Definition of Regulation DD
Through Regulation DD, consumers are entitled to regulated disclosures from financial institutions—excluding credit unions. A consumer is entitled to these disclosures when opening a deposit account or at various other times as a potential or actual customer. While you can request disclosures at any time, you will receive the information from your depository institution when:
Opening an accountReceiving a periodic statementAccount terms changeAn account matures
These disclosures help you comparison shop for the account that best suits your needs. Knowing the history and scope of Regulation DD can offer insight into why it is important to your financial health. Understanding how depository institutions implement and distribute disclosures empowers you to choose the best deposit accounts for your financial situation. The Truth in Savings Act (TISA) was passed in 1991, and Regulation DD became effective in June 1993. The purpose of Regulation DD is to ensure that financial institutions are transparent with potential and existing customers when it comes to the features of their depository accounts. These institutions must provide disclosures to consumers who can then make informed decisions and shop around for the right accounts for their needs. On July 1, 2006, amendments to Regulation DD further regulated the adequacy of the information disclosed to customers when they overdraw their accounts. Regulation DD outlines the authority, purpose, coverage, and effect on state laws in the Truth in Savings Act. It also offers official definitions of features that depository institutions present to consumers. Regulation DD’s coverage extends to depository institutions in the United States, as well as foreign depository institutions that operate branches within the country.
How Does Regulation DD Work?
Regulation DD lists definitions of features of financial accounts, beginning with a basic explanation of what constitutes an account. For example, Regulation DD defines an account as “a deposit account at a depository institution that is held by or offered to a consumer. It includes time, demand, savings, and negotiable order of withdrawal accounts. Regulation DD covers interest-bearing as well as non-interest-bearing accounts.” Listing the various definitions ensures that lawmakers, attorneys, and depository institutions are on the same page about account features—and, therefore, on the same page about the extent of the disclosures required to comply with Regulation DD. In addition, Regulation DD ensures that the advertisements produced by depository institutions to attract potential customers will comply with federal law, be truthful, and be free from misleading information. All claims made by the institution in their advertisements must:
Be reasonableReflect the legal obligation of both the institution and the account holderUse consistent terminology
Regulation DD also requires that banks provide disclosures to people who are opening accounts. Customers are entitled to disclosures that explain fees, annual percentage yield, interest rates, and other possible features. For instance, when a consumer goes to a bank to open a savings account, the bank must provide information about the account’s interest rate and how it is calculated. According to the Federal Credit Insurance Corporation, depository institutions must make disclosures “applicable, clearly and conspicuously, in writing, and in a form the consumer may keep.” Consumers can consent to an electronic form, but depository institutions must request that consent.
Why You Should Understand Regulation DD
By understanding Regulation DD, you become a more informed—and, therefore, more powerful—consumer. You can better advocate for yourself and your rights as a consumer when opening or managing your savings accounts at depository institutions. You can also comparison shop more easily for savings accounts, as banks must advertise their true interest rates and minimum-balance requirements. Regulation DD prevents abuse and fraud by requiring banking institutions that offer depository accounts to provide truthful information about their products.
