12 Cfr 707, Tisa (1-1-20 Ed)

Pt. 707

12 CFR Ch. VII (1–1–20 Edition)

(2) Appeals procedures inapplicable.
The foregoing procedure applies during
an open period in which funds are
available and NCUA has called for applications. NCUA will reject any application submitted during a period in
which NCUA has not called for applications, except for applications submitted under § 705.8. Such rejections
are not subject to appeal or review by
the NCUA Board.
(b) Appeals of technical assistance
grant reimbursement denials. Pursuant to
NCUA Interpretative Ruling and Policy
Statement 11–1, any Participating
Credit Union may appeal a denial of a
technical assistance grant reimbursement to NCUA’s Supervisory Review
Committee. All appeals of technical assistance grant reimbursements must be
submitted to the Supervisory Review
Committee within 30 days from the
date of the denial. The decisions of the
Supervisory Review Committee are
final and may not be appealed to the
NCUA Board.
[81 FR 85113, Nov. 25, 2016, as amended at 82
FR 50293, Oct. 30, 2017]

PART 706 [RESERVED]
PART 707—TRUTH IN SAVINGS
Sec.
707.1 Authority, purpose, coverage and effect on State laws.
707.2 Definitions.
707.3 General disclosure requirements.
707.4 Account disclosures.
707.5 Subsequent disclosures.
707.6 Periodic statement disclosures.
707.7 Payment of dividends.
707.8 Advertising.
707.9 Enforcement and record retention.
707.10 [Reserved]
707.11 Additional disclosure requirements
for overdraft services.
APPENDIX A TO PART 707—ANNUAL PERCENTAGE YIELD CALCULATION
APPENDIX B TO PART 707—MODEL CLAUSES
AND SAMPLE FORMS
APPENDIX C TO PART 707—OFFICIAL STAFF INTERPRETATIONS
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AUTHORITY: 12 U.S.C. 4311.

§ 707.1 Authority, purpose,
and effect on State laws.

(a) Authority. This regulation is
issued by the National Credit Union
Administration to implement the
Truth in Savings Act of 1991 (TISA),
contained in the Federal Deposit Insurance Corporation Improvement Act of
1991, 12 U.S.C. 3201 et seq., Pub. L. 102–
242, 105 Stat. 2236. Information collection requirements in this regulation
have been approved by the Office of
Management and Budget under the provisions of 44 U.S.C. 3501 et seq. and have
been assigned OMB No. 3133–0134.
(b) Purpose. The purpose of this part
is to enable credit union members and
potential members to make informed
decisions about accounts at credit
unions. This part requires credit
unions to provide disclosures so that
members and potential members can
make meaningful comparisons among
credit unions and depository institutions.
(c) Coverage. This part applies to all
credit unions whose accounts are either insured by, or eligible to be insured by, the National Credit Union
Share Insurance Fund, except for any
credit union that has been designated
as a corporate credit union by the National Credit Union Administration
and any credit union that has $2 million or less in assets, after subtracting
any nonmember deposits, and is determined to be nonautomated by the National Credit Union Administration. In
addition, the advertising rules in § 707.8
apply to any person who advertises an
account offered by a credit union, including any person who solicits any
amount from any other person for
placement in a credit union.
(d) Effect on state laws. State law requirements that are inconsistent with
the requirements of the TISA and this
part are preempted to the extent of the
inconsistency.
[58 FR 50445, Sept. 27, 1993, as amended at 61
FR 68129, Dec. 27, 1996; 74 FR 36103, July 22,
2009]

§ 707.2

SOURCE: 58 FR 50445, Sept. 27, 1993, unless
otherwise noted.

Definitions.

For purposes of this part, the following definitions apply:

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National Credit Union Administration

§ 707.2

(a) Account means a share or deposit
account at a credit union held by or offered to a member or potential member. It includes, but is not limited to,
accounts such as share, share draft,
checking and term share accounts. For
purposes of the advertising regulations
in § 707.8, the term also includes an account at a credit union that is held by
or offered by a share or deposit broker.
(b) Advertisement means a commercial
message, appearing in any medium,
that promotes directly or indirectly:
(1) The availability or terms of, or a
deposit in, a new account; and
(2) For purposes of §§ 707.8(a) and
707.11 of this part, the terms of, or a deposit in, a new or existing account.
(c) Annual percentage yield means a
percentage rate reflecting the total
amount of dividends paid on an account, based on the dividend rate and
the frequency of compounding for a 365day period and calculated according to
the rules in appendix A of this part.
(d) Average daily balance method
means the application of a periodic
rate to the average daily balance in the
account for the period. The average
daily balance is determined by adding
the full amount of principal in the account for each day of the period and dividing that figure by the number of
days in the period.
(e) Bonus means a premium, gift,
award, or other consideration worth
more than $10 (whether in the form of
cash, credit, merchandise, or any
equivalent) given or offered to a member during a year in exchange for opening, maintaining, or renewing an account, or increasing an account balance. The term does not include dividends, other consideration worth $10 or
less given during a year, the waiver or
reduction of a fee, the absorption of expenses, non-dividend membership benefits, or extraordinary dividends.
(f) Credit union means a federal or
state-chartered credit union that is either insured by, or is eligible to apply
for insurance from, the National Credit
Union Share Insurance Fund.
(g) Daily balance method means the
application of a daily periodic rate to
the full amount of principal in the account each day.
(h) Dividend and dividends mean any
declared or prospective earnings on a

member’s shares in a credit union to be
paid to a member or to the member’s
account. For purposes of this part, the
term does not include the payment of a
bonus or other consideration worth $10
or less given during a year, the waiver
or reduction of a fee, the absorption of
expenses, non-dividend membership
benefits, or extraordinary dividends.
(i) Dividend declaration date means
the date that the board of directors of
a credit union declares a dividend for
the preceding dividend period.
(j) Dividend period means the span of
time established by the board of directors of a credit union by the end of
which shares in a member account earn
dividend credit. The dividend period
may be different for each type of account.
(k) Dividend rate means the declared
or prospective annual dividend rate
paid on an account, which does not reflect compounding. For purposes of the
account disclosures in § 707.4(b)(1)(i),
the rate may, but need not, be referred
to as the ‘‘annual percentage rate’’ in
addition to being referred to as the
‘‘dividend rate.’’
(l) Extraordinary dividends means a
nonrepetitive dividend paid at an irregular time from funds legally available
for such distribution.
(m) Fixed-rate account means an account that is not a variable rate account as defined in paragraph (z) of
this section.
(n) Grace period means a period following the maturity of an automatically renewing term share account during which the member may withdraw
funds without being assessed a penalty.
(o) Interest means any payment to a
member or to a member’s account for
the use of funds in a nondividend-bearing account at a state-chartered credit
union offered pursuant to state law,
calculated by application of a periodic
rate to the balance. For purposes of
this regulation, the term does not include the payment of a bonus or other
consideration worth $10 or less given
during a year, the waiver or reduction
of a fee, the absorption of expenses,
non-dividend membership benefits, or
extraordinary dividends. Except as is
specifically otherwise provided in this
part, in the case of an interest-bearing
account held in or offered by a state-

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§ 707.3

12 CFR Ch. VII (1–1–20 Edition)

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chartered credit union pursuant to
state law, the word ‘‘interest’’ shall be
substituted for all references to ‘‘dividend’’ or ‘‘dividends’’ in this part.
(p) Member means:
(1) A natural person member of the
credit union who holds an account primarily for personal, family, or household purposes;
(2) A natural person nonmember who
holds an account primarily for personal, family, or household purposes,
either jointly with a natural person
member or in a credit union designated
as a low-income credit union, or to
whom such an account is offered; and
(3) A natural person nonmember who
holds a deposit account in a state-chartered credit union pursuant to state
law, or to whom such deposit account
is offered.
The term does not include a natural
person who holds an account for another in a professional capacity or an
unincorporated nonbusiness association of natural person members.
(q) Non-dividend membership benefits
means any property or service provided
by a credit union to its members, the
nature of which makes its valuation
unreasonable and administratively impracticable.
(r) Passbook account means an account in which the member retains a
book or other document in which the
credit union records transactions on
the account.
(s) Periodic statement means a statement setting forth information about
an account (other than a term share
account or passbook account) that is
provided to a member on a regular
basis four or more times a year.
(t) Potential member means a natural
person within the credit union’s field of
membership (or an unincorporated nonbusiness association of such persons) or
otherwise eligible to become a member
as defined in paragraph (q) of this section.
(u) Stepped-rate account means an account that has two or more dividend
rates that take effect in succeeding periods and are known when the account
is opened.
(v) Term share account means any
share certificate, interest-bearing certificate of deposit account, or other account with a maturity of at least seven

days in which the member generally
does not have a right to make withdrawals for six days after the account
is opened, unless the account is subject
to an early withdrawal penalty of at
least seven days’ dividends on amounts
withdrawn, offered by a credit union to
a member or potential member.
(w) Tiered-rate account means an account that has two or more dividend
rates that are applicable to specified
balance levels.
(x) Variable-rate account means a
share, share draft, checking, or term
share account in which the simple dividend rate may change after the account is opened, unless the credit
union contracts to give at least thirty
days advance written notice of rate decreases.
[58 FR 50445, Sept. 27, 1993, as amended at 59
FR 13436, Mar. 22, 1994; 59 FR 59899, Nov. 21,
1994; 70 FR 72898, Dec. 8, 2005; 78 FR 32544,
May 31, 2013]

§ 707.3 General
disclosure
requirements.
(a) Form. Credit unions must make
the disclosures required by §§ 707.4
through 707.6 of this part, as applicable, clearly and conspicuously, in writing, and in a form the member or potential member may keep. Credit
unions may provide the disclosures required by this part to a member or potential member in electronic form, subject to compliance with the consent
and other applicable provisions of the
Electronic Signatures in Global and
National Commerce Act (E–Sign Act),
15 U.S.C. 7001 et seq. Credit unions may
provide the disclosures required by
§§ 707.4(a)(2) and 707.8 to a member or
potential member in electronic form
without regard to the consent or other
provisions of the E–Sign Act in the circumstances set forth in those sections.
Disclosures for each account offered by
a credit union may be presented separately or combined with disclosures for
the credit union’s other accounts, as
long as it is clear which disclosures are
applicable to the member or potential
member’s account.
(b) General. The disclosures shall reflect the terms of the legal obligation
between the member and the credit
union. Disclosures may be made in languages other than English, provided

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National Credit Union Administration

§ 707.4

the disclosures are available in English
upon request.
(c) Relation to Regulation E (12 CFR
part 1005). Disclosures required by and
provided in accordance with the Electronic Fund Transfer Act (15 U.S.C.
1601) and its implementing Regulation
E (12 CFR part 1005) that are also required by this part may be substituted
for the disclosures required by this
part.
(d) Multiple members. If an account is
held by more than one member, disclosures may be made to any one of the
members.
(e) Oral responses to inquiries. In an
oral response to a member or potential
member’s inquiry about dividend rates
payable on its accounts, the credit
union shall state the annual percentage yield. The dividend rate may be
stated in addition to the annual percentage yield. No other rate may be
stated. In stating a dividend rate and
annual percentage yield, a credit union
shall:
(1) For dividend-bearing accounts
other than term share accounts, specify a dividend rate and annual percentage yield as of the last dividend declaration date. In the event that disclosures of a dividend rate and annual percentage yield as of the last dividend
declaration date might be inaccurate
because of known or contemplated dividend rate changes, the credit union
may disclose the prospective dividend
rate and prospective annual percentage
yield. Such prospective dividend rate
and prospective annual percentage
yield may be disclosed either in lieu of,
or in addition to, the dividend rate and
annual percentage yield as of the last
dividend declaration date.
(2) For interest-bearing accounts and
for dividend-bearing term share accounts, specify an interest (dividend)
rate and annual percentage yield that
were offered within the most recent
seven calendar days; state that the
rate and yield are accurate as of an
identified date; and provide a telephone
number members may call to obtain
current rate information.
(f) Rounding and accuracy rules for
rates and yields—(1) Rounding. The annual percentage yield, the annual percentage yield earned, and the dividend
rate shall be rounded to the nearest

one-hundredth of one percentage point
(.01%) and expressed to two decimal
places. For account disclosures, the
dividend rate may be expressed to more
than two decimal places.
(2) Accuracy. The annual percentage
yield (and the annual percentage yield
earned) will be considered accurate if
not more than one-twentieth of one
percentage point (.05%) above or below
the annual percentage yield (and the
annual percentage yield earned) determined in accordance with the rules in
appendix A of this part.
(Approved by the Office of Management and
Budget under control number 3133–0134)
[58 FR 50445, Sept. 27, 1993, as amended at 61
FR 114, Jan. 3, 1996; 66 FR 33162, June 21, 2001;
74 FR 36104, July 22, 2009; 77 FR 71084, Nov. 29,
2012]

§ 707.4 Account disclosures.
(a) Delivery of account disclosures—(1)
Account opening—(i) General. A credit
union must provide account disclosures
to a member or potential member before an account is opened or a service
is provided, whichever is earlier. A
credit union is deemed to have provided a service when a fee required to
be disclosed is assessed. Except as provided in paragraph (a)(1)(ii) of this section, if a member or potential member
is not present at the credit union when
the account is opened or the service is
provided and has not already received
the disclosures, the credit union must
mail or deliver the disclosures no later
than 10 business days after the account
is opened or the service is provided,
whichever is earlier.
(ii) Timing of electronic disclosures. If a
member or potential member who is
not present at the credit union uses
electronic means, for example, an
internet Web site, to open an account
or request a service, the disclosures required under paragraph (a)(1) of this
section must be provided before the account is opened or the service is provided.
(2) Requests. (i) A credit union must
provide account disclosures to a member or potential member upon request.
If a member or potential member who
is not present at the credit union
makes a request, the credit union must
mail or deliver the disclosures within a
reasonable time after it receives the

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§ 707.4

12 CFR Ch. VII (1–1–20 Edition)

request and may provide the disclosures in paper form or electronically if
the member or potential member
agrees.
(ii) In providing disclosures upon request, the credit union may:
(A) Specify rates as follows:
(1) For dividend-bearing accounts
other than term share accounts, specify a dividend rate and annual percentage yield as of the last dividend declaration date. In the event that disclosures of a dividend rate and annual percentage yield as of the last dividend
declaration date might be inaccurate
because of known or contemplated dividend rate changes, the credit union
may disclose the prospective dividend
rate and prospective annual percentage
yield. Such prospective dividend rate
and prospective annual percentage
yield may be disclosed either in lieu of,
or in addition to, the dividend rate and
annual percentage yield as of the last
dividend declaration date.
(2) For interest bearing accounts and
for dividend-bearing term share accounts, specify an interest rate and annual percentage yield that were offered
within the most recent seven calendar
days; state that the rate and yield are
accurate as of an identified date; and
provide a telephone number members
may call to obtain current rate information; and
(B) State the maturity of a term
share account as either a term or a
date.
(b) Content of account disclosures. Account disclosures shall include the following, as applicable:
(1) Rate information—(i) Annual percentage yield and dividend rate. (A) For
interest-bearing accounts and for dividend-bearing term share accounts, the
‘‘annual percentage yield’’ and the
‘‘interest rate’’ (‘‘dividend rate’’), using
those terms, and for fixed-rate accounts the period of time the interest
(dividend) rate will be in effect.
(B) For dividend-bearing accounts
other than term share accounts, a credit union shall specify a dividend rate
and annual percentage yield (using
those terms) as of the last dividend
declaration date. In the event that disclosures of a dividend rate and annual
percentage yield as of the last dividend
declaration date might be inaccurate

because of known or contemplated dividend rate changes, the credit union
may disclose the prospective dividend
rate and prospective annual percentage
yield. Such prospective dividend rate
and prospective annual percentage
yield may be disclosed either in lieu of,
or in addition to, the dividend rate and
annual percentage yield as of the last
dividend declaration date.
(ii) Variable rates. For variable-rate
accounts:
(A) The fact that the dividend rate
and annual percentage yield may
change;
(B) How the dividend rate is determined;
(C) The frequency with which the dividend rate may change; and
(D) Any limitation on the amount
the dividend rate may change.
(2) Compounding and crediting—(i) Frequency. The frequency with which dividends are compounded and credited,
and the dividend period for dividendbearing accounts.
(ii) Effect of closing an account. If
members will forfeit dividends if they
close an account before accrued dividends are credited, a statement that
the dividends will not be paid in such
cases.
(3) Balance information—(i) Minimum
balance requirements. Any minimum
balance required to:
(A) Open the account;
(B) Avoid the imposition of a fee; or
(C) Obtain the annual percentage
yield disclosed.
Except for the balance to open the account, the disclosure shall state how
the balance is determined for these
purposes.
(ii) Balance computation method. An
explanation of the balance computation method specified in § 707.7, used to
calculate dividends on the account.
(iii) When dividends begin to accrue. A
statement of when dividends begin to
accrue on noncash deposits.
(4) Fees. The amount of any fee that
may be imposed in connection with the
account (or an explanation of how the
fee will be determined) and the conditions under which the fee may be imposed.
(5) Transaction limitations. Any limitations on the number or dollar
amount of withdrawals or deposits.

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National Credit Union Administration

§ 707.5

(6) Features of term share accounts. For
term share accounts:
(i) Time requirements. The maturity
date.
(ii) Early withdrawal penalties. A
statement that a penalty will be imposed for early withdrawal, how it is
calculated, and the conditions for its
assessment.
(iii) Withdrawal of dividends prior to
maturity. If compounding occurs and
dividends may be withdrawn prior to
maturity, a statement that the annual
percentage yield assumes dividends remain in the account until maturity
and that a withdrawal will reduce earnings. For accounts with a stated maturity greater than 1 year that do not
compound dividends on an annual or
more frequent basis, that require dividend payouts at least annually, and
that disclose an APY determined in accordance with section E of appendix A
of this part, a statement that dividends
cannot remain on account and that
payout of dividends is mandatory.
(iv) Renewal policies. A statement of
whether or not the account will renew
automatically at maturity. If it will, a
statement of whether or not a grace period will be provided and, if so, the
length of that period must be stated. If
the account will not renew automatically, a statement of whether dividends
will be paid after maturity if the member does not renew the account must be
stated.
(7) Bonuses. The amount or type of
any bonus, when the bonus will be provided, and any minimum balance and
time requirements to obtain the bonus.
(8) Nature of dividends. For accounts
earning dividends, other than term
share accounts, a statement that dividends are paid from current income
and available earnings, after required
transfers to reserves at the end of a
dividend period.
(c) Notice to existing account holders—
(1) Notice of availability of disclosures.
Credit unions shall provide a notice to
members who receive periodic statements and who hold existing accounts
of the type offered by the credit union
on January 1, 1995. The notice shall be
included on or with the first periodic
statement sent after January 1, 1995 (or
on or with the first periodic statement
for a statement cycle beginning on or

after that date). The notice shall state
that the members may request account
disclosures containing terms, fees, and
rate information for the account. In responding to such a request, credit
unions shall provide disclosures in accordance with paragraph (a)(2) of this
section.
(2) Alternative to notice. As an alternative to the notice described in paragraph (c)(1) of this section, credit
unions may provide account disclosures to members. The disclosures may
be provided either with a periodic
statement or separately, but must be
sent no later than when the periodic
statement described in paragraph (c)(1)
of this section is sent.
(Approved by the Office of Management and
Budget under control number 3133–0134)
[58 FR 50445, Sept. 27, 1993, as amended at 61
FR 114, Jan. 3, 1996; 63 FR 71574, Dec. 29, 1998;
66 FR 33163, June 21, 2001; 74 FR 36104, July
22, 2009]

§ 707.5 Subsequent disclosures.
(a) Change in terms—(1) Advance notice
required. A credit union shall give advance notice to affected members of
any change in a term required to be
disclosed under § 707.4(b), if the change
may reduce the annual percentage
yield or adversely affect the member.
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.
(2) No notice required. No notice under
this section is required for:
(i) Variable-rate changes. Changes in
the dividend rate and corresponding
changes in the annual percentage yield
in variable-rate accounts.
(ii) Share draft and check printing fees.
Changes in fees for check printing.
(iii) Short-term term share accounts.
Changes in any term for term share accounts with maturities of one month or
less.
(b) Notice before maturity for term share
accounts longer than one month that
renew automatically. For term share accounts with a maturity longer than
one month that renew automatically
at maturity, credit unions shall provide the disclosures described below before maturity. The disclosures shall be
mailed or delivered at least 30 calendar

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§ 707.6

12 CFR Ch. VII (1–1–20 Edition)

days before maturity of the existing
account. Alternatively, the disclosures
may be mailed or delivered at least 20
calendar days before the end of the
grace period on the existing account,
provided a grace period of at least five
calendar days is allowed.
(1) Maturities of longer than one year.
If the maturity is longer than one year,
the credit union shall provide account
disclosures set forth in § 707.4(b) for the
new account, along with the date the
existing account matures. If the dividend rate and annual percentage yield
that will be paid for the new account
are unknown when disclosures are provided, the credit union shall state that
those rates have not yet been determined, the date when they will be determined, and a telephone number
members may call to obtain the dividend rate and the annual percentage
yield that will be paid for the new account.
(2) Maturities of one year or less but
longer than one month. If the maturity
is one year or less but longer than one
month, the credit union shall either:
(i) Provide disclosures as set forth in
paragraph (b)(1) of this section; or
(ii) Disclose to the member:
(A) The date the existing account
matures and the new maturity date if
the account is renewed;
(B) The dividend rate and the annual
percentage yield for the new account if
they are known (or that those rates
have not yet been determined, the date
when they will be determined, and a
telephone number the member may
call to obtain the dividend rate and the
annual percentage yield that will be
paid for the new account); and
(C) Any difference in the terms of the
new account as compared to the terms
required to be disclosed under § 707.4(b)
for the existing account.
(c) Notice before maturity for term share
accounts longer than one year that do not
renew automatically. For term share accounts with a maturity longer than
one year that do not renew automatically at maturity, credit unions shall
disclose to members the maturity date
and whether dividends will be paid
after maturity. The disclosures shall be
mailed or delivered at least 10 calendar

days before maturity of the existing
account.
(Approved by the Office of Management and
Budget under control number 3133–0134)
[58 FR 50445, Sept. 27, 1993, as amended at 61
FR 114, Jan. 3, 1996; 63 FR 71574, Dec. 29, 1998]

§ 707.6

Periodic statement disclosures.

(a) Rule when statement and crediting
periods vary. In making the disclosures
described in paragraph (b) of this section, credit unions that calculate and
credit dividends for a period other than
the statement period, such as the dividend period, may calculate and disclose
the annual percentage yield earned and
amount of dividends earned based on
that period rather than the statement
period. The information in paragraph
(b)(4) shall be stated for that period as
well as for the statement period.
(b) Statement disclosures. If a credit
union mails or delivers a periodic
statement, the statement shall include
the following disclosures:
(1) Annual percentage yield earned.
The ‘‘annual percentage yield earned,’’
using that term as calculated according to the rules in appendix A of this
part.
(2) Amount of dividends. The dollar
amount of dividends earned (accrued or
paid and credited) on the account. The
dollar amount of any extraordinary
dividends earned during the statement
period shall be shown as a separate figure.
(3) Fees imposed. Fees required to be
disclosed under § 707.4(b)(4) of this part
that were debited from the account
during the statement period. The fees
must be itemized by type and dollar
amounts. Except as provided in
§ 707.11(a)(1) of this part, when fees of
the same type are imposed more than
once in a statement period, a credit
union may itemize each fee separately
or group the fees together and disclose
a total dollar amount for all fees of
that type.
(4) Length of period. The total number
of days in the statement period, or the
beginning and ending dates of the period.
(5) Aggregate fee disclosure. If applicable, the total overdraft and returned

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National Credit Union Administration

§ 707.8

item fees required to be disclosed by
§ 707.11(a).
(Approved by the Office of Management and
Budget under control number 3133–0134)
[58 FR 50445, Sept. 27, 1993, as amended at 59
FR 59899, Nov. 21, 1994; 61 FR 114, Jan. 3, 1996;
64 FR 66356, Nov. 26, 1999; 66 FR 33163, June
21, 2001; 70 FR 72898, Dec. 8, 2005; 75 FR 47175,
Aug. 5, 2010]

§ 707.7 Payment of dividends.
(a) Permissible methods—(1) Balance on
which dividends are calculated. Credit
unions shall calculate dividends on the
full amount of principal in an account
for each day by use of either the daily
balance method or the average daily
balance method. Credit unions shall
calculate dividends by use of a daily
rate of at least 1⁄365 of the dividend rate.
In a leap year a daily rate of 1⁄366 of the
dividend rate may be used.
(2) Determination of minimum balance
to earn dividends. A credit union shall
use the same method to determine any
minimum balance required to earn
dividends as it uses to determine the
balance on which dividends are calculated. A credit union may use an additional method that is unequivocally
beneficial to the member.
(b) Compounding and crediting policies.
This section does not require credit
unions to compound or credit dividends
at any particular frequency.
(c) Date dividends begin to accrue.
Dividends shall begin to accrue not
later than the day specified in section
606 of the Expedited Funds Availability
Act (12 U.S.C. 4005) and implementing
Regulation CC (12 CFR part 229). Dividends shall accrue on funds until the
day funds are withdrawn.
(Approved by the Office of Management and
Budget under control number 3133–0134)

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[58 FR 50445, Sept. 27, 1993, as amended at 61
FR 114, Jan. 3, 1996]

§ 707.8 Advertising.
(a) Misleading or inaccurate advertisements. An advertisement must not:
(1) Be misleading or inaccurate or
misrepresent a credit union’s account
agreement; or
(2) Refer to or describe an account as
‘‘free’’ or ‘‘no cost’’ or contain a similar term if any maintenance or activity
fee may be imposed on the account.

The word ‘‘profit’’ must not be used in
referring to dividends or interest paid
on an account.
(b) Permissible rates. If an advertisement states a rate of return, it shall
state the rate as an ‘‘annual percentage yield,’’ using that term. (The abbreviation ‘‘APY’’ may be used provided the term ‘‘annual percentage
yield’’ is stated at least once in the advertisement.) The advertisement shall
not state any other rate, except that
the ‘‘dividend rate,’’ using that term,
may be stated in conjunction with, but
not more conspicuously than, the annual percentage yield to which it relates.
(c) When additional disclosures are required. Except as provided in paragraph
(e) of this section, if the annual percentage yield is stated in an advertisement, the advertisement shall state
the following information, to the extent applicable, clearly and conspicuously:
(1) Variable rates. For variable-rate
accounts, a statement that the rate
may change after the account is
opened.
(2) Time annual percentage yield is offered. For interest-bearing accounts
and dividend-bearing term share accounts, 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.
For dividend-bearing accounts other
than term share accounts, a statement
that the annual percentage yield is accurate as of the last dividend declaration date. In the event that disclosure
of an annual percentage yield as of the
last dividend declaration date might be
inaccurate because of known or contemplated dividend rate changes, the
credit union may disclose the prospective annual percentage yield. Such prospective annual percentage yield may
be disclosed either in lieu of, or in addition to, the dividend rate and annual
percentage yield as of the last dividend
declaration date.
(3) Minimum balance. The minimum
balance required to earn the advertised
annual percentage yield. For tieredrate accounts, the minimum balance
required for each tier shall be stated in

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§ 707.9

12 CFR Ch. VII (1–1–20 Edition)

close proximity and with equal prominence to the applicable annual percentage yield.
(4) Minimum opening deposit. The minimum deposit required to open the account, if it is greater than the minimum balance necessary to earn the
advertised annual percentage yield.
(5) Effect of fees. A statement that
fees could reduce the earnings on the
account.
(6) Features of term share accounts. For
term share accounts:
(i) Time requirements. The term of the
account.
(ii) Early withdrawal penalties. A
statement that a penalty will or may
be imposed for early withdrawal.
(iii) Required dividend payouts. For
noncompounding term share accounts
with a stated maturity greater than
one year that do not compound dividends on an annual or more frequent
basis, that require dividend payouts at
least annually, and that disclose an
APY determined in accordance with
section E of appendix A of this part, a
statement that dividends cannot remain on account and that payout of
dividends is mandatory.
(d) Bonuses. Except as provided in
paragraph (e) of this section, if a bonus
is stated in an advertisement, the advertisement shall state the following
information, to the extent applicable,
clearly and conspicuously:
(1) The ‘‘annual percentage yield,’’
using that term;
(2) The time requirements to obtain
the bonus;
(3) The minimum balance required to
obtain the bonus;
(4) The minimum balance required to
open the account, if it is greater than
the minimum balance necessary to obtain the bonus; and
(5) When the bonus will be provided.
(e) Exemption for certain advertisements—(1) Certain media. If an advertisement is made through one of the
following media, it need not contain
the information in paragraphs (c)(1),
(c)(2), (c)(4), (c)(5), (c)(6)(ii), (d)(4) and
(d)(5) of this section:
(i) Broadcast or electronic media,
such as television or radio;
(ii) Outdoor media, such as billboards; or
(iii) Telephone response machines.

