NDIP Referral Fees

Question:

I understand per the Interagency Statement on Retail Sales of NDIP that the referral fee may be a one-time nominal fee paid to the bank employee by either the insurance agency or the bank. If we structure a referral fee so that the first three referrals do not warrant a referral fee and starting with the fourth referral the bank employee receives a fixed amount nominal fee per referral retro-active to the first referral made. Would this be acceptable as a one-time fee?

Answer:

The structure that you propose would be in violation of this regulation if the referrals were for the same customer. However, the restriction is per referral of a specific customer. For example, Teller A makes a NDIP referral for Customer Smith. Teller A may receive reasonable compensation only once for any referrals made for Customer Smith. However, Teller A may receive reasonable compensation for referrals of as many other customers as he or she can, but only once for each customer.

Here is a quote from the FDIC's document: FDIC Law, Regulations, Related Acts that you may find helpful: "5. Compensation - Depository institution employees, including tellers, may receive a one-time nominal fee of a fixed dollar amount for each customer referral for nondeposit investment products."

First published on BankersOnline.com 4/06/09