If one offers a age 50+ checking product and one of the benefits is a percentage discount on consumer loans provided the payment is withdrawn from the 50+ program checking account, does the 62+ Reg B consideration come into play?

I thought the age and Reg B violation only came into play when the discount or benefit is given to all members of the account group (50+) and the discount just came from being in that group. The fact the discount really comes from the direct payment using the checking account (a savings to the institution) is where the discount is permitted. PS: all other checking account products of the bank provide this direct deposit paymemt discount on loans too.

If you say the benefit is because it comes from a 50+ deposit account, the effect is discriminatory because someone under 50 cannot do this.

If you are more clear and say this is a discount allowed for all deposit accounts, as you did in the last paragraph, you are OK.

It is like telling a minority loan applicant, "You are a minority. I cannot make you this loan." Two facts, but it would be better said "You have borrowed many thousands of dollars and never repaid any of it. You are filing bankruptcy and lost your job. I cannot make you this loan."

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The fact the discount really comes from the direct payment using the checking account (a savings to the institution) is where the discount is permitted. PS: all other checking account products of the bank provide this direct deposit paymemt discount on loans too.

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If the discount is available to ANYONE who opts for direct payment from a checking account, then you would not have a problem. Just be careful how you market this benefit, perhaps consider wording that says "The 50+ account offers the same direct payment discount as our other accounts" so there is no confusion.

Also, be careful if for some reason the direct payment discount program is discontinued on the other products, but left in place for the 50+ account. THEN, you will have a problem.

BTW - discounts that are EXCLUSIVE to a "50+" type of account is a very common Reg B violation, and may wind up as a referral to the Department of Justice. You can only have exclusive preferential pricing if it is limited to age 62 and above.

Is it okay to offer a loan discount to, i.e., 2 of 4 account types, where age is not a factor? The two account it would be offered to would be those with higher monetary qualifiers.

If there is no age qualifier to obtain the underlying account and only, for example, a minimum balance, then there would be no Reg B problem.

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If there is no age qualifier to obtain the underlying account and only, for example, a minimum balance, then there would be no Reg B problem.

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You still need to be careful that you don't have a Disparate Treatment issue which comes up when you set minimum income requirements, or minimum loan amounts. You need to carefully document your business reasons for offering the discount on that basis.

Reopening this issue. Suppose a bank offers a checking program to all customers. One of the benefits to all account holders is a 1/2% discount on consumer loans. Customers over age 50+ pay $1 less per month for this checking account than customers under age 50. Is this a Reg B violation for offering preferential terms to persons aged 50-61? The FDIC thinks yes. I think no. I think it's a $1 discount on the checking account's monthly maintenance fee.

It's not the $1 on the monthly CHECKING account service fee that makes this a violation of Reg. B. It's the discount on the loan fee that you have tied to it. Never tie credit products to an Age related deposit product unless the age begins at 62. See Section 202.6(b)(2)(1) in the Commentary to Reg. B.

I don't understand not being able to have a loan discount tied to a deposit product that is available to EVERYONE. So...the discount is also available to EVERYONE.

How is this considered discrimination?

This is available to people age 50 and older. The age requirement for Regulation B to allow for special rates is 62. In essence, you are discriminating against people under the age of 50. They do not qualify for this product.

I'm not sure I agree. The $1 discount on the monthly checking fee does not "buy" them more favorable terms on the loan product. According the the post ALL checking account customers receive the same loan discount.

No, the deposit product is available to anyone who wants in...including those under age 50. There is no age requirement to get the deposit product. Anyone who has the deposit product can also have the 1/2% loan discount.

The only difference between the deposit account customers over and under age 50 is that those 50+ pay $1 less for the checking account's monthly maintenance fee.

The local FDIC folks say it's a violation because those age 50-62 pay $1 less for the benefit of receiving the loan discount. I still argue that it's simply a reduction of $1 in the monthly maintenance fee for the deposit account.

After re-reading and re-thinking, I will amend my previous post. The $1 does not on the "surface" appear to buy a larger discount, but in the long run it does cost them (those 50+) $12 per year less to obtain the discount, therefore they are getting more favorable terms.

The FDIC sounds like they cite this more than the other agencies. I think this could be argued either way as each has attributes.

You have a checking product that is not age related and that product entitles all owners to a loan discount. So far you are fine. But some of those owners not in a "protected" age class get a discount on the checking product. Indirectly, those under 51 pay full price, those 51+ get a discount on the monthly cost of the deposit account. The effect is that indirectly those "seniors" 51-61 get an additional loan discount not allowed under "B". The effects test says they are treated better and that is the problem.

I'd have to research the old opinions expressed in the banking bulletins for better wording, but the fact that age was condition of the account and the account was the condition of the discount has a slight disconnect here as this account is open to everyone. If you had two similar deposit products but the seniors product was priced lower and both accounts enjoyed a general loan discount because of the mutual product ownership, that would not be discriminatory at face value. But the effects test says it would be the same. So seniors can't get a discounted deposit product if everyone is treated the same on the loans. That doesn't sound right. Bottom line, the deposit pricing is not tied to the loan. The loan discount is a result of deposit account ownership.

If it is a battle worth fighting, you might tell them you'd like that opinion from a higher authority. You may prevail on this issue, or not. It is "iffy", in my opinion.

The bank is removing the loan discount from the product. The letter from the FDIC indicated the matter would be forwarded to DOJ. I'm not sure if they have the option not to send it on given the bank's response.

I just hate rolling over for the examiners. I feel like I've got to put up a fight ~ especially when I think they are wrong.

I appreciate all your input...it helps put things into perspective.

While some attributes are in your favor the effects test is not. It would be interesting to see any follow-up opinions from the FDIC/DOJ on this as it is slightly different from the cases of a few years ago.

As noted above, it is generally best to divorce deposit products with age limitations/benefits from loan discounts unless you meet Reg. B specs.

I'll keep you posted. The bank's response is due at the end of the week...then we'll see what happens.

Thanks again!