(2) Indoors signs. (i) Signs inside the
premises of a credit union (or the
premises of a share or deposit broker)
are not subject to paragraphs (b), (c),
(d) or (e)(1) of this section.
(ii) If a sign exempted by paragraph
(e)(2) of this section states a rate of return, it shall:
(A) State the rate as an ‘‘annual percentage yield,’’ using that term or the
term ‘‘APY.’’ The sign shall not state
any other rate, except that the dividend rate may be stated in conjunction
with the annual percentage yield to
which it relates.
(B) Contain a statement advising
members to contact an employee for
further information about applicable
fees and terms.
(3) Newsletters. (i) Newsletters sent by
a credit union to existing members
only are not subject to paragraphs (b),
(c), (d) or (e)(1) of this section.
(ii) If a newsletter exempted by paragraph (e)(3) of this section states a rate
of return, it shall:
(A) State the rate as an ‘‘annual percentage yield,’’ using that term or the
term ‘‘APY.’’ The newsletter shall not
state any other rate, except that the
dividend rate may be stated in conjunction with the annual percentage yield
to which it relates.
(B) Contain a statement advising
members to contact an employee for
further information about applicable
fees and terms.
(f) Additional disclosures in connection
with the payment of overdrafts. Credit
unions that promote the payment of
overdrafts in an advertisement must
include in the advertisement the disclosures required by § 707.11(b) of this
part.
(Approved by the Office of Management and
Budget under control number 3133–0134)
[58 FR 50445, Sept. 27, 1993, as amended at 59
FR 13436, Mar. 22, 1994; 61 FR 114, Jan. 3, 1996;
63 FR 71575, Dec. 29, 1998; 70 FR 72898, Dec. 8,
2005; 73 FR 30477, May 28, 2008]

§ 707.9 Enforcement and record retention.
(a) Administrative enforcement. Section
270 of TISA (12 U.S.C. 4309) contains the
provisions relating to administrative
sanctions for failure to comply with
the requirements of TISA and this
part.

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National Credit Union Administration

§ 707.11

(b) Civil liability. Section 271 of TISA
(12 U.S.C. 4310) contains the provisions
relating to civil liability for failure to
comply with the requirements of TISA
and this part; Section 271 is repealed
effective September 30, 2001.
(c) Record retention. A credit union
shall retain evidence of compliance
with this regulation for a minimum of
two years after the date disclosures are
required to be made or action is required to be taken.
(Approved by the Office of Management and
Budget under control number 3133–0134)
[58 FR 50445, Sept. 27, 1993, as amended at 59
FR 13436, Mar. 22, 1994; 61 FR 114, Jan. 3, 1996;
63 FR 71575, Dec. 29, 1998]

§ 707.10

[Reserved]

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§ 707.11 Additional disclosure requirements for overdraft services.
(a) Disclosure of total fees on periodic
statements—(1) General. A credit union
must separately disclose on each periodic statement, as applicable:
(i) The total dollar amount for all
fees or charges imposed on the account
for paying checks or other items when
there are insufficient or unavailable
funds and the account becomes overdrawn, using the term ‘‘Total Overdraft Fees;’’ and
(ii) The total dollar amount for all
fees or charges imposed on the account
for returning items unpaid.
(2) Totals required. The disclosures required by paragraph (a)(1) of this section must be provided for the statement period and for the calendar yearto-date.
(3) Format requirements. The aggregate fee disclosures required by paragraph (a) of this section must be disclosed in close proximity to fees identified under § 707.6(a)(3), using a format
substantially similar to Sample Form
B–10 in appendix B.
(b) Advertising disclosures for overdraft
services—(1) Disclosures. Except as provided in paragraphs (b)(2),(b)(3), and
(b)(4) of this section, any advertisement promoting the payment of overdrafts must disclose in a clear and conspicuous manner:
(i) The fee or fees for the payment of
each overdraft;

(ii) The categories of transactions for
which a fee for paying an overdraft
may be imposed;
(iii) The time period by which the
member must repay or cover any overdraft; and
(iv) The circumstances under which
the credit union will not pay an overdraft.
(2) Communications about the payment
of overdrafts not subject to additional advertising disclosures. Paragraph (b)(1) of
this section does not apply to:
(i) An advertisement promoting a
service where the credit union’s payment of overdrafts will be agreed upon
in writing and subject to part 1026 of
this title (Regulation Z);
(ii) A communication by a credit
union about the payment of overdrafts
in response to a member-initiated inquiry about share accounts or overdrafts. Providing information about
the payment of overdrafts in response
to a balance inquiry made through an
automated system, such as a telephone
response machine, ATM, or a credit
union’s Internet site, is not a response
to a member-initiated inquiry for purposes of this paragraph;
(iii) An advertisement made through
broadcast or electronic media, such as
television or radio;
(iv) An advertisement made on outdoor media, such as billboards;
(v) An ATM receipt;
(vi) An in-person discussion with a
member;
(vii) Disclosures required by Federal
or other applicable law;
(viii) Information included on a periodic statement or a notice informing a
member about a specific overdrawn
item or the amount the account is
overdrawn;
(ix) A term in a share account agreement discussing the credit union’s
right to pay overdrafts;
(x) A notice provided to a member,
such as at an ATM, that completing a
requested transaction may trigger a fee
for overdrawing an account, or a general notice that items overdrawing an
account may trigger a fee;
(xi) Informational or educational materials concerning the payment of overdrafts if the materials do not specifically describe the credit union’s overdraft service; or

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12 CFR Ch. VII (1–1–20 Edition)

(xii) An opt-out or opt-in notice regarding the credit union’s payment of
overdrafts or provision of discretionary
overdraft services.
(3) Exception for ATM screens and telephone response machines. The disclosures described in paragraphs (b)(1)(ii)
and (b)(1)(iv) of this section are not required in connection with any advertisement made on an ATM screen or
using a telephone response machine.
(4) Exception for indoor signs. Paragraph (b)(1) of this section does not
apply to advertisements for the payment of overdrafts on indoor signs as
described by § 707.8(e)(2) of this part,
provided that the sign contains a clear
and conspicuous statement that fees
may apply and that members should
contact an employee for further information about applicable fees and
terms. For purposes of this paragraph
(b)(4), an indoor sign does not include
an ATM screen.
(c) Disclosure of account balances. If a
credit union discloses balance information to a member through an automated system, the balance may not include additional amounts that the
credit union may provide to cover an
item when there are insufficient or unavailable funds in the member’s account, whether under a service provided in its discretion, a service subject to part 1026 of this title (Regulation Z), or a service to transfer funds
from another member account. The
credit union may, at its option, disclose additional account balances that
include such additional amounts, if the
credit union prominently states that
any such balance includes such additional amounts and, if applicable, that
additional amounts are not available
for all transactions.
[70 FR 72898, Dec. 8, 2005, as amended at 74
FR 36104, July 22, 2009; 75 FR 47175, Aug. 5,
2010; 77 FR 71084, Nov. 29, 2012]

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APPENDIX A TO PART 707—ANNUAL
PERCENTAGE YIELD CALCULATION
The annual percentage yield (APY) measures the total amount of dividends a credit
union pays on an account based on the dividend rate and the frequency of compounding.
The annual percentage yield is expressed as
an annualized rate, based on a 365-day year.
(Credit unions may calculate the annual percentage yield based on a 365-day or a 366-day
year in a leap year.) Part I of this appendix

discusses the annual percentage yield calculations for account disclosures and advertisements, while Part II discusses annual
percentage yield earned calculations for
statements. The annual percentage yield reflects only dividends and does not include
the value of any bonus, as that term is defined in part 707, that may be provided to the
member to open, maintain, increase or renew
an account. Dividends, interest or other
earnings are not to be included in the annual
percentage yield if such amounts are determined by circumstances that may or may
not occur in the future. These formulas
apply to both dividend-bearing and interestbearing accounts held by credit unions.
PART I. ANNUAL PERCENTAGE YIELD FOR ACCOUNT DISCLOSURES AND ADVERTISING PURPOSES

In general, the annual percentage yield for
account disclosures under §§ 707.4 and 707.5
and for advertising under § 707.8 is an
annualized rate that reflects the relationship
between the amount of dividends that would
be earned by the member for the term of the
account and the amount of principal used to
calculate those dividends. The amount of
dividends that would be earned may be projected based on the most recent past declared rate or an anticipated future rate,
whichever the credit union judges to most
reasonably approximate the dividends to be
earned. Special rules apply to accounts with
tiered and stepped dividend rates, and to certain term share accounts with a stated maturity greater than 1 year.
A. General Rules
Except as provided in Part I. E. of this appendix, the annual percentage yield shall be
calculated by the formula shown below.
Credit unions may calculate the annual percentage yield using projected dividends
based on either the rate at the last dividend
declaration date or the rate anticipated at a
future date. The credit union must disclose
whichever option it uses to members. Credit
unions shall calculate the annual percentage
yield based on the actual number of days for
the term of the account. For accounts without a stated maturity date (such as a typical
share or share draft account), the calculation shall be based on an assumed term of 365
days. In determining the total dividends figure to be used in the formula, credit unions
shall assume that all principal and dividends
remain on deposit for the entire term, and
that no other transactions (deposits or withdrawals) occur during the term. (This assumption shall not be used if a credit union
requires, as a condition of the account, that
members withdraw dividends during the

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National Credit Union Administration

Pt. 707, App. A

term. In such a case, the dividends (and annual percentage yield calculation) shall reflect that requirement.) For term share accounts that are offered in multiples of
months, credit unions may base the number
of days on either the actual number of days
during the applicable period, or the number
of days that would occur for any actual sequence of that many calendar months. If
credit unions choose to use this permissive
rule, they must use the same number of days
to calculate the dollar amount of dividends
that will be earned on the account in the annual percentage yield formula (where ‘‘Dividends’’ are divided by ‘‘Principal’’.)
The annual percentage yield is to be calculated by use of the following general formula ((‘‘APY’’) is used for convenience in the
formulas):
APY = 100 [(1 + Dividends/Principal) (365/Days in
term) ¥1].
‘‘Principal’’ is the amount of funds assumed to have been deposited at the beginning of the account.
‘‘Dividends’’ is the total dollar amount of
dividends earned on the Principal for the
term of the account.
‘‘Days in term’’ is the actual number of
days in the term of the account.
When the ‘‘days in term’’ is 365 (that is,
where the stated maturity is 365 days or
where the account does not have a stated
maturity), the APY can be calculated by use
of the following simple formula:
APY = 100 (Dividends/Principal).
Examples:
(1) If a credit union would pay $61.68 in
dividends for a 365-day year on $1,000 deposited into a share draft account, the APY is
6.17%:
APY = 100 [(1 + 61.68/1,000) (365/365) ¥1]
APY = 6.17%.
Or, using the simple formula above (since
the term is deemed to be 365 days):
APY = 100(61.68/1,000)
APY = 6.17%.
(2) If a credit union pays $30.37 in dividends
on a $1,000 six-month term share certificate
account (where the six-month period used by
the credit union contains 182 days), using the
general formula above, the APY is 6.18%:
APY = 100 [(1 + 30.37/1,000)(365/182) ¥1]
APY = 6.18%.
The APY is affected by the frequency of
compounding, i.e., the amount of dividends
will be greater the more frequently dividends
are compounded for a given nominal rate.
When two credit unions are offering the
same dividend rate on, for example, a share
account, the APY disclosed may be different
if the credit unions use a different frequency
of compounding.
Examples:
(1) If a credit union pays $1,268.25 in dividends for a 365-day year on $10,000 deposited

into a regular share account earning 12%,
and the dividends are compounded monthly,
the APY will be 12.68%.
APY = 100($1,268.25/10,000)
APY = 12.68%
(2) However, if a credit union is
compounding dividends on a quarterly basis
on an account which otherwise has the same
terms, the dividends will be $1,255.09 and the
APY will be 12.55%.
APY = 100 ($1,255.09/10,000)
APY = 12.55%
B. Stepped-Rate Accounts (Different Rates
Apply in Succeeding Periods)
For accounts with two or more dividend
rates applied in succeeding periods (where
the rates are known at the time the account
is opened), a credit union shall assume each
dividend rate is in effect for the length of
time provided for in any share agreement.
Examples:
(1) If a credit union offers a $1,000 6-month
term share (certificate) account on which it
pays a 5% dividend rate, compounded daily,
for the first three months (which contain 91
days), and a 5.5% dividend rate, compounded
daily, for the next three months (which contain 92 days), the total dividends for six
months is $26.68, and, using the general formula above, the APY is 5.39%:
APY = 100 [(1 + 26.68/1,000)(365/183)¥1]
APY = 5.39%.
(2) If a credit union offers a $1,000 2-year
share certificate on which it pays a 6% dividend rate, compounded daily, for the first
year, and a 6.5% dividend rate, compounded
daily, for the next year, the total dividends
for two years is $133.13, and, using the general formula above, the APY is 6.45%:
APY = 100 [(1 + 133.13/1,000)(365/730)¥1]
APY = 6.45%.
C. Variable-Rate Accounts
For variable-rate accounts without an introductory premium or discounted rate, a
credit union must base the calculation only
on the initial dividend rate in effect when
the account is opened (or advertised), and assume that this rate will not change during
the year.
Variable-rate accounts with an introductory premium or discount rate must be
treated like stepped-rate accounts. Thus, a
credit union shall assume that: (1) The introductory simple dividend rate is in effect for
the length of time provided for in the account contract; and (2) the variable dividend
rate that would have been in effect when the
account is opened or advertised (but for the
introductory rate) is in effect for the remainder of the year. If the variable rate is tied to
an index, the index-based rate in effect at
the time of disclosure must be used for the
remainder of the year. If the rate is not tied

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12 CFR Ch. VII (1–1–20 Edition)

to an index, the rate in effect for existing
members holding the same account (who are
not receiving the introductory dividend rate)
must be used for the remainder of the year.
For example, if a credit union offers an account on which it pays a 7% dividend rate,
compounded daily, for the first three months
(which, for example, contains 91 days), while
the variable dividend rate that would have
been in effect when the account was opened
was 5%, the total dividends for a 365-day year
for a $1,000 account balance is $56.52, (based
on 91 days at 7% followed by 274 days at 5%).
Using the simple formula, the APY is 5.65%:
APY = 100 (56.52/1,000)
APY = 5.65%.
D. Accounts With Tiered Rates (Different Rates
Apply to Specified Balance Level)
For accounts in which two or more dividend rates paid on the account are applicable
to specified balance levels, the credit union
must calculate the annual percentage yield
in accordance with the method described
below that it uses to calculate dividends. In
all cases, an annual percentage yield (or a
range of annual percentage yields, if appropriate) must be disclosed for each balance
tier.
For purposes of the examples discussed
below, assume the following:
Simple dividend rate (Percent)
5.25 ................
5.50 ................
5.75 ................

Share balance required to earn rate
Up to but not exceeding $2,500.
Above $2,500, but not exceeding $15,000.
Above $15,000.

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Tiering Method A
Under this method, a credit union pays on
the full balance in the account the stated
dividend rate that corresponds to the applicable share balance tier. For example, if a
member deposits $8,000, the credit union pays
the 5.50% dividend rate on the entire $8,000.
This is also known as a ‘‘hybrid’’ or ‘‘plateau’’ tiered rate account.
When this method is used to determine
dividends, only one annual percentage yield
will apply to each tier. Within each tier, the
annual percentage yield will not vary with
the amount of principal assumed to have
been deposited.
For the dividend rates and account balances assumed above, the credit union will
state three annual percentage yields—one
corresponding to each balance tier. Calculation of each annual percentage yield is similar for this type of account as for accounts
with a single fixed dividend rate. Thus, the
calculation is based on the total amount of
dividends that would be received by the
member for each tier of the account for a
year and the principal assumed to have been
deposited to earn that amount of dividends.

First tier. Assuming daily compounding, the
credit union will pay $53.90 in dividends on a
$1,000 account balance. Using the general formula for the first tier, the APY is 5.39%:
APY = 100 [(1 + 53.90/1,000)(365/365)¥1]
APY = 5.39%.
Using the simple formula:
APY = 100 (53.90/1,000)
APY = 5.39%.
Second tier. The credit union will pay
$452.29 in dividends on an $8,000 deposit.
Thus, using the simple formula, the annual
percentage yield for the second tier is 5.65%:
APY = 100(452.29/8,000)
APY = 5.65%.
Third tier. The credit union will pay
$1,183.61 in dividends on a $20,000 account balance. Thus, using the simple formula, the annual percentage yield for the third tier is
5.92%:
APY = 100(1,183.61/20,000)
APY = 5.92%.
Tiering Method B
Under this method, a credit union pays the
stated dividend rate only on that portion of
the balance within the specified tier. For example, if a member deposits $8,000, the credit
union pays 5.25% on only $2,500 and 5.50% on
$5,500 (the difference between $8,000 and the
first tier cutoff of $2,500). This is also known
as a ‘‘pure’’ tiered rate account.
The credit union that computes dividends
in this manner must provide a range that
shows the lowest and the highest annual percentage yields for each tier (other than for
the first tier, which, like the tiers in Method
A, has the same annual percentage yield
throughout). The low figure for an annual
percentage yield is calculated based on the
total amount of dividends earned for a year
assuming the minimum principal required to
earn the dividend rate for that tier. The high
figure for an annual percentage yield is
based on the amount of dividends the credit
union would pay on the highest principal that
could be deposited to earn that same dividend rate. If the account does not have a
limit on the amount that can be deposited,
the credit union may assume any amount.
For the tiering structure assumed above,
the credit union would state a total of five
annual percentage yields—one figure for the
first tier and two figures stated as a range
for the other two tiers.
First tier. Assuming daily compounding, the
credit union could pay $53.90 in dividends on
a $1,000 account balance. For this first tier,
using the simple formula, the annual percentage yield is 5.39%:
APY = 100 (53.90/1,000)
APY = 5.39%.
Second tier. For the second tier the credit
union would pay between $134.75 and $841.45
in dividends, based on assumed balances of

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Pt. 707, App. A

$2,500.01 and $15,000, respectively. For
$2,500.01, dividends would be figured on $2,500
at 5.25% dividend rate plus dividends on $.01
at 5.50%. For the low end of the second tier,
therefore, the annual percentage yield is
5.39%. Using the simple formula:
APY = 100 (134.75/2,500)
APY = 5.39%.
For $15,000, dividends are figured on $2,500
at 5.25% dividend rate plus dividends on
$12,500 at 5.50% dividend rate. For the high
end of the second tier, the annual percentage
yield, using the simple formula, is 5.61%:
APY = 100 (841.45/15,000)
APY = 5.61%.
Thus, the annual percentage yield range
that would be stated for the second tier is
5.39% to 5.61%.
Third tier. For the third tier, the credit
union would pay $841.45 and $5,871.78 in dividends on the low end of the third tier (a balance of $15,000.01). For $15,000.01, dividends
would be figured on $2,500 at 5.25% dividend
rate, plus dividends on $12,500 at 5.50% dividend rate, plus dividends on $.01 at 5.75% dividend rate. For the low end of the third tier,
therefore, the annual percentage yield, using
the simple formula, is 5.61%:
APY = 100 (841.45/15,000)
APY = 5.61%.
Assuming the credit union does not limit
the account balance, it may assume any
maximum amount for the purposes of computing the annual percentage yield for the
high end of the third tier. For an assumed
maximum balance amount of $100,000, dividends would be figured on $2,500 at 5.25% dividend rate, plus dividends on $12,500 at 5.50%
dividend rate, plus dividends on $85,000 at
5.75% dividend rate. For the high end of the
third tier, therefore, the annual percentage
yield, using the simple formula, is 5.87%:
APY = 100 (5,871.78/100,000)
APY = 5.87%.
Thus, the annual percentage yield that
would be stated for the third tier is 5.61% to
5.87%. If the assumed maximum balance
amount is $1,000,000, credit unions would use
$985,000 rather than $85,000 in the last calculation. In that case for the high end of the
third tier, the annual percentage yield, using
the simple formula, is 5.91%:
APY = 100 (59,134.22/1,000,000)
APY = 5.91%
Thus, the annual percentage yield range
that would be stated for the third tier is
5.61% to 5.91%.

kpayne on VMOFRWIN702 with $$_JOB

E. Term Share Accounts with a Stated Maturity
Greater than One Year that Pay Dividends At
Least Annually
1. For term share accounts with a stated
maturity greater than one year, that do not
compound dividends on an annual or more
frequent basis, and that require the member

to withdraw dividends at least annually, the
annual percentage yield may be disclosed as
equal to the dividend rate.
Example:
If a credit union offers a $1,000 two-year
term share account that does not compound
and that pays out dividends semi-annually
by check or transfer at a 6.00% dividend rate,
the annual percentage yield may be disclosed
as 6.00%.
2. For term share accounts covered by this
paragraph that are also stepped-rate accounts, the annual percentage yield may be
disclosed as equal to the composite dividend
rate.
Example:
(1) If a credit union offers a $1,000 threeyear term share account that does not compound and that pays out dividends annually
by check or transfer at a 5.00% dividend rate
for the first year, 6.00% dividend rate for the
second year, and 7.00% dividend rate for the
third year, the credit union may compute
the composite dividend rate and APY as follows:
(a) Multiply each dividend rate by the
number of days it will be in effect;
(b) Add these figures together; and
(c) Divide by the total number of days in
the term.
(2) Applied to the example, the products of
the dividend rates and days the rates are in
effect are (5.00% × 365 days) 1825, (6.00% × 365
days) 2190, and (7.00% × 365) 2555, respectively. The sum of these products, 6570, is divided by 1095, the total number of days in the
term. The composite dividend rate and APY
are both 6.00%.
PART II. ANNUAL PERCENTAGE YIELD EARNED
FOR STATEMENTS
The annual percentage yield earned for
statements under § 707.6 is an annualized rate
that reflects the relationship between the
amount of dividends actually earned (accrued or paid and credited) to the member’s
account during the period and the average
daily balance in the account for the period
over which the dividends were earned.
Pursuant to § 707.6(a), when dividends are
paid less frequently than statements are
sent, the APY Earned may reflect the number of days over which dividends were earned
rather than the number of days in the statement period, e.g., if a credit union uses the
average daily balance method and calculates
dividends for a period other than the statement period, the annual percentage yield
earned shall reflect the relationship between
the amount of dividends earned and the average daily balance in the account for the
other period, such as a crediting or dividend
period.
The annual percentage yield shall be calculated by using the following formulas

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12 CFR Ch. VII (1–1–20 Edition)

(‘‘APY Earned’’ is used for convenience in
the formulas):
A. General Formula
APY Earned = 100 [(1 + Dividends earned/Balance)(365/Daysinperiod)¥1].
‘‘Balance’’ is the average daily balance in
the account for the period.
‘‘Dividends earned’’ is the actual amount
of dividends accrued or paid and credited to
the account for the period.
‘‘Days in period’’ is the actual number of
days over which the dividends disclosed on
the statement were earned.
Examples:
(1) If a credit union calculates dividends
for the statement period (and uses either the
daily balance or the average daily balance
method), and the account had a balance of
$1,500 for 15 days and a balance of $500 for the
remaining 15 days of a 30-day statement period, the average daily balance for the period
is $1,000. Assume that $5.25 in dividends was
earned during the period. The annual percentage yield earned (using the formula
above) is 6.58%:
APY Earned = 100 [(1 + 5.25/1,000)(365/30)¥1]
APY Earned = 6.58%.
(2) Assume a credit union calculates dividends on the average daily balance for the
calendar month and provides periodic statements that cover the period from the 16th of
one month to the 15th of the next month.
The account has a balance of $2,000 September 1 through September 15 and a balance
of $1,000 for the remaining 15 days of September. The average daily balance for the
month of September is $1,500, which results

in $6.50 in dividends earned for the month.
The annual percentage yield earned for the
month of September would be shown on the
periodic statement covering September 16
through October 15. The annual percentage
yield earned (using the formula above) is
5.40%:
APY Earned = 100 [(1 + 6.50/1,500)(365/30)¥1]
APY Earned = 5.40%.
(3) Assume a credit union calculates dividends on the average daily balance for a
quarter (for example, the calendar months of
September through November), and provides
monthly periodic statements covering calendar months. The account has a balance of
$1,000 throughout the 30 days of September, a
balance of $2,000 throughout the 31 days of
October, and a balance of $3,000 throughout
the 30 days of November. The average daily
balance for the quarter is $2,000, which results in $21 in dividends earned for the quarter. The annual percentage yield earned
would be shown on the periodic statement
for November. The annual percentage yield
earned (using the formula above) is 4.28%:
APY Earned = 100 [(1 + 21/2,000)(365/91)¥1]
APY Earned = 4.28%.
B. SPECIAL FORMULA FOR USE WHERE PERIODIC
STATEMENT IS SENT MORE OFTEN THAN THE
PERIOD FOR WHICH DIVIDENDS ARE COMPOUNDED.

Credit unions that use the daily balance
method to accrue dividends and that issue
periodic statements more often than the period for which dividends are compounded
shall use the following special formula:

( 365 / Compounding )
⎤
⎡⎧
(Dividends earned / Balance) ⎫
− 1⎥
APY Earned = 100 ⎢⎨1 +
⎬
⎥⎦
⎢⎣⎩ Days in period (Compounding) ⎭
compounded annually, and provides periodic
statements for each monthly cycle. The account has a daily balance of $1000.00 for a 30day statement period. The dividend earned of
$4.11 for the period, and the annual percentage yield earned (using the special formula
above) is 5.00%:

( 365 / 365)
⎡⎧ ($4.11/1,000)
⎤
⎫
(365)⎬
APY Earned = 100 ⎢⎨1 +
− 1⎥
30
⎭
⎢⎣⎩
⎥⎦

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er27se93.000 er27se93.001

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The following definition applies for use in
this formula (all other terms are defined
under Part II):
‘‘Compounding’’ is the number of days in
each compounding period.
Assume a credit union calculates dividends
for the statement period using the daily balance method, pays a 5.00% dividend rate,

National Credit Union Administration

Pt. 707, App. B

APY Earned = 5.00%.

