We are offering a $50 bonus for opening a new checking account (interest bearing and non interest bearing); the $50 is paid after they have utilized their debit card 10 times.

We are advertising "Open a new checking account and get a $50 bonus after using your debit card 10 times." Since we aren't advertising any rates or APY, does 1030.8(d)(1) apply? We don't want to include the rates and applicable disclosures required by 1030.8(c) since we aren't advertising a rate.

Your thoughts?

If your incentive meets the Regulation DD definition of "bonus" and you advertise it, you pull the trigger on disclosing the rest of the bonus information required by 1030.8(d), including 1030.8(d)(1) -- the APY(s) -- and the inclusion of the APY triggers the requirements of 1030.8(c).

So, what's the definition of "bonus"? "Bonus means a premium, gift, award, or other consideration worth more than $10 (whether in the form of cash, credit, merchandise, or any equivalent) given or offered to a consumer during a year in exchange for opening, maintaining, renewing, or increasing an account balance. The term does not include interest, other consideration worth $10 or less given during a year, the waiver or reduction of a fee, or the absorption of expenses." (Emphasis added)

If you are providing the bonus for the ten uses of the debit card, and not for opening, maintaining, renewing or increasing an account balance, you aren't providing a "bonus" as defined in the regulation, and your ad doesn't, therefore, trigger the other disclosures.

But if you are paying the $50 for opening, maintaining, renewing or increasing an account balance, you've pulled the triggers described above.

Would the payment of the $50 for applying for a debit card or e-statements along with a new account be considered a bonus?

I am thinking no for the reasons John mentioned above.

bump

And John agrees with you for the reasons John gave in his earlier post. The incentive isn't for opening, maintaining or adding to the deposit account. It is for applying for a debit card or agreeing (under E-SIGN, of course ) to accept e-statements.

Just make very certain that no one is screwing things up by letting someone get the $50 solely for opening the account.

Thanks, John!

I am reading this post and just want to clarify that I am understanding correctly since our bank is thinking of doing something similar.

In the example above, if the bank is offering $50.00 for a customer to sign up for e-statements, this would not be considered a bonus. Does this mean that we would not be required to do a 1099Int?

However, if we were running the same promotion ($50.00 to sign up for e-statements) but offered it to someone opening a new account who enrolls in e-statements,then this would be considered a bonus? Resulting in disclosing it on our TISA, including the "bonus" information on our adverstisements, and reporting this on a 1099Int?

Thank you for any clarification you can provide!

Giving someone $50 for signing-up for e-statements is not interest or a bonus under Regulation DD or the IRS no matter when it happens.

Thank you!!

Going back to the April 2014 discussion at the top, if a bank was to advertise a $50 promotion for opening account (only - no other requirements like using a debit card or direct deposit), and all personal checking accounts were eligible, would the ad then have to list all APY info for all of the interest-bearing accounts? I'm working through a promo like that now, and I was hanging my hat on "to the extent applicable" in (d)... I didn't see how the APY really applied to the bonus, since it wasn't going to be a bonus rate. But if I understand John's post, all the requirements apply all of the time?

Yes, I think you understand what John stated.

I might be asking the same question but here goes.
Marketing would like to give away a free toaster or if the customer chooses, a $50 gift card for opening a new account. This would be checking accounts or savings accounts. We condition the bonus with signing up to receive Estatements and Direct Deposit at the time of opening the account.
So if my understanding of the above is correct, because we are giving the $50 card for the account opening AND the estatement and direct deposit this does not qualify as a bonus and therefore will not require us to put the APY for savings and interest bearing checking accounts on our flyer that we are sending out?
Does it matter that in our language it says that a minimum balance may be required?

Correct: It is not a bonus under Reg DD because of the qualifications for the gift.

Awesome. Is there anything else I should be concerned about? I kept reading on the threads this $10/$20 deal. Was that a reg Q thing? Ours is obviously over that amount, on our advertisement there is disclosure that we are going to be sending the customers 1099-INTs. This is all new to me so any help would be greatly appreciated.

And just an aside, how did it come to that interpretation that it is not a bonus when it applies to when you have a qualification to opening up the new account? I read the reg and commentary and my mind did not make that leap in that reg DD did not apply because the bonus was tied to the estatement....(the qualifications of the gift) not just the account opening.

I can open an account, I don't get the bonus. Therefore, it is not tied to account opening.

The $10/$20 was Regulation Q that was repealed.

Since the premium is not tied to account opening, it is not considered interest under IRS rules and would be reported with other miscellaneous income given to the customer if $600 or more in the calendar year on a 1099MISC.

Ummmmm......wow, couldn't get much simpler than that. Thanks for boiling it down for me.
Pray for me, I need to learn how to do that for myself

Thanks for all the help!

One more question regarding the 1099 form. On our advertisement it states that the customer will be issued a 1099 form (no INT or MISC, just 1099) at the end of the year. Is that ok, or would it be better to qualify the type of 1099 they are getting?
My knee jerk is that it isn't that big of a deal...but perhaps it is?

You might want to ask the person that came up with that mouse print on the ad and why? There is no regulatory requirement to make this statement. Any non-regulatory statements in the mouse print on advertisements should be reviewed by legal counsel.

So what you are saying is we need only to disclose what the qualifications are and that would do it right? I wonder if we would even need to include the mention that a minimum balance may be required??
Even if this did qualify as a "bonus" that 1099 thing and the minimum balance thing would not have needed to be on there.

Additional disclosures under 1030.8(c) are not triggered unless the APY is mentioned.

Additional disclosures under 1030.8(d) are not triggered unless there actually is a bonus involved.

OK ok....so let me go on a limb here and possibly expose my lack of compliance aptitude, but when reading 1030.8(d), could one even say that we would not need to put out the qualifying terms to receive the toaster/gift card? On 1030.8(d)(5) it states that we only need to say when the bonus is to be provided when it qualified as a bonus. In this case it does not, so therefore no mouseprint is necessary.

Have I gone too far?

You have not described any features that trigger the advertising rules in (c) and (d). However, you still have 1030.8(a)(1) and UDAAP to worry about. As I mentioned, mouse print should be left to your legal counsel.

Yup, went to far.


Thanks again.

Randy, you say "1030.8(d) is not triggered unless there actually is a bonus involved" - I'm in a scenario that the bonus is involved, and (d) states you must state the APY. My bonus is a gift card, that could be tied to different types of accounts that have different APYs. Am I free of the APY disclosures since the gift is a gift card and we aren't mentioning rates anywhere? Sorry if this is a stupid question...

And darn, does this mean we have to add this to the TIS disclosure? Or, can we do an addendum since it applies to multiple types?