Incentives and the Anti-tying Prohibitions
by Mary Beth Guard, BOL Guru
Interested in offering customers incentives to maintain a combined minimum balance in a package of products and services, but don't want to run afoul of the anti-tying prohibitions in the Bank Holding Company Act? Check out the safe harbor the Federal Reserve Board has for combined-balance discounts under 12 C.F.R. 225.7(b)(2).
Citigroup recently explored the anti-tying prohibition boundaries of the Federal Reserve Board's safe harbor for combined-balance discounts through a request for a legal interpretation from the Federal Reserve.
In the request, it indicated that Citibank, N.A. and its banking affiliates (collectively, "Citibank") wished to offer incentives to their credit card, mortgage, or loan customers to maintain a combined minimum balance in a package of products and services that include annuities, auto, homeowners, life and/or long-term care insurance from insurance affiliates of Citibank. The incentives would include lower interest rates and/or other items, such as frequent flyer miles. Citibank wanted confirmation that insurance products could be included among the products offered by a bank as part of a combined-balance discount program operated under the Federal Reserve Board's safe harbor, if the other requirements of the safe harbor were met. They also asked for confirmation that the principal amount of annuity products could be counted towards the minimum balance, and that insurance premiums could be counted towards the minimum balance for non-annuity insurance products.
Examine the safe harbor language and the interpretive letter Citigroup obtained to see if it sparks some ideas for your bank!
Originally appeared in the Oklahoma Bankers Association Compliance Informer.
First published on BankersOnline.com 11/19/01
First published on 11/19/2001