[58 FR 50445, Sept. 27, 1993, as amended at 63 FR 71575, Dec. 29, 1998]

APPENDIX B TO PART 707—MODEL
CLAUSES AND SAMPLE FORMS
Table of Contents
B–1—Model Clauses for Account Disclosures
(§ 707.4(b))
B–2—Model Clauses for Changes in Terms
(§ 707.5(a))
B–3—Model Clauses for Pre-Maturity Notices
for Term Share Accounts (§ 707.5(b-d))
B–4—Sample Form (Signature Card/ Application for Membership)
B–5—Sample Form (Term Share (Certificate)
Account)
B–6—Sample Form (Regular Share Account
Disclosures)
B–7—Sample Form (Share Draft Account
Disclosures)
B–8—Sample Form (Money Market Share
Account Disclosures)

balance/ average daily balance]’’). It should
be noted that only in sections B–6 through
B–10 of this appendix have specific examples
of disclosures been given, with dates and figures. Sections B–1 through B–5, and section
B–11 provide only unspecific model clauses or
blank forms. The Board felt, as articulated
in the appendix A to Regulation DD, that a
mix of blank clauses and forms and application of the model clauses to real specific situations would benefit those who must comply with TISA.
Any references to NCUA Rules and Regulations, the NCUA Standard FCU Bylaws, or the
NCUA Accounting Manual for FCUs, are provided for guidance and as a point of reference
for credit unions. Citations to these sources
does not indicate that their application is required for those credit unions who need not
follow them.
B–1 MODEL CLAUSES FOR ACCOUNT
DISCLOSURES (§ 707.4(B))

B–9—Sample Form (Term Share (Certificate)
Account Disclosures)

(a) Rate Information (Sec. 707.4(b)(1))

B–10—Sample Form (Periodic Statement)

(i) Fixed-Rate Accounts (§ 707.4(b)(1)(i)(A–B))

B–11—Sample Form (Rate and Fee Schedule)
B–12 Aggregate Overdraft and Returned Item
Fees Sample Form

kpayne on VMOFRWIN702 with $$_JOB

GENERAL NOTE: Appendix B contains model
clauses and sample forms intended for optional use by credit unions to aid in compliance with the disclosure requirements of
§§ 707.4 (account disclosures), 707.5 (subsequent disclosures), 707.6 (statement disclosures), and 707.8 (advertisements). Section
269(b) of TISA provides that credit unions
that use these clauses and forms will be in
compliance with TISA’s disclosure provisions.
As discussed in the supplementary information to § 707.3(a), this final rule provides
for flexibility in designing the format of the
disclosures. Credit unions can choose to prepare a single document or brochure that incorporates disclosures for all accounts offered, or to prepare different documents for
each type of account. Credit unions may also
use inserts to a document, or fill in blanks to
show current rates, fees and other terms.
In the model clauses, words in parentheses
indicate the type of disclosure a credit union
should insert in the space provided (for example, a credit union might insert ‘‘July 23,
1995’’ in the blank for a ‘‘(date)’’ disclosure).
Brackets and ‘‘/’’ indicate that a credit union
must choose the alternative that best describes its practice (for example, ‘‘[daily

1. Interest-bearing Accounts
The interest rate on your deposit account
is lll% with an annual percentage yield
(APY) of lll%. [For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar
days and were accurate as of (date). Please
call (credit union telephone number) to obtain current rate information.] You will be
paid this rate [for (time period)/until (date)/
for at least 30 calendar days].
NOTE: This provision reflects an accurate
statement for an interest-bearing account
authorized by state law for state-chartered
credit unions. While the definition of the
term ‘‘interest’’ permits its substitution for
the term ‘‘dividends,’’ separate disclosures
should be made for interest-bearing accounts. Since account opening disclosures
may be provided to potential members requesting account information before opening
an account, and members opening new accounts, information is provided indicating
that the rate may not be current, but that
the potential member or member may call
the credit union to obtain up-to-date information. When opening a new account, of
course, a credit union could provide the contractual rate alone, and delete the sentences
in brackets. Given the definition of fixedrate account in § 707.2(n), credit unions offering fixed-rate accounts must contract to

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12 CFR Ch. VII (1–1–20 Edition)

hold rates steady for at least a 30-day period.
Thus, if the 30-day option of the last sentence is not chosen, the period chosen must
be longer than 30 days.
2. Dividend-bearing Term Share Accounts
The dividend rate on your term share account is lll% with an annual percentage
yield (APY) of lll%. [For purposes of this
disclosure, this is a rate and APY that were
offered within the most recent seven calendar days and were accurate as of (date).
Please call (credit union telephone number)
to obtain current rate information.] You will
be paid this rate [for (time period)/until
(date)/for at least 30 calendar days].
NOTE: This provision reflects an accurate
statement for a fixed-rate, dividend-bearing
term share account. Interest-bearing term
share accounts would use the disclosure in
§ 1, above. Since account opening disclosures
may be provided to potential members requesting account information before opening
an account, and members opening new accounts, information is provided indicating
that the rate may not be current, but that
the potential member or member may call
the credit union to obtain up-to-date information. When opening a new account, of
course, a credit union could provide the contractual rate alone, and delete the sentences
in brackets. Given the definition of fixedrate account in § 707.2(n), credit unions offering fixed-rate accounts must contract to
hold rates steady for at least a 30-day period.
Thus, if the 30-day option of the last sentence is not chosen, the period chosen must
be longer than 30 days.
3. Other Dividend-bearing Accounts

kpayne on VMOFRWIN702 with $$_JOB

[As of [the last dividend declaration date/
(date)], the dividend rate was lll% with
an annual percentage yield (APY) of lll%
on your account. /or The prospective dividend rate on your account is lll% with a
prospective APY of lll% for the current
dividend period.] You will be paid this rate
for [(time period)/at least 30 calendar days].
or
[As of [the last dividend declaration date/
(date)], the dividend rate was lll% with
an annual percentage yield (APY) of lll%
on your account. /or The prospective dividend rate on your account is lll% with an
annual percentage yield (APY) of lll% for
this dividend period.] This rate will not
change unless the credit union notifies you
at least 30 calendar days prior to any change.
NOTE: Credit unions may disclose the dividend rate and annual percentage yield on accounts as of the last dividend declaration
date. This necessitates inclusion of a disclosure of the actual calendar date of the last
dividend declaration date. Additionally or
alternatively (if the last dividend rate could

be inaccurate), credit unions may disclose a
prospective dividend rate and a prospective
annual percentage yield. Such prospective
rates and yields must be estimated in good
faith, and must be declared at the proper
time if it is at all possible to do so. As for
the last sentence in these disclosures, this
provision reflects a credit union policy to set
prospective dividend rates for the next
month (or at least 30 days), quarter or other
period. Many credit unions, at their midmonthly board meeting, set prospective dividend rates for the next month beginning on
the 1st day of the month and continuing to
the last day of the month. These rates must
be formalized or ratified at the end of a dividend period. Given the timing of the board
meetings, the time to prepare and mail notices and the 30 day period, it will often take
credit unions 45 to 60 days to effectively
change rates. For these reasons, the Board
strongly suggests that credit unions do not
offer fixed-rate, dividend-bearing accounts.
(ii) Variable-Rate Accounts (§ 707.4(b)(1)(ii))
1. Interest-bearing Accounts
The interest rate on your deposit account
is lll%, with an annual percentage yield
(APY) of lll%. [For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar
days and were accurate as of (date). Please
call (credit union telephone number) to obtain current rate information.] The interest
rate and annual percentage yield may
change every (time period) based on [(name
of index)/the determination of the credit
union board of directors]. The interest rate
for your account will [never change by more
than lll% each (time period)/never be less/
more than lll%/never exceed lll%
above or fall more than lll% below the
initial interest rate].
NOTE: This disclosure combines the requirements
of
§ 707.4(b)(1)(i)
with
§ 707.4(b)(1)(ii) for interest-bearing accounts.
The variable nature of a deposit account usually is based on an external index or is set at
the discretion of the board. If another means
of rate setting is used, that, instead of the
proposed language, must be disclosed. Since
account opening disclosures may be provided
to potential members requesting account information before opening an account, and
members opening new accounts, information
is provided indicating that the rate may not
be current, but that the potential member or
member may call the credit union to obtain
up-to-date information. When opening a new
account, of course, a credit union could provide the contractual rate alone, and delete
the sentences in brackets. Rarely would
there be limitations on rate changes, but
language is provided for this situation in the

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National Credit Union Administration

Pt. 707, App. B

last sentence. Of course, it is only to be used
if it applies to an account.
2. Dividend-bearing Term Share Accounts
The dividend rate on your term share account is lll%, with an annual percentage
yield (APY) of lll%. [For purposes of this
disclosure, this is a rate and APY that were
offered within the most recent seven calendar days and were accurate as of (date).
Please call (credit union telephone number)
to obtain current rate information.] The dividend rate and annual percentage yield may
change every (time period) based on [(name
of index)/the determination of the credit
union board of directors]. The dividend rate
for your account will [never change by more
than lll% each (time period)/never be less/
more than lll% /never exceed lll%
above or fall more than lll% below the
initial dividend rate].
NOTE: This disclosure combines the requirements
of
§ 707.4(b)(1)(i)
with
§ 707.4(b)(1)(ii) for dividend-bearing, variablerate term share accounts. The variable nature of a deposit account usually is based on
an external index or is set at the discretion
of the board. If another means of rate setting
is used, that, instead of the model language,
must be disclosed. Since account opening
disclosures may be provided to potential
members requesting account information before opening an account, and members opening new accounts, information is provided indicating that the rate may not be current,
but that the potential member or member
may call the credit union to obtain up-todate information. When opening a new account, of course, a credit union could provide
the contractual rate alone, and delete the
sentences in brackets. Rarely would there be
limitations on rate changes, but language is
provided for this situation in the last sentence. Of course, it is only to be used if it applies to an account.
3. Other Dividend-bearing Accounts

kpayne on VMOFRWIN702 with $$_JOB

[As of [the last dividend declaration date/
(date)], the dividend rate was lll% with
an annual percentage yield (APY) of lll%
on your account. /or The prospective dividend rate on your account is lll% with an
anticipated annual percentage yield (APY) of
lll% for the current dividend period.] The
dividend rate and annual percentage yield
may change every (dividend period) as determined by the credit union board of directors.
NOTE: This language combines the requirements of § 707.4(b)(1)(i) with § 707.4(b)(1)(ii).
Credit unions may disclose the dividend rate
and annual percentage yield on accounts as
of the last dividend declaration date. This
necessitates inclusion of a disclosure of the
actual calendar date of the last dividend declaration date or use of the phrase ‘‘last divi-

dend declaration date’’. Additionally or alternatively, credit unions may disclose a
prospective dividend rate and a prospective
annual percentage yield. Such prospective
rates and yields must be estimated in good
faith, and must be declared at the proper
time if it is at all possible to do so. As for
the last sentence in these disclosures, this
provision reflects the variable nature of the
account. Generally, there is only one variable-rate feature for share accounts: the frequency of dividend period rate changes (e.g.,
daily, weekly, monthly, quarterly, semi-annually, annually). Normally, there are no
contractual limitations on share account
earnings (unless imposed by a regulator), nor
are earnings based on any internal or external index. If contractual limitations or an
index are involved, however, those factors
would need to be disclosed (unless a regulator orders otherwise).
(iii) Stepped-Rate Accounts (§ 707.4(b)(1)(i))
1. Interest-bearing Accounts
The initial interest rate on your deposit
account is lll%. You will be paid that
rate [for (time period)/ until (date)]. After
that time, the interest rate for your deposit
account will be lll% and you will be paid
that rate [for (time period)/ until (date)]. The
annual percentage yield (APY) for your account is lll%. [For purposes of this disclosure, this is a rate and APY that were offered
within the most recent seven calendar days
and were accurate as of (date). Please call
(credit union telephone number) to obtain
current rate information.] You will be paid
this rate [for (time period)/until (date)/for at
least 30 calendar days].
2. Dividend-bearing Term Share Accounts
The initial dividend rate on your term
share account is lll%. You will be paid
that rate [for (time period)/ until (date)].
After that time, the dividend rate for your
term share account will be lll% and you
will be paid that rate [for (time period)/ until
(date)]. The annual percentage yield (APY)
for your account is lll%. [For purposes of
this disclosure, this is a rate and APY that
were offered within the most recent seven
calendar days and were accurate as of (date).
Please call (credit union telephone number)
to obtain current rate information.] You will
be paid this rate [for (time period)/until
(date)/for at least 30 calendar days].
3. Other Dividend-bearing Accounts
[As of [the last dividend declaration date/
(date)], the initial dividend rate on your account was lll%. /or The prospective dividend rate on your account is lll%.] You
will be paid that rate [for (time period)/ until
(date)]. After that time, the prospective dividend rate for your share account will be

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12 CFR Ch. VII (1–1–20 Edition)

lll% and you will be paid such rate [for
(time period)/ until (date)]. The annual percentage yield (APY) for your account is
lll%. You will be paid this rate for [(time
period)/at least 30 calendar days].
NOTE: Stepped-rate accounts are accounts
with two or more rates that take effect in
succeeding periods. The applicable rates and
time periods are known when the account is
opened. By nature these are fixed-rate accounts and are usually associated with term
share (certificate) accounts. Accordingly, a
contract provision (for share accounts) to
change rates should be included.
(iv) Tiered-Rate Accounts (§ 707.4(b)(1)(i))
1. Interest-bearing Accounts
Tiering Method A
1* If your [daily balance/average daily balance] is $lll or more, the interest rate
paid on the entire balance in your account
will be lll%, with an annual percentage
yield (APY) of lll%.
2* If your [daily balance/average daily balance] is more than $lll, but less than
$lll, the interest rate paid on the entire
balance in your account will be lll%, with
an APY of lll%.
3* If your [daily balance/average daily balance] is $lll or less, the interest rate paid
on the entire balance will be lll% with an
APY of lll%.
[For purposes of this disclosure, this is a
rate and APY that were offered within the
most recent seven calendar days and were
accurate as of (date). Please call (credit
union telephone number) to obtain current
rate information.]
[Fixed-rate—You will be paid this rate [for
(time period)/until (date)/for at least 30 calendar days]./ Variable-rate—The interest rate
and APY may change every (time period)
based on [(name of index)/ the determination
of the credit union board of directors.]
NOTE: Tiering Method A pays the stated interest rate that corresponds to the applicable deposit tier on the full balance in the account. This example contemplates a two-tier
system. The option (1, 2 or 3) most closely
matching the terms of the account should be
chosen as the appropriate disclosure. For
tiered-rate accounts, a disclosure may be
added about the currency of the rate, as is
provided in the first set of brackets. A disclosure regarding the fixed-rate or variablerate nature of the account must be added, as
is provided in the last set of brackets.

kpayne on VMOFRWIN702 with $$_JOB

Tiering Method B
1* An interest rate of llll% will be paid
only on the portion of your [daily balance/
average daily balance] that is greater than
$llll. The annual percentage yield (APY)
for this tier will range from llll% to

llll%, depending on the balance in the
account.
2* An interest rate of llll% will be paid
only on the portion of your [daily balance/
average daily balance] that is greater than
$llll, but less than $llll. The annual
percentage yield (APY) for this tier will
range from llll% to llll%, depending
on the balance in the account.
3* If your [daily balance/average daily balance] is $llll or less, the interest rate
paid on the entire balance will be llll%,
with an annual percentage yield (APY) of
llll%.
[For purposes of this disclosure, this is a
rate and APY that were offered within the
most recent seven calendar days and were
accurate as of (date). Please call (credit
union telephone number) to obtain current
rate information.]
[Fixed-rate—You will be paid this rate [for
(time period)/until (date)/for at least 30 calendar days]./ Variable-rate—The interest rate
and APY may change every (time period)
based on [(name of index)/ the determination
of the credit union board of directors.]
NOTE: Tiering Method B pays different
stated interest rates corresponding to applicable deposit tiers, on the applicable balance
in each tier of the account. For example, a
credit union might pay 3% interest on account funds of $500 or below, and pay 4% interest on the portion of the same account
that exceeds $500. The example contemplates
an account with two tiers, but additional
tiers are possible. The option (1, 2 or 3) most
closely matching the terms of the account
should be chosen as the appropriate disclosure. For tiered-rate accounts, a disclosure
may be added about the currency of the rate,
as is provided in the first set of brackets.
Tiered-rate accounts can be either fixedrate or variable-rate accounts. The last sentence offers an option of either fixed-rate or
variable-rate disclosure. Thus, the disclosures outlined above will be made in addition
to either: (i) Disclosure of the period the
fixed-rates are in effect or (ii) the variablerate disclosures. Tiered-rate accounts are
also subject to the requirement for disclosure of the balance computation method, see
paragraph (e) to this appendix.
2. Dividend-bearing Term Share Accounts
Tiering Method A
1* If your [daily balance/average daily balance] is $llll or more, the dividend rate
paid on the entire balance in your account
will be llll%, with an annual percentage
yield (APY) of llll%.
2* If your [daily balance/average daily balance] is more than $llll, but less than
$llll, the dividend rate paid on the entire
balance in your account will be llll%,
with an APY of llll%.

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Pt. 707, App. B

3* If your [daily balance/average daily balance] is $llll or less, the dividend rate
paid on the entire balance will be llll%
with an APY of llll%.
[For purposes of this disclosure, this is a
rate and APY that were offered within the
most recent seven calendar days and were
accurate as of (date). Please call (credit
union telephone number) to obtain current
rate information.]
[Fixed-rate—You will be paid this rate [for
(time period)/until (date)/for at least 30 calendar days]./ Variable-rate—The interest rate
and APY may change every (time period)
based on [(name of index)/ the determination
of the credit union board of directors.]
NOTE: Tiering Method A pays the stated
dividend rate that corresponds to the applicable account balance tier on the full balance in the account. This example contemplates a two-tier system. The option (1, 2
or 3) most closely matching the terms of the
account should be chosen as the appropriate
disclosure. For tiered-rate accounts, a disclosure may be added about the currency of
the rate, as is provided in the first set of
brackets. A disclosure regarding the fixedrate or variable-rate nature of the account
must be added, as is provided in the last set
of brackets.
Tiering Method B

kpayne on VMOFRWIN702 with $$_JOB

1* A dividend rate of llll% will be paid
only on the portion of your [daily balance/
average daily balance] that is greater than
$llll. The annual percentage yield (APY)
for this tier will range from llll% to
llll%, depending on the balance in the
account.
2* A dividend rate of llll% will be paid
only on the portion of your [daily balance/
average daily balance] that is greater than
$llll, but less than $llll. The annual
percentage yield (APY) for this tier will
range from llll% to llll%, depending
on the balance in the account.
3* If your [daily balance/average daily balance] is $llll or less, the dividend rate
paid on the entire balance will be llll%,
with an annual percentage yield (APY) of
llll%.
[For purposes of this disclosure, this is a
rate and APY that were offered within the
most recent seven calendar days and were
accurate as of (date). Please call (credit
union telephone number) to obtain current
rate information.]
[Fixed-rate—You will be paid this rate [for
(time period)/until (date)/for at least 30 calendar days]./ Variable-rate—The interest rate
and APY may change every (time period)
based on [(name of index)/ the determination
of the credit union board of directors.]
NOTE: Tiering Method B pays different
stated dividend rates corresponding to applicable account balance tiers, on the applica-

ble balance in each tier of the account. For
example, a credit union might pay 3% dividend on account funds of $500 or below, and
pay 4% dividend on the portion of the same
account that exceeds $500. The example contemplates an account with two tiers, but additional tiers are possible. The option (1, 2 or
3) most closely matching the terms of the account should be chosen as the appropriate
disclosure. For tiered-rate accounts, a disclosure may be added about the currentness
of the rate, as is provided in the first set of
brackets.
Tiered-rate accounts can be either fixedrate or variable-rate accounts. The last sentence offers an option of either fixed-rate or
variable-rate disclosure. Thus, the disclosures outlined above will be made in addition
to either: (i) Disclosure of the period the
fixed-rates are in effect or (ii) the variablerate disclosures. Tiered-rate accounts are
also subject to the requirement for disclosure of the balance computation method, see
paragraph (e) to this appendix.
3. Other Dividend-bearing Accounts
Tiering Method A
1* [As of [the last dividend declaration
date/ (date)], if your [daily balance/average
daily balance] was $llll or more, the dividend rate paid on the entire balance in your
account was llll%, with an annual percentage yield (APY) of llll%. /or If your
[daily balance/average daily balance] is
$llll or more, a prospective dividend rate
of llll% will be paid on the entire balance in your account with a prospective annual percentage yield (APY) of llll% for
this dividend period.]
2* [As of [the last dividend declaration
date/ (date)], if your [daily balance/average
daily balance] was more than $llll, but
was less than $llll, the dividend rate
paid on the entire balance in your account
was llll%, with an annual percentage
yield (APY) of llll%. /or If your [daily
balance/average daily balance] is more than
$llll, but is less than $llll, a prospective dividend rate of llll% will be
paid on the entire balance in your account
with a prospective annual percentage yield
(APY) of llll% for this dividend period.]
3* [As of the last dividend declaration date/
(date)], if your [daily balance/average daily
balance] was $llll or less, the dividend
rate paid on the entire balance in your account will be llll% with an annual percentage yield (APY) of llll%. /or If your
[daily balance/average daily balance] is
$llll or less, the prospective dividend
rate of llll% will be paid on the entire
balance in your account with a prospective
annual percentage yield (APY) of llll%
for this dividend period.
[Fixed-rate—You will be paid this rate for
[(time period)/at least 30 calendar days]./

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Pt. 707, App. B

12 CFR Ch. VII (1–1–20 Edition)

Variable-rate—The dividend rate and APY
may change every (dividend period) as determined by the credit union board of directors.]
NOTE: Tiering Method A pays the stated
dividend rate that corresponds to the applicable deposit tier on the full balance in the
account. This example contemplates a twotier system. The option (1, 2 or 3) most closely matching the terms of the account should
be chosen as the appropriate disclosure. For
tiered-rate accounts, a disclosure may be
added about the prospective rate. Note that
the prospective rate disclosure options
match the required tiered-rate disclosures
based on the previous dividend declaration
date. A disclosure regarding the fixed-rate or
variable-rate nature of the account must be
added, as is provided in the last set of brackets.

kpayne on VMOFRWIN702 with $$_JOB

Tiering Method B
1* [As of [the last dividend declaration
date/ (date)], a dividend rate of llll% was
paid only on the portion of your [daily balance/average daily balance] that was greater
than $llll. The annual percentage yield
(APY) for this tier ranged from llll% to
llll%, depending on the balance in the
account. /or A prospective dividend rate of
llll% will be paid only on the portion of
your [daily balance/average daily balance]
that is greater than $llll with a prospective annual percentage yield (APY) ranging
from llll% to llll%, depending on
the balance in the account, for this dividend
period.]
2* [As of [the last dividend declaration
date/ (date)], a dividend rate of llll% was
paid only on the portion of your [daily balance/average daily balance] that was greater
than $llll but less than $llll. The annual percentage yield (APY) for this tier
ranged from llll% to llll%, depending on the balance in the account. /or A prospective dividend rate of llll% will be
paid only on the portion of your [daily balance/average daily balance] that is greater
than $llll, but less than $llll] with a
prospective annual percentage yield (APY)
ranging from llll% to llll%, depending on the balance in the account, for this
dividend period.]
3* [As of [the last dividend declaration
date/ (date)], if your [daily balance/average
daily balance] was $llll or less, the dividend rate paid on the entire balance was
llll%, with an annual percentage yield
(APY) of llll%. /or If your [daily balance/
average daily balance] was $lll or less,
the prospective dividend rate paid on the entire balance in your account will be lll%
with a prospective annual percentage yield
(APY) of lll% for this dividend period.
NOTE: Tiering Method B pays different
stated dividend rates corresponding to appli-

cable account tiers, on the applicable balance in each tier of the account. For example, a credit union might pay a 3% dividend
on account funds of $500 or below, and pay a
4% dividend on the portion of the same account that exceeds $500. The example contemplates an account with two tiers, but additional tiers are possible. The option (1, 2 or
3) most closely matching the terms of the account should be chosen as the appropriate
disclosure. Note that the prospective rate
disclosure options match the required tieredrate disclosures based on the previous dividend declaration date.
Tiered-rate accounts can be either fixedrate or variable-rate accounts. The last sentence offers an option of either fixed-rate or
variable-rate disclosures. Thus, the disclosures outlined above must be made in addition to either: (i) Disclosure of the period the
fixed-rates are in effect or (ii) the variablerate disclosures. Tiered-rate accounts are
also subject to the requirement for disclosure of the balance computation method, see
paragraph (e) to this appendix.
(b) Nature of Dividends (§ 707.4(b)(8))
Dividends are paid from current income
and available earnings, after required transfers to reserves at the end of a dividend period.
NOTE: The Board of Directors declares dividends based on current income and available
earnings of the credit union after providing
for the required reserves at the end of the
month. The dividend rate and annual percentage yield shown may reflect either the
last dividend declaration date on the account
or the earnings the credit union anticipates
having available for distribution. This disclosure only applies to share and share draft
(as opposed to deposit) accounts and should
be grouped with the Rate Information to
make the disclosures more meaningful. This
disclosure also does not apply to term share
accounts for reasons discussed in the supplementary information regarding §§ 707.3(e) and
707.4(b)(8).
(c) Compounding and Crediting (§ 707.4(b)(2))
[Dividends/Interest] will be compounded
(frequency) and will be credited (frequency).
and, if applicable:
If you close your [share/deposit] account
before [dividends/interest] [are/is] paid, you
will not receive the accrued [dividends/interest].
and, if applicable (for dividend-bearing accounts):
For this account type, the dividend period
is (frequency), for example, the beginning
date of the first dividend period of the calendar year is (date) and the ending date of
such dividend period is (date). All other dividend periods follow this same pattern of

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National Credit Union Administration

Pt. 707, App. B

dates. The dividend declaration date follows
the ending date of a dividend period, and for
the example is (date).
NOTE: Where the word ‘‘(frequency)’’ appears, time periods must be inserted to coincide with those specified in board resolutions
of each credit union’s board of directors. A
disclosure of dividend period was added to
§ 707.4(b)(2)(i) in the final rule to assist members in knowing when dividend rate and APY
disclosures would be given by a credit union
using the optional statement rule of
§ 707.6(a). The dividend declaration date is
important for purposes of § 707.4(a)(2)(ii), request disclosures, § 707.4(b)(2), account opening disclosures, and § 707.8(c)(2), advertising
disclosures. The Board believes that this is
critical information for dividend-bearing accounts, but that provision by an example
(whether of the first dividend period of the
year, or of any randomly chosen dividend period) is favorable to providing a list of such
dates for the entire year or for a period of
years (although these methods would also be
permissible). As noted in the supplementary
information to § 707.2(j), dividend declaration
date, the dividend period and actual dividend
distribution date may vary. Thus, it is possible for crediting periods and dividend periods not to coincide, though the Board believes that credit unions should make every
effort to attempt to coordinate the two periods.

kpayne on VMOFRWIN702 with $$_JOB

(d) Minimum Balance Requirements
(§ 707.4(b)(3)(i))
(i) To open the account
The minimum balance required to open
this account is $llll.
or, for first share account at a credit union
The minimum required to open this account is the purchase of a (par value of a
share) share in the credit union.
(ii) To avoid imposition of fees
You must maintain a minimum daily balance of $llll in your account to avoid a
service fee. If, during any (time period), your
account balance falls below the required
minimum daily balance, your account will
be subject to a service fee of $llll for
that (time period).
or
You must maintain a minimum average
daily balance of $llll in your account to
avoid a service fee. If, during any (time period), your average daily balance is below
the required minimum, your account will be
subject to a service fee of $llll for that
(time period).
(iii) To obtain the annual percentage yield
disclosed
You must maintain a minimum daily balance of $llll in your account each day to
obtain the disclosed annual percentage yield.
or

You must maintain a minimum average
daily balance of $llll in your account to
obtain the disclosed annual percentage yield.
(iv) Absence of minimum balance requirements
No minimum balance requirements apply
to this account.
(v) Par value
The par value of a share in this credit
union is $llll.
NOTE: Where the words ‘‘(time period)’’ appear, time periods should be inserted to coincide with those specified in board resolutions
of each credit union’s board of directors. As
the
supplementary
information
to
§ 707.4(b)(3)(i) explains, the par value of a
share to establish membership is a critical
disclosure to be made to potential members
of credit unions. The par value disclosure is
required by § 707.4(b)(3)(i) as being analogous
to a minimum balance account opening requirement.
(e) Balance Computation Method
(§ 707.4(b)(3)(ii))
(i) Daily Balance Method
[Dividends/Interest] [are/is] calculated by
the daily balance method which applies a
daily periodic rate to the balance in the account each day.
(ii) Average Daily Balance Method
[Dividends/Interest] [are/is] calculated by
the average daily balance method which applies a periodic rate to the average daily balance in the account for the period. The average daily balance is calculated by adding the
balance in the account for each day of the
period and dividing that figure by the number of days in the period.
NOTE: Any explanation of balance computation method must contain enough information for members to grasp the means by
which dividends or interest will be calculated on their accounts. Using a shorthand
form, such as ‘‘day in/day out’’ for the daily
balance method or ‘‘average balance’’ for the
average daily balance method, without more
information, is insufficient. In addition, any
disclosure based on the equivalency of the
two allowable methods, such as stating that
the average daily balance method was the
same as the daily balance method, is impermissible and misleading.
(f) Accrual of Dividends/Interest on Noncash
Deposits (§ 704.4(b)(3)(iii))
[Dividends/Interest] will begin to accrue on
the business day you [place/deposit] noncash
items (e.g. checks) to your account.
or
[Dividends/Interest] will begin to accrue no
later than the business day we receive provisional credit for the [placement/deposit] of
noncash items (e.g. checks) to your account.
NOTE: Accrual information is not included
in the explanation of balance computation

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Pt. 707, App. B

12 CFR Ch. VII (1–1–20 Edition)
(i) Disclosures Related to Term Share Accounts
(§ 707.4(b)(6))

method required by § 707.4(b)(4)(ii). In addition, the disclosures required by TISA do not
affect the substantive requirements of the
EFAA and Regulation CC.
The EFAA and Regulation CC control, and
any modifications to them should occasion
credit unions to revisit this disclosure with a
view to revising it to reflect current law.
(g) Fees and Charges (§ 707.4(b)(4))
The following fees and charges may be assessed against your account:
(Service/explanation)—$lll.
(Service/explanation)—$lll.
NOTE: Fees and charges may be disclosed in
an account disclosure, or separately in a
Rate and Fee Schedule (see section B–11 of
this appendix). In either event, the disclosure should also specify when the fee will be
assessed by using phrases such as ‘‘per
item,’’ ‘‘per month,’’ or ‘‘per inquiry.’’
(h) Transaction Limitations (§ 707.4(b)(5))
The minimum amount you may [withdraw/
write a draft for] is $llll
During any statement period, you may not
make more than six withdrawals or transfers
to another credit union account of yours or
to a third party by means of a preauthorized
or automatic transfer or telephonic order or
instruction. No more than three of the six
transfers may be made by check, draft, debit
card, if applicable, or similar order to a third
party. If you exceed the transfer limitations
set forth above in any statement period,
your account will be subject to [closure by
the credit union/a fee of $llll.
NOTE: This paragraph satisfies the requirements of § 707.4(b)(6) with respect to the Federal Reserve Board’s Regulation D limitations on share accounts and money market
accounts. These are some of the more common limitations applicable.

kpayne on VMOFRWIN702 with $$_JOB

The credit union reserves the right to require a member intending to make a withdrawal from any account (except a share
draft account) to give written notice of such
intent not less than seven days and up to 60
days before such withdrawal.
NOTE: This disclosure is limited to federal
credit unions with Bylaws containing this
limitation. See Standard Federal Credit Union
Bylaws, Art. III, section 5(a). Similar disclosures are required of any state-chartered
credit unions having similar limitations in
their bylaws, or under state law. This limitation does not directly relate to the ‘‘number’’ or ‘‘amount’’ of transactions, and accordingly, may not be necessary under
§ 707.4(b)(5), but would, if applicable, be required by § 707.3(b).

