Hi All,

First time offering a cash bonus for opening a new personal account. I have no idea where to begin. My bank wants to offer $150.00 cash bonus for new customers only. The account can only be opened at one location (new Branch) and must have direct deposit or 10 debit transaction within 60 days of account opening. The account will must remain open for 90 days or the bank reserves the right to redeem the cash bonus. This offer is limited to one per household and is not available to existing customers, bank/affiliate employees, business accounts or customers who have closed a checking account within 6 months. Any ideas of where to begin or see anything wrong with the example I provided?

Wow - $150? I can borrow $150,000 from the Fed for a year for that price. I sure would like to see the cost benefit analysis on this promotion.

You need to focus in the disclosure requirements for bonuses under Regulation DD and also the advertising rules if you are going to advertise. General UDAAP concerns about full and accurate disclosures will also need to be considered.

Related question since we're doing a similar promotion. In soliciting new accounts, we're offering $50 for e-statements and $50 for using a debit card a cert 10 times in 60 days.

The question has come up about the requirement to disclose the minimum opening balance of the deposit account because it relates to the fact that a new account must be opened to proceed with the offer to get the offer for the "bonus" for the services.

The promotional piece is a direct mail flyer and includes a description of a low-cost non-interest account and states "no minimum balance". Issue?

Thank you.

If the cash incentive is earned by those two events, it is not a bonus under Regulation DD as it is not in exchange for opening, maintaining, renewing, or increasing an account balance.

Not sure about your question regarding a minimum balance - do you or do you not require one?

There is a $100 minimum to open a checking account. My impression was that there was a connect the dot kind of thought process being used. If the flyer says "open an account and earn $100 by doing the following (lists the two items that earn $50 each) there is the concern that we're requiring the customer to deposit $100 to eventually earn $100. A "no minimum" balance" bullet point used to describe available checking account features is part of issue. It's commonly used in this situation - but maybe that leads to too much customer confusion. (Lots of things go down that UDAAP road if allowed to.) Thoughts?

Like I said, you either require a minimum balance or you do not, it is totally up to the bank. If you don't, then no disclosure is necessary. How are you requiring the customer to deposit $100?? I don't understand that statement.

The $100 is just the minimum amount to open an account. The party reviewing this then concluded that because an account must be opened and that requires $100, then that translates to a minimum balance required for the payments that are intended for the two services described - not specifically for opening a checking account. If an account is opened and the two services are not used as required, the two $50 "bonus" deposits are not intended to be made. Is that any clearer?
Because the promotion is tied to a new account - not current accounts - there are some questions being asked.

OK, so you have a minimum deposit to open the account. If you trigger disclosures under 1030.8 through your advertising, you are going to have to include that fact in the ad. If you don't pull those triggers, then you will have to decide whether or not disclosing that fact might keep you out of UDAAP water.

OK - thanks. I agree there is always some risk of a UDAAP question. Some select customers have only read that they can open an account - and there is a chance to get $100. The balance to open an account is not the issue for them - no confusion on that. They just want the extra deposit.

They just want the extra deposit.

And then they will close the account and move on to the next promotion and the bank wasted all these $100 bills

My bank is offering $50 for the opening of any new checking account (includes interest bearing and non-interest bearing. I assume we would have to comply with the advertising requirements in Reg DD regarding the bonus but not sure how to disclose the APY when some of the accounts have it and some don't. Is this necessary and if so, how can it be done?

A bonus never goes into the calculation of the APY.

Agreed. But I thought in looking at the advertising requirements that if we have a bonus advertised (we have a little handout) that you had to list the APY based on this:

(d) Bonuses. Except as provided in paragraph (e) of this section, if a bonus is stated in an advertisement, the advertisement shall state the following information, to the extent applicable, clearly and conspicuously:

(1) The “annual percentage yield,” using that term;

(2) The time requirement to obtain the bonus;

(3) The minimum balance required to obtain the bonus;

(4) The minimum balance required to open the account, if it is greater than the minimum balance necessary to obtain the bonus; and

(5) When the bonus will be provided.

I think I am missing something here.

(d) Bonuses. Except as provided in paragraph (e) of this section, if a bonus is stated in an advertisement, the advertisement shall state the following information, to the extent applicable, clearly and conspicuously:

So in my example we wouldn't need to disclose any APY's even if the bonus could be paid for opening an interest bearing account?

Correct. There is no APY on a non-interest bearing account.

I guess I am still confused. There is an APY on an interest bearing account. Are you saying the fact that the bonus could be paid for an interest bearing or a non-interest bearing account negates the requirement to disclose the APY in the advertisement?

No, I am saying that if you advertise a bonus on an account, the advertisement triggers the bonus advertising requirements (1030.8(d) as applicable.

If the bonus is advertised in connection with a non-interest bearing account, there is no APY to include in the advertisement.

Similar to (d)(4) of that section. If you do not have a minimum balance required to open the account - do don't make one up just to meet the advertising requirements.

I think we are on the same page but my original question was if we have a $50 bonus that will be paid whether the account is interest bearing or not (and we actually have a couple of different interest bearing checking accounts with different APY's) how would you list the APY's in the advertisement?

You would have to list all of them.

That's what I was afraid of.

Thanks for your help!

May I add that you may want to state cash bonus is deposited to the account on a certain period? Some customers may expect it in cash when the account is opened we have run into that request. We place after 15th of next calendar month as to keep the customer and have made more additional requirements in keeping the account. As we did, gift cards and customers opened and closed the account within the same week.

I would think that any and all such requirements and conditions should be in any advertisement to avoid a UDAAP situation regardless of what may or may not be required by regulation.