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Preferential Employee Loan Rates

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Question: 
The bank currently offers a lower interest rate on credit cards to its employees than to its customers. Is this a violation of 12 CFR something, 12 USC 375 "a" and "b", or any other regulation?
Answer: 

Reg. O is the only prohibition I know of. It won't effect the employees at large, but will effect those subject to Reg. O as insiders.

If this discount is part of a bona fide employee benefit plan you should be OK. But this can't be something that only those execs have access to. (12 CFR 215.4(a)(2)) Similarly, I would watch the usage. While you could argue that the credit limits are tied to income and the execs generally have a better income, if the execs have $15,000 limits and the employees have $500, you may not pass the smell test.

First published on BankersOnline.com 12/6/04

First published on 12/06/2004

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