(i) Time requirements
Your account will mature on (date).
or
Your account will mature after (time period).
(ii) Early withdrawal penalties
We [will/may] impose a penalty if you
withdraw [any/all] of the [funds/principal] in
your account before the maturity date. The
penalty will equal [llll [days’/weeks’/
months’] [dividends/interest] on your account.
or
We [will/may] impose a penalty of
$lllll if you withdraw [any/all] of the
[funds/principal] before the maturity date.
If you withdraw some of your funds before
maturity, the [dividend/interest] rate for the
remaining funds in your account will be
lll%, with an annual percentage yield of
lll%.
NOTE: In most cases, the dividend rate and
annual percentage yield on the funds remaining in the account after early withdrawal are
the same as before the withdrawal. Accordingly, the disclosure of dividend rate and annual percentage yield after withdrawal is required only if the dividend rate and APY will
change.
(iii) Withdrawal of Dividends/Interest Prior to
Maturity
The annual percentage yield is based on an
assumption that [dividends/interest] will remain in the account until maturity. A withdrawal will reduce earnings.
NOTE: This disclosure may be used if the
credit union compounds dividends/interest
and allows withdrawal of accrued dividends/
interest before maturity. This disclosure
alerts members that the annual percentage
yield is based on an assumption that the
dividends/interest remain on deposit until
maturity.
(iv) Renewal Policies
1. Automatically Renewable Term Share
Accounts
Your term share account will automatically renew at maturity. You will have a
grace period of llll [calendar/business]
days after the maturity date to withdraw the
funds in the account without being charged
an early withdrawal penalty.
or
Your term share account will automatically renew at maturity. There is no grace
period following the maturity of this account.

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Pt. 707, App. B

2. Non-Automatically Renewable Term Share
Accounts
This account will not renew automatically
at maturity. If you do not renew the account, your account will [continue to earn/
no longer earn] [dividends/interest] after the
maturity date.
NOTE: These disclosures should agree with
the necessary pre-maturity notices for term
share accounts in B–3 of this appendix.
(v) Required dividend distribution.
This account requires the distribution of
dividends and does not allow dividends to remain in the account.
(j) Bonuses (§ 704.4(b)(7))
You will [be paid/receive] [$lllll/(description of item)] as a bonus [when you open
the account/on (date)].
You must maintain a minimum [daily balance/average daily balance] of $lllll to
obtain the bonus.
To earn the bonus, [$lllll/your entire
principal] must remain on deposit [for (time
period)/until (date)].
NOTE: These disclosures follow the requirements of § 707.4(b)(7) and should be used as
applicable. Further information may also be
added, especially if it clarifies the conditions
and timing of receiving the bonus, or better
informs the member about the bonus.
B–2 MODEL CLAUSES FOR CHANGES IN TERMS
(§ 707.5(a))

kpayne on VMOFRWIN702 with $$_JOB

On (date), the (type of fee) will increase to
$lllll.
On (date), the [dividend/interest] rate on
your account will decrease to lll%, with
an annual percentage yield (APY) of lll%.
On (date), the [minimum daily balance/average daily balance] required to avoid imposition of a fee will increase to $lllll.
NOTE: These examples apply to the more
common changes necessitating a change in
terms notice. However, any change, amendment or modification reducing the APY or
adversely affecting the members holding
such accounts must be disclosed. For such
changes not contemplated by the model
clauses, the Board recommends the use of as
simple language as possible to convey the
change, along with cross-referencing to the
particular sections or paragraph numbers of
the account opening disclosures, when to do
so
will assist members in reviewing and understanding the change.

B–3 MODEL CLAUSES FOR PRE-MATURITY NOTICES FOR TERM SHARE ACCOUNTS (§ 707.5(bc))
(a) Maturity Date
Your term share account will mature on
lllll.
(b) Nonrenewal
Unless your term share account is renewed, it will not accrue further [dividends/
interest] after the maturity date.
(c) Rate Information
The [dividend/interest] rate and annual
percentage yield that will apply to your
term share account if it is renewed have not
yet been determined. That information will
be available on llll. After that date, you
may call the credit union during regular
business hours at (telephone number) to find
out the [dividend/interest] rate and annual
percentage yield (APY) that will apply to
your term share account if it is renewed.
NOTE: Pre-maturity notices should follow
the requirements of § 707.5(b-d) as closely as
possible. Care should be taken to explain any
grace periods used. See discussion of use of
alternative timing in supplementary information to § 707.2(o) and § 707.5(b–d).
B–4 SAMPLE FORM (SIGNATURE CARD/
APPLICATION FOR MEMBERSHIP)
Application for Membership/Account Signature
Card
ACCOUNT NUMBER lllllll
lllll lllll lllll
(last name) (first name) (middle name)
llllllllllllllllllllllll
(street address) (apartment number)
lllll lll llll
(city) (state) (zip code)
llllll llllll
(home telephone number) (business telephone number)
ll–ll–llll
lllll
(Social Security # or TIN) (date of birth)
lllllll llllllll
(mother’s maiden name) (employer, occupation)
I hereby make application for membership
in and agree to conform to the Bylaws, as
amended, of lllll Credit Union (the
‘‘Credit Union’’). I certify that: I am within
the field of membership of this Credit Union;
the information provided on this application
is true and correct; and my signature on this
card applies to all accounts under my name
at this Credit Union. I also agree to be bound
to the terms and conditions of any account
that I have in the Credit Union now or in the
future.

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kpayne on VMOFRWIN702 with $$_JOB

Pt. 707, App. B

12 CFR Ch. VII (1–1–20 Edition)

llllllllllllllllllllllll
(signature of applicant)
This application approvedllll(date) by
the (Check one)
( ) Board
( ) Exec. Committee
( ) Membership Officer
Signed: lllllllllllllllllll
(Secretary; Exec. Cmte. Member, or
Membership Officer)

against the drafter, credit unions should be
very careful in their use of account terms
and conditions varying from those provided
as model clauses and sample forms in this
appendix.

NOTE: This form is modeled on NCUA Form
FCU 150, Application for Membership, as discussed in the Accounting Manual for FCUs,
§§ 5030.1, 5150.3. It is noted that other information can also be requested on the signature card, as long as it is in accordance with
federal and state laws. For example, information identifying the member, such as a
state driver’s license number, could be
added. The types of accounts that the signature applies to could be specified. Furthermore, the Board notes that this card contains much identification information that
may not be necessary for all credit unions;
common sense should guide credit union
boards of directors in designing their applications for membership/signature cards.
However, the Board believes that the information solicited on this form is reasonable
and prudent for many credit unions. Payable
on death designations, joint account language required under state law, life savings
beneficiary designations, and other like variations and designations may be added to the
card if so desired. The proposed signature
card/ application for membership form contained taxpayer certification language. One
commenter noted that the IRS may always
change its requirements in this area, which
are beyond the authority of the Board.
Therefore, the Board has deleted reference to
the IRS taxpayer certification required by 26
U.S.C. 3406, but notes that such certification
must be made in accordance with applicable
law and IRS rules. The information may be
included on the front and back of a standard
size signature card, or on the front of a large
size signature card. However, no account
terms may be included on a signature card
unless a copy of the signature card is provided to the member at the time of account
opening. The Board recommends that credit
unions refrain from this practice, and instead use standard account disclosures. One
reason for this is that if laws, regulations or
credit union policies change, discrepancies
may result between them and the earlier signature card terms. Given the longevity of
credit union membership, signature cards
may well be in use for up to or over a century. In addition, as signature cards are relatively small, they probably will not contain
enough space to make all desired and required disclosures. Fragmentation of terms,
some on signature cards, some on separate
disclosures, could easily lead to member confusion. As terms are usually construed

llllllllllllllllllllllll
Date Issued
llllllllllllllllllllllll
Account Number
llllllllllllllllllllllll
Certificate Number
llllllllllllllllllllllll
Social Security Number
This
is
to
certify
that
(name(s))
lllllllll [is/ are] the owner(s) of a
term share certificate account in the
lllll Credit Union (the ‘‘Credit Union’’)
in the amount of lllll Dollars
($lllll). This term share certificate account may be redeemed on (maturity date)
lllll only upon presentation of the certificate to the Credit Union. The dividend
rate of this certificate account is ll% with
an annual percentage yield of ll%. The annual percentage yield and dividend rate assume that dividends are to be [check one] (
) added to principal/( ) paid to regular share
account number lllll/ ( ) mailed to
owner(s). This account is subject to all terms
and conditions stated in the Term Share Certificate Account Disclosures, as they may be
amended from time to time, and incorporates the same by reference into this
agreement.
llllllllllllllllllllllll
Authorized signature
llllllllllllllllllllllll
Authorized signature

B–5 SAMPLE FORM (TERM SHARE
(CERTIFICATE) ACCOUNT)
Term Share Certificate

NOTE: This form is modeled on NCUA Form
FCU 107SCP, Credit Union Share Certificate,
as discussed in the Accounting Manual for
FCUs, §§ 5030.1, 5150.6. It is simplified to reflect the term share (certificate) account
agreement, the parties involved, the maturity term and the annual percentage yield
and dividend rate. All other terms are incorporated by reference. This should allow the
credit union maximum flexibility in fashioning certificate, and other term share account, products. If a credit union so desired,
other terms and conditions could be incorporated into the term share certificate itself,
as long as a copy is presented to the member
at the account opening. Care should also be
taken to ensure that the term share certificate format addresses any necessary state
law concerns. As the FRB’s Regulation D on
reserve requirements permits all term share
accounts to be represented by a transferable

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Pt. 707, App. B

or nontransferable, or a negotiable or nonnegotiable, certificate, instrument, passbook, statement or otherwise, and still be
considered a ‘‘time deposit’’, the Board has
made no entry on this sample form regarding
such terms, leaving the decision instead to
each credit union’s board of directors. 12
CFR 204.2(c)(2).
B–6 SAMPLE FORM (REGULAR SHARE ACCOUNT
DISCLOSURES)

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Regular Share Account Disclosures
1. Rate information. As of April 1, 1995, the
dividend rate was 5.00% and the annual percentage yield (APY) was 5.13% on your regular share account. In addition, the credit
union estimates a prospective dividend rate
of 5.25% and a prospective APY of 5.39% on
your share account for this dividend period.
The dividend rate and annual percentage
yield may change every quarter as determined by the credit union board of directors.
2. Compounding and crediting. Dividends
will be compounded daily and will be credited quarterly. For this account type, the
dividend period is quarterly, for example, the
beginning date of the first dividend period of
the calendar year is January 1 and the ending date of such dividend period is March 31.
All other dividend periods follow this same
pattern of dates. The dividend declaration
date follows the ending date of a dividend period, and for the example is April 1. If you
close your regular share account before dividends are credited, you will not receive accrued dividends.
3. Minimum balance requirements. The minimum balance to open this account is the
purchase of a $5 share in the Credit Union.
You must maintain a minimum daily balance of $500 in your account to avoid a service fee. If, during any day during a quarter,
your account balance falls below the required minimum daily balance, your account
will be subject to a service fee of $5 for that
quarter.
4. Balance computation method. Dividends
are calculated by the daily balance method
which applies a daily periodic rate to the
principal in your account each day.
5. Accrual of dividends. Dividends will begin
to accrue on the business day you deposit
noncash items (e.g., checks) to your account.
6. Fees and charges. The following fees and
charges may be assessed against your account.
a. Statement copies—$5.00 per statement.
b. Account inquiries—$3.00 per inquiry.
c. Dormant account fee—$10.00 per month.
d. Wire transfers—$8.00 per transfer.
e. Minimum balance service fee—$5.00 per
quarter.
f. Share transfer—$1.00 per transfer.
g. Excessive share withdrawals $1.00 per
item.

7. Transaction limitations. During any statement period, you may not make more than
six withdrawals or transfers to another credit union account of yours or to a third party
by means of a preauthorized or automatic
transfer or telephonic order or instruction.
No more than three of the six transfers may
be made by check, draft, debit card, if applicable, or similar order to a third party. If
you exceed the transfer limitations set forth
above in any statement period, your account
will be subject to closure by the credit union
or to a fee of $1.00 per item.
8. Nature of dividends. Dividends are paid
from current income and available earnings,
after required transfers to reserves at the
end of a dividend period.
9. Bylaw Requirements. A member who fails
to complete payment of one share within
lllll of his admission to membership, or
within lllll from the increase in the par
value in shares, or a member who reduces his
share balance below the par value of one
share and does not increase the balance to at
least the par value of one share within
lllll of the reduction may be terminated from membership at the end of a dividend period. [All blanks should be filled with
time chosen by credit union board of directors.] Shares may be transferred only from
one member to another, by written instrument in such form as the Credit Union may
prescribe. The Credit Union reserves the
right, at any time, to require members to
give, in writing, not more than 60 days notice of intention to withdraw the whole or
any part of the amounts so paid in by them.
No member may withdraw shareholdings
that are pledged as required on security on
loans without the written approval of the
credit committee or a loan officer, except to
the extent that such shares exceed the member’s total primary and contingent liability
to the Credit Union. No member may withdraw any shareholdings below the amount of
his/her primary or contingent liability to the
Credit Union if he/she is delinquent as a borrower, or if borrowers for whom he/she is
comaker, endorser, or guarantor are delinquent, without the written approval of the
credit committee or loan officer.
10. Par value of shares; Dividend period. The
par value of a regular share in this Credit
Union is $5. The dividend period of the Credit
Union is quarterly.
11. National Credit Union Share Insurance
Fund. Member accounts in this Credit Union
are federally insured by the National Credit
Union Share Insurance Fund.
12. Other Terms and Conditions. [In this
item, which may be titled or subdivided in
any manner by each credit union, NCUA suggests that the following issues be covered or
handled: Statutory lien or setoff; expenses
(garnishments and bankruptcy orders and
holds on account); joint ownership accounts;
trust accounts; payable-on-death accounts;

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Pt. 707, App. B

12 CFR Ch. VII (1–1–20 Edition)

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retirement accounts; Uniform Transfer to
Minor Act accounts; sole proprietorship accounts; escrow and custodial accounts; corporation accounts; not-for-profit corporation
accounts; voluntary association accounts;
partnership accounts; public unit accounts;
powers of attorney (guardianship orders); tax
disclosures and certifications; Uniform Commercial Code variances; amendments; reliance on signature card; change of address;
incorporations of other documents by reference, such as expedited funds availability
policies, service charges schedules or electronic banking disclosures; ability to suspend services; and operational matters (stop
payment orders—verbal and written, satisfactory identification, refusal of deposits not
in proper form, wire transfers, stale check
deposits, availability of periodic statements
or passbook feature.)]
NOTE: This form is modeled on the share
account disclosures in the Accounting Manual
for FCUs, § 5150.7. The disclosures are for a
variable-rate, daily balance method dividend
calculation regular share account in an FCU
with a $500 minimum balance to avoid service fees. For the example, the account was
opened on May 1, 1995. Other terms are selfexplanatory. The dividend rate paid and annual percentage yield disclosures will reflect
the prospective dividend rate for a given dividend period. Item nos. 1–8 reflect standard
TISA and part 707 disclosures discussed in
sections B–1 through B–3 of this appendix.
Note that if the credit union limits the maximum amount of shares which may be held
by one member under NCUA Standard FCU
Bylaws, Art. III, section 2, that this should
be stated in item no. 7, transaction limitations. Item no. 9 reflects various terms provided in Art. III, sections 3–6 of the NCUA
Standard FCU Bylaws. Item no. 10 reflects the
par value amount of regular shares in a federal credit union, pursuant to section 117 of
the FCU Act, 12 U.S.C. 117. It also states the
dividend period of the credit union, which is
set by the board of directors. Item no. 11 addresses the requirements of 12 CFR part 740.
Nonfederally insured credit unions (NICUs)
would be expected to disclose information required by section 151 of the Federal Deposit
Insurance Corporation Improvement Act of
1991. 12 U.S.C. 1831t. By December 19, 1992, all
NICUs were required to include conspicuously on all periodic statements of account,
signature cards, passbooks, share certificates
and other similar instruments of deposit and
in all advertising a notice that the credit
union is not federally insured. Additional
disclosures will be required of NICUs by June
19, 1994. Item no. 12 is inserted to ensure that
credit unions add other account terms and
conditions not covered by the proposed regulation. These sorts of terms are contemplated by proposed § 707.3(b), requiring
that the disclosures reflect the terms of the

legal obligation between the member and the
credit union. This list is not meant to be exhaustive, but to give a general idea of other
topics often covered in share account contracts. Item no. 12 is not expressly required
by either TISA or part 707, but any of these
terms that are disclosed must be accurate
and not misleading. Also the Board strongly
recommends that such terms are included in
account opening disclosures to inform the
membership and to clearly set forth the legal
relationship between the members and their
credit union.
B–7 SAMPLE FORM (SHARE DRAFT ACCOUNT
DISCLOSURES)
Share Draft Account Disclosures
1. Rate information. As of January 1, 1995,
the dividend rate was 3.00% and the annual
percentage yield (APY) was 3.04% on your
share account. In addition, the prospective
dividend rate on your account is 3.15% with
a prospective annual percentage yield (APY)
of 3.20% for the current dividend period. The
dividend rate and APY may change every
dividend period as determined by the credit
union board of directors.
2. Compounding and crediting. Dividends
will be compounded monthly and will be
credited monthly. For this account type, the
dividend period is monthly, for example, the
beginning date of the first dividend period of
the calendar year is January 1 and the ending date of such dividend period is January
31. All other dividend periods follow this
same pattern of dates. The dividend declaration date follows the ending date of a dividend period, and for the example above is
February 1. If you close your share draft account before dividends are credited, you will
not receive accrued dividends.
3. No Minimum balance requirements apply to
this account.
4. Balance computation method. Dividends
are calculated by the average daily balance
method which applies a periodic rate to the
average daily balance in the account for the
period. The average daily balance is calculated by adding the balance in the account
for each day of the period and dividing that
figure by the number of days in the period.
5. Accrual of dividends. Dividends will begin
to accrue no later than the business day we
receive provisional credit for the placement
of noncash items (e.g. checks) to your account.
6. Fees and charges. The following fees and
charges may be assessed against your account.
a. Statement copies—$5.00 per statement.
b. Account inquiries—$3.00 per inquiry.
c. Dormant account fee—$10.00 per month.
d. Wire transfers—$8.00 per transfer.
e. Overdrafts/Returned Items—$5.00 per
draft.
f. Share transfer—$1.00 per transfer.

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National Credit Union Administration

Pt. 707, App. B

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g. Excessive share withdrawals—$1.00 per
item.
h. Certified checks—$5.00 per check.
i. Stop Payment Order—$5.00 per order.
j. Check Printing Fee—$12.00 per 200 checks
(varies depending on style of check ordered).
7. No transaction limitations apply to this account.
8. Nature of dividends. Dividends are paid
from current income and available earnings,
after required transfers to reserves at the
end of a dividend period.
9. Bylaw Requirements. A member who fails
to complete payment of one share within
lllll of his admission to membership, or
within lllll from the increase in the par
value in shares, or a member who reduces his
share balance below the par value of one
share and does not increase the balance to at
least the par value of one share within
lllll of the reduction may be terminated from membership at the end of a dividend period. [All blanks should be filled with
time chosen by credit union board of directors.] Shares may be transferred only from
one member to another, by written instrument in such form as the Credit Union may
prescribe. The Credit Union reserves the
right, at any time, to require members to
give, in writing, not more than 60 days notice of intention to withdraw the whole or
any part of the amounts so paid in by them.
Shares paid in under an accumulated payroll
deduction plan may not be withdrawn until
credited to a member’s account. No member
may withdraw shareholdings that are
pledged as required on security on loans
without the written approval of the credit
committee or a loan officer, except to the extent that such shares exceed the member’s
total primary and contingent liability to the
Credit Union. No member may withdraw any
shareholdings below the amount of his/her
primary or contingent liability to the Credit
Union if he/she is delinquent as a borrower,
or if borrowers for whom he/she is comaker,
endorser, or guarantor are delinquent, without the written approval of the credit committee or loan officer.
10. Par value of shares; Dividend period. The
par value of a regular share in this Credit
Union is $5. The dividend period of the Credit
Union is monthly, beginning on the first of a
month and ending on the last day of the
month.
11. National Credit Union Share Insurance
Fund. Member accounts in this Credit Union
are federally insured by the National Credit
Union Share Insurance Fund.
12. Other Terms and Conditions. [See section
B–6, item 12, of this appendix].
NOTE: This form is modeled on the share
account disclosures in the Accounting Manual
for FCUs, § 5150.7. The disclosures are for a
variable-rate, average daily balance method
dividend calculation share draft account in

an FCU with no minimum balance requirement. For purposes of this example, the account was opened on January 15, 1995. The
Credit Union has monthly dividend periods.
Other terms are self-explanatory. The dividend rate paid and annual percentage yield
disclosures will reflect the prospective dividend rate for a given dividend period. The
disclosures are very similar to the ones in
section B–6 of appendix B, except for the rollback and par value disclosures, which have
been removed from the final rule and appendices.
B–8 SAMPLE FORM (MONEY MARKET SHARE
ACCOUNT DISCLOSURES)
Money Market Share Account Disclosures
1. Rate information. As of January 1, 1995, if
your average daily balance was $500 or more,
the dividend rate paid on the entire balance
in your account was 4.75%, with an annual
percentage yield (APY) of 4.85%. If your average daily balance is $500 or more, a prospective dividend rate of 4.95% will be paid
on the entire balance in your account with a
prospective APY of 5.00% for this dividend
period on your account. The dividend rate
and APY may change every dividend period
as determined by the credit union board of
directors.
2. Compounding and crediting. Dividends
will be compounded monthly and will be
credited quarterly. If you close your share
money market account before dividends are
credited, you will not receive accrued dividends.
3. Minimum balance requirements. The minimum balance required to open this account
is $500. You must maintain a minimum daily
balance of $500 in your account to avoid a
service fee. If, during any (time period), your
account falls below the required minimum
daily balance, your account will be subject
to a service fee of $5 for that (time period).
4. Balance computation method. Dividends
are calculated by the average daily balance
method which applies a periodic rate to the
average daily balance in your account for
the period. The average daily balance is calculated by adding the principal in the account for each day of the period and dividing
that figure by the number of days in the period.
5. Accrual of dividends. Dividends will begin
to accrue on the business day you deposit
noncash items (e.g., checks) to your account.
6. Fees and charges. The following fees and
charges may be assessed against your account.
a. Statement copies—$5.00 per statement.
b. Account inquiries—$3.00 per inquiry.
c. Dormant account fee—$10.00 per month.
d. Wire transfers—$8.00 per transfer.
e. Minimum balance service fee—$5.00 per
(time period).
f. Share transfer—$1.00 per transfer.

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Pt. 707, App. B

12 CFR Ch. VII (1–1–20 Edition)

g. Excessive share withdrawals—$1.00 per
item.
h. Certified checks—$5.00 per check.
i. Stop Payment Order—$5.00 per order.
j. Check Printing Fee—$12.00 per 200 checks
(varies depending on style of check ordered).
7. Transaction limitations. During any statement period, you may not make more than
six withdrawals or transfers to another credit union account of yours or to a third party
by means of a preauthorized or automatic
transfer or telephonic order or instruction.
No more than three of the six transfers may
be made by check, draft, debit card, if applicable, or similar order to a third party. If
you exceed the transfer limitations set forth
above in any statement period, your account
will be subject to closure by the credit union
or to a fee of $1.00 per item.
8. Nature of dividends. Dividends are paid
from current income and available earnings,
after required transfers to reserves at the
end of a dividend period.
9. Bylaw Requirements. [This section should
reflect any requirements concerning share
accounts in the FISCU’s bylaws or charter.]
10. Par value of shares; Dividend period. The
par value of a regular share in this Credit
Union is $50. The dividend period of the Credit Union is monthly, beginning on the first of
a month and ending on the last day of the
month.
11. National Credit Union Share Insurance
Fund. Member accounts in this Credit Union
are federally insured by the National Credit
Union Share Insurance Fund.
12. Other Terms and Conditions. [See section
B–6, item 12, of this appendix.]
NOTE: This form is modeled on the share
account disclosures in the Accounting Manual for FCUs, § 5150.7 and on the share draft
account disclosures in section B–7 of this appendix. The disclosures are for a variablerate, tiered-rate (method A, option 1), average daily balance method dividend calculation, money market share account in a
FISCU with a $500 minimum balance to open
the account and to avoid service fees. For
purposes of this example, the account was
opened on January 29, 1995. Other terms are
self-explanatory. The dividend rate paid and
annual percentage yield disclosures will reflect the prospective dividend rate for a
given dividend period. Note that the contents of Item 9, Bylaw requirements, must be
tailored to the specific bylaws of a FISCU or
NICU. Also note the high par value amount
in Item 10.

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B–9 SAMPLE FORM (TERM SHARE
(CERTIFICATE) ACCOUNT DISCLOSURES)
Term Share (Certificate) Account Disclosures
1. Rate information. [Repeat rates disclosed
on face of term share certificate, see § B–5,

Sample Form (Term Share (Certificate) Account)].
2. Compounding and crediting. Dividends
will be compounded monthly and will be
credited annually. If you close your certificate account before dividends are credited,
you will not receive accrued dividends.
3. Minimum balance requirements. The
minium balance required to open this account is $500.
4. Balance computation method. Dividends
are calculated by the daily balance method,
which applies a daily periodic rate to the
principal in your account each day.
5. Accrual of dividends. Dividends will begin
to accrue on the business day you deposit
noncash items (e.g., checks) to your account.
6. Fees and charges. The following fees and
charges may be assessed against your account.
a. Statement copies—$5.00 per statement.
b. Account inquiries—$3.00 per inquiry.
c. Share transfer—$1.00 per transfer.
7. Transaction limitations. After the account
is opened, you may not make deposits into
the account until the maturity date stated
on the certificate.
8. Maturity date. Your account will mature
on January 1, 1996.
9. Early withdrawal penalties. We may impose a penalty if you withdraw any of the
funds before the maturity date. The penalty
will equal three months’ dividends on your
deposit.
10. Renewal policies. Your certificate account will automatically renew at maturity.
You will have a grace period of 10 business
days after the maturity date to withdraw the
funds in the account without being charged
an early withdrawal penalty.
11. Bonus. You will receive a new (insert
brand name) toaster-oven as a bonus when
you open the account after December 31,
1994, and before June 30, 1995. You must
maintain your entire principal on deposit
until the maturity date of your certificate
account to obtain the bonus.
12. [Reserved]
13. Bylaw Requirements. [This section
should reflect any requirements concerning
share accounts in the FISCU’s bylaws or
charter.]
14. Par value of shares; Dividend period. The
par value of a regular share in this Credit
Union is $25. The dividend period of the Credit Union on this type of account is annual,
beginning on the date the account is opened,
and ending on the stated maturity date, unless renewed.
15. National Credit Union Share Insurance
Fund. Member accounts in this Credit Union
are federally insured by the National Credit
Union Share Insurance Fund.
16. Other Terms and Conditions. [See section
B–6, item 12, of this appendix.]

