Our bank was also recently trapped by the Reward Checking verbiage in our most recent FDIC Compliance Exam. Apparently, since this is becoming such a hot topic, our FDIC office took it upon themselves to make an "example" out of our little community bank. Among other things, we are required to make restitution on a specific group of accounts from 2006 (when Reward Checking was implemented at our bank) to present and we are also under a Board Resolution giving the FDIC quarterly compliance updates until they return to do their next exam. We too are seeking assistance from our vendor. I think I'll be saying "Post and Clear" in my sleep for quite a while! Anyone else experiencing this as well?

Was there anything else the FDIC caught you on regarding these Reward Checking account?

Yes, we also have a Smart Saver savings account that is tied to the Reward Checking account. The interest that is paid on the Reward was being automatically swept into the Saver account to promote "savings". This is how the two products were promoted to us by the vendor. FDIC says that the interest is not compounding correctly so that was another UDAAP.

Anyone had any issues on this with the OCC?

I have recently heard of a bank in my area being cited for this issue by the FDIC.

I am wondering this as well......I haven't heard anything about these UDAAP violations until now but most of them seem to be coming from the FDIC.

Where in the Regs does it state that a bank can not specify transactions be of a certain dollar amount?

I'm not sure if my Marketing Department just wants me to be completely crazy or what - but we have Rewards Checking - went through FDIC scrutiny this summer - we did great (we have disclosed clearly) - but now Marketing wants to offer a special rate on this product for accounts who refer-a-freind. Somethings smells UDAP to me - also the special rate is only in effect for 6 months, then it goes back to our normal rates (which are about half what they are offering on the special rate). Im I just being paranoid? Or isn't there a concern with increasing rates for just these people for just this period of time?

I don't even think that the Rewards Checking vendor will sign off on that - I would talk to them (the vendor).

If you use the same vendor that I do, I believe their preferred option is $xx paid to the referee after the referall's account has been opened for 90 days......

I've been through this thread and a few others regarding CHIRO-05-2007 and I'm still slightly confused.

In the bulleted list of "important points to remember", it's very clear from the first bullet point that completely eliminating the payment of interest based on anything other than minimum balance requirements is forbidden. My question is in regards to the second bullet point. The bullet point reads, "Banks may not require that transactions be of a certain dollar value (individually or in aggregate)." Does that mean that banks are forbidden from requiring a certain dollar value of transactions in order to trigger a higher interest rate for the customer (even though the customer would still be earning interest if they didn't meet the trigger)?

As an example - a bank has an account that pays 1% APY (minimum balance to earn interest is $1). The account will pay 2% if the customer makes at least 10 debit card transactions that total at least $100 in a statement cycle. If the customer doesn't meet that threshold, they'll still earn the 1% interest (assuming they have a $1 minimum balance), they just miss out on the "rewards rate". Is that type of account structure prohibited under the second bullet point in CHIRO-05-2007?

Any help is appreciated. Thank you.

Yes, CV, that is prohibited. Just like you said: "Banks may not require that transactions be of a certain dollar value (individually or in aggregate)."

It's interesting to read the above on the minimum transaction. We have a local bank competitor that has been hammering their reward checking heavily in the past months. Their radio ads specify that it's "so easy" and doesn't require a "bunch of work like the others do, with minimum balances and all that", then goes on to list their 4-5 requirements (which I find hilarious after their opening). One of the stated requirements is that the 15 transactions must be at least $10. Of course, management here is now wondering why we don't have that implemented on our product. We have several people using the checking as an investment tool and make a dozen $.50 or less transactions near month end and that's it, so it would benefit us to have this restriction...but it seems pretty clear that it's not allowed.

I'm assuming that they would still pay the regular checking account rate if the account didn't qualify for the higher rate on a given month, but who knows. Part of me wants to send them a nice little note about it

Matt_B, let the competition fry -- when they get examined and get hammered for UDAP and Reg DD, they will spend alot of time, money, and man-hours righting the ship -- which will be good for your Bank

I can hope for that, sure. They're similar in size to us and one of our more relevant competitors.

Doesn't solve the "Why aren't we doing that? Obviously they're getting away with it!" discussion

Where are the relevant sections of Reg DD from which bullets 1 and 2 refer to in the 2007 CHIRO bulletin?

Anyone ever pin-point what part of Reg DD (or any other regulation) that the transaction minimum violates??

Is there any information that someone can point me to regarding the verbiage of "monthly qualifcation cycle" for a rewards program? I believe this is something that a specific vendor (that we are not using) pushes with their Rewards products and template TIS disclosures, but i am wondering if this is simply just the verbiage that their compliance department uses, or if this is regulatory in nature.

I was originally looking at using "monthly statement cycle", and being extrememely clear on the transaction posting timelines that is mentioned throughout this thread.