire, they are treated as “stepped-rate” accounts under Regulation DD. Assuming that your advertisements will include a rate of return for the money market accounts, the advertisements must state the APY for the accounts (as well as stepped-rate disclosures of “the interest rates and the time period that each rate is in effect”). As you described these accounts, the APY will change daily, so an advertised APY will become inaccurate the day after it is published.

However, we believe that Regulation DD permits the advertisement of a changing APY, provided that your bank indicates that the rate is “accurate as of the date of publication” and the date is “recent in relation to the publication or broadcast frequency of the media used, taking into account the particular circumstances or production deadlines involved.” For example, if you are advertising in a daily newspaper, your bank will have to ensure that the advertisements “reflect rates offered shortly before (or on) the date the rates are published.” If your institution takes this approach, we also recommend examining the proposed advertisements holistically, to ensure that they are not “misleading or inaccurate or misrepresent [your] institution’s deposit contract.”

Of course, if your advertisements do not state a rate of return for the money market accounts, disclosure of the APY will be unnecessary.

For resources related to our guidance, please see:

Regulation DD, 12 CFR 1030.2(s) (“Stepped-rate account means an account that has two or more interest rates that take effect in succeeding periods and are known when the account is opened.”)

Regulation DD, 12 CFR 1030.8(b) (“If an advertisement states a rate of return, it shall state the rate as an ‘annual percentage yield’ using that term. . . .”)

Regulation DD, Appendix A, Part I(B) — Stepped-Rate Accounts (Different Rates Apply in Succeeding Periods) (For accounts with two or more interest rates applied in succeeding periods (where the rates are known at the time the account is opened), an institution shall assume each interest rate is in effect for the length of time provided for in the deposit contract. . . .”)

Regulation DD, 12 CFR 1030.8(c)(2) (“ . . . if the annual percentage yield is stated in an advertisement, the advertisement shall state the following information, to the extent applicable, clearly and conspicuously: . . . (2) Time annual percentage yield is offered. The period of time the annual percentage yield will be offered, or a statement that the annual percentage yield is accurate as of a specified date.”)

Regulation DD, Official Interpretations, Paragraph 8(c)(2), Comment 1 (“If an advertisement discloses an annual percentage yield as of a specified date, that date must be recent in relation to the publication or broadcast frequency of the media used, taking into account the particular circumstances or production deadlines involved. For example, the printing date of a brochure printed once for a deposit account promotion that will be in effect for six months would be considered “recent,” even though rates change during the six-month period. Rates published in a daily newspaper or on television must reflect rates offered shortly before (or on) the date the rates are published or broadcast.”)

Regulation DD, Official Interpretations, Paragraph 8(c)(2), Comment 2 (“An advertisement may refer to the annual percentage yield as being accurate as of the date of publication, if the date is on the publication itself. For instance, an advertisement in a periodical may state that a rate is ‘current through the date of this issue,’ if the periodical shows the date.”)

Regulation DD, Official Interpretations, Paragraph 8(b), Comment 2 (“An advertisement that states an interest rate for a stepped-rate account must state all the interest rates and the time period that each rate is in effect.”)

Regulation DD, 12 CFR 1030.8(a) (“An advertisement shall not: (1) Be misleading or inaccurate or misrepresent a depository institution’s deposit contract; . . .”)