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National Credit Union Administration

Pt. 707, App. B

NOTE: Even though this disclosure if for an
account at a FISCU, this form is modeled on
the share account disclosures in the Accounting Manual for FCUs, § 5150.7 and upon the
regular share account disclosures in section
B–6 of this appendix. The disclosures are for
a fixed-rate, daily balance method dividend
calculation, automatically renewing term
share certificate account in a FISCU with a
$500 minimum balance to open the account
and a ten day grace period. For the example,
the account is opened on January 1, 1995 and
matures on January 1, 1996. Other terms are
self-explanatory. The dividend rate paid and
annual percentage yield disclosures reflect
the contracted, prospective dividend rate for
a given dividend period. Note the special disclosures for term share certificate accounts,
items nos. 8–10. Note also the bonus disclosure, item no. 11.
B–10 SAMPLE FORM (PERIODIC STATEMENT)
Periodic Statement
llllllllllllllllllllllll
Member Name
llllllllllllllllllllllll
Account Number
[Transaction account activity by date.]
[Average daily balance of $1,500 for the
month, daily compounding.]
Your account earned $6.72, with an annual
percentage yield earned of 5.40%, for the
statement period from May 1 through and including May 31. In addition, your account
earned $15 in extraordinary dividends for this
period. Any fees assessed against your account are shown in the body of the periodic
statement and are identified by the code at
the bottom margin of this statement.
Service Charge Codes
SC–1 Stop Payment Order Fee
SC–2 Statement Copy Fee
SC–3 Draft Return Fee
SC–4 Transfer from Shares
SC–5 Microfilm Copy
SC–6 Share Draft Printing Fee
SC–7 Dormant Account Fee
SC–8 Wire Transfer Fee
SC–9 Excessive Share Withdrawal Fee
SC–10 lllllllllll

B–11 SAMPLE FORM (RATE AND FEE SCHEDULE)
Rate and Fee Schedule
This Rate and Fee Schedule for all Accounts sets forth certain conditions, rates,
fees and charges applicable to your regular
share, share draft, and money market accounts at the lllll Federal Credit Union
as of lllll [insert date of delivery to
member]. This schedule is incorporated as
part of your account agreement with the
lllll Federal Credit Union.
Regular Share
Dividend Rate as of Last Dividend Declaration Date lll%.
Annual Percentage Yield as of Last Dividend Declaration Date lll%.
Prospective Dividend Rate lll%.
Prospective Annual Percentage Yield
lll%.
Dividends Compounded [Annually, Semiannually, Quarterly, Monthly, Weekly,
Daily].
Dividends Credited—At close of a dividend
period.
Dividend Period [Annually, Semiannually,
Quarterly, Monthly, Weekly, Daily].
Minimum Opening Deposit $5.00 par value
share.
Minimum Monthly Balance [None, $
amount].
Share Draft

Other Transactions
D Dividends
EC Error Correction
OR Overdraft Returned
OL Overdraft Loan
OS Overdraft Share Transfer

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formation regarding fees could also be included on the line of the periodic statement
showing when the fees were debited from the
account. Alternatively, a credit union could
show all fees debited against the account for
the statement period in a special area of the
periodic statement. Clarity to the member of
the required information—annual percentage
yield earned; amount of dividends; fees imposed and length of period—is the important
goal. An additional disclosure regarding the
dollar value of any extraordinary dividends
earned must be added to those statements
showing the payment of such extraordinary
dividends to the member.

NOTE: This form is modeled on the share
draft statement of account, Form FCU 107GSD, in the Accounting Manual for FCUs,
§ 5150.4. All information is self-explanatory.
Codes of transactions are not required, but
are a common credit union practice. The in-

Dividend Rate as of Last Dividend Declaration Date lll%.
Annual Percentage Yield as of Last Dividend Declaration Date lll%.
Prospective Dividend Rate lll%.
Prospective Annual Percentage Yield
lll%.
Dividends Compounded [Annually, Semiannually, Quarterly, Monthly, Weekly,
Daily].
Dividends Credited—At close of a dividend
period.
Dividend Period [Annually, Semiannually,
Quarterly, Monthly, Weekly, Daily].
Minimum Opening Deposit [None, $
amount].

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Pt. 707, App. C
Minimum
amount].

12 CFR Ch. VII (1–1–20 Edition)

Monthly

Balance

[None,

$

B–12 AGGREGATE OVERDRAFT AND RETURNED
ITEM FEES SAMPLE FORM

Money Market
Dividend Rate as of Last Dividend Declaration Date lll%.
Annual Percentage Yield as of Last Dividend Declaration Date lll%.
Prospective Dividend Rate lll%.
Prospective Annual Percentage Yield
lll%.
Dividends Compounded [Annually, Semiannually, Quarterly, Monthly, Weekly,
Daily].
Dividends Credited—At close of a dividend
period.
Dividend Period [Annually, Semiannually,
Quarterly, Monthly, Weekly, Daily].
Minimum Opening Deposit [None, $
amount].
Minimum Monthly Balance [None, $
amount].
The following fees may be assessed in connection with your accounts:
FEES APPLICABLE TO ALL ACCOUNTS
Returned item fee—$ll.00 per item.
Account reconciliation fee—$ll.00 per
hour.
Statement copies fee—$ll.00 per statement.
Certified draft fee—$ll.00 per draft.
Wire transfer fee—$ll.00 per transfer.
Account inquiry fee—$ll.00 per inquiry.
Dormant account fee—$ll.00 per month.
Minimum balance service fee—$ll.00 per
day.
Share transfer fee—$ll.00 per transfer.
Excessive share withdrawals fee—$ll.00
per item.
SHARE DRAFT ACCOUNT FEES
Monthly service fee—$ll.00 per month.
Overdraft transfers fee—$ll.00 per overdraft.
Drafts returned insufficient funds fee—
$ll.00 per draft.
Stop payment order fee—$ll.00 per order.
Draft copy fee—$ll.00 per copy.
Check printing fee—$ll.00 per 200 drafts.
MONEY MARKET SHARE ACCOUNT FEES

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Monthly service fee—$ll.00 per month.
Check printing fee—$ll.00 per 200 drafts.
NOTE: This illustration is for use of an
FCU. The information provided on a Rate
and Fee Schedule can be presented in any
format. To ensure that it is a part of the account agreement, if used, it should be incorporated by reference into the appropriate
share account disclosures. The figures used
are illustrative only.

Total for this
period
Total overdraft fees .......
Total returned item fees

$60.00
$0.00

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$150.00
$30.00

[58 FR 50445, Sept. 27, 1993, as amended at 59
FR 13436, 13437, Mar. 22, 1994; 63 FR 71575,
Dec. 29, 1998; 72 FR 30246, May 31, 2007; 74 FR
36104, July 22, 2009; 75 FR 47175, Aug. 5, 2010;
77 FR 71084, Nov. 29, 2012]

APPENDIX C TO PART 707—OFFICIAL
STAFF INTERPRETATIONS
Introduction
1. Official status. This commentary is the
means by which the staff of the Office of
General Counsel of the National Credit
Union Administration issues official staff interpretations of Part 707 of the NCUA Rules
and Regulations. Good faith compliance with
this commentary affords protection from liability under section 271(f) of the Truth in
Savings Act (TISA), 12 U.S.C. 4311.
Section 707.1—Authority, Purpose, Coverage,
and Effect on State Laws
(c) Coverage
1. Foreign applicability. Part 707 applies to
all credit unions that offer share and deposit
accounts to residents (including resident
aliens) of any state as defined in § 707.2(v)
and that offer accounts insurable by the National Credit Union Share Insurance Fund
(NCUSIF) whether or not such accounts are
insured by the NCUSIF. Corporate credit
unions designated as such by NCUA under 12
CFR 704.2 (definition of ‘‘corporate credit
union’’) are exempt from part 707.
2. Persons who advertise accounts. Persons
who advertise accounts are subject to the advertising rules. This includes agent and
agented accounts, such as a member who
subdivides interests in a jumbo term share
certificate account for sale to other parties
or among members who form a certificate
account investment club. For example, if an
agent places an advertisement that offers
members an interest in an account at a credit union, the advertising rules apply to the
advertisement, whether the account is held
by the agent or directly by the member.
3. Nonautomated credit unions. Nonautomated credit unions with an asset size of $2
million or less, after subtracting any nonmember deposits, are exempt from TISA and
part 707. NCUA defines a ‘‘nonautomated
credit union’’ as a credit union without sufficient data processing capability and capacity to establish, operate and maintain a
share and loan software system to timely

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and accurately process all account transactions of all members. The nonautomated
credit union exemption is available to all
credit unions meeting the asset size and automation standards of this comment, including newly chartered credit unions. If any of
the credit unions eligible for this exemption
grow to have more than $2 million in assets
as of December 31 of any year, the NCUA
Board will require such credit unions to comply with TISA and part 707 on January 1 of
one year after such credit union loses its exemption eligibility. Similarly, if a credit
union becomes sufficiently automated to operate a complete share and loan system, such
credit union will be entitled to the same
compliance phase-in period.

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(d) Effect on State Laws
1. Preemption of state laws/Inconsistent requirements. State law requirements that are
inconsistent with the requirements of TISA
and part 707 are preempted to the extent of
the inconsistency. A state law is inconsistent if it requires a credit union to make
disclosures or take actions that contradict
the requirements of the federal law. A state
law is also contradictory if it requires the
use of the same term to represent a different
amount or a different meaning than the federal law, requires the use of a term different
from that required in the federal law to describe the same item, or permits a method of
calculating dividends or interest on an account different from that required in the federal law.
2. Preemption determinations. A credit
union, state, or other interested party may
request the Board to determine whether a
state law requirement is inconsistent with
the federal requirements. A request for a determination should be addressed to NCUA’s
Office of General Counsel, 1775 Duke Street,
Alexandria, VA 22314. Written preemption requests should cite (or include a copy of) the
allegedly inconsistent state law, demonstrate the inconsistency with TISA and
part 707 and the burden on credit unions, and
formally request a preemption determination. The Office of General Counsel may provide other interested parties, particularly affected states, an informal opportunity to
comment on any request for a preemption
determination, unless it finds that such notice and opportunity for comment would be
impracticable, unnecessary, or contrary to
the public interest. NCUA will publicize any
preemption determinations using any means
readily at its disposal.
3. Effect of preemption determinations. After
the Board, through its Office of General
Counsel, determines that a state law is inconsistent, a credit union may not make disclosures using the inconsistent term or take
actions relying on the inconsistent law.
4. Reversal of determination. The Board reserves the right to reverse a determination

for any reason bearing on the coverage or effect of state or federal law.
Section 707.2—Definitions
(a) Account
1. Covered accounts. Examples of accounts
subject to the regulation are:
i. Dividend-bearing and interest-bearing
accounts.
ii. Non-dividend-bearing and non-interestbearing accounts.
iii. Accounts opened as a condition of obtaining a credit card.
iv. Escrow accounts with a consumer purpose, such as an account established by a
member to escrow rental payments, pending
resolution of a dispute with the member’s
landlord.
v. Accounts held by a parent or custodian
for a minor under a state’s Uniform Gift to
Minors Act (or Uniform Transfers to Minors
Act).
vi. Individual retirement accounts (IRAs)
and simplified employee pension (SEP) accounts.
vii. Payable-on-Death (POD) or ‘‘Totten
trust’’ accounts.
2. Other accounts. Examples of accounts not
subject to the regulation are:
i. Mortgage escrow accounts for collecting
taxes and property insurance premiums.
ii. Accounts established to make periodic
disbursements on construction loans.
iii. Trust accounts opened by a trustee pursuant to a formal written trust agreement
(not merely declarations of trust on a signature card such as a ‘‘Totten trust,’’ or an
IRA or SEP account).
iv. Accounts opened by an executor in the
name of decedent’s estate.
v. Accounts of individuals operating businesses as sole proprietors.
vi. Certificates of indebtedness. Some credit unions borrow funds from their members
through a certificate of indebtedness that
sets forth the terms and conditions of the repayment of the borrowing, such as federal
credit unions do through 12 CFR 701.38. Such
an account does not represent an account in
a credit union and is not covered by part 707.
vii. Unincorporated nonbusiness association accounts.
3. Other investments. The term ‘‘account’’
does not apply to these products. Examples
of products not covered are:
i. Government securities.
ii. Mutual funds.
iii. Annuities.
iv. Securities or obligations of a credit
union.
v. Contractual arrangements such as repurchase agreements, interest rate swaps,
and bankers acceptances.
vi. Purchases of U.S. Savings Bonds
through a credit union.

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12 CFR Ch. VII (1–1–20 Edition)

vii. Services offered through a group purchasing plan or a credit union service organization (CUSO).
4. Options. All dividend-bearing and interest-bearing accounts are either fixed-rate or
variable-rate accounts.
5. Use of synonyms. Generally, it is not the
purpose of part 707 to prohibit specific descriptive terms for accounts. For example,
credit unions can use adjectives and trade
names to describe accounts such as ‘‘Best
Share Draft Account,’’ or ‘‘Ultra Money Market Share Account.’’ Synonyms for share,
share draft, money market share, and term
share accounts may be used to describe various types of credit union share and deposit
accounts as long as the synonym is accurate
and not misleading and, for account disclosures, is used in conjunction with the correct
legal term. For example, the following synonyms may be used:
i. The term ‘‘checking account’’ may be
used to describe share draft accounts.
ii. The term ‘‘money market account’’ may
be used to describe money market share accounts.
iii. The term ‘‘savings account’’ may be
used to describe regular share and share accounts.
iv. The terms ‘‘share certificate,’’ ‘‘certificate account,’’ or ‘‘certificate’’ may be used
to describe share certificates and other dividend-bearing term share accounts.
v. However, under no circumstances may a
credit union describe a share account as a
deposit account, or vice versa. For example,
the term ‘‘certificate of deposit’’ or ‘‘CD’’
may not be used to describe share certificates and other dividend-bearing term share
accounts. Similarly, the terms ‘‘time account’’ (used in Regulation DD, 12 CFR
1030.2(u)) and ‘‘time deposit’’ (used in Federal
Reserve Board’s Regulation D, 12 CFR
204.2(c)) may not be used to describe term
share accounts.

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(b) Advertisement
1. Covered messages. Advertisements include
commercial messages in visual, oral, or print
media that invite, offer, or otherwise announce generally to members and potential
members the availability of member accounts such as:
i. Telephone solicitations.
ii. Messages on automated teller machine
(ATM) screens (including any printout).
iii. Messages on a computer screen in a
credit union’s lobby (including any printout)
other than a screen viewed solely by the
credit union’s employee.
iv. Messages in a newspaper, magazine, or
promotional flyer or on radio or television.
v. Messages promoting an account that are
provided along with information about the
member’s existing account at a credit union
and that promote another account at the

credit union (such as account promotional
messages on the periodic statement).
2. Other messages. Examples of messages
that are not advertisements are:
i. Rate sheets published in newspapers,
periodicals, or trade journals (unless the
credit union or share and deposit broker that
offers accounts at the credit union pays a fee
to have the information included or otherwise controls publication).
ii. Telephone conversations initiated by a
member or potential member about an account.
iii. An in-person discussion with a member
about the terms for a specific account.
iv. For purposes of § 707.8(b) of this part
through § 707.8(e) of this part, information
given to members about existing accounts,
such as current rates recorded on a voice-response machine or notices for automatically
renewable time account sent before renewal.
v. Information about a particular transaction in an existing account.
vi. Disclosures required by Federal or
other applicable law.
vii. A share account agreement.
(c) Annual Percentage Yield.
1. General. The annual percentage yield
(APY) is required for disclosures for new accounts, oral responses to inquiries about
rates; disclosures provided upon request; initial disclosures (if the credit union chooses
to provide full disclosures instead of the abbreviated notice); notices prior to the renewal of a term share account, if known at
the time the notice is sent, and in advertising. The annual percentage yield shows
the total amount of dividends for a 365 day
period (or a 366 day period for a leap year) on
an assumed principal amount based on the
dividend rate and frequency of compounding
as a percentage of the assumed principal (for
accounts such as share or share draft accounts) or for the total amount of dividends
over the term of the account for term share
accounts. The annual percentage yield assumes the principal amount remains in the
account for 365 days (366 days for leap year)
or for the term of the account.
2. How Annual Percentage Yield Differs from
Annual Percentage Yield Earned. The annual
percentage yield (APY) differs from the annual percentage yield earned (APYE). The
annual percentage yield earned is required
for periodic statements only. The annual
percentage yield earned shows the total
amount of dividends earned for the dividend
or statement period as a percent of the actual average daily balance in the member’s
account. Unlike the annual percentage yield,
the annual percentage yield earned is affected by additions and withdrawals during
the period. The annual percentage yield and
the annual percentage yield earned must be
calculated according to the formulas provided in appendix A to this rule.

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(d) Average Daily Balance Method
1. General. One of the two required methods
(the daily balance is the other) of determining the balance upon which dividends
must be accrued and paid. The average daily
balance method requires the application of a
periodic rate to the average daily balance in
the account for the average daily balance
calculation period. The average daily balance is determined by adding the full
amount of principal in the account for each
day of the period and dividing that figure by
the number of days in the period.
(e) Board.
1. General. The NCUA Board.

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(f) Bonus
1. General. Bonuses include items of value
offered as incentives to members, such as an
offer to pay the final installment deposit for
a holiday club account if the final installment is over $10. Bonuses do not include the
payment of dividends (including extraordinary dividends), the waiver or reduction of
a fee, the absorption of expenses, non-dividend membership benefits, or other consideration aggregating $10 or less per year.
2. Examples. The following are examples of
bonuses.
i. A credit union offers $25 to potential
members for becoming a member and opening an account. The $25 could be provided by
check, cash, or direct deposit.
ii. A credit union offers $25 to a member
with only a regular share account to open a
share draft account. The $25 could be provided by check, cash, or direct deposit.
iii. A credit union offers a portable radio
with a value of $20 to members and potential
members for opening a share draft account.
iv. A credit union pays the final installment deposit for a holiday club account if
over $10.
3. Examples not comprising bonuses. The following are examples of items that are not bonuses:
i. Discount coupons distributed by credit
unions for use at restaurants or stores.
ii. A credit union offers $20 to any member
if the member is responsible for encouraging
a potential member to open an account. The
$20 is not a bonus because the $20 is not paid
to the individual opening the account. Any
item, including cash, given or offered to a
third party (that is not a joint member or
joint owner in an account being opened) in
exchange for a member or potential member
opening (or a member renewing or adding to)
an account is not a bonus.
iii. A credit union offers $25 to a member if
the member can locate his name in the body
of a newsletter.
iv. Life savings benefits. Many credit
unions offer life savings benefits to beneficiaries of deceased members. Because the

benefit accrues to a third party, such life
savings plans offered are not bonuses.
v. A credit union offers to pay annual
membership dues in a benevolent organization for a class of members.
4. De minimis rule. Items with a de minimis
value of $10 or less are not bonuses. Credit
unions may rely on the valuation standard
used by the Internal Revenue Service (IRS)
to determine if the value of the item is de
minimis. Items required to be reported by the
credit union under IRS rules are bonuses
under this regulation. Examples of items of
de minimis values are:
i. Disability insurance premiums on a
share account valued at an amount of $10 or
less per year.
ii. Coffee mugs, T-shirts or other merchandise with a market value of $10 or less per
year.
5. Aggregation. In determining if an item
valued at $10 or less is a bonus, credit unions
must aggregate per account per calendar
year items that may be given to members. In
making this determination, credit unions aggregate per account only the market value of
items that may be given for a specific promotion. To illustrate, assume a credit union
offers in January to give members an item
valued at $7 for each calendar quarter during
the year that the average account balance in
a share draft account exceeds $10,000. The
bonus rules are triggered, since members are
eligible under the promotion to receive up to
$28 during the year. However, the bonus rules
are not triggered if an item valued at $7 is
offered to members opening a share draft account during the month of January, even
though in November the credit union introduces a new promotion that includes, for example, an offer to existing share draft
accountholders for an item valued at $8 for
maintaining an average balance of $5,000 for
the month.
6. Waiver or reduction of a fee or absorption
of expenses. Bonuses do not include value received by members through the waiver or reduction of fees for credit union-related services (even if the fees waived exceed $10), such
as the following:
i. Waiving a safe deposit box rental fee for
one year for members who open a new account.
ii. Waiving fees for travelers checks for
members, and waiving check and share draft
printing fees.
iii. Nondiscriminatorily waiving all fees
for a particular class of members, such as
seniors or minors.
iv. Discounts on interest rates charged for
loans at the credit union.
v. Rebates of loan interest already paid by
a member.
vi. Discounts on application fees charged
for loans at the credit union.
vii. Packaged, linked, or tied-account services.

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12 CFR Ch. VII (1–1–20 Edition)

7. Non-dividend membership benefits. Such
benefits are not bonuses because they are
sporadic in nature, often difficult to value,
and providing non-dividend membership benefits is a long-standing unique credit union
practice. (See commentary to § 707.2(r) for
examples of such benefits.)
(g) Credit Union
1. General. Includes credit unions in the
United States, Puerto Rico, Guam, U.S. Virgin Islands, and U.S. territories. Applies to
credit unions whether or not the accounts in
the credit union are federally, state, privately insured, or uninsured.
(h) Daily Balance Method
1. General. One of the two required methods
(the average daily balance is the other) of
determining the balance upon which dividends must be accrued and paid. The daily
balance method requires the application of a
daily periodic rate to the full amount of
principal in the account each day.

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(i) Dividend and Dividends
1. General. Member savings placed in share
accounts are equity investments, and the returns earned on these accounts are dividends. Federal credit unions may only offer
dividend-bearing and non-dividend-bearing
share
accounts.
State-chartered
credit
unions may offer both share and deposit accounts if permitted by state law. State law,
including without limitation regulations and
official interpretations, will determine if returns earned in accounts in state-chartered
credit unions are dividends. Dividends exclude the payment of a bonus or other consideration worth $10 or less given during a
year, the waiver or reduction of a fee, the absorption of expenses, non-dividend membership benefits and extraordinary dividends.
Dividend-bearing accounts must be either
fixed-rate or variable-rate accounts.
2. Procedure. Credit unions must follow appropriate law (state law for state-chartered
credit unions and federal law for federal
credit unions) in determining dividend policies and declaring dividends. Generally, dividends may be viewed as a portion of the
available account and undivided earnings of
the credit union which is set apart, after required transfer to reserves, by valid act of
the board of directors, for distribution
among the members. As a matter of legal
procedure, members are usually not entitled
to dividends until the following steps are
completed: (1) The board of the credit union
develops a nondiscriminatory dividend policy, by establishing dividend periods, dividend credit determination dates dividend
distribution dates, any associated penalties
(if applicable), and the method of dividend
computation for each type of share account;
(2) the provisions for required transfers to re-

serves are made; (3) sufficient and available
prior and/or current earnings are available at
the end of the dividend period; (4) the board
formally makes a dividend declaration in accordance with the credit union’s dividend
policy; and (5) dividends must be paid to
members by a credit to the appropriate share
account, payment by check or share draft, or
by a combination of the two methods.
3. When available. Credit unions must follow the law of their primary chartering authority to determine when dividends are
available. Generally, it is the declaration of
the dividend itself which creates the dividend and the member has no right to receive
a dividend until it is so declared. The decision of when to declare dividends lies within
the official discretion of each credit union’s
board of directors and cannot be abrogated
by contract. An agreement to pay dividends
on a share account is generally interpreted
not as an obligation to pay the stipulated
dividends absolutely and unconditionally,
but as an undertaking to pay them out of the
earnings when sufficiently accumulated from
which dividends in general are properly payable. Generally, ‘‘prospective rates’’ are
rates set in good faith in advance of the close
of a dividend period, that may be altered if
sufficient funds are not available, or in the
event of a superseding event, such as a
strike, plant closure, significant fluctuation
in market rates and/or a significant change
in financial structure, natural disaster or
emergency that alters the assumptions
under which the ‘‘prospective rates’’ were
made. It is the intent of TISA that all disclosure be accurate when made, and credit
unions are urged to make every effort to ratify disclosed ‘‘prospective rates.’’ ‘‘Prospective rates’’ may also be referred to as ‘‘projected rates’’ or similar wording, but not as
‘‘estimated rates.’’ (See comment 3(b)–2, prohibiting use of estimates).
4. Sample dividend resolutions. (i) The following resolution may be used where the dividend rates are set after the close of a dividend period.
RESOLUTION OF BOARD OF DIRECTORS FOR THE
DECLARATION OF DIVIDENDS
A. I, llllllll, certify that I am Secretary of llllllll Credit Union Board
of Directors, and that the following is a correct copy of the resolution for declaring dividend adopted by the llllllll Credit
Union at a meeting of the Board of Directors
duly and properly held on lllllllll,
19ll. This resolution appears in the minutes of this meeting and has not been rescinded or modified.
B. Resolved, that
(1) The Board of Directors has developed a
nondiscriminatory dividend policy, by establishing dividend periods, dividend credit determination dates, dividend distribution

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dates, any associated penalties (if applicable), and the method of dividend computation for each type of share account;
(2) The required transfers to reserves have
been made; and
(3) Sufficient and available prior and/or
current earnings are available at the end of
this dividend period.
C. Resolved, further, that the Board of Directors now formally makes a dividend declaration in accordance with the Credit
Union’s dividend policy and authorizes that
on llllllll, 19ll, dividends must be
paid to members by a credit to the appropriate share account, payment by share draft
or by a combination of the two methods.
D. I further certify that the Board of Directors of this Credit Union has, and the
time of adoption of this resolution had, full
power and lawful authority to adopt the
foregoing resolutions and that this resolution revokes any prior resolution.
In witness whereof, this is my signature
and the date on which I signed this Resolution.
llllllllllllllllllllllll
Signature
llllllllllllllllllllllll
Date
[Attach list of accounts with dividend rates
for each type of account.]
(ii) The following resolution may be used
where the dividend rates are set before the
close of a dividend period.

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RESOLUTION OF BOARD OF DIRECTORS FOR THE
DECLARATION OF DIVIDENDS
A. I, llllllll, certify that I am the
Secretary of llllllll Credit Union,
and that the following is a correct copy of
the resolution for declaring dividends adopted by the llllllll Credit Union at a
meeting of the Board of Directors duly and
properly held on llllllllll, 19ll.
This resolution appears in the minutes of
that meeting and has not been rescinded or
modified.
B. Resolved, that the Board of Directors
has adopted a nondiscriminatory dividend
policy, by establishing dividend periods, dividend credit determination dates, dividend
distribution dates, any associated penalties
(if applicable) and the method of dividend
computation for each type of share account.
C. Resolved, that it is the policy and practice of the Board of Directors to meet periodically to establish prospective dividend
rates for each type of dividend-bearing share
account.
D. Resolved, that if the required transfers
to reserves have been made and there are
sufficient and available prior and/or current
earnings available at the end of a dividend
period, the officers of the Credit Union are
authorized to pay dividends at the rate prospectively established by the Board of Direc-

tors for each account for the dividend period.
The officers may pay the dividends without
any further action of the Board of Directors.
The act of paying the dividends shall constitute the declaration of the dividends and
shall be a ratification of the prospective dividend rate.
In witness whereof, this is my signature
and the date on which I signed this Resolution.
llllllllllllllllllllllll
Signature
llllllllllllllllllllllll
Date
[Attach list of accounts with prospective dividend rates for each type of account.]
5. Referencing. Except where specifically
stated otherwise, use of the term ‘‘share’’ in
part 707, as in ‘‘share account,’’ also refers to
‘‘deposit,’’ as in ‘‘deposit account,’’ where
appropriate (for interest-bearing or non-interest-bearing deposit accounts at some
state-chartered credit unions).
(j) Dividend Declaration Date
1. General. The importance of the dividend
declaration date is to tie the last paid dividend to a certain period of time to place
members and potential members on notice
that the last paid dividend is different from
the next dividend to be paid. In order to
achieve this purpose, a credit union may use
any of the following methods:
i. ‘‘As of 3/15/95’’ (the date the board of directors last met and declared the last paid
dividend).
ii. ‘‘As of 3/31/95’’ (the last day of the last
dividend period upon which a dividend has
been paid).
iii. ‘‘For the period 1/1/95 to 3/31/95’’ (the
last dividend period upon which a dividend
has been paid).
iv. ‘‘For the first quarter of 1995’’ (the last
dividend period upon which a dividend has
been paid).
v. ‘‘For April 1995’’ (the last dividend period upon which a dividend has been paid).
vi. ‘‘As of the last dividend declaration
date’’ (the last dividend period upon which a
dividend has been paid).
(k) Dividend Period
1. General. The dividend period is to be set
by a credit union’s board of directors for
each account type, e.g., regular share, share
draft, money market share, and term share.
The most common dividend periods are
weekly, monthly, quarterly, semi-annually,
and annually. Dividend periods need not
agree with calendar months, e.g., a monthly
dividend period could begin March 15 and end
April 14.

