Good Morning-

Under the Reg CC New Account Exception Rule would the following be considered a new account?:
John Doe DBA Acme Stress Relievers has a business account at XYZ bank for a period of time over 30 days. John Doe comes in and wants to open up a personal account, would John Doe be subject to the New Account Exception Rule or would he be considered to have an existing relationship?

-or-

John Doe has a personal account for a period of time over 30 days. John Doe comes in and opens a business account for John Doe DBA Acme Stress Relievers, would John Doe DBA Acme Stress Relievers be subject to the New Account Exception Rule or would the DBA be considered to have an existing relationship?

Thank you!

Kara

In my opinion, in neither case would you be able to impose the new account restrictions. In each case the owner of the new account is an established customer.

Thank you, that is what my conclusion was!

Just thought of a "but, what about..."

If John Doe is an established customer and the company is not, wouldn't the DBA be subject to the New account exception since both customers need to be existing?

Or am I looking at this too deeply!

Kara, the distinction is that John Doe and John Doe dba Acme Stress Relievers are the same legal entity. A sole proprietorship is the individual.

If John Doe had come in and opened Acme Stress Relievers LLC, or even John Doe LLC, then you would be dealing with a separate legal entity which is not an established customer.

Thank you all so much!

Kara

Of course, if the same SSN is used, then the entity is the same and the second account would be considered to be owned by an established entity.

Actually, Jeremy, I'll nit-pick an exception. In some cases involving a single-member LLC, the IRS permits the LLC to use the SSN of the single member for all purposes. But the LLC is a legal entity separate from the individual.

If Jeremy Fraud Pup is an established DDA customer and opens a new account for Fraud Pup LLC, using his own SSN as the TIN, I could apply new account exception holds to the new account. But a bank should realize that its good customer will be operating the account, and new account treatment, though permitted, isn't appropriate.

If you didn't nit-pick, would you be a guru?