Answer:
There are privacy issues you would have to work around if the referral fee is paid based on the actual opening of the account. You cannot divulge that a person has an account with you under the Privacy rules and you would do this with payment to the person making the referral. Counsel should be able to assist you in some form of a disclosure allowing the payment and "disclosure" that an account was opened.
The fee you are paying them is for a contract service, the referral. I would put these on a 1099-MISC which has a $600 threshold. So 12 referrals would be needed to report them at all. That means you would have to track them all, with names, addresses, and SSANs, so that you knew when the floor amount was reached and reportable.
First published on BankersOnline.com 8/15/05
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