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12 CFR Ch. VII (1–1–20 Edition)

(l) Dividend Rate
1. General. The dividend rate does not reflect compounding. Compounding is reflected
in the ‘‘annual percentage yield’’ definition.
2. Referencing. Except where specifically
stated otherwise, use of the term ‘‘dividend
rate’’ in part 707 also refers to ‘‘interest
rate,’’ where appropriate (for interest-bearing and non-interest-bearing deposit accounts at some state-chartered credit
unions).
(m) Extraordinary Dividends
1. General. The definition encompasses all
irregularly scheduled and declared dividends,
and as dividends, extraordinary dividends are
exempt from the ‘‘bonus’’ disclosure requirements. Extraordinary dividends do not have
to be disclosed on account disclosures, but
the dollar amount of an extraordinary dividend credited to the account during the
statement period does have to be separately
disclosed on the periodic statement for the
dividend period during which the extraordinary dividends are earned. Extraordinary
dividends, like ordinary dividends, do not include the payment of a bonus or other consideration worth $10 or less given during a
year, the waiver or reduction of a fee, the absorption of expenses or non-dividend membership benefits. See comments 2(f) 1
through 7 and 2(i) 1 through 4. Extraordinary
dividends may be calculated by any means
determined by the board of directors of a
credit union and may not be used in the annual percentage yield earned calculation.
2. Use of synonym. Extraordinary dividends
may be described as ‘‘bonus dividends.’’
(n) Fixed-Rate Account
1. General. Includes all accounts in which
the credit union, by contract, agrees to give
at least 30 days advance written notice of decreases in the dividend rate. Thus, credit
unions can decrease rates only after providing advance written notice of rate decreases, e.g., a ‘‘change-in-terms notice.’’
(o) Grace Period
1. General. A period after maturity of an
automatically renewing term share account
during which the member may withdraw
funds without being assessed a penalty. Use
of a ‘‘grace period’’ is discretionary, not
mandatory. This definition does not refer to
the ‘‘grace period’’ account, which is a synonym for ‘‘federal rollback method’’ or ‘‘in
by the 10th’’ accounts, which are prohibited
by TISA and part 707.

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(p) Interest
1. General. Member savings placed in deposit accounts are debt investments, and the
return earned on these accounts is interest.
Federal credit unions are not authorized to

offer any interest-bearing deposit accounts.
State-chartered credit unions may offer both
share and deposit accounts if permitted by
state law. State law, including without limitation regulations and official interpretations, will determine if returns earned in accounts in state-chartered credit unions are
interest. Interest excludes the payment of a
bonus or other consideration worth $10 or
less given during a year, the waiver of reduction of a fee, the absorption of expenses, nondividend membership benefits, and extraordinary dividends.
2. Differences between dividends and interest.
Generally, dividends are returns on an equity investment (shares); interest is return
on a debt investment (deposits). Dividends,
in general, are not properly payable until declared at the close of a dividend period; interest, in general, is properly payable daily
according to the deposit contract. Dividend
rates are prospective until actually declared;
interest rates are set according to contract
in advance and are earned on that basis.
Share accounts establish a member (owner)/
credit union (cooperative) relationship; deposit accounts establish a depositor (creditor)/depository (debtor) relationship.
3. Referencing. Except where specifically
stated otherwise, use of the terms ‘‘dividend’’ or ‘‘dividends’’ in part 707 also refers
to ‘‘interest’’ where appropriate (for interest-bearing and non-interest-bearing deposit
accounts at some state-chartered credit
unions).
(q) Member
1. Professional capacity. Examples of accounts held by a natural person in a professional capacity for another are:
i. Attorney-client trust accounts.
ii. Trust, estate and court-ordered accounts.
iii. Landlord-tenant security accounts.
2. Other accounts. Examples of accounts not
held in a professional capacity include accounts held by parents for a child under the
Uniform Gifts to Minors Act (or Uniform
Transfers to Minors Act.
3. Retirement plans. IRAs and SEP accounts
are member accounts to the extent that
funds are invested in accounts subject to the
regulation. Keogh accounts, like sole proprietor accounts, are not subject to the regulation.
(r) Non-Dividend Membership Benefits
1. General. Term reflects unique credit
union practices that are difficult to value,
encourage community spirit, and are not
granted in such quantity as to be includable
as calculable dividends.
2. Examples. Examples include:
i. Food, refreshments, and drawings and
raffles at annual meetings, member functions, and branch openings.

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Pt. 707, App. C

ii. Travel club benefits.
iii. Prizes offered at annual meetings, such
as U.S. Savings Bonds, a deposit of funds
into the winner’s account, trips, and other
gifts. Such prizes are not bonuses because
they are offered as an incentive to increase
attendance at the annual meeting, and not
to entice members to open, maintain, or
renew accounts or increase an account balance.
iv. Life savings benefits.

members not on credit union premises request disclosures.
3. Nonmembers. Within its sole discretion,
the board of directors of a credit union may
provide TISA disclosures to nonmembers
who are ineligible for membership or to hold
an account at the credit union. If disclosures
are made to such nonmembers, it is the position of the Board that no civil liability can
accrue to the credit union for any errors in
such disclosures. (See commentary to
§ 707.3(d)).

(s) Passbook Account

(v) State

1. Relation to Regulation E. Passbook accounts
include
accounts
accessed
by
preauthorized electronic fund transfers to
the account (as defined in 12 CFR 1005.2(k)),
such as an account credited by direct share
and deposit of social security payments. Accounts that permit access by other electronic means are not ‘‘passbook accounts,’’
and any statements that are sent four or
more times a year must comply with the requirements of § 707.6.
(t) Periodic Statement
1. General. Periodic statements are not required by part 707. Passbook and term share
accounts are exempt from periodic statement requirements.
2. Examples. Periodic statements do not include:
i. Additional statements provided solely
upon request.
ii. General service information such as a
quarterly newsletter or other correspondence
that describes available services and products.

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(u) Potential Member
1. General. A potential member is a natural
person eligible for membership in a credit
union, who has not yet taken the steps necessary to become a member. The term also
includes natural person nonmembers eligible
to hold accounts in a credit union pursuant
to relevant federal or state law.
2. Verification of eligibility. It is recommended that credit unions have sound
written procedures in place to identify those
eligible for membership. If these procedures
include verification measures, such as an application process, verification telephone call
or letter to an employer or association within the field of membership, witnessing by an
existing member, or similar procedure, then
the credit union may first verify the membership eligibility of a potential member before providing account disclosures or other
information to the potential member. This
process of verifying a member’s eligibility
status, making a recommendation for membership, and providing account disclosures
should be completed within 20 calendar days.
This period also applies when potential

1. General. Territories and possessions include American Samoa, Guam, the Mariana
Islands, and the Marshall Islands.
(w) Stepped-Rate Account
1. General. Stepped-rate accounts are those
accounts in which two or more dividend
rates (known at the time the account is
opened) will take effect in succeeding periods.
2. Example. An example of a stepped-rate
account is a one-year term share certificate
account in which a 5.00% dividend rate is
paid for the first six months, and 5.50% for
the second six months.
(x) Term Share Account
1. Relation to the Federal Reserve Board’s
Regulation D. Federal Reserve Board’s Regulation D permits, in limited circumstances,
the withdrawal of funds without penalty during the first six days after a ‘‘time deposit’’
is opened. (See 12 CFR 204.2(c)(1)(i).) But the
fact that a member makes a withdrawal as
permitted by Regulation D does not disqualify the account from being a term share
account for purposes of this regulation (such
as withdrawals upon the death of the member, or within a ‘‘grace period’’ for automatically renewable term share accounts).
2. Club accounts. Club accounts, including
Christmas club, holiday club, and vacation
club accounts may be either term share or
regular share accounts, depending on the
terms of the account. Although club accounts typically have a maturity date, they
are not term share accounts unless they also
require a penalty of at least seven days’ dividends for withdrawals during the first six
days after the account is opened.
(y) Tiered-Rate Account
1. General. Tiered-rate accounts are those
accounts in which two or more dividend
rates are paid on the account and are determined by reference to a specified balance
level. Tiered-rate accounts are of two types:
Tiering Method A and Tiering Method B. In
Tiering Method A accounts, the credit union
pays the applicable tiered dividends rate on
the entire amount in the account. This
method is also known as the ‘‘hybrid’’ or

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12 CFR Ch. VII (1–1–20 Edition)

‘‘plateau’’ tiered-rate account. In Tiering
Method B accounts, the credit union does
not pay the applicable tiered dividends rate
on the entire amount in the account, but
only on the portion of the share account balance that falls within each specified tier.
This method is also known as the ‘‘pure’’ or
‘‘split-rate’’ tiered-rate account. (See appendix A, part I, D.)
2. Example. An example of a tiered-rate account is one in which a credit union pays a
5.00% dividend rate on balances below $1,000,
and 5.50% on balances $1,000 and above.
3. Term share accounts. Term share accounts that pay different rates based solely
on the amount of the initial share and deposit are not tiered-rate accounts.
4. Minimum balance accounts. A requirement to maintain a minimum balance to
earn dividends does not make an account a
tiered-rate account. If dividends are not paid
on amounts below a specified balance level,
then the account has a minimum balance requirement (required to be disclosed under
§ 707.4(b)(3)(i)), but the account does not constitute a tiered-rate account. A zero rate
(0%) cannot constitute a tier. Minimum balance accounts are single rate accounts with
a minimum balance requirement.

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(z) Variable-Rate Account
1. General. Includes accounts in which the
credit union does not contract to give at
least 30 days advance written notice of decreases in the dividend rate. An account
meets this definition whether the rate
change is determined by reference to an
index, by use of a formula, or merely at the
discretion of the credit union’s board of directors. An account that permits one or
more rate adjustments prior to maturity at
the member’s option, such as a rate relock
option, is a variable-rate account.
2. Differences between fixed-rate and variablerate accounts. All ccounts must either be
fixed-rate
or
variable-rate
accounts.
Classifying an account as variable-rate affects credit unions three ways:
i. Additional account disclosures are required (§ 707.4(b)(1)(ii));
ii. Rate decreases are exempted from
change-in-terms
requirements
(§ 707.5(a)(2)(i)); and
iii.
Advertising
notice
required
(§ 707.8(c)(1)).
Fixed-rate accounts require a contract
term obligating the credit union to a 30-day
advance, written notice to members before
decreasing the dividend rate on the account.
Term changes adversely affecting the member and rate decreases cannot take effect
until 30 days after such fixed-rate change-interms notices are mailed or delivered to
members (§ 707.5(a)).

Section 707.3—General Disclosure
Requirements
(a) Form
1. General. All required disclosures (e.g., account disclosures, change-in-terms notices,
term share renewal/maturity notices, statement disclosures and advertising disclosures)
must be made clearly and conspicuously, in
a form the member may retain. Disclosures
need be made only as applicable (e.g., disclosures for a non-dividend-bearing account
would not include disclosure of annual percentage yield, dividend rate, or other disclosures pertaining to dividend calculations).
2. Design requirements. Disclosures must be
presented in a format that allows members
and potential members to readily understand
the terms of their account. Credit unions are
not required to use a particular type size or
typeface, nor are credit unions required to
state any term more conspicuously than any
other term. Disclosures may be made:
i. In any order.
ii. In combination with other disclosures
or account terms.
iii. In combination with disclosures for
other types of accounts, as long as it is clear
to members and potential members which
disclosures apply to their account.
iv. On more than one page and on the front
and reverse sides.
v. By using inserts to a document or filling
in blanks.
vi. On more than one document, as long as
the documents are provided at the same
time.
3. Consistent terminology. A credit union
must use the same terminology to describe
terms or features that are required to be disclosed. For example, if a credit union describes a monthly fee (regardless of account
activity), as a ‘‘monthly service fee’’ in account opening disclosures, the periodic statements and change-in-terms notices must use
the same terminology so that members and
potential members can readily identify the
fee.
(b) General
1. Terms and conditions. Credit unions are
required to have disclosures reflect the
terms of the legal obligation between the
credit union and a member at the time the
member opens the account. This provision
does not impose any contract terms or supersede state or other laws that define how the
legal obligations between a credit union and
its membership are determined.
2. Specificity of legal obligation. Credit
unions may refer to the calendar month or
to roughly equivalent intervals during a calendar year as a ‘‘month.’’ Use of estimates is
prohibited in TISA disclosures.
3. Foreign language. Disclosures may be
made in any foreign language, if desired by

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Pt. 707, App. C

the board of directors of a credit union. However, disclosures must also be provided in
English, upon request.
(c) Relation to Regulation E
1. General rule. Compliance with Regulation E (12 CFR part 1005) is deemed to satisfy
the disclosure requirements of this regulation, such as when:
i. A credit union changes a term that triggers a notice under Regulation E, and the
timing and disclosure rules of Regulation E
for sending change-in-terms notices.
ii. A member adds an ATM access feature
to an account, and the credit union provides
disclosures pursuant to Regulation E, including disclosure of fees before the member receives ATM access. (See 12 CFR 1005.7.)
iii. A credit union complying with the timing rules of Regulation E discloses at the
same time fees for electronic services (such
as balance inquiry fees imposed if the inquiry is made at an ATM) that are required
to be disclosed by this regulation, but not by
Regulation E.
iv. A credit union relies on Regulation E’s
rules regarding disclosures of limitations on
the frequency and amount of electronic fund
transfers, including security-related exceptions. But any limitation on the number of
‘‘intra-institutional transfers’’ to or from
the member’s other accounts at the credit
union during a given time period must be
disclosed, even though intra-institutional
transfers are exempt from Regulation E.

about the account during the term, the credit union need not disclose the annual percentage yield, unless the member is calling
for rate information under a maturity notice.
(f) Rounding and Accuracy Rules for Rates and
Yields
(f)(1) Rounding
1. Permissible rounding. The annual percentage yield, annual percentage yield earned
and dividend rate must be rounded to the
nearest one-hundredth of one percentage
point (.01%) when disclosed. Examples of permissible rounding are an annual percentage
yield calculated to be 5.644%, rounded down
and shown as 5.64%; 5.645% would be rounded
up and disclosed as 5.65%. For account disclosures, the dividend rate may be expressed
to more than two decimal places.
(f)(2) Accuracy
1. Annual percentage yield and annual percentage yield earned. The tolerance for annual
percentage yield and annual percentage yield
earned calculations is designed to accommodate inadvertent errors. Credit unions may
not purposely incorporate the one-twentieth
of one percentage point (.05%) tolerance into
their calculation of yields.
2. Dividend rate. There is no tolerance for
an inaccuracy in the dividend rate.
Section 707.4—Account Disclosures
(a) Delivery of Account Disclosures

(d) Multiple Members
1. General. When an account has multiple
natural person member accountholders, delivery of disclosures to any member
accountholder or agent authorized by the
accountholder satisfies the disclosure requirements of part 707.

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(e) Oral Response to Inquiries
1. Application of rule. Credit unions need
not provide rate information orally. Disclosures need be made only as appropriate. For
example, the requirement to give a telephone number for a member to call about
rates for interest-bearing accounts and dividend-bearing term share accounts, would not
be necessary for members calling the credit
union for information. Also, the disclosure
requirements are applicable only to credit
union employees and volunteers acting in
the ordinary course of credit union business.
2. Relation to advertising. The advertising
rules do not cover an oral response to a question about rates.
3. Existing accounts. This paragraph does
not apply to oral responses about rate information for existing term share accounts or
accounts not currently offered. For example,
if a member holding a one-year term share
account requests dividend rate information

(a)(1) Account Opening
1. New accounts. New account disclosures
must be provided when:
i. A term share account that does not automatically rollover is renewed by a member.
ii. A member changes the term for a renewable term share account (from a one-year
term share account to a six-month term
share account, for instance) (see comment
5(b)–5 regarding disclosure alternatives).
iii. A credit union transfers funds from an
account to open a new account not at the
member’s request, unless the credit union
previously gave account disclosures and any
change-in-terms notices for the new account
(e.g., funds in a money market share account
are transferred by a credit union to open a
new account for the member, such as a share
draft account, because the member exceeded
transaction limitations on the money market share account).
iv. A credit union accepts a deposit from a
member to an account that the credit union
had previously deemed to be ‘‘closed,’’ under
applicable federal or state law, for the purpose of treating accrued, but uncredited,
dividends as forfeited dividends. New account numbers are not required by this requirement.

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12 CFR Ch. VII (1–1–20 Edition)

2. Acquired accounts. New account disclosures need not be given when a credit union
acquires an account through an acquisition
of, or merger with, another credit union (but
see § 707.5(a) regarding advance notice requirements if terms are changed).
3. Combination disclosures. New account disclosures need not be given when a member
has already received disclosures covering
several accounts, and opens a new account
properly disclosed by the already received
combination disclosures, if the new account
is opened within a reasonable amount of
time after receipt of the combination disclosures and if the received disclosures and
terms are accurate at the time the new account is opened.

rate (or dividend rate on a dividend-bearing
term share account) and annual percentage
yield accurate within the seven calendar
days preceding the date they send the disclosures.
(a)(2)(ii)(B)
1. Term. Describing the maturity of a term
share account as ‘‘1 year’’ or ‘‘6 months,’’ for
example, illustrates a response stating the
maturity of a term share account as a term
rather than a date (e.g., ‘‘June 1, 1995’’).
(b) Content of Account Disclosures
(b)(1) Rate Information
(b)(1)(i) Annual Percentage Yield and Dividend
Rate

(a)(2) Requests
(a)(2)(i)

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1. Inquiries versus requests. A response to an
oral inquiry (by telephone or in person)
about rates and yields or fees does not trigger the duty to provide account disclosures.
But, when a member asks for written information about an account (whether by telephone, in person, or by other means), the
credit union must provide disclosures unless
the account is no longer offered to the public.
2. General requests. When member’s or potential member’s request disclosures about a
type of account (a share draft account, for
example), a credit union that offers several
variations may provide disclosures for any
one of them. No disclosures need be made to
nonmembers, though a credit union may provide disclosures to nonmembers within its
sole discretion.
3. Timing for response. Ten business days is
a reasonable time for responding to requests
for account information that members or potential members do not make in person, including requests made by electronic means,
such as by electronic mail.
4. Use of electronic means. If a member or
potential member who is not present at the
credit union makes a request for account disclosures, including a request made by telephone, e-mail, or via the credit union’s Web
site, the credit union may send the disclosures in paper form or, if the member or potential member agrees, may provide the disclosures electronically, such as to an e-mail
address that the member or potential member provides for that purpose, or on the credit union’s Web site, without regard to the
consent or other provisions of the E–Sign
Act. The regulation does not require a credit
union to provide, nor a member or potential
member to agree to receive, the disclosures
required by § 707.4(a)(2) in electronic form.
(a)(2)(ii)(A)(2)
1. Recent rates. Credit unions comply with
this paragraph if they disclose an interest

1. Rate disclosures. In addition to the dividend rate and annual percentage yield, credit
unions may disclose a periodic rate corresponding to the dividend rate. No other
rate or yield (such as ‘‘tax effective yield’’) is
permitted. If the annual percentage yield is
the same as the dividend rate, credit unions
may disclose a single figure but must use
both terms.
2. Fixed-rate accounts. For fixed-rate term
share accounts paying the opening rate until
maturity, credit unions may disclose the period of time the dividend rate will be in effect by stating, or cross-referencing, the maturity date. For other fixed-rate accounts,
credit unions may use a date (such as ‘‘This
rate will be in effect through June 30, 1995’’)
or a period (such as ‘‘This rate will be in effect for at least 30 days’’).
3. Tiered-rate accounts. Each dividend rate,
along with the corresponding annual percentage yield for each specified balance level
(or range of annual percentage yields, if appropriate), must be disclosed for tiered-rate
accounts. (See appendix A, Part I, Paragraph
D.)
4. Stepped-rate accounts. A single composite
annual percentage yield must be disclosed
for stepped-rate accounts. (See appendix A,
Part I, Paragraph B.) The dividend rates and
the period of time each will be in effect also
must be provided. When the initial rate offered for a specified time on a variable-rate
account is higher or lower than the rate that
would otherwise be paid on the account, the
calculation of the annual percentage yield
must be made as if for a stepped-rate account. (See appendix A, Part I, Paragraph C.)
5. Minimum balance accounts. If a credit
union sets a minimum balance to earn dividends, the credit union may, but need not,
state that the annual percentage yield is 0%
for those days the balance in the account
drops below the minimum balance level
when using the daily balance method. Nor is
a disclosure of 0% required for credit unions
using the average daily balance method, if

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(b)(3) Balance Information

the member fails to meet the minimum balance required for the average daily balance
period.
(b)(1)(ii) Variable Rates
(b)(1)(ii)(B)
1. Determining dividend rates. To disclose
how the dividend rate is determined, credit
unions must:
i. Identify the index and specific margin, if
the dividend rate is tied to an index.
ii. State that rate changes are within the
credit union’s discretion, if the credit union
does not tie changes to an index.
(b)(1)(ii)(C)
1. Frequency of rate changes. A credit union
reserving the right to change rates at its discretion must state the fact that rates may
change at any time.
(b)(1)(ii)(D)
1. Limitations. A floor or ceiling on rates or
on the amount the rate may decrease or increase during any time period must be disclosed. Credit unions need not disclose the
absence of limitations on rate changes.
(b)(2) Compounding and Crediting
(b)(2)(i) Frequency
1. General. Descriptions such as ‘‘quarterly’’ or ‘‘monthly’’ are sufficient. Irregular
crediting and compounding periods, such as
if a cycle is out short at year end for tax reporting purposes, need not be disclosed.
2. Dividend period. For dividend-bearing accounts, the dividend period must be disclosed. (A specific example must also be
given, see appendix B, § B–1(c).) The dividend
period for term share accounts generally
may be disclosed as the account’s term (e.g.,
two years).

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(b)(2)(ii) Effect of Closing an Account
1. Deeming an account closed. A credit union
may, subject to state or other law, provide in
account contracts the actions by members
that will be treated as closing the account
and that will result in the forfeiture of accrued but uncredited dividends. An example
is the withdrawal of all funds from the account prior to the date dividends are credited. Credit unions are cautioned that bylaw
requirements may prevent a credit union
from deeming a member’s account closed
until certain time periods are extinguished if
funds remain in a member’s account. NCUA
Standard FCU Bylaws, Art. III, § 3. Such
bylaw requirements may not be overridden
without proper agency approval.

(b)(3)(i) Minimum Balance Requirements
1. Par value. Credit unions must disclose
any minimum balance required to open the
account, to avoid the imposition of a fee, or
to obtain the annual percentage yield. Since
members cannot generally maintain any accounts until the par value of the membership
share is paid in full, this section requires
that credit unions disclose the par value of a
share necessary to become a member and
maintain accounts at the credit union. The
par value of a share and the minimum balance requirement do not have to be the same
amount (e.g., a credit union may have a $5
par value for a membership share, in order
for accounts to be opened and maintained,
and a $100 minimum balance requirement, in
order for the account to earn dividends).
2. Disclosures. The explanation of minimum
balance computation methods may be combined with the balance computation method
disclosures (§ 707.4(b)(3)(ii)) if they are the
same. If a credit union uses different cycles
for determining minimum balance requirements for purposes of assessing fees and for
paying dividends, the credit union must disclose the specific cycle or time period used
for each purpose (e.g., use of a midmonth
statement cycle for determining dividends,
and use of a calendar month cycle for determining fees). Credit unions may assess fees
by using any method. If fees on one account
are tied to the balance in another account,
such provision must be explained (e.g., if
share draft fees are tied to a minimum balance in the regular share account (or a combination of the share draft and regular share
accounts), the share draft account must explain that fact and how the balance in the
regular share account (or both accounts) is
determined). The fee need not be disclosed in
the account disclosures if the fee is not imposed on that account.
(b)(3)(ii) Balance Computation Method
1. Methods and periods. Credit unions may
use different methods or periods to calculate
minimum balances for purposes of imposing
a fee (the daily balance for a calendar
month, for example) and accruing dividends
(the average daily balance for a statement
period, for example). Each method and corresponding period must be disclosed.
(b)(3)(iii) When dividends begin to accrue
1. Additional information. Credit unions
must include a statement as to when dividends begin to accrue for noncash deposits.
Credit unions may disclose additional information such as the time of day after which
deposits are treated as having been received
the following business day, and may use additional descriptive terms such as ‘‘ledger’’
or ‘‘collected’’ balances to disclose when

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12 CFR Ch. VII (1–1–20 Edition)

dividends begin to accrue. Under the ledger
balance method, dividends begin to accrue
on the day of deposit. Under the collected
balance methods, dividends begin to accrue
when provisional credit is received for the
item deposited.

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(b)(4) Fees
1. Types of fees. Fees related to the routine
use of an account must be disclosed. The following are types of fees that must be disclosed in connection with an account:
i. Maintenance fees, such as monthly service fees.
ii. Fees related to share deposits or withdrawals.
iii. Fees for special services, such as stop
payment fees, fees for balance inquiries or
verification of share and deposits, fees associated with checks returned unpaid, fees for
regularly sending to members share drafts
that otherwise would be held by the credit
union, and overdraft line of credit access fees
(if charged against the share account).
iv. Fees to open or to close an account.
v. Fees imposed upon dormant or inactive
accounts.
2. Other fees. Credit unions need not disclose fees such as the following:
i. Fees for services offered to members and
nonmembers alike, such as fees for certain
travelers checks, for wire transfers and automated clearinghouse (ACH) transfers, to
process credit card cash advances, or to handle U.S. Savings Bond Redemption (even if
different amounts are charged to members
and nonmembers).
ii. Incidental fees, such as fees associated
with state escheat laws, garnishment or attorneys fees, to change names on an account,
to generate a midcycle periodic statement,
to wrap loose coins, for photocopying, for
statements returned to the credit union because of a wrong address, and locator fees.
3. Amount of fees. Credit unions are cautioned that merely providing fee information
in an account disclosure may not be sufficient to gain the legal right to impose the
fee involved under applicable law. Credit
unions must state the amount and conditions under which a fee may be imposed.
Naming and describing the fee typically satisfies this requirement. Some examples are:
i. ‘‘$4.00 monthly service fee’’.
ii. $7.00 and up’’ or ‘‘fee depends on style of
checks ordered’’ for check printing fees.
4. Tied-accounts. Credit unions must state
if fees that may be assessed against an account are tied to other accounts at the credit union. For example, if a credit union ties
the fees payable on a share draft account to
balances held in the share draft account and
in a regular share account, the share draft
account disclosures must state that fact and
explain how the fee is determined.
5. Regulation E statements. Some fees are required to be disclosed under both Regulation

E (12 CFR 1005.7) and part 707. If such fees,
such as ATM transaction fees, are disclosed
on a Regulation E statement, they need not
be disclosed again on a periodic statement
required under part 707.
6. Fees for overdrawing an account. Under
§ 707.4(b)(4) of this part, credit unions must
disclose the conditions under which a fee
may be imposed. In satisfying this requirement credit unions must specify the categories of transactions for which an overdraft fee may be imposed. An exhaustive list
of transactions is not required. It is sufficient for a credit union to state that the fee
applies to overdrafts ‘‘created by check, inperson withdrawal, ATM withdrawal, or
other electronic means.’’ Disclosing a fee
‘‘for overdraft items’’ would not be sufficient.
(b)(5) Transaction Limitations
1. General rule. Examples of limitations on
the number of dollar amount of share deposits or withdrawals that credit unions must
disclose are:
i. Limits on the number of share drafts or
checks that may be written on an account
for a given time period.
ii. Limits on withdrawals or share deposits
during the term of a term share account.
iii. Limitations required by Regulation D,
such as the number of withdrawals permitted
from money market share accounts by check
to third parties each month (credit unions
need not disclose reservation of right to require a notice for withdrawals from accounts
required by federal or state law).
(b)(6) Features of Term Share Accounts
(b)(6)(i) Time Requirements
1. ‘‘Callable’’ term share accounts. In addition to the maturity date, credit unions
must state the date or the circumstances
under which the credit union may redeem a
term share account at the credit union’s option (a ‘‘callable’’ term share account).
(b)(6)(ii) Early Withdrawal Penalties
1. General. The term ‘‘penalty’’ may, but
need not, be used to describe the loss that
may be incurred by members for early withdrawal of funds from term share accounts.
2. Examples. Examples of early withdrawal
penalties are:
i. Monetary penalties, such a specific dollar amount (e.g., ‘‘$10.00’’) or a specific days’
worth of dividends (e.g., ‘‘seven days’ dividends plus accrued but uncredited dividends,
but only if the account is closed’’).
ii. Adverse changes to terms such as the
lowering of the dividend rate, annual percentage yield, or reducing the compounding
or crediting frequency for funds remaining in
shares or on deposit.
iii. Reclamation of bonuses.

