Hello. I'm having a bit of a heart attack after reading a dated post from 2011 - BOL -
I'm understanding that if we charge a Paper Statement Fee (as opposed to free eStatements) or a OD trsf fee from Savings to Checking, we cannot call an account "Free" -
Am I understanding this correctly?!
I thought that if the fee was for an opted service, then it would not be considered a "maintenance" fee - but now it's sounding like that's not the case.
HELP!

Depends on how you present the statement fee and the account product to the customer.

The OD transfer fee is a separate issue, as it is not directly related to the checking account. They would have to sign up for the ancillary service.

The statement fee is much more problematic. You are required to send them a statement. If you require them to jump through the E-sign hoops and that waives the paper statement fee, then IMHO you do not have a free account.

John and I posted at about the same time. I think we are saying the same thing. You cannot have one account type. You would have to have a free account and a non-free account type.

Candidly, if I agreed in 2011 that charging a fee for a paper statement would mean an account could not be advertized as fee, I recant that opinion today, with conditions.

If the account is offered as an e-disclosure (statements, notices, the whole list) account, you step through the ESign hoops and have demonstrable consent, I believe you can advertize the account as free if there are no fees charged. Again in my opinion, a fee for a one-time written statement copy would not be a maintenance or activity charge that would kill "free" status. I'd make it clear, though, that the account does not provide for regular paper periodic statements, and that the account would have to be converted to a different, non-free, account if the customer asks to be switched to paper statement delivery.

So, if we offer a Free Checking account, and the member can elect to get free eStatements (following ESIGN requirements, of course) OR receive Paper Statements for $2, then we cannot advertise or call the account "Free Checking".

However, if we charge $5 to OD transfer from Savings to Checking, we can still call that "Free Checking"?

I would agree with both statements.

But how is a OD transfer from Savings to Checking not considered a "fee imposed to deposit, withdraw, or transfer funds" under Reg DD Commentary 1030.8(8)(a)(3)(iv)?

Because the OD transfer portion is an ancillary product. I can have the checking account without that service, correct?

Correct! And thank you!

We are considering an account called "FREE-e Checking" and in order for it to be free from a monthly minimum balance service charge, the customer is required to sign up for e-statements the day of, or within a certain amount of time after the account is opened. If they do not sign up for, or if they later opt-out of e-statements, we would convert their account to our "Regular Checking" and provide a new Truth-in-Savings disclosure. Are there any issues with this? If we end up converting their account to the "Regular Checking" how much notice do we need to give before we do this? Thanks.

I assume your regular checking isn't free? and I assume your initial disclosures for the FREE e-checking will spell out all of the requirements and consequences up front?

Yes on both statements, our Regular Checking has a minimum balance fee, and we would disclose the process up-front when the customer signs up for the FREE account that if they do not meet the requirements they will be converted.

M&T got hit for something similar. CFPB's 3 main points were deceptive advertising of the product, the automatic conversion, and not adequately alerting the customer of the conversion.

https://www.consumerfinance.gov/about-us...-free-checking/

CFPB Takes Action Against M&T Bank for Deceptively Advertising Free Checking
OCT 09, 2014

M&T to Refund $2.9 Million to Approximately 59,000 Account Holders Who Paid Fees for Free Checking

WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) took action against M&T Bank for deceptively advertising free checking accounts. The CFPB found that M&T lured in consumers with promises of “no strings attached” free checking, without disclosing key eligibility requirements. When consumers failed to meet the requirements, M&T automatically switched them to checking accounts with fees. M&T will provide $2.9 million in refunds to the approximately 59,000 consumers deceived into paying fees and it will pay a $200,000 penalty for the violations.

“Although M&T promised people free checking, tens of thousands of consumers ended up paying for a product they had thought was free,” said CFPB Director Richard Cordray. “This is an important reminder to all banks and credit unions that they cannot misstate to consumers whether a financial product or service is free. Today we are putting $2.9 million back in the pockets of consumers as a result.”

Frankly, use of the word "free" in almost any deposit account ad is so fraught with risk that I don't think it's worth it to try.

I think it's doable but cumbersome because if they do not complete E-SIGN requirements (consumers) they do not qualify. UDAP penalties are many where consumers were not told of product requirements, mislead as to the requirements or had no hopes of qualifying. Get the E-SIGN before the account is opened or send paper statements until E-SIGN is complete. If this is not done within so many days, the bank sends a Reg DD change notice advising the consumer their failure to complete the E-SIGN requirements necessitates a change after 30 days to the XYZ account, with disclosures provided. I'd also get something at opening ensuring they understand this requirement for demonstrable consent and all that goes with it.

Again, cumbersome and it may be too much so to make it worthwhile. Converting existing accounts is easier because there is no conversion sans E-SIGN.