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4000 - Advisory Opinions
Advertisement for "No Fee" Checking Account Violates Truth
in Savings Act if a Fee Is Imposed When Minimum Balance Is Not
Maintained
FDIC--95--31
November 21, 1995
Mark A. Mellon, Counsel
It has been brought to our attention that your depository
institution placed an advertisement in the "newspaper" of
September 3, 1995 offering a "Personal Banking Package". See the
enclosed copy of the advertisement. The advertisement states that a
"no fee" checking account is one of the features of this deposit
product. A footnote to the advertisement states, however, that a daily
average balance of $2,500 must be maintained in any group of accounts
for no monthly fees to be charged and that, if the available balances
fall below that sum for any one day during a month, a monthly fee of 8
dollars will be charged.
As a state-chartered depository institution which is not a member of
the Federal Reserve System, you are subject to the Truth in Savings Act
(the "TISA") and its implementing regulation,
12 C.F.R. Part 230,
Truth in Savings (Regulation DD) ("Regulation DD"). See sections
262 and 274(6) of the TISA (12 U.S.C.
§§ 4301 and
4313(6)); see also
12 C.F.R. § 230.1(c).
Section 263(c) of the TISA (12
U.S.C. § 4302(c)) provides that an advertisement which
solicits deposits on the behalf of a depository institution shall not
refer to or describe a deposit account as "free" or "no
cost" or contain a similar term if a minimum balance must be
maintained in the account in order to avoid the fees or if any regular
service or transaction fee may be imposed on the account. This
statutory requirement is implemented by
12 C.F.R. § 230.8(a) of
Regulation DD which provides that an advertisement may not state that
an account is "free" or "no cost" (or contain a similar
term) if any maintenance or activity fee may be imposed on the account.
The official staff commentary on Regulation DD provides that, for
purposes of determining whether an account can be advertised as
"free" or "no cost", maintenance and activity fees include
"[a]ny fee imposed when a minimum balance is not
met. . ." See 12 C.F.R. Part 230, Supp. 1, 12 C.F.R.
§ 230.8(a), comment number 3.i.
Review of the relevant statutory and regulatory provisions
demonstrates that your advertisement does not comply with TISA and
Regulation DD requirements. You should not advertise deposit accounts
as "no fee" if in fact a fee will be charged if the account
balance falls below a pre-specified minimum. Your institution should
take steps to correct this deficiency in all future advertising which
solicits investment in deposit accounts. We would appreciate it if you
would inform us within two weeks from the date of the receipt of this
letter whether you have taken such steps.
If you have any questions or would like to discuss this matter
further, please contact Mr. Thomas Lawless, (617) 320-5701, Regional
Counsel for the FDIC Boston Region. Thank you in advance for your
prompt attention to this matter.
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