Answer by David Dickinson:The Commentary to Section 230.8(a) #4 makes it clear that you can charge "fees assessed against a dormant account" and still call the account free. I know of numerous banks that consider 6 months of inactivity as dormant. I believe this is perfectly acceptable and well within your rights to assess this fee.
You are correct that this change will require a notification to all affected consumers. However, you could simply do this through a statement message and by updating your disclosures for new customers.
Answer by John Burnett:David and I disagree on whether you can declare an account dormant at the six month mark. Some states define the term in connection with their abandoned property laws.
Elsewhere in the Commentary (Comment #6 to section 230.7(a)(1)) the Fed Staff mentions inactive and dormant accounts and appears to recognize them as separate terms. I believe that if the Fed wanted to include inactive accounts in the comment that David cites, they would have.
There is nothing wrong with advertising an account as "free" for a specified period of time. You could adjust your ads to indicate that the "free" status ends after 6 months. At the end of six months, you could then apply an inactivity fee. If you elect to go this route, you will need to notify existing customers, as David noted.
First published on BankersOnline.com 1/29/07