I've read up on compliance for giving "free gifts" to open a new account with the bank, but I have always been under the impression that the accounts that this refers to were interest bearing/non-interest bearing checking accounts? Do the same rules apply to CD's? If not, what regulations would I need to read up on to make sure we would be in compliance? As I understand it, our marketing department would like to give a gift (less than $10 value) to every new account that is opened.

Any possible problems do you see with this marketing technique?

Sorry, I believe I titled this post incorrectly. It wouldn't technically be a bonus since it's under $10.00 value. Would it instead be considered 'interest' or just a 'free gift'?

It's not considered interest under Reg. Q because it's under the de minimis amount. It's considered neither interest nor a bonus under Regulation DD.

Your compliance responsibilities will be to document the cost of the giveaways, including shipping and storage, and making sure it's under $10. That's all.

Sounds great! Thank you very much!

Can it still be done if the gift is greater than $10 in value?

Sure, but it would be considered a bonus under Reg DD and trigger the required disclosures at account opening and during any advertising. It would also be considered interest from a reporting standpoint and the value would have to be added to the interest reported for the year on the customer's 1099INT.

Thank you for the quick response.

Then how do the big city guys in NY get away with giving away cars ($100,000 5 yr), big screen TV's ($100,000 3 yr), etc with a CD promotion?

Is that a question or a statement?

Anonymous (post 348727) -- For these giveaways, the interest rate on the CD is typically well below market rates, and the cost of the bonus is reported as interest to the IRS.

After having read the BankersCompliance (David Dickinson) "Paying a Bonus on Deposit Accounts", I have the following question:

If we have a CD product where a customer can receive an additional 0.75% interest on their CD "base" interest rate if they have another account with Direct Deposit or a total banking relationship (deposit) of at least $100,000, is this additional interest rate "bump" considered a bonus?

I can't find anything that says it is.

David's information specifically references the Reg. DD Commentary which states;
"1. Examples. Bonuses include items of value, other than interest, offered as incentives to consumers,"

Anyone?

David's statement can be relied upon. Look to section 230.2 of Regulation DD. The definition of "bonus" specifically excludes "interest" and the definition of "interest" in the regulation limits it to amounts computed by applying a periodic rate to a balance. So-called "bonus rates" are not "bonuses" for purposes of Regulation DD.