Answer:
Here's some guidance from our Advanced Deposit Operations Manual on Free Checking Accounts:
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I. GENERAL RULE - Advertisements may not be misleading, inaccurate or misrepresent the deposit contract.
A. Accounts may not be advertised as “free” or “no cost” if a maintenance or activity fee could be imposed.
1. Maintenance and activity fees include:
a) Any fee imposed when a minimum balance requirement is not met, or when consumers exceed a specified number of transactions;
b) Transactions and service fees that consumers reasonably expect to be imposed on a regular basis;
c) A flat fee, such as a monthly service fee; and
d) Fees imposed to deposit, withdraw, or transfer funds, including per-check or per transaction charges (for example, $.25 for each withdrawal, whether by check or in person).
2. Other fees. Examples of fees that are not maintenance or activity fees include:
a) Fees not required to be disclosed under Section 230.4(b)(4) (The initial disclosure requirement);
b) Check printing fees;
c) Balance inquiry fees;
d) Stop-payment fees and fees associated with checks returned unpaid;e) Fees accessed against a dormant account; and
f) Fees for ATM or electronic transfer services (such as preauthorized transfers or home banking services) not required to obtain an account.
3. Similar terms. An advertisement may not use the term “fees waived” if a maintenance or activity fee may be imposed because it is similar to the terms “free” or “no cost.”
4. Specific account services. Institutions may advertise a specific account service or feature as free if no fee is imposed for that service or feature. For example, institutions offering an account that is free of deposit or withdrawal fees could advertise that fact, as long as the advertisement does not mislead consumers by implying that the account is free and that no other fee (a monthly service fee, for example) may be charged.
5. Free for limited time. If an account (or a specific account service) is free only for a limited period of time--for example, for one year following the account opening--the account (or service) may be advertised as free if the time period is also stated.
6. Conditions not related to deposit accounts. Institutions may advertise accounts as “free” for consumers meeting conditions not related to deposit accounts, such as the consumer’s age. For example, institutions may advertise a NOW account as “free for persons over 65 years old,” even though a maintenance or activity fee is assessed on accounts held by consumers 65 or younger.
7. Interest paid cannot be called "profit."
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This is also a topic we will explore in the upcoming Advertising Compliance Webinar on 10-17-07.
First published on BankersOnline.com 10/15/07
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