If we offer customers the option of switching to online statements from paper or e-statements in exchange for a $10 credit to each account that is converted, would we be bound by the Reg DD "bonus" disclosure requirements?

The reg says that "maintaining an account" can trigger the requirement, so I'm wondering if it applies here.

(f) 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 consumer during a year in exchange for opening, maintaining, renewing, or increasing an account balance. The term does not include interest, other consideration worth $10 or less given during a year, the waiver or reduction of a fee, or the absorption of expenses.

Bonus.

1. Examples. Bonuses include items of value, other than interest, offered as incentives to consumers, such as an offer to pay the final installment deposit for a holiday club account. Items that are not a bonus include discount coupons for goods or services at restaurants or stores.

What does switching to e-statements have to do with opening, maintaining, renewing, or increasing an account balance?

In other words, you are compensating them for enrolling in a service, the same as you would be if you offered them $10 because they started receiving direct deposit.

I'll make this a three-part harmony -- The incentive is for use of a service, and not a bonus as defined under Regulation DD.

Ok, thank you!

An additional question, since the bonus is not more than $10, would that not also apply?

Well, yes, the $10 amount makes it not a bonus but the reason for the payment is the overriding reason it's not a bonus and not interest. And just to clarify matters a bit more, make sure that it isn't considered interest when computing the APY or the APYE on the account or when reporting interest at year end. The payment is of a type that would be reported as "other non-employee payments" under 1099-MISC rules if the amounts ever exceeded $600 for a customer.

Hi John,

Forgive me for dragging this back up, but I need to clarify. Are you saying the payment is NOT reportable to the IRS on a 1099 INT?

Specifically, I'm trying to determine if a $25 credit we gave to customers for using Bill Pay service is interest reportable on a 1099 INT, under IRS rules.

I've already arrived at the fact that it doesn't trigger any Reg DD interest requirements (pymt is made for use of a service, not to open or maintain the account), but the IRS side is tripping me up.

John is correct.

The IRS defines interest as " The term “interest” means amounts paid for the use or forbearance of money, which includes amounts, whether or not designated as interest, paid on savings accounts and other deposit arrangements."

Since the payment is for using the Bill Pay service, it has nothing to do with the use or forbearance of money in any account that may be linked to the service.

Hi Randy!!

Thanks, that's great news. This particular article by Carl Pry (from 2008) was making me think the opposite, that we did need to file a 1099 because the payment, even though not interest, was made in connection with an account. I didn't want to end up on the wrong side of the IRS!

We won't report it at all on a 1099. Thanks again! Hope all is well.