Marketing wants to offer a large bonus for opening a checking account. I've recommended that they tie the bonus to getting something else, say a debit card when the customer also open a new account, instead of tying it to the new account. Do I still need to include the APY, balance tiers and other APY disclosures since the new account could be interest bearing? I will not state any APY's in the ad promoting the account.

Take that a step further- in that same ad, if they tied the bonus to the deposit account, if I don't mention any specific type of checking, but it could be a non-interest bearing or an interest bearing account, would I need to include APYs, balance tiers and other APY disclosures for our interest bearing products? Could I get by without disclosing since I don't mention any specific product?

The use of the term "checking account" is a little confusing. The differences on what you can or cannot do will be based on whether the account is a DDA account or a NOW account - being a checking account has no bearing on this question.

We have the same question coming from our marketing department. They see other banks offering and want to offer a cash bonus tied to opening a new "checking account" as long as other services are also added (bill pay, ATM card, overdraft line, etc.). There are both min deposit and duration provisions in the offer that I have seen.

The ONLY way that I can see that this can be done is if the account is account is actually a NOW account and not a true DDA. Even though the term "NOW account" is not used in the marketing materials. Otherwise, this would be in violation of Regulation Q.

Am I correct or is there some way that other banks are getting around the Regulation Q interest prohibitions (other than just violating the regualation..)?

Before deciding for certain, BillyBob, review section 217.101(b) of Regulation Q. That section was added specifically so that bonus promotions for services (direct deposit, debit cards, bill pay, etc.) OTHER THAN the opening of or addition to a demand deposit account would not be considered interest under the regulation. The wording of the exception in the regulation isn't the clearest in the world, but it's clear to me that, if you offer a gift conditioned on direct deposit or bill pay, etc., you can do so without tripping over Reg. Q.

That Regulation Q exception, however, doesn't buy you anything when it comes to Regulation DD (Truth in Savings). If you advertise a bonus in connection with opening a deposit account (with or without a qualifying ancillary service like direct deposit), you trigger a disclosure of the APY (if the account is interest-paying), and that triggers other disclosures you're familiar with. If there is no interest paid, mention of a bonus won't trigger disclosure of the APY (because it doesn't apply), and therefore it doesn't trigger the other disclosures, either.

John,
Thanks for the clarification. If we just say "open a checking account and a debit card and get a $50 bonus", if that checking account could be a non-interest bearing or an interest bearing demand deposit account, do we still need to list the APY's and all other disclosures for our interest bearing deposit accounts that are available?

John,

"If there is no interest paid, mention of a bonus won't trigger disclosure of the APY (because it doesn't apply), and therefore it doesn't trigger the other disclosures, either."

But still, the mention of a bonus does trigger additional disclosures regardless of whether the account is interest bearing or not:

230.8 (d) Bonuses. Except as provided in paragraph (e) of this section, if a bonus is stated in an advertisement, the advertisement shall state the following information, to the extent applicable, clearly and conspicuously:
(1) The ``annual percentage yield,'' using that term;
(2) The time requirement to obtain the bonus;
(3) The minimum balance required to obtain the bonus;
(4) The minimum balance required to open the account, if it is greater than the minimum balance necessary to obtain the bonus; and
(5) When the bonus will be provided.

Correct, Randy. What I should have said is that it won't trigger the items that a mention of the APY would trigger. Thank you for catching that important slip of the keyboard.

Thanks for the commentary, this is extremely helpful.

It is the "...directly or indirectly,...." verbiage in Section 217.101(b) of Regulation Q that had me concerned. I was reading that to suggest that if the services attached to the account had to be in place for a specific period of time, there was a "indirect" relation to a duration.

I appreciate all of the feedback. I'm still not clear on if I just say "checking account" and do not mention a specific product, do I need to disclose the APY and all other disclosures applicable to our interest bearing checking accounts that are available? That could be pretty lengthy, and marketing is pushing back on listing all options. Can we just pick the one account for which we'd list the APY and disclosures?

I, too, would like to know the answer to this. If we're advertising a gift to be given in connection with the opening of a new "checking account" AND the receipt of two direct deposits into the new account, do we need to disclose APYs, minimum balences, etc. for the interest-bearing accounts that could be opened? If so, is there a way to get around this? I'm not sure how I would word the ad to clearly state that the gift is only for the direct deposit and not for the opening of the account since the promotion is only for new checking account customers - i.e., existing customers who establish direct deposit do not get the gift and new customers that don't establish direct deposit don't get the gift.

Deeana, in your scenario I think your stipulations result in a requirement to open a new account since an existing customer is ineligible for the gift. However, if you keep the value of the gift at or under $10 (see Reg DD for method of determining this), it would not be considered a bonus and you would avoid the disclosures that the bonus would trigger.

Well, the gift is way over $10, so that's out. I suppose we could limit the promotion to non-interest earning accounts, but I don't think they want to do that.