Our marketing department would like to provide a unique rewards program. It is based on your average deposit amounts within our clients checking and savings accounts. Here's the brief outline of how it works.

When you open a checking or savings account (and other products) you will be given 100 points. Every year based on your average balances within the qualifying accounts you will receive 2 point for every 100 dollars. (If average balance is $500 you get 10 points and so on).

The points are banked by a third party and years from now you can redeem the points as "tuition" to a participating private college. (Yes you enroll a specific child to benefit from the points)

That's the short version. My questions include:

Are we violating Reg Q if we include checking accounts? (Would this meet the definition of interest) Also would we have an issue with premiums or bonuses under Reg DD - since we give points just for opening the accounts? (Therefore having to disclose the bonus at account opening.)

Does anyone offer something similar? I'm told by the marketing department that we are the only bank in our state that is being allowed to offer this particular product. Yes, it is something that we contracted (and pay) with a third party, who also contracts the private colleges (who pay).

Any help would be great!

IMHO - it results in the indirect payment of interest on DDA account balances and if the 100 points have a value of over $10 - it would be a bonus under Regulation DD.

Thanks for the information. This is exactly what my gut was telling me.

One other point we thought of - do you think we need to worry about IRS tax reporting?

Has marketing thought of partnering with one of the college tuition corporations? I can't remember the names of any of them right now, but I know when I use my Tom Thumb/Randall's supermarket card I get points that are added to my kids' tuition accounts.

I think Citi might also have something similar through their RewardsPoints program.

Thanks for responding. Yep, we are partnering - but we still need to make sure that we comply with bank regs. Tom Thomb doesn't have THAT problem.

It all sounds great from a customer service/rewards position - but as you know my job depends on me keeping the marketing guys out of "orange jump" suits! So I have to look at things from all every point.