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Rewards or Penalties – Walking the Line of Deposit Advertising

Compliance expert Elizabeth Greene covers the do’s and dont’s of deposit advertising.

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dawatts – Person

“You can get paid to bank here!”, “You get refunded on your app purchases!”, “You can earn high interest on any balance!”, “Free Savings Account!”.

These tag lines sound amazing in getting the public interested; however, examiners have also become interested in these claims, leaving items to take note. While high rewards interest accounts are not a new product, they can leave the marketing of these accounts to become slightly blasé.

Due to the scrutiny of these marketing campaigns, the examiners have recently expressed criticism towards the advertising and disclosing of these types of products.

When approaching review of these products, we must consider a few key items:

Profit

Regulation DD states:

(a) Misleading or inaccurate advertisements. An advertisement shall not:

  1. Be misleading or inaccurate or misrepresent a depository institution’s deposit contract; or
  2. Refer to or describe an account as “free” or “no cost” (or contain a similar term) if any maintenance or activity fee may be imposed on the account. The word “profit” shall not be used in referring to interest paid on an account

Stating “You get paid to bank here”, referring to the interest the customer could potentially earn, walks a fine line of inferring the customer is earning a profit from earning interest. Unless you are attempting to be as defiant as Johnny Cash, don’t walk this line by implying that a customer is paid to bank with you.

Refunds

“You will get up to $10 of Google App store purchases!” Wow, this sounds too good to be true! All I have to do is purchase $10 of app purchases and the institution will reimburse me?

This is not always the case. Ensure the disclosures and the advertisements are relaying the same information. For instance, if an advertisement states “$10 off of Google or Apple App Store purchases” and the new account disclosure states restrictions on how to receive a refund of these purchases, your institution could be looking at a potential UDAAP issue.

Interest

An institution may not eliminate the payment of interest on anything other than the minimum balance requirements.

What does this mean? This means that an account may offer 2.05% APY on a checking account with specific requirements such as requiring direct deposit every month, 12 debit card purchases post / settle every month, and a balance up to $15,000.

What if the these requirements are not met? Then interest can be eliminated altogether, right? No! This is not the case. Interest can only be eliminated if the minimum balance requirements are not met. You cannot base the elimination of interest on the qualification requirements. If the qualification requirements are not met, then interest earned can be reduced, however it cannot be eliminated altogether.

Free Account

A free savings account sounds great, right? I can earn a higher interest rate and not receive any fees!

Well, what occurs when the savings account is subject to Regulation D violations? There is a negative impact to the customer. Why did the customer get charged for excessive transaction limitations when the account is advertised as free? The fees associated with the excessive transaction limitations will essentially make this account “not free”; therefore, it should not be advertised as such.

In the end, when stating bold claims that could be considered “too good to be true”, confirm these claims are accurate to the product and not misleading to the consumer. This will ensure your reward account will be the product your client is searching for and expecting.A free savings account sounds great, right? I can earn a higher interest rate and not receive any fees!

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