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Pt. 707, App. C

3. Relation to rules for IRAs or similar plans.
Penalties imposed by the Internal Revenue
Code for certain withdrawals from IRAs or
similar pension or savings plans are not
early withdrawal penalties for purposes of
this regulation.
4. Disclosing penalties. Penalties may be
stated in months, whether credit unions assess the penalty using the actual number of
days during the period or using another
method such as a number of days that occurs
in any actual sequence of the total calendar
months involved. For example, stating ‘‘one
month’s dividends’’ is permissible, whether
the credit union assesses 30 days’ dividends
during the month of April, or selects a time
period between 28 and 31 days for calculating
the dividends for all early withdrawals regardless of when the penalty is assessed.
(b)(6)(iv) Renewal Policies
1. Rollover term share accounts. Credit
unions are not required to provide a grace
period, to pay dividends during the grace period, or to disclose whether or not dividends
will be paid during the grace period. Credit
unions offering a grace period on term share
accounts must give the length of the grace
period. Commentary, appendix B, Model
Clauses, § B–1(i)(iv).
2. Nonrollover term share accounts. Credit
unions that pay dividends on funds following
the maturity of term share accounts that do
not renew automatically need not state the
rate (or annual percentage yield) that may
be paid.
(b)(7) Bonuses
1. General. Credit unions are required to
state the amount and type of bonus, and disclose any minimum balance or time requirement to obtain the bonus and when the
bonus will be provided. If the minimum balance or time requirement is otherwise required to be disclosed, credit unions need not
duplicate the disclosure for purposes of this
paragraph.

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(b)(8) Nature of Dividends
1. General. Dividends are not payable until
declared and unless sufficient current and
undivided earnings are available after required transfers to reserves at the close of a
dividend period. A disclosure explaining dividends educates members and protects credit
unions in the event that a prospective dividend cannot be paid, or is not properly payable. This disclosure is required for all dividend-bearing share accounts. Term share accounts need not include a statement regarding the nature of dividends.
2. State-chartered credit unions with interestbearing deposit accounts. State law controls
the nature of accounts (i.e., whether an account is a share account or a deposit account). If a member of a state-chartered

credit union is opening only an interestbearing deposit account, or is requesting account disclosures only for an interest-bearing deposit account (if state law requires the
depositor to hold a share account), the disclosures must generally include the following information on any dividend-bearing
share portion of the account (e.g., membership share): the par value of a share; a statement that the portion of the deposit that
represents the par value of the membership
share will earn dividends, and that dividends
are paid from current income and available
earnings after required transfers to reserves.
Further additional disclosures, such as a separate dividend rate and annual percentage
yield for the membership share, are not required (if the additional disclosures would
agree with the remainder of the account
which is invested in an interest-bearing deposit).
(c) Notice to Existing Accountholders
1. General. Only members who receive periodic statements (provided regularly at least
four times per year) and who hold accounts
of the type offered by the credit union as of
the compliance date of part 707 (generally
January 1, 1995) must receive the notice. If
following receipt of the notice members request disclosures, credit unions have twenty
calendar days from receipt of the request to
provide the disclosures. Rate and annual percentage yield information in such disclosures must conform to that required for disclosures upon request. As an alternative to
including the notice in or on the periodic
statement, the final rule permits credit
unions to send the account disclosures themselves, as long as they are sent at the same
time as the periodic statement (the disclosures may be mailed either with the periodic
statement or separately).
2. Form of the notice. The notice may be included on the periodic statement, in a member newsletter, or on a statement stuffer or
other insert, if it is clear and conspicuous.
The notice cannot be sent in a separate mailing from the periodic statement.
3. Timing. The notice may accompany the
first periodic statement after the compliance
date for part 707, or the periodic statement
for the first cycle beginning after that date.
For example, a credit union’s statement
cycle is December 15, 1994-January 14, 1995.
The statement is mailed on January 15, The
next cycle is January 15, 1995 through February 14, 1995, and the statement for that
cycle is mailed on February 15. The credit
union may provide the notice either on or
with the January 15 statement or on or with
the February 15 statement, as it covers the
first cycle after January 1, 1995.
4. Early compliance. Credit unions that provide the notice to existing members prior to

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12 CFR Ch. VII (1–1–20 Edition)

the compliance date of part 707, must be prepared to provide accurate and timely disclosures when, following receipt of the notice,
members ask for account disclosures. Such
disclosures must be provided even if they are
requested before the compliance date of part
707. Credit unions who provide early notice
to existing members need to comply with
other aspects of part 707, but need not provide disclosures already provided in compliance with part 707.
Section 707.5—Subsequent Disclosures
(a) Change in Terms
(a)(1) Advance Notice required
1. Form of notice. Credit unions may provide
a change-in-term notice on or with a regular
periodic statement or in another mailing
(such as a highlighted portion of a newsletter or statement stuffer insert). If a credit
union provides notice through revised account disclosures, the changed term must be
highlighted in some manner. For example,
credit unions may state that a particular fee
has been changed (also specifying the new
amount) or use an accompanying letter that
refers to the changed term. Credit unions are
cautioned that unless credit unions have reserved the right to change terms in the account agreement or disclosures, a change-interms notice may not be sufficient to amend
the terms under applicable law.
2. Effective date. An example of a language
for disclosing the effective date of a change
is: ‘‘As of May 11, 1995’’.
3. Terms that change upon the occurrence of
an event. A credit union offering terms that
will automatically change upon the occurrence of a stated event need not send an advance notice of the change provided the credit union fully describes the conditions of the
change in the account opening disclosures
(and sends any change-in-term notices regardless of whether the changed term affects
that member’s account at that time).
4. Examples. Examples of changes not requiring an advance change-in-terms notice
are:
i. The termination of employment for employee-members for whom account maintenance or activity fees were waived during
their employment by the credit union.
ii. The expiration of one year in a promotion described in the account opening disclosures to ‘‘waive $4.00 monthly service
charges for one year’’.
(a)(2) No Notice Required

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(a)(2)(ii) Check Printing Fees
1. Increase in fees. A notice is not required
for an increase in fees for printing share
drafts (or deposit and withdrawal slips) even
if the credit union adds some amount to the
price charged by the vendor.

(b) Notice Before Maturity for Term Share Accounts Longer Than One Month That Renew
Automatically.
1. Maturity dates on nonbusiness days. In determining the term of a term share account,
credit unions may disregard the fact that the
term will be extended beyond the disclosed
number of days if the maturity date falls on
a nonbusiness day. For example, a holiday or
weekend may cause a ‘‘one-year’’ term share
account to extend beyond 365 days (or 366, in
a leap year), or a ‘‘one-month’’ term share
account to extend beyond 31 days.
2. Disclosing when rates will be determined.
Ways to disclose when the annual percentage
yield will be available include the use of:
i. A specific date, such as ‘‘October 28’’.
ii. A date that is easily discernible, such as
‘‘the Tuesday prior to the maturity date
stated on the notice’’ or ‘‘as of the maturity
date stated on this notice’’.
3. Alternative timing rule. Under the alternative timing rule, a credit union that offers
a 10-day grace period would have to provide
the disclosures at least 10 calendar days
prior to the scheduled maturity date.
4. Club accounts. If members have agreed to
the transfer of payments from another account to a club term share account for the
next club period, the credit union must comply with the requirements for automatically
renewable term share accounts—even though
members may withdraw funds from the club
account at the end of the current club period.
5. Renewal of a term share account. In the
case of a change-in-terms that becomes effective if a rollover term share account is
subsequently renewed:
i. If the change is initiated by the credit
union, the disclosure requirements of this
paragraph apply. (Section 707.5(a) applies if
the change becomes effective prior to the
maturity of the existing term share account.)
ii. If the change is initiated by the member, the account opening disclosure requirements of § 707.4(b) apply. (If the notice required by this paragraph has been provided,
credit unions may give new account disclosures or disclosures that reflect the new
term.)
6. Example. If a member receives a notice
prior to maturity on a one-year term share
account and requests a rollover to a sixmonth account, the credit union must provide either account opening disclosures including the new maturity date or, if all other
terms previously disclosed in the prematurity notice remain the same, only the
new maturity date.
(b)(1) Maturities of Longer Than One Year
1. Highlighting changed terms. Credit unions
need not highlight terms that have changed

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Pt. 707, App. C

since the last account disclosures were provided.
(c) Notice Before Maturity for Term Share Accounts Longer Than One Year That Do not
Renew Automatically
1. Subsequent account. When funds are
transferred following maturity of a nonrollover term share account, credit unions need
not provide account disclosures unless a new
account is established.
Section 707.6—Periodic Statement
Disclosures

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(a) Rule When Statement and Crediting Periods
Vary
1. General. Credit unions are not required
to provide periodic statements. If they provide periodic statements, disclosures need
only be furnished to the extent applicable.
For example, if no dividends are earned for a
statement period, credit unions need not
state that fact. Or, credit unions may disclose ‘‘$0’’ dividends earned and ‘‘0%’’ annual
percentage yield earned.
2. Regulation E interim statements. When a
credit union provides regular quarterly
statements, and in addition provides a
monthly interim statement to comply with
Regulation E, the interim statement need
not comply with this section unless it states
dividend or rate information. (See 12 CFR
1005.9). For credit unions that choose not to
treat Regulation E activity statements as
part 707 periodic statements, the quarterly
periodic statement must reflect the annual
percentage yield earned and dividends earned
for the full quarter. However, credit unions
choosing this option need not redisclose fees
already disclosed on an interim Regulation E
activity statement on the quarterly periodic
statement. For credit unions that choose to
treat Regulation E activity statements as
part 707 periodic statements, the Regulation
E statement must meet all part 707 requirements.
3. Combined statements. Credit unions may
provide certain information about an account (such as a money market share account or regular share account) on the periodic statement for another account (such as
a share draft account) without triggering the
disclosures required by this section, as long
as:
i. The information is limited to information such as the account number, the type of
account,
balance
information,
accountholders’ names, and social security
or tax identification number; and
ii. The credit union also provides members
a periodic statement complying with this
section for the account (the money market
share account or regular share account, in
the example).

4. Other information. Additional information that may be given on or with a periodic
statement, includes:
i. Dividend rates and corresponding periodic rates to the dividend rate applied to balances during the statement period.
ii. The dollar amount of dividends earned
year-to-date.
iii. Bonuses paid (or any de minimis consideration of $10 or less).
iv. Fees for other products, such as safe deposit boxes.
v. Accounts not covered by the periodic
statement disclosure requirements (passbook
and term share accounts) may disclose any
information on the statement related to
such accounts, so long as such information is
accurate and not misleading.
5. When statement and crediting periods vary.
This rule permits credit unions, on dividendbearing share accounts, to report the annual
percentage yield earned and the amount of
dividends earned on a statement other than
on each periodic statement when the dividend period does not agree with, varies from,
or is different than, the statement period.
For dividend-bearing share accounts, credit
unions may disclose the required information either upon each periodic statement, or
on the statement on which dividends are actually earned (credited or posted) to the
member’s account. In addition, for accounts
using the average daily balance method of
calculating dividends, when the average
daily balance period and the statement periods do not agree, vary or are different, credit
unions may also report annual percentage
yield earned and the dollar amount of dividends earned on the periodic statement on
which the dividends or interest is earned.
For example, if a credit union has quarterly
dividend periods, or uses a quarterly average
daily balance on an account, the first two
monthly statements may not state annual
percentage yield earned and dividends earned
figures; the third ‘‘monthly’’ statement will
reflect the dividends earned and the annual
percentage yield earned for the entire quarter. The fees imposed disclosure must be
given on the periodic statement on which
they are imposed.
6. Length of the period. Credit unions must
disclose the length of both the dividend period (or average daily balance calculation period) and the statement period. For example,
a statement could disclose a statement period of April 16 through May 15 and further
state that ‘‘the dividends earned and the annual percentage yield earned are based on
your dividend period (or average daily balance) for the period April 1 through April
30.’’
7. Dividend period more frequent than statement period. Credit unions that calculate
dividends on a monthly basis, but send statements on a quarterly basis, may disclose a
single dividend (and annual percentage yield

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Pt. 707, App. C

12 CFR Ch. VII (1–1–20 Edition)

earned) figure. Alternatively, a credit union
may disclose three dividends earned and
three annual percentage yield earned figures,
one of each month in the quarter, as long as
the credit union states the number of days
(or beginning and ending date) in each dividend period if it varies from the statement
period.
8. Additional voluntary disclosures. For credit unions not disclosing the annual percentage yield earned and dividends earned on all
periodic statements, credit unions may place
a notice on statements without dividends
and annual percentage yield earned figures,
that the annual percentage yield earned and
dollar amount of dividends earned will appear on the first statement at the close of
the dividend (or average daily balance) period, or similar wording. Credit unions may
also choose to include a telephone number to
call for interim information, if desired by a
member.

not show any figures for ‘‘dividends earned’’
or annual percentage yield earned for the period (other than zero, at the credit union’s
option).
5. Extraordinary dividends. Extraordinary
dividends are not a component of the annual
percentage yield earned or the dividend rate,
but are an addition to the member’s account.
The dollar amount of the extraordinary dividends paid, denoted as a separate, identified
figure, must be disclosed on the periodic
statement on which the extraordinary dividends are earned. A credit union may also
disclose information regarding the calculation of the extraordinary dividends, and additional annual percentage yield earned and
dividend rate figures taking into account the
extraordinary dividend, so long as such information is accurate and not misleading.

(b) Statement Disclosures

1. General. Periodic statements must state
fees disclosed under § 707.4(b) that were debited to the account during the statement period, even if assessed for an earlier period.
2. Itemizing fees by type. In itemizing fees
imposed more than once in the period, credit
unions may group fees if they are the same
type. (See § 707.11(a)(1) of this part regarding
certain fees that are required to be grouped.)
When fees of the same type are grouped together, the description must make clear that
the dollar figure represents more than a single fee, for example, ‘‘total fees for checks
written this period.’’ Examples of fees that
may not be grouped together are—
i. Monthly maintenance and excess-activity fees.
ii. ‘‘Transfer’’ fees, if different dollar
amounts are imposed, such as $.50 for deposits and $1.00 for withdrawals.
iii. Fees for electronic fund transfers and
fees for other services, such as balance-inquiry or maintenance fees.
iv. Fees for paying overdrafts and fees for
returning checks or other items unpaid.
3. Identifying fees. Statement details must
enable the member to identify the specific
fee. For example:
i. Credit unions may use a code to identify
a particular fee if the code is explained on
the periodic statement or in documents accompanying the statement.
ii. Credit unions using debit slips may disclose the date the fee was debited on the
periodic statement and show the amount and
type of fee on the dated debit slip.
4. Relation to Regulation E. Disclosure of
fees in compliance with Regulation E complies with this section for fees related to
electronic fund transfers (for example, totaling all electronic funds transfer fees in a single figure).

(b)(1) Annual Percentage Yield Earned
1. Ledger and collected balances. Credit
unions that accrue interest using the collected balance method may use either the
ledger or collected balance methods to determine the balance used to determine the annual percentage yield earned. Ledger balance
means the record of the balance in a member’s account, as per the credit union’s
records. (The ledger balance may reflect additions and deposits for which the credit
union has not yet received final payment).
Collected balance means the record of balance in a member’s account reflecting collected funds, that is, cash or checks deposited in the credit union which have been presented for payment and for which payment
has actually been received. (See Regulation
CC, 12 CFR 229.14).

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(b)(2) Amount of Dividends or Interest
1. Definition of earned. The term ‘‘earned’’
is defined to include dividends and interest
either ‘‘accrued’’ or ‘‘paid and credited.’’
Credit unions may use either the ‘‘ledger’’ or
the ‘‘collected’’ balance for either option.
(See 707.6(b)(1)1. and 707.7(c)2. of this appendix.)
2. Accrued interest. Credit unions must state
the amount of interest that accrued during
the statement period, even if it was not credited.
3. Terminology. In disclosing dividends
earned for the period, credit unions must use
the term ‘‘dividends’’ or terminology such
as: ‘‘Dividends paid,’’ to describe dividends
that have been credited; ‘‘Dividends accrued,’’ to indicate that dividends are not
yet credited.
4. Closed accounts. If a member closes an
account between crediting periods and forfeits accrued dividends, the credit union may

(b)(3) Fees Imposed

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(b)(4) Length of Period
1. General. Credit unions providing the beginning and ending dates of the period must
make clear whether both dates are included
in the period. For example, stating ‘‘April 1
through April 30’’ would clearly indicate
that both April 1 and April 30 are included in
the period.
2. Opening or closing an account mid-cycle. If
an account is opened or closed during the period for which a statement is sent, credit
unions must calculate the annual percentage
yield earned based on account balances for
each day the account was open.
Section 707.7—Payment of Dividends

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(a) Permissible Methods
1. Prohibited calculation methods. Calculation methods that do not comply with the
requirement to pay dividends on the full
amount of principal in the account each day
include:
i. The ‘‘rollback’’ method, also known as
the ‘‘grace period’’ or ‘‘in by the 10th’’ method, where credit unions pay dividends on the
lowest balance in the account for the period.
ii. The ‘‘increments of par value’’ method,
where credit unions only pay dividends on
full shares in an account, e.g., a credit union
with $5 par value shares pays dividends on
$20 of a $24 account balance.
iii. The ‘‘ending balance’’ method, where
credit unions pay dividends on the balance in
the account at the end of the period.
iv. The ‘‘investable balance’’ method,
where credit unions pay dividends on a percentage of the balance, excluding an amount
credit unions set aside for reserve requirements.
v. The ‘‘low balance’’ method, where credit
unions pay dividends on the lowest balance
in the account for any day in that period.
2. Use of 365-day basis. Credit unions may
apply a daily periodic rate that is greater
than 1⁄365 of the dividend rate—such as 1⁄360 of
the dividend rate—as long as it is applied 365
days a year.
3. Periodic dividend payments. A credit
union can pay dividends each day on the account and still make uniform dividend payments. For example, for a one-year term
share account, a credit union could make
monthly dividend payments that are equal
to 1⁄12 of the amount of dividends that will be
earned for a 365-day period (or 11 uniform
monthly payments—each equal to roughly
1⁄12 of the total amount of dividends—and one
payment that accounts to the remainder of
the total amount of dividends earned for the
period).
4. Leap year. Credit unions may apply a
daily rate of 1⁄366 or 1⁄365 of the dividend rate
for 366 days in a leap year, if the account will
earn dividends for February 29.

5. Maturity of term share accounts. Credit
unions are not required to pay dividends
after term share accounts mature. Examples
include:
i. During any grace period offered by a
credit union for an automatically renewable
term share account, if the member decides
during that period not to renew the account.
ii. Following the maturity of nonrollover
term share accounts.
iii. When the maturity date falls on a holiday, and the member must wait until the
next business day to obtain the funds.
6. Dormant accounts. Credit unions must
pay dividends on funds in an account, even if
inactivity or the infrequency of transactions
would permit the credit union to consider
the account to be ‘‘inactive’’ or ‘‘dormant’’
(or similar status) as defined by state or
other law or the account contract.
7. Insufficient funds. Credit unions are not
required to pay dividends on checks or share
drafts deposited to a member’s account that
are returned for insufficient funds. If a credit
union accrues dividends on a check that it
later determines is not good, it may deduct
from the accrued dividends any dividends attributed to the proceeds of the returned
check. If dividends have already been credited before the credit union determines the
item has insufficient funds, the credit union
may deduct the amount of the check and associated dividends from the account balance.
The amount deducted will not be reflected in
the dividend amount and annual percentage
yield earned reported for the next period.
8. Account drawn below par value of a share.
If a member draws his or her account below
the par value of a share, dividends would
continue to accrue on the account so long as
any minimum balance requirement is met.
However, under the NCUA Standard FCU Bylaws, if a member who reduces his or her
share balance below the value of a par value
share and does not increase the balance
within at least six months, the credit union
may terminate the member’s membership.
State-chartered credit unions may have
similar termination provisions.
(a)(2) Determination of Minimum Balance To
Earn Dividends
1. General. Credit unions may set minimum
balance requirements that must be met in
order to earn dividends. However, credit
unions must use the same method to determine a minimum balance required to earn
dividends as they use to determine the balance upon which dividends will accrue and
pay. For example, a credit union that calculates dividends on the daily balance method must use the daily balance method to determine if the minimum balance to earn
dividends has been met. Similarly, a credit
union that calculates dividends on the average daily balance method must use the average daily balance method to determine if the

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Pt. 707, App. C

12 CFR Ch. VII (1–1–20 Edition)

minimum to earn dividends has been met.
Credit unions may have a par value of a
share that is different from the minimum
balance requirement to earn dividends. (See
commentary to § 707.4(b)(3)(i)).
2. Daily balance accounts. Credit unions
that require a minimum balance to earn
dividends may choose not to pay dividends
for days when the balance drops below the
required minimum balance if they use the
daily balance method to calculate dividends.
For example, a credit union could set a minimum daily balance level of $200 and pay
dividends only those days the $200 daily balance is maintained.
3. Average daily balance accounts. Credit
unions that require a minimum balance to
earn dividends may choose not to pay dividends for the average daily balance calculation period in which the average daily balance drops below the required minimum, if
they use the average daily balance method
to calculate dividends. For example, a credit
union could set a minimum average daily
balance level of $200 and pay dividends only
if the $200 average daily balance is met for
the calculation period.
4. Beneficial method. Credit unions may not
require members to maintain both a minimum daily balance and a minimum average
daily balance to earn dividends, such as by
requiring the member to maintain a $500
daily balance and a prescribed average daily
balance (whether higher or lower). But a
credit union could offer a minimum balance
to earn dividends that includes an additional
method that is ‘‘unequivocally beneficial’’ to
the member such as the following:
i. A credit union using the daily balance
method to calculate dividends and requiring
a $500 minimum daily balance could choose
to pay dividends on the account (for those
days the minimum balance is not met) as
long as the member maintained an average
daily balance throughout the month of $400.
ii. A credit union using the average daily
balance method to calculate dividends and
requiring a $400 minimum average daily balance could choose to pay dividends on the account as long as the member maintained a
daily balance of $500 for at least half of the
days in the period.
iii. A credit union using either the daily
balance method or average daily balance
method to calculate dividends that requires:
(A) a $500 daily balance; or (B) a $400 average
daily balance to pay dividends on the account.
5. Paying on full balance. Credit unions
must pay dividends on the full balance in the
account that meets the required minimum
balance. For example, if $300 is the minimum
daily balance required to earn dividends, and
a member deposits $500, the credit union
must pay the stated dividend rate on the full
$500 and not just on the $200.

6. Negative balances prohibited. Credit
unions must treat a negative account balance as zero to determine:
i. The daily or average daily balance on
which dividends will be paid.
ii. Whether any minimum balance to earn
dividends is met. (See commentary to appendix A, Part II, which prohibits credit unions
from using negative balances in calculating
the dividends figure for the annual percentage yield earned.)
7. Club accounts. Credit unions offering club
accounts (such as a ‘‘holiday’’ or ‘‘vacation’’
club accounts) cannot impose a minimum
balance requirement for dividends based on
the total number or dollar amount of payments required under the club plan. For example, if a plan calls for $10 weekly payments for 50 weeks, the credit union cannot
set a $500 minimum balance and then pay
only if the member makes all 50 payments.
8. Minimum balances not affecting dividends.
Credit unions may use the daily balance, average daily balance, or other computation
method to calculate minimum balance requirements not involving the payment of
dividends—such as to compute minimum balances for assessing fees.
(b) Compounding and Crediting Policies
1. General. Credit unions choosing to compound dividends may compound or credit
dividends annually, semi-annually, quarterly, monthly, daily, continuously, or on
any other basis.
2. Withdrawals prior to crediting date. If
members withdraw funds (without closing
the account), prior to a scheduled crediting
date, credit unions may delay paying the accrued dividends on the withdrawn amount
until the scheduled crediting date, but may
not avoid paying dividends.
3. Closed accounts. Subject to state or other
law, a credit union may choose not to pay
accrued dividends if members close an account prior to the date accrued dividends are
credited, as long as the credit union has disclosed that fact. If accrued dividends are
paid, accrued dividends must be paid on
funds up until the account is closed or the
account is deemed closed. For example, if an
account is closed on a Tuesday, accrued dividends on the funds through Monday would be
paid. Whether (and the conditions under
which) credit unions are permitted to deem
an account closed by a member is determined by state or other law, if any. Credit
unions are cautioned that bylaw requirements may prevent a credit union from
deeming a member’s account closed until
certain time periods are extinguished. (See
NCUA Standard FCU Bylaws, Art. III, § 3.
Such bylaw requirements may not be overridden without proper agency approval.)

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National Credit Union Administration

Pt. 707, App. C

(c) Date Dividends Begin To Accrue
1. Relation to Regulation CC. Credit unions
may rely on the Expedited Funds Availability Act (EFAA) and Regulation CC (12
CFR part 229) to determine, for example,
when a deposit is considered made for purposes of dividend accrual, or when dividends
need not be paid on funds because a deposited check is later returned unpaid.
2. Ledger and collected balances. Credit
unions may calculate dividends by using a
‘‘ledger’’ balance or ‘‘collected’’ balance
method, as long as the crediting requirements of the EFAA are met (12 CFR 229.14).
3. Withdrawal of principal. Credit unions
must accrue dividends on funds until the
funds are withdrawn from the account. For
example, if a check is debited to an account
on a Tuesday, the credit union must accrue
dividends on those funds through Monday.
Section 707.8—Advertising

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(a) Misleading or Inaccurate Advertisements
1. General. All advertisements are subject
to the rule against misleading or inaccurate
advertisements, even though the disclosure
applicable to various media differ. The word
‘‘profit’’ may be used when referring to dividend-bearing share accounts, as it reflects
the nature of dividends. The word ‘‘profit’’
may not be used when referring to interestbearing deposit accounts.
2. Indoor signs. An indoor sign advertising
an annual percentage yield is not misleading
or inaccurate if:
i. For a tiered-rate account, it also provides the upper and lower dollar amounts of
the tier corresponding to the advertised annual percentage yield.
ii. For a term share account, it also provides the term required to obtain the advertised annual percentage yield.
3. ‘‘Free’’ or ‘‘no cost’’ accounts. For purposes of determining whether an account can
be advertised as ‘‘free’’ or ‘‘no cost,’’ maintenance and activity fees include:
i. Any fee imposed if a minimum balance
requirement is not met, or if the member exceeds a specified number of transactions.
ii. Transaction and service fees that members reasonably expect to be imposed on an
account on a regular basis (see comments
4(b)(4)–1 and 2).
iii. A flat fee, such as a monthly service
fee.
iv. Fees imposed to deposit, withdraw or
transfer funds, including per-check or pertransaction charges (for example, $.25 for
each withdrawal, whether by check, in person).
4. Other fees. Examples of fees that are not
maintenance or activity fees include:
i. Fees that are not required to be disclosed
under § 707.4(b)(4).
ii. Check printing fees of any type.

iii. Fees for obtaining copies of checks,
whether or not the original checks have been
truncated or returned to the member periodically.
iv. Balance inquiry fees.
v. Fees assessed against a dormant account.
vi. Fees for using an ATM.
vii. Fees for electronic transfer services
that are not required to obtain an account,
such as preauthorized transfers or home electronic credit union services.
viii. Stop payment fees and fees for share
drafts or checks returned unpaid.
5. Similar terms. An advertisement may not
use a term such as ‘‘fees waived’’ if a maintenance or activity fee may be imposed because it is similar to the terms ‘‘free’’ or ‘‘no
cost.’’
6. Specific account services. Credit unions
may advertise a specific account service or
feature as free as long as no fee is imposed
for that service or feature. For example,
credit unions offering an account that is free
of deposit or withdrawal fees could advertise
that fact, as long as the advertisement does
not mislead members by implying that the
account is free and that no other fee (a
monthly service fee, for example) may be
charged.
7. Free for limited time. If an account (or a
specific account service) is free only for a
limited period of time—for example, for one
year following the account opening—the account (or service) may be advertised as free
as long as the time period is stated.
8. Conditions not related to share accounts.
Credit unions may advertise accounts as
‘‘free’’ for members that meet conditions not
related to share accounts, such as the member’s age. For example, credit unions may
advertise a share draft account as ‘‘free for
persons over 65 years old,’’ even though a
maintenance or activity fee may be assessed
on accounts held by members that are 65 or
younger.
9. Electronic advertising. If an electronic advertisement, such as an advertisement appearing on an internet Web site, displays a
triggering term, such as a bonus or annual
percentage yield, the advertisement must
clearly refer the member to the location
where the additional required information
begins. For example, an advertisement that
includes a bonus or annual percentage yield
may be accompanied by a link that directly
takes the member to the additional information.
10. Examples. Examples of advertisements
that would ordinarily be misleading, inaccurate, or misrepresent the deposit contract
are:
i. Representing an overdraft service as a
‘‘line of credit,’’ unless the service is subject
to 12 CFR part 1026 (Regulation Z).
ii. Representing that the credit union will
honor all checks or authorize payment of all

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Pt. 707, App. C

12 CFR Ch. VII (1–1–20 Edition)

transactions that overdraw an account, with
or without a specified dollar limit, when the
credit union retains discretion at any time
not to honor checks or authorize transactions.
iii. Representing that members with an
overdrawn account can maintain a negative
balance when the terms of the account’s
overdraft service require members promptly
to return the share account to a positive balance.
iv. Describing a credit union’s overdraft
service solely as protection against bounced
checks when the credit union also permits
overdrafts for a fee for overdrawing their accounts by other means, such as ATM withdrawals, debit card transactions, or other
electronic fund transfers.
v. Advertising an account-related service
for which the credit union charges a fee in an
advertisement that also uses the word ‘‘free’’
or ‘‘no cost’’ or a similar term to describe
the account, unless the advertisement clearly and conspicuously indicates that there is
a cost associated with the service. If the fee
is a maintenance or activity fee under
§ 707.8(a)(2) of this part, however, an advertisement may not describe the account as
‘‘free’’ or ‘‘no cost’’ or contain a similar
term even if the fee is disclosed in the advertisement.
11. Additional disclosures in connection with
the payment of overdrafts. The rule in
§ 707.3(a), providing that disclosures required
by § 707.8 may be provided to the member in
electronic form without regard to E–Sign
Act requirements, applies to the disclosures
described in § 707.11(b), which are incorporated by reference in § 707.8(f).

