Yes, minors are permitted to open savings accounts. While we are not aware of a dollar limit on account opening gifts, Regulation DD’s disclosure requirements apