Free checks

Posted By: Liz F

Free checks - 07/23/01 08:14 PM

If a bank pays for a customer's first order of checks (an amount exceeding $10) for opening a new checking account, is it considered a payment of interest under Reg Q?
Posted By: rlcarey

Re: Free checks - 07/23/01 08:45 PM

No. Refer to 217.2(d):

"Interest" means any payment to or for the account of any depositor as compensation for the use of funds constituting a deposit. A member bank's absorption of expenses incident to providing a normal banking function or its forbearance from charging a fee in connection with such a service is not considered a payment of interest.

Posted By: Liz F

Re: Free checks - 07/24/01 12:13 PM

My concern is 217.101 Premiums on deposits:

"Premiums, whether in the form of merchandise, credit, or cash, given by a member bank to a depositor will be regarded as an advertising or promotional expense rather than a payment of interest if:
(1)The premium is given to a depositor only at the time of the opening of a new account or an addition to an existing account;
(2) No more than two premiums per account are given within a 12-month period; and
(3) The value of the premium or, in the case, of articles of merchandise, the total cost (including taxes, shipping, warehousing, packaging, and handling costs) does not exceed $10 for deposits of less than $5000...

The way our check printing fee is assessed is a debit to the customer's account by the check printing company. If instead the bank pays the check company directly for the checks for the customer, can it still be considered absorption of expenses or forbearance from charging a fee?

Posted By: rlcarey

Re: Free checks - 07/24/01 01:37 PM

I have never seen it interpreted in that manner. If it would have been, I think a lot of us would be in trouble because it is a pretty common practice to waive the charge for the first set of checks. I think that it is pretty clear that it is an absorbtion of expense incident to providing a normal banking function.