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#2265056 - 01/24/22 04:22 PM Rate discount based on deposit balance
WDCA Offline
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Joined: Nov 2015
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Are we allowed to discount loan rates based on a customer's amount on deposit? We would like to set the threshold at 1M for all customers to receive a .5 discount. Is there a difference in your answer if we base the discount on a PB relationship, which has the same deposit balance requirement? Thank you in advance

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Fair Lending
#2265057 - 01/24/22 04:31 PM Re: Rate discount based on deposit balance WDCA
rlcarey Online
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Legally - since they are both traditional banking products, it would not violate the anti-tying regulations. You are going to have to be the judge as to the fair lending implications. Why $1M - what demographics are in that group. Why not $500K - why .5%? You better have your cost benefit documentation in line.
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#2265066 - 01/24/22 05:26 PM Re: Rate discount based on deposit balance WDCA
WDCA Offline
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Thank you for this insight!

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#2265068 - 01/24/22 05:44 PM Re: Rate discount based on deposit balance WDCA
InFairness, CRCM Offline
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USA
And if you use the PB relationship flag instead of deposits, all of Randy's comments apply, plus you need to make sure everyone eligible for a PB relationship has one.
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#2265111 - 01/24/22 09:54 PM Re: Rate discount based on deposit balance WDCA
WDCA Offline
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Thanks again, Along with Randy's good point, I am also trying to figure out how to make this more systematic with less human involvement so there's less chance of inconsistency. I appreciate your responses.

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#2265119 - 01/25/22 02:33 AM Re: Rate discount based on deposit balance WDCA
Rocky P Online
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Think about the type of deposit too. I wouldn’t put it past someone to transfer $1MM in a 3 month cd, get the rate discount for 30 years and transfer the funds at maturity, especially if your rates were competitive before the discount.

Banks have used established customers, and deposit balances to reward customers. The amount seems very high though. Since minorities generally have a greater chance to fall into the lower income/asset ranges, you need to document (as the others said) the reasons to avoid disparate impact.
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#2265124 - 01/25/22 01:40 PM Re: Rate discount based on deposit balance Rocky P
InFairness, CRCM Offline
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Originally Posted by Rocky P
Think about the type of deposit too. I wouldn’t put it past someone to transfer $1MM in a 3 month cd, get the rate discount for 30 years and transfer the funds at maturity, especially if your rates were competitive before the discount.

I've seen this happen pretty often.
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#2265250 - 01/26/22 05:27 PM Re: Rate discount based on deposit balance InFairness, CRCM
fmissle Offline
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Back in 2006(?) when DDA rates were higher and banks were trying to increase deposit volume we ran special rates if you met the criteria (Direct Deposit, 6 debit card transactions, etc.).

One client would go to the grocery store on the last day of the month and purchase 6 grapes, one at a time in order to meet the requirement.

We probably wouldn't have noticed, but those transactions wouldn't post until the following day and so he didn't meet the requirements and he complained and I think we agreed to give it to him and then ended up closing the account because he was abusive.

All that to say... some customers will definitely find loop holes to the intended results.

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