Waiving Monthly Club Account Fee for Executive Officers

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Question:

Our bank offers a checking account (The Club Account) to customers for a fee of $7 per month with various benefits including unlimited check writing, free checks, no minimum monthly balance, etc. Employees receive the account for no monthly charge. Are executive officers also allowed to receive the account for no charge? It is my understanding that executive officers cannot receive more favorable terms than customers.

Answer:

Normally deposits are not impacted by Reg. O which largely addresses preferential loan treatments. You may be thinking of 12 U.S.C. Sec. 376, which addresses rate of interest paid to directors, etc.

"Sec. 376 [Federal Reserve Act, Sec. 22] No member bank shall pay to any director, officer, attorney, or employee a greater rate of interest on the deposits of such director, officer, attorney, or employee than that paid to other depositors on similar deposits with such member bank."

In this instance you are referring to a fee waiver which is part of an employee benefit plan to which many other employees, not just insiders, participate. This would be allowable.

If it were an interest-bearing account I think it would be a stretch to say that the fee waiver is the equivalent of interest income.

First published on BankersOnline.com 10/03/05