Compliance Blog

Happy Wednesday, compliance friends! Today is a special day (at least in my household) because it’s my cat’s 15^th birthday! Here is a picture of Quincy in his “shrimp” pose to add some cuteness to your day:

Now on to the topic of this blog: Are credit unions required to post rates to their websites? While there are no requirements to do so, credit unions should note that there are rules in section 707.8 regarding advertising that would likely apply if the credit union does post rates online. The commentary advises on permissible rates and states that:

“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.”

Credit unions should be careful as NCUA’s TISA regulation defines advertisement broadly. Section 707.2(b) defines an “advertisement” as:

“…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.”

Additionally, section 1026.16 of Regulation Z requires that all advertisements state only those terms that are actually available. This general requirement applies to all terms stated in an advertisement, not just the disclosures required by Regulation Z. For example, this rule prohibits credit unions from advertising a low annual percentage rate that will not actually be available at any time. Section 1026.16(a) states:

“If an advertisement for credit states specific credit terms, it shall state only those terms that actually are or will be arranged or offered by the creditor.” (Emphasis added).

Furthermore, if an advertisement states any of the trigger terms pursuant to section 1026.16 either referenced positively or negatively, the advertisement must also include additional disclosures. Section 1026.16(b)(1)(ii) requires additional disclosure for APR and states “[i]f any of the terms that trigger additional disclosures under this paragraph is set forth in an advertisement, the advertisement shall also clearly and conspicuously set forth the following… [a]ny periodic rate that may be applied expressed as an annual percentage rate as determined under § 1026.14(b). If the plan provides for a variable periodic rate, that fact shall be disclosed.”

The commentary states that “[n]egative as well as affirmative references trigger the requirement for additional information.” Additionally, regarding implicit terms, the commentary provides that these are terms that “may be readily determined from the advertisement.”  The commentary to section 1026.16(b)(1) also provides some examples of negative and implicit references that would constitute trigger terms, and require additional disclosures, including: 

• “No interest” 
• “No annual membership fee” 
• “Small monthly service charge on the remaining balance” 
• “No interest charges until May” (“or any other statement regarding when interest or finance charges begin to accrue”)
• “A $15 annual membership fee buys you $2,000 in credit” 
• “12 percent APR” 

Credit unions will also want to keep in mind that there are similar examples for closed-end credit advertisements under section 1026.24. As with TISA, Regulation Z also defines advertisement broadly. Section 1026.2 defines an advertisement as “a commercial message in any medium that promotes, directly or indirectly, a credit transaction.”

Overall, while there is no general requirement for a credit union to post rates on its website, if a credit union posts advertisements on its websites, then the credit union must follow the applicable rules regarding advertisements.

The NAFCU Advertising Guide provides more information regarding compliance with advertising rules.

I hope this helps when your credit union is deciding whether or not to post rates to its website.