Just curious how other banks handle dormant account fees. Our policy is to charge $5/month on a DDA with no activity for 1 year and $15/quarter on a savings with no activity for 2 years. However, there is no charge if the balance in the account is over $100. My main question is do you charge only accounts below a certain balance (if so, how low) or do you charge all dormant accounts.

You can charge a "reasonable" amount - basically whatever everybody esle in your area is charging on any balance for any period of inactivity.
However, If you are charging it on an account who's balance is greater than $100, you must send a notice to the customer, not more than 3 months prior to the first charge.
To aleviate this stress, we only charge accounts with less than $75.

Where can I find a reference that you must notify the customer before the first charge if the balance is over $100. Does the fee schedule they receive at account opening take care of this or are you saying there is an additional notice required?

no the original fee schedule does not cover it....
Check OCC 12 CFR 7.7515
or OCC 148 on 9/25/80

Also, you cannot charge a dormancy cahrge for more than 5 years,
check with your state laws for they supersede federal laws in this case - although your state more than likely follows the uniform unclaimed property Act -
or UUPA!!

The law regarding charging an inactive account varies greatly from state to state and you really need to research your State law. In Texas, after an account is inactive for a 1 year period, you cannot even assess normal services charges. This is regardless of any contracted fees.

I'm having difficulty finding this information in the state law. Anyone out there from KY that can help? I've looked through KRS Chapter 393 regarding abandoned property but find nothing that says we can only charge fees for a certain period of time. We have accounts that have been dormant for several years but since they are getting their monthly or quarterly statements they are not escheatable.

While many states do, Kentucky does not have any statutory or regulatory limitation on a bank's ability to impose fees on dormant accounts right up to the point where the funds are subject to escheat.

Since this question involved the law of a specific state, I would have moved it to the Kentucky forum for a response, but wanted to offer a comment that relates to other states as well.

My personal opinion is that banks that assess "dormancy" fees, but do not actually put in the safeguards for dormant accounts that these fees are supposed to compensate them for are asking for a lawsuit based on unfair and deceptive practices. Those who simply "fee" the account out of existence are begging for that same law suit. While the dollar amounts involved would not be enough incentive for an individual, the concept should have a lot of appeal to the state's Attorney General.

If you are going to charge a fee, 1) make certain you are taking some actions to justify the fee and 2)don't get greedy.

Thanks to everyone for their input.

We had an examiner that questioned charging accounts with lower balances and not charging accounts with larger balances (cut-off balance $1,000). I agree. Our auditor wanted things done this way and took it to the BOD. They voted it down. Fees are charged equally without regard to the balance.

That seems pretty silly to me. A $10,000 balance probably justifies maintaining dormant account controls, the mailing of the monthly statement, the associated data processing charges, etc. A $10 balance doesn't.

Yes, normal fees are charged equally. However, your institution, depending on what state you're in, defines its own "dormancy" fees and the situation in which they are applicable. Based on your decision, there are some rules regarding the implementation of these fees, but they are not used across the board for all balances...

What is the going rate to charge for Dormant accounts? Is this monthly?

Be careful about asking other bankers about the amount of fees they charge. This should be determine independant of other banker input. It violates the OCC regulations and possible anti-trust rules.

Just be sure when you implement a fee that itis only for accounts that go inactive in the future and are not currently inactive:


Section: 69-1302
Property held or owing by a banking or financial organization or business association; presumed abandoned; when

c) A holder may not, with respect to property described in subdivision (a) or (b) of this section, impose any charges solely due to dormancy or cease payment of interest solely due to dormancy unless there is a written contract between the holder and the owner of the property pursuant to which the holder may impose reasonable charges or cease payment of interest or modify the imposition of such charges and the conditions under which such payment may be ceased. A holder of such property who imposes charges solely due to dormancy may not increase such charges with respect to such property during the period of dormancy. The contract required by this subdivision may be in the form of a signature card, deposit agreement, or similar agreement which contains or incorporates by reference

(1) the holder's schedule of charges and the conditions, if any, under which the payment of interest may be ceased or
(2) the holder's rules and regulations setting forth the holder's schedule of charges and the conditions, if any, under which the payment of interest may be ceased.