I'm going to try to keep this brief. We are attempting to increase our private banking presence and are working on a new deposit account with higher rates. This account will be tiered - per se; however moving between tiers isn't automatic. The tier levels are based on accounts with the bank (personal, corporate, trust) and will be reviewed on a quarterly basis manually as our system cannot. At that time a customer could move tiers (i.e. paying off a mortgage could lower their tier - will bringing in new deposit or trust accounts could increase their tier). I am working with platform to create the TISA. While this is tough, I think we have a good feel for it. The rates are variable and could change each month within each tier as with any account.

I am recommending that a letter be sent to the customer if the tier changes during one of the quarterly reviews. I think we need to keep the consumer informed.

Thoughts? Does anyone have an account similar that can give me any feedback?

I am not sure I understand.

1. You have account that is tiered? Do you mean you pay a different xx% for different dollar amount ranges and those interest rate tiers can change?

2. Or you pay one rate on the account depending on whether they meet specific criteria?

Thanks Randy - #2 is accurate. If my total balances are a specific amount - say $1,000,000 then I would be in the highest tier. If during the quarterly review I have paid off my mortgage and my total balances are now $500,000 then I would go into a lower tier and be paid a lower rate; however the rates in each tier are variable and can change monthly.

I hope that is fairly clear.

Sounds to me it is just a variable rate account if you are not tying what you are paying for each relationship threshold to an index, even if that index is internal.

So you get xxx% for under $500,000 in total relationship dollars

xxx% plus xx% for $500,001 to $1,000,000

xxx% plus xx% from $1,000,001 to $2,000,000

The xxx% can be variable and would apply across the board, but the xx% would not be.

You can set xx% at whatever you want, however if every tier is actually discretionary, then it is just a variable rate account.

Plus, once you disclose this, you are locking yourself into a contractual obligation and with this being a totally manual process, god help you if you make any mistakes.

Trust me Randy - I know and this is extremely frustrating. And UDAAP is one of the reasons I believe a letter should be forwarded to the customer if their tier changes. While the rate is variable the customer may not realize that the tier has decreased.

SMH

I guess I am not sure why there would be a letter necessary. If you disclose the total relationship tiers, it is no different than them moving between tiers within an account. You don't tell them when they do that. The criteria would all have to be disclosed at the time the account is opened.

I agree. If all the criteria related to each tier is known, it can be disclosed at the time an account is opened.

Some of the larger banks have these types of products that consider the entire relationship. However, they have a proprietary system in place that monitors everything. I would be hesitant to offer something like this if the monitoring was going to be a manual process. I would find out what your system is capable of doing.

Thanks Trying and Randy - we know our system cannot accommodate this and it will need to be manual. While that is not my call to make, I just want to make sure we are totally transparent to the consumer opening the account. So maybe I am overthinking this about a letter when the customer changes tiers.

This being said - I honestly have no idea how many of these will be opened. We maybe putting a lot of effort into something that won't bring us the deposits they want - or we could be overloaded. At this point it's anybody's guess.

Also, which I haven't mentioned, we will have two levels of these types of accounts according to income and assets of the customers. While it wouldn't be common - they could also change levels; although the tier criteria would be the same.

If it is more complex than you can describe in two sentences - nobody is going to want it. Also, unless you plan on paying a hefty premium - it is not going to gather much momentum and then you have this manual process for a couple of accounts. The more complex you make it, the less chance of it succeeding, as you will never be able to properly advertise it.

Seems like one of those "sounds good on paper" ideas.

I think the same thing too - but I need to 'stay in my lane'.

Another quick question - we can disclose the tiers on the TISA; however the rates for each tier will not be on the initial disclosure due to system limitations. Would that be acceptable or will we be required to also hand the new customer a rate sheet for their product?

Not much of a TISA account opening disclosure without including the rates that currently apply.

1030.4(b) Content of account disclosures. Account disclosures shall include the following, as applicable:

(1) Rate information. (i) Annual percentage yield and interest rate. The "annual percentage yield" and the "interest rate," using those terms, and for fixed-rate accounts the period of time the interest rate will be in effect.

(ii) Variable rates. For variable-rate accounts:

(A) The fact that the interest rate and annual percentage yield may change;

(B) How the interest rate is determined;

(C) The frequency with which the interest rate may change; and

(D) Any limitation on the amount the interest rate may change.

Thanks Randy - this thing is just a disclosure nightmare and our system is also fairly limited since the change between tiers is manual.

Now I'll reach out to someone else to see if they can create a separate rate sheet for this product to hand out at account opening.

Again - thanks so much. You know that I (and most of us) value your thoughts and opinions greatly!

With respect to the Change Management controls of your Compliance Management System, I'd also recommend lots of training for staff that will be selling this product to ensure that it is appropriately marketed, implementing a monitoring process to spot check to verify that the separate rate sheet is actually being given in response to inquiries or account opening along with the template from your core and close monitoring of your complaints to see if there is a pattern of customers who claim they did not understand how the product worked or don't think they received the promised rates.

To Randy's point, I hope the product brings in the business that management thinks it will or this will be a lot of time, effort and expense for a complex product to sit on the shelf.

Thanks Brian - I do plan on performing monitoring on this account periodically. Additionally I also monitor complaints.

I appreciate everyone's insight and thoughts.