Earnings Credits and Regulation Q

by Mary Beth Guard, BOL Guru

Question: I just read the article Lending Disclosures at a Glance and I became a little concerned about our commercial checking accounts. Would the following situation be considered the payment of a premium? Earnings credits are accumulated based on the collected balance and are used to offset transaction fees. If the credit is greater than the transaction fees for the month, no transaction fees are charged.

Answer: The situation you describe is not an impermissible payment of interest in violation of Regulation Q, but would instead be more akin to a waiver or partial waiver of fees, rather than paying interest. The customer is not actually being paid anything. Instead, in recognition of the amount they have on deposit you are giving them a break on the costs they would otherwise incur in connection with the account. Since this is not a payment of interest, Regulation Q does not come into play.

The original version appeared in the March 2002 edition of the Oklahoma Bankers Association Compliance Informer.

First published on BankersOnline.com 7/8/02