Account Opening Bonuses, Reg DD & Disclosures

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Question:

We offer an interest checking account to individuals 55 and over. To promote this account we will be offering a $10.00 bonus to anyone who opens a new account. In addition, anyone who signs up for direct deposit will be paid an additional $20.00. Is this $20.00 considered a bonus under Reg DD, since it is only being paid if the customer signs up for direct deposit and does it trigger the bonus disclosure requirements for advertising? The Compliance Department is saying the bonus disclosure is applicable because the customer has the possibility of receiving $30.00.

Answer:

Your compliance folks have a reasonable interpretation.

12 CFR 230.2(f) Bonus means a premium, gift, award, or other consideration worth more than $10 (whether in the form of cash, credit, merchandise, or any equivalent) given or offered to a consumer during a year in exchange for opening, maintaining, renewing, or increasing an account balance...

The $20 payment would appear to be for "increasing an account balance" using a particular method.

The TISA commentary discusses aggregation:3. Aggregation. In determining if an item valued at $10 or less is a bonus, institutions must aggregate per account per calendar year items that may be given to consumers. In making this determination,institutions aggregate per account only the market value of items that may be given for a specific promotion.

In order to avoid having to add the $10 to the $20 it appears you would have to argue they were different promotions. Do you really want to do that?

You are already in a bonus situation, but all that does is trigger additional disclosures. The disclosures it requires are basically an explanation to the customer as to what the bonus is and what he has to do to get it. It might not be worth your efforts to avoid the aggregation.

First published on BankersOnline.com 2/4/02