In our last exam, we were written up by our regulator for advertising our Debit/ATM card as "free" because while the debit side of the card has no fees, and we do not charge to withdraw cash from our ATM, we allow eight withdrawals from foreign ATMs in a month, after which we assess a $2 charge each. The regulator cited us under 230.8(a)which refers to using the word "free" when advertising accounts, which a debit card is not. Our debit cards are packaged in any way (ie open a free checking acct to get a debit card). Our external compliance auditors disagree with our examiners and feel 230.8(a) does not apply to our Debit/ATM card. I really do not want to change all my marketing material to remove the word "free" or "no charge".

Any advice or guidance someone could give me would be much appreciated.

I agree with the examiners. You (your bank) are imposing a charge on the checking account of $2 for each foreign ATM withdrawal greater than 8. How does that equate to a "free" ATM/Debit card? That is like say the checking account is "free", except we are going to charge you $2 a check after you write 10 checks. I think it clearly falls under the "misleading" section of 230.8(a).

If your argument is that you don't charge for issuing a debit card - I think it is a weak argument. I know of no banks that charge to actually issue the card.

I understand what you are saying about the maintenance fees on the ATM/Debit card, however in the TISA Staff Commentary 230.8(a) ATM fees are not considered maintenance fees as long as they are not a requirement to open the account, which for us they are not.

rlcarey - what are your thoughts on this scenario -

"Free" account includes debit card with "no ATM fees" (even when using foreign ATM). In operation, the bank holding the account assesses no fee to use a foreign ATM. Foreign bank fees are assessed at time of transaction, and credited back at the end of the statement cycle.

It's the "assessed and credited back" piece that hits my gut. Can the bank truly call it a "no fee" debit card?

Well, Mulligan, that gets you off the hook if you are saying an account is free, even though there may be ATM fees that affect it.

However, your question was about being dinged because of a reference to a free debit card. Frankly, I question the appropriateness of tying disclosures about your debit card service to TIS disclosures because the latter are about accounts.

Be that as it may, your use of "free" to describe your debit card (if that is truly what you were doing) would seem to wander into the "Unfair and Deceptive" territory, since your card isn't free.

I realize I jumped off topic, but does anyone have gut feelings on this scenario?

If the "credited back at the end of the statement cycle" is an automatic function, I don't see a problem. Identifying these fees are going to be tough in order to refund automatically as they are buried in the ATM transaction. Most banks that I see doing this require the customer to apply/ask for the refunds.

I also think that you could still offer it as free as you are not charging them for anything (unlike the original post that charged them after the first 8). You cannot be held responsible for what others do - i.e., you offer a free checking account and the merchant charges the customer an extra $2 for accepting their check - same principle.

I wonder if the "free" issue around the debit card could be resolved if it's clarified that there is no charge to obtain the debit card, which is different that actually using the card.