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#2079056 - 05/17/16 08:12 PM $10 Gift Card to Open an Account
Adam F Offline
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Adam F
Joined: Apr 2013
Posts: 420
VA
Are they any prohibitions or problems if we offer $10 gift cards to our customers for opening a free checking account?

It would not meet the bonus definition under Regulation DD,wouldn't meet the interest definition under Regulation Q and we wouldn't have to file a 1099-INT with the IRS. Is this correct?

Can anybody think of anything else I am missing?

Thanks
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#2079078 - 05/17/16 08:58 PM Re: $10 Gift Card to Open an Account Adam F
BrianC Offline
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I wonder how many active BOL users still know what Regulation Q is. Although the premium definition from Reg Q was moved to 12 CFR Sec 330.101, the prohibition for paying interest on demand accounts went the way of the do-do in 2011 with the passage od Dodd-Frank.

As long as the bonus does not exceed $10.00 no 1099-INT is required. Just make sure that you limit the promotion to one account per customer as someone receiving two gift cards would need a 1099-INT for $20.00.
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#2087482 - 07/11/16 09:58 PM Re: $10 Gift Card to Open an Account Adam F
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BrianC what if we were to offer $5 bonus on an account that has low debit card volume and if they use their debit card between Aug 1 & Aug 31 we will give them $5 for 5 transactions? What if there are joint account holder's and each have a card and what if they have more than one account? Would we need to keep track if they were to reach the $20 limit per person or per account?

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#2087485 - 07/12/16 02:28 AM Re: $10 Gift Card to Open an Account Adam F
BrianC Offline
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Illinois
The definition of interest under this section is based on a consumer "opening, adding or maintaining an account." Providing financial incentive to perform certain actions such as debit card transactions, direct deposit, electronic statements, etc. does not meet this definition. These would fall under the rules for 1099-MISC payments which you must report to the IRS if they reach $600.
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#2087600 - 07/12/16 06:20 PM Re: $10 Gift Card to Open an Account Adam F
lcc Offline
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I am going to piggy-back on this post, since I have a similar question. We have a promotion that we give $100 to open a certain type of deposit account, but you must also either make a direct deposit, make a certain number of debit card transactions, or have a certain number of electronic payments (bill pay, P2P, etc). Would we report this a interest on a 1099-INT or would it be considered MISC, but since it is below the $600 threshold, we wouldn't have to report?

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#2087920 - 07/14/16 01:04 PM Re: $10 Gift Card to Open an Account Adam F
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Bump...I am hoping to get a response as soon as I can on my question above. Thanks!

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#2087949 - 07/14/16 02:08 PM Re: $10 Gift Card to Open an Account Adam F
ItsJustMe Offline
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Icc, since the promotion is cash value of more than $10 in exchange for opening an account, you would report on the INT. But even when you have a promotion where reporting is required on the MISC, you still have to track it for the year in case your customer reaches that threshold for other reasons (multiple promotions, etc.).

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#2087964 - 07/14/16 02:34 PM Re: $10 Gift Card to Open an Account Adam F
rlcarey Online
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Galveston, TX
1. If I open the account do I get $10?

or

2. If I open a certain type of deposit account and must also either make a direct deposit, make a certain number of debit card transactions, or have a certain number of electronic payments (bill pay, P2P, etc) I get $10.

If #2, the $10 is not for opening the account.
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#2088052 - 07/14/16 05:29 PM Re: $10 Gift Card to Open an Account Adam F
lcc Offline
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It would be scenario 2. You must open the account and do one of the 3 qualifying transactions to get the money. But wouldn't the main purpose of the promotion is to open the account? You can't do the transactions on an existing account...it has to be a new account.

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#2088099 - 07/14/16 07:53 PM Re: $10 Gift Card to Open an Account Adam F
ItsJustMe Offline
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Icc, clarify your promotion (to rlcarey's point) but it sounds like you are giving the $100 in exchange for the opening of the account and all the other stuff but you can't do any of the other things without first establishing the account.

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#2088111 - 07/14/16 08:36 PM Re: $10 Gift Card to Open an Account Adam F
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But wouldn't the main purpose of the promotion is to open the account?

The purpose of the promotion is moot when it comes to the IRS regulations. You are not paying for the opening of the account. The payment is made later when they jump through the hoops. The hoops are the trigger not the account opening.
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#2125294 - 04/06/17 03:20 PM Re: $10 Gift Card to Open an Account rlcarey
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We are looking at offering a $50 bonus if you open a new checking account and establish a recurring direct deposit within 90 days of account opening. Once the direct deposit has occurred, the $50 bonus will be deposited to the account. Since the trigger to receive the $50 is setting up the direct deposit, would this NOT meet the definition of "bonus" in Reg DD and thus NOT trigger any of the bonus disclosure requirements?

I was thinking it would trigger Reg DD since it is related to setting up a direct deposit; i.e., "increasing" the balance??

Thanks!!

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#2125657 - 04/10/17 03:50 PM Re: $10 Gift Card to Open an Account Adam F
John Burnett Offline
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See Randy Carey's 7/14/16 response, immediately above your question, Summer 101.
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#2194239 - 10/01/18 12:08 AM Re: $10 Gift Card to Open an Account BrianC
travelgirl1 Offline
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Posts: 92
Re-opening an older post.

Marketing wants to send a postcard with two coupons on it (both on one card) for two upcoming promotions. The postcard says we will pay you up to $20 (hardly seems worth any consumer's time for 20 bucks but what do I know?). On each coupon It goes on to say:

Coupon for savings account type "A": "Bring this coupon in to any XXX Bank branch to open your savings account "A" and we'll add $10 to your account. Minimum $x.xx deposit required. Offer expires 60 days after the postmark on this postcard."

Coupon for savings account type "B": "Bring this coupon in to any XXX Bank branch to open your savings account "B" and earn a $10 reward upon opening an account. Offer expires 60 days after the postmark on this postcard."

My question is this - does this require bonus disclosure language? Is it $10 per ACCOUNT per year or is it $10 per CONSUMER per year? In this case the consumer can potentially earn $20 in a year. I am reading the reg both ways.

We seem to be seeing more of this in our market and I'm sure it's not the last we will see at the bank. Do we need to keep track of any annual earnings of these for each consumer. They won't go over the $600/year.

Also, do you think we need to be more clear in the ad WHEN the $10 will be paid? In the first example I think it should mirror account B and say "reward is earned upon opening an account." This would for sure be in the TISA.

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#2194341 - 10/01/18 07:40 PM Re: $10 Gift Card to Open an Account Adam F
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Petersburg, VA
For the bonus language disclosure:

3. Aggregation. In determining if an item valued at $10 or less is a bonus, institutions must aggregate per account per calendar year items that may be given to consumers. In making this determination, institutions aggregate per account only the market value of items that may be given for a specific promotion. To illustrate, assume an institution offers in January to give consumers an item valued at $7 for each calendar quarter during the year that the average account balance in a negotiable order of withdrawal (NOW) account exceeds $10,000. The bonus rules are triggered, since consumers are eligible under the promotion to receive up to $28 during the year. However, the bonus rules are not triggered if an item valued at $7 is offered to consumers opening a NOW account during the month of January, even though in November the institution introduces a new promotion that includes, for example, an offer to existing NOW account holders for an item valued at $8 for maintaining an average balance of $5,000 for the month.

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