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(b) Permissible Rates
1. Tiered-rate accounts. An advertisement
for a tiered-rate account that states an annual percentage yield must also state the annual percentage yield for each tier, along
with corresponding minimum balance requirements. Any dividend rates stated must
appear in conjunction with the annual percentage yields for each tier.
2. Stepped-rate accounts. An advertisement
that states a dividend rate for a stepped-rate
account must state all the dividend rates
and the time period that each rate is in effect.
3. Representative examples. An advertisement that states an annual percentage yield
for a type of account (such as a term share
account for a specified term) need not state
the annual percentage yield applicable to
every variation offered by the credit union
or indicate that other maturity terms are
available. In an advertisement stating that
rates for an account may vary depending on
the amount of the initial deposit or the term
of a term share account, credit unions need
not list each balance level and term offered.
Instead, the advertisement may:

i. Provide a representative example of the
annual percentage yields offered, clearly described as such. For example, if a credit
union offers a $25 bonus on all term share accounts and the annual percentage yield will
vary depending on the term selected, the
credit union may provide a disclosure of the
annual percentage yield as follows: ‘‘For example, our 6-month share certificate currently pays a 3.15% annual percentage
yield.’’
ii. Indicate that various rates are available, such as by stating short-term and
longer-term maturities along with the applicable annual percentage yields: ‘‘We offer
share certificates with annual percentage
yields that depend on the maturity you
choose. For example, our one-month share
certificate earns a 2.75% APY. Or, earn a
5.25% APY for a three-year share certificate.’’
(c) When Additional Disclosures are Required
1. Trigger terms. The following are examples
of information stated in advertisements that
are not ‘‘trigger’’ terms:
i. ‘‘One, three, and five year share certificates available’’.
ii. ‘‘Bonus rates available’’.
iii. ‘‘1% over our current rate,’’ so long as
the rates are not determinable from the advertisement.
(c)(2) Time Annual Percentage Yield is Offered
1. Specified recent date. 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. For example, the
printing date of a brochure printed once for
an account promotion that will be in effect
for six months would be considered ‘‘recent,’’
even though rates change during the sixmonth period. Dividend rates published in a
daily newspaper or on television must be a
rate offered shortly before (or on) the date
the rates are published or broadcast. Similarly, dividend rates published in a daily
newspaper or on television must be a rate reflecting either the preceding dividend period,
or a prospective rate, and the option chosen
should be noted.
2. Reference to date of publication. 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.
(c)(5) Effect of Fees
1. Scope. This requirement applies only to
maintenance or activity fees as described in
paragraph 8(a).

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National Credit Union Administration

Pt. 707, App. C

(c)(6) Features of Term Share Accounts
(c)(6)(i) Time Requirements
1. Club accounts. If a club account has a
maturity date, but the term may vary depending on when the account is opened, credit unions may use a phrase such as: ‘‘The maturity date of this club account is November
15; its term varies depending on when the account is opened.’’
(c)(6)(ii) Early Withdrawal Penalties
1. Discretionary penalties. Credit unions imposing early withdrawal penalties on a caseby-case basis may disclose that they ‘‘may’’
(rather than ‘‘will’’) impose a penalty if that
accurately describes the account terms.
(d) Bonuses
1. General reference to ‘‘bonus.’’ General
statements such as ‘‘bonus checking’’ or
‘‘get a bonus when you open a checking account’’ do not trigger the bonus disclosures.
(e) Exemption for Certain Advertisements
(e)(1) Certain Media

ly, monthly, quarterly, biannually, annually,
or irregularly) or of any certain format (e.g.
magazine, bulletin, broadside, circular, mimeograph, letter, or pamphlet) in order to be
eligible for the partial advertising exemption.
2. Permissible Distribution. In order for newsletters to retain the partial advertising exemption, newsletters can be sent to existing
credit union members only. Any distribution
reasonably calculated to reach only members is also acceptable, such as:
i. Mailing newsletters to existing members.
ii. Distributing newsletters at a function
reasonably limited to members, such as an
annual meeting or member picnic.
iii. Displaying or offering newsletters at a
credit union lobby, branch, or office.
3. Impermissible Distribution. Distributing a
newsletter in a place open to nonmembers,
such as a sponsor’s lunch room, is not reasonably calculated to reach only members,
and such newsletter would be subject to all
applicable advertising rules.
Section 707.9—Enforcement and Record
Retention

(e)(1)(i)
1. Internet advertisements. The exemption
for advertisements made through broadcast
or electronic media does not extend to advertisements posted on the internet or sent by
e-mail.
2. Internet advertisements. The exemption
for advertisements made through broadcast
or electronic media does not extend to advertisements made by electronic communication, such as advertisements posted on the
Internet or sent by e-mail.
(e)(1)(iii)
1. Tiered-rate accounts. Solicitations for
tiered-rate accounts made through telephone
response machines must provide all annual
percentage yields and the balance requirements applicable to each tier.
(e)(2) Indoor Signs
(e)(2)(i)
1. General. Indoor signs include advertisements displayed on computer screens, banners, preprinted posters, and chalk or peg
boards. Any advertisement inside the premises that can be retained by a member (such
as a brochure or a printout from a computer)
is not an indoor sign.

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(e)(3) Newsletters
1. General. The partial exemption applies to
all credit union newsletters, whether instituted before or after the compliance date of
part 707. Nor must a newsletter be of any
particular circulation frequency (e.g., week-

(c) Record Retention
1. Evidence of required actions. Credit unions
comply with the regulation by demonstrating they have done the following:
i. Established and maintained procedures
for paying dividends and providing timely
disclosures as required by the regulation,
and
ii. Retained sample disclosures for each
type account offered to members, such as account-opening disclosures, copies of advertisements, and change-in-term notices; and
information regarding the dividend rates and
annual percentage yields offered.
2. Methods of retaining evidence. Credit
unions must be able to reconstruct the required disclosures or other actions. They
need not keep disclosures or other business
records in hard copy. Records evidencing
compliance may be retained on microfilm,
microfiche, or by other methods that reproduce records accurately (including computer
files). Credit unions must retain copies of all
printed advertisements and the text of all
advertisements conveyed by electronic or
broadcast media, and newsletters.
3. Payment of dividends. Credit unions must
retain sufficient rate and balance information to permit the verification of dividends
paid on an account, including the payment of
dividends on the full principal balance.

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Pt. 707, App. C

12 CFR Ch. VII (1–1–20 Edition)

Section 707.10 [Reserved]
Section 707.11—Additional Disclosures
Regarding the Payment of Overdrafts
(a) Disclosure of total fees on periodic
statements

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(a)(1) General.
1. Transfer services. The overdraft services
covered by § 707.11(a)(1) of this part do not include a service providing for the transfer of
funds from another share account of the
member to permit the payment of items
without creating an overdraft, even if a fee is
charged for the transfer.
1. Examples of credit unions advertising the
payment of overdrafts. A credit union would
trigger the periodic statement disclosures if
it:
i. Promotes the credit union’s policy or
practice of paying some overdrafts, unless
the service would be subject to 12 CFR part
1026 (Regulation Z), in advertisements using
broadcast media, brochures, telephone solicitations ,or electronic mail, or on Internet
sites, ATM screens or receipts, billboards, or
indoor signs. But see, Sec. 707.11(a)(2) of this
part regarding communications about the
payment of overdrafts that would not trigger
periodic statement disclosures;
ii. Includes a message on a periodic statement informing the member of an overdraft
limit or the amount of funds available for
overdrafts. For example, a credit union that
includes a message on a periodic statement
informing the member of a $500 overdraft
limit or that the member has $300 remaining
on the overdraft limit, is promoting an overdraft service;
iii. Discloses an overdraft limit or includes
the dollar amount of an overdraft limit in a
balance disclosed by any means, including on
an ATM receipt or on an automated system,
such as a telephone response machine, ATM
screen, or the credit union’s Internet site.
2. Fees for paying overdrafts. Credit unions
must disclose on periodic statements a total
dollar amount for all fees or charges imposed
on the account for paying overdrafts. The
credit union must disclose separate totals
for the statement period and for the calendar
year-to-date. The total dollar amount for
each of these periods includes per-item fees
as well as interest charges, daily or other
periodic fees, or fees charged for maintaining
an account in overdraft status, whether the
overdraft is by check, debit card transaction,
or by any other transaction type. It also includes fees charged when there are insufficient funds because previously deposited
funds are subject to a hold or are uncollected. It does not include fees for transferring funds from another account of the member to avoid an overdraft, or fees charged
under a service subject to Regulation Z (12
CFR part 1026). See also comment 11(c)–2.

Under § 707.11(a)(1)(i), the disclosure must describe the total dollar amount for all fees or
charges imposed on the account for the
statement period and calendar year-to-date
for paying overdrafts using the term ‘‘Total
Overdraft Fees.’’ This requirement applies
notwithstanding comment 3(a)–2.
3. Fees for returning items unpaid. The total
dollar amount for all fees for returning items
unpaid must include all fees charged to the
account for dishonoring or returning checks
or other items drawn on the account. The
credit union must disclose separate totals
for the statement period and for the calendar
year-to-date. Fees imposed when deposited
items are returned are not included. Credit
unions may use terminology such as ‘‘returned item fee’’ or ‘‘NSF fee’’ to describe
fees for returning items unpaid.
4. Waived fees. In some cases, a credit union
may provide a statement for the current period reflecting that fees imposed during a
previous period were waived and credited to
the account. Credit unions may, but are not
required to, reflect the adjustment in the
total for the calendar year-to-date and in the
applicable statement period. For example, if
a credit union assesses a fee in January and
refunds the fee in February, the credit union
could disclose a year-to-date total reflecting
the amount credited, but it should not affect
the total disclosed for the February statement period, because the fee was not assessed in the February statement period. If a
credit union assesses and then waives and
credits a fee within the same cycle, the credit union may, at its option, reflect the adjustment in the total disclosed for fees imposed during the current statement period
and for the total for the calendar year-todate. Thus, if the credit union assesses and
waives the fee in the February statement period, the February fee total could reflect a
total net of the waived fee.
5. Totals for the calendar year to date. Some
credit unions’ statement periods do not coincide with the calendar month. In such cases,
the credit union may disclose a calendar
year-to-date total by aggregating fees for 12
monthly cycles, starting with the period
that begins during January and finishing
with the period that begins during December. For example, if statement periods begin
on the 10th day of each month, the statement covering December 10, 2006 through
January 9, 2007 may disclose the year-to-date
total for fees imposed from January 10, 2006
through January 9, 2007. Alternatively, the
credit union could provide a statement for
the cycle ending January 9, 2007, showing the
year-to-date total for fees imposed January
1, 2006 through December 31, 2006.
6. Itemization of fees. A credit union may
itemize each fee in addition to providing the
disclosures required by § 707.11(a)(1) of this
part.

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Pt. 707, App. C

(a)(3) Time period covered by disclosures
1. Periodic statement disclosures. The disclosures under § 707.11(a) must be included on
periodic statements provided by a credit
union starting with the first statement period that begins after January 1, 2010. For example, if a member’s statement period typically closes on the 15th of each month, a
credit union must provide the disclosures required by § 707.11(a)(1) on subsequent periodic
statements for that member beginning with
the statement reflecting the period from
January 16, 2010 to February 15, 2010.
(a)(5) Acquired accounts

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(b) Advertising disclosures in connection with
overdraft services
1. Examples of credit unions promoting the
payment of overdrafts. A credit union must include
the
advertising
disclosures
in
§ 707.11(b)(1) of this part if the credit union:
i. Promotes the credit union’s policy or
practice of paying overdrafts, unless the
service would be subject to 12 CFR part 1026
(Regulation Z). This includes advertisements
using print media such as newspapers or brochures, telephone solicitations, electronic
mail, or messages posted on an Internet site.
But see, § 707.11(b)(2) of this part for communications that are not subject to the additional advertising disclosures;
ii. Includes a message on a periodic statement informing the member of an overdraft
limit or the amount of funds available for
overdrafts. For example, a credit union that
includes a message on a periodic statement
informing the member of a $500 overdraft
limit or that the member has $300 remaining
on the overdraft limit, is promoting an overdraft service.
iii. Discloses an overdraft limit or includes
the dollar amount of an overdraft limit in a
balance disclosed on an automated system,
such as a telephone response machine, ATM
screen, or the credit union’s Internet site.
See, however, § 707.11(b)(3) of this part.
2. Transfer services. The overdraft services
covered by § 707.11(b)(1) of this part do not include a service providing for the transfer of
funds from another share account of the
member to permit the payment of items
without creating an overdraft, even if a fee is
charged for the transfer.
3. Electronic media. The exception for advertisements made through broadcast or electronic media, such as television or radio,
does not apply to advertisements posted on a
credit union’s Internet site, on an ATM
screen, provided on telephone response machines, or sent by electronic mail.
4. Fees. The fees that must be disclosed
under § 707.11(b)(1) of this part include peritem fees as well as interest charges, daily or
other periodic fees, and fees charged for
maintaining an account in overdraft status,

whether the overdraft is by check or by
other means. The fees also include fees
charged when there are insufficient funds because previously deposited funds are subject
to a hold or are uncollected. The fees do not
include fees for transferring funds from another account to avoid an overdraft or fees
charged when the credit union has previously agreed in writing to pay items that
overdraw the account and the service is subject to 12 CFR part 1026 (Regulation Z).
5. Categories of transactions. An exhaustive
list of transactions is not required. Disclosing that a fee may be imposed for covering overdrafts created by check, in-person
withdrawal, ATM withdrawal, or other electronic means would satisfy the requirements
of § 707.11(b)(1)(ii) of this part where the fee
may be imposed in these circumstances. See
comment 4(b)(4)-5 of this part.
6. Time period to repay. If a credit union reserves the right to require a member to pay
an overdraft immediately or on demand instead of affording members a specific time
period to establish a positive balance in the
account, a credit union may comply with
§ 707.11(b)(1)(iii) of this part by disclosing
this fact.
7. Circumstances for nonpayment. A credit
union must describe the circumstances under
which it will not pay an overdraft. It is sufficient to state, as applicable: ‘‘Whether your
overdrafts will be paid is discretionary and
we reserve the right not to pay. For example,
we typically do not pay overdrafts if your account is not in good standing, or you are not
making regular deposits, or you have too
many overdrafts.’’
8. Advertising an account as ‘‘free.’’ If the
advertised account-related service is an
overdraft service subject to the requirements
of § 707.11(b)(1) of this part, credit unions
must disclose the fee or fees for the payment
of each overdraft, not merely that a cost is
associated with the overdraft service, as well
as other required information. Compliance
with comment 8(a)—10.v is not sufficient.
(c) Disclosure of account balances
1. Balance that does not include additional
amounts. For purposes of the balance disclosure requirement in § 707.11(c), if a credit
union discloses balance information to a
member through an automated system, it
must disclose a balance that excludes any
funds the credit union may provide to cover
an overdraft pursuant to a discretionary
overdraft service that will be paid by the
credit union under a service subject to part
1026 of this title (Regulation Z) or that will
be transferred from another account held individually or jointly by a member. The balance may, but need not, include funds that
are deposited in the member’s account, such
as from a check, that are not yet made available for withdrawal in accordance with the
funds availability rules under part 229 of the

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Pt. 707, App. C

12 CFR Ch. VII (1–1–20 Edition)

title (Regulation CC). In addition, the balance may, but need not, include funds that
are held by the credit union to satisfy a prior
obligation of the member, for example, to
cover a hold for an ATM or debit card transaction that has been authorized but for
which the credit union has not settled.
2. Retail sweep programs. In a retail sweep
program, a credit union establishes two legally distinct subaccounts, a share draft subaccount and a share savings subaccount,
which together make up the member’s account. The credit union allocates and transfers funds between the two subaccounts in
order to maximize the balance in the share
savings account while complying with the
monthly limitations on transfers out of savings accounts under the Federal Reserve
Board’s Regulation D, 12 CFR 204.2(d)(2). Retail sweep programs are generally not established for the purpose of covering overdrafts.
Rather, credit unions typically establish retail sweep programs by agreement with the
member in order for the credit union to minimize its transaction account reserve requirements and, in some cases, to provide a
higher interest rate than the member would
earn on a share draft account alone. Section
707.11(c) does not require a credit union to
exclude funds from the member’s balance
that may be transferred from another account pursuant to a retail sweep program
that is established for such purposes and
that has the following characteristics:
i. The account involved complies with the
Federal Reserve Board’s Regulation D, 12
CFR 204.2(d)(2),
ii. The member does not have direct access
to the share savings subaccount that is part
of the retail sweep program, and
iii. The member’s periodic statements
show the account balance as the combined
balance in the subaccounts.
3. Additional balance. The credit union may
disclose additional balances supplemented by
funds that may be provided by the credit
union to cover an overdraft, whether pursuant to a discretionary overdraft service, a
service subject to Regulation Z (12 CFR part
1026), or a service that transfers funds from
another account held individually or jointly
by the member, so long as the credit union
prominently states that any additional balance includes these additional overdraft
amounts. The credit union may not simply
state, for instance, that the second balance
is the members ‘‘available balance,’’ or contains ‘‘available funds.’’ Rather, the credit
union should provide enough information to
convey that the second balance includes
these amounts. For example, the credit
union may state that the balance includes
‘‘overdraft funds.’’ Where a member has not
opted into, or as applicable, has opted out of
the credit union’s discretionary overdraft
service, any additional balance disclosed
should not include funds that otherwise

might be available under that service. Where
a member has not opted into, or as applicable, has opted out of, the credit union’s discretionary overdraft service for some, but
not all transactions (e.g., the member has
not opted into overdraft services for ATM
and one-time debit card transactions), a
credit union that includes these additional
overdraft funds in the second balance should
convey that the overdraft funds are not
available for all transactions. For example,
the credit union could state that overdraft
funds are not available for ATM and onetime (or everyday) debit card transactions.
Similarly, if funds are not available for all
transactions pursuant to a service subject to
Regulation Z (12 CFR part 1026) or a service
that transfers funds from another account, a
second balance that includes such funds
should also indicate this fact.
4. Automated systems. The balance disclosure requirement in § 707.11(c) applies to any
automated system through which the member requests a balance, including, but not
limited to, a telephone response system, the
credit union’s Internet site, or an ATM. The
requirement applies whether the credit
union discloses a balance through an ATM
owned or operated by the credit union or
through an ATM not owned or operated by
the credit union, including an ATM operated
by an entity that is not a financial institution. If the balance is obtained at an ATM,
the requirement also applies whether the
balance is disclosed on the ATM screen or on
a paper receipt.
Appendix A to Part 707—Annual Percentage
Yield Calculation
Part I. Annual Percentage Yield for Account
Disclosures and Advertising Purposes
1. Rounding for calculations. The following
are examples of permissible rounding rules
for calculating dividends and the annual percentage yield:
i. The daily rate applied to a balance carried to five or more decimals. For example;
.008219178%, 3.00% for a 365 day year, would
be rounded to no less than .00822%.
ii. The daily dividends or interest earned
carried to five or more decimals. For example; $.08219178082, daily dividends on $1,000 at
3% for a 365 day year, would be rounded to no
less than $.08219.
2. Exponents in a leap year. The annual percentage yield formula’s exponent numerator
will remain 365 in leap years. The ‘‘days in
term’’ figure used in the denominator should
be consistent with the length of term used in
the dividends calculation.
3. First tier of a tiered-rate account. When
credit unions use a rate table, the first tier
of a tiered rate account is to be disclosed and
advertised; ‘‘Up to but not exceeding * * * ’’,
‘‘$.01 to * * * ’’, or similar language.

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National Credit Union Administration

Pt. 707, App. C

4. Term Share Accounts Opened in Midterm.
For club accounts that meet the definition of
a term share account, the annual percentage
yield is based on the maximum number of
days in the term not to exceed 365 days (or
366 days in a leap year).
Part II. Annual Percentage Yield Earned for
Periodic Statements
1. Balance method. The dividend or interest
figure used in the calculation of the annual
percentage yield earned may be derived from
the daily balance method or the average
daily balance method. Regardless of the dividend calculation method, the balance used in
the annual percentage yield earned formula
is the average daily balance. The average
daily balance calculation is the sum of the
balances for each day in the period divided
by the number of days in the period. The balance for each day is based on a point in time;
i.e. beginning of day balance, end of day balance, closing of day balance, etc. Each day’s
balance, for dividend accrual and payment
purposes, must be based on the same point in
time and cannot be based on the day’s low
balance.
2. Negative balances prohibited. Credit
unions must treat a negative account balance as zero to determine the balance on
which the annual percentage yield earned is
calculated. (See commentary to § 707.7(a)(2).)

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A. General Formula
1. Accrued but uncredited dividends. To calculate the annual percentage yield earned,
accrued but uncredited dividends:
i. May not be included in the balance for
statements that are issued at the same time
or less frequently than the account’s
compounding and crediting frequency. For
example, if monthly statements are sent for
an account that compounds dividends daily
and credits dividends monthly, the balance
may not be increased each day to reflect the
effect of daily compounding. Assume a credit
union will pay $13.70 in dividends on $100,000
for the first day, $6.85 in dividends on
$50,013.70 for the second day, and $3.43 in dividends on $25,020.55 for the third day. The sum
of each days balance is $175,000 (does not include accrued, but uncredited, dividends
amounts $13.70, $6.85, and $3.43), thereby resulting in an average daily balance for the
three days of $58,333.33.
ii. Must be included in the balance for succeeding statements if a statement is issued
more frequently than compounded dividends
is credited on an account. For example, if
monthly statements are sent for an account
that compounds dividends daily and credits
dividends quarterly, the balance for the second monthly statement would include dividends that had accrued for the prior month.
Assume a credit union will pay $411.78 in
dividends on 30 days of $100,000, $427.28 in

dividends on 31 days of $100,411.78, and $415.23
in dividends on 30 days of $100,839.06. The balance (average daily balance in the account
for the period) for the second 31 days is
$100,411.78.
2. Rounding. The dividends earned figure
used to calculate the annual percentage
yield earned must be rounded to two decimals to reflect the amount actually paid.
For example, if the dividends earned for a
statement period is $20.074 and the credit
union pays the member $20.07, the credit
union must use $20.07 (not $20.074) to calculate the annual percentage yield earned.
For accounts that pay dividends based on the
daily balance method, compound and credit
dividends or interest quarterly, and send
monthly statements, the credit union may,
but need not, round accrued dividends to two
decimals for calculating the ‘‘projected’’ or
‘‘anticipated’’
annual
percentage
yield
earned on the first two monthly statements
issued during the quarter. However, on the
quarterly statement the dividends earned
figure must reflect the amount actually
paid.
3. Compounding frequency using the average
daily balance method. Any compounding frequency, including daily compounding, can be
used when calculating dividends using the
average daily balance method. (See comment
707.7(b), which does not require credit unions
to compound or credit dividends at any particular frequency).
B. Special Formula for Use Where Periodic
Statement is Sent More Often Than the Period
for Which Dividends are Compounded
1. Statements triggered by Regulation E. Credit unions may, but need not, use this formula
to calculate the annual percentage yield
earned for accounts that receive quarterly
statements and that are subject to Regulation E’s rule calling for monthly statements
when an electronic fund transfer has occurred. They may do so even though no
monthly statement was issued during a specific quarter. This formula must be used for
accounts that compound and credit dividends
quarterly and that receive monthly statements, triggered by Regulation E, which
comply with the provisions of § 707.6.
2. Days in compounding period. Credit
unions using the special annual percentage
yield earned formula must use the actual
number of days in the compounding period.
Appendix B to Part 707—Model Clauses and
Sample Forms
1. Modifications. Credit unions that modify
the model clauses will be deemed in compliance as long as they do not delete information required by TISA or regulation or rearrange the format so as to affect the substance or clarity of the disclosures.

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Pt. 708a

12 CFR Ch. VII (1–1–20 Edition)

2. Format. Credit unions may use inserts to
a document (see Sample Form B–11) or fill-in
blanks (see Sample Forms B–4 and B–5,
which use double underlining to indicate
terms that have been filled in) to show current rates, fees or other terms.
3. Disclosures for opening accounts. The sample forms illustrate the information that
must be provided to a member when an account is opened, as required by § 707.4(a)(1).
(See § 707.4(a)(2), which states the requirements for disclosing the annual percentage
yield, the dividend rate, and the maturity of
a term share account in responding to a
member’s request.)
4. Compliance with Regulation E. Credit
unions may satisfy certain requirements
under Part 707 with disclosures that meet
the requirements of Regulation E. (See
§ 707.3(c).) The model clauses and sample
forms do not give examples of disclosures
that would be covered by both this regulation and Regulation E (such as disclosing the
amount of a fee for ATM usage). Credit
unions should consult appendix A to Regulation E for appropriate model clauses.
5. Duplicate disclosures. If a requirement
such as a minimum balance applies to more
than one account term (to obtain a bonus
and determine the annual percentage yield,
for example), credit unions need not repeat
the requirement for each term, as long as it
is clear which terms the requirement applies
to.
6. Guide to model clauses. In the model
clauses, italicized words indicate the type of
disclosure a credit union should insert in the
space provided (for example, a credit union
might insert ‘‘March 25, 1995’’ in the blank
for ‘‘(date)’’ disclosure). Brackets and diagonals (‘‘/’’) indicate a credit union must
choose the alternative that describes its
practice (for example, [daily balance/average
daily balance]).
7. Sample forms. The sample forms (B–4
through B–11) serve a purpose different from
the model clauses. They illustrate various
ways of adapting the model clauses to specific accounts. The clauses shown relate only
to the specific transactions described.

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[59 FR 59899, Nov. 21, 1994, as amended at 60
FR 21699, May 3, 1995; 61 FR 68129, Dec. 27,
1996; 63 FR 71575, Dec. 29, 1998; 66 FR 33163,
June 21, 2001; 70 FR 72899, Dec. 8, 2005; 72 FR
30246, May 31, 2007; 74 FR 36105, July 22, 2009;
75 FR 47175, Aug. 5, 2010; 77 FR 71085, Nov. 29,
2012]

PART 708a—BANK CONVERSIONS
AND MERGERS
Subpart A—Conversion of Insured Credit
Unions to Mutual Savings Banks
Sec.
708a.101 Definitions.
708a.102 Authority to convert.
708a.103 Board of directors’ approval and
members’ opportunity to comment.
708a.104 Disclosures and communications to
members.
708a.105 Notice to NCUA.
708a.106 Membership approval of a proposal
to convert.
708a.107 Certification of vote on conversion
proposal.
708a.108 NCUA oversight of methods and
procedures of membership vote.
708a.109 Other regulatory oversight of
methods and procedures of membership
vote.
708a.110 Completion of conversion.
708a.111 Limit on compensation of officials.
708a.112 Voting incentives.
708a.113 Voting guidelines.

Subpart B [Reserved]
Subpart C—Merger of Insured Credit
Unions Into Banks
708a.301 Definitions.
708a.302 Authority to merge.
708a.303 Board of directors’ approval and
members’ opportunity to comment.
708a.304 Notice to NCUA and request to proceed with member vote.
708a.305 Disclosures and communications to
members.
708a.306 Membership approval of a proposal
to merge.
708a.307 Certification of vote on merger proposal.
708a.308 NCUA approval of the merger.
708a.309 Completion of merger.
708a.310 Limits on compensation of officials.
708a.311 Voting incentives.
708a.312 Voting guidelines.
AUTHORITY: 12 U.S.C. 1766, 1785(b), and
1785(c).
SOURCE: 71 FR 77167, Dec 22, 2006, unless
otherwise noted.

Subpart A—Conversion of Insured
Credit Unions to Mutual Savings Banks
§ 708a.101 Definitions.
As used in this part:
Clear and conspicuous means text in
bold type in a font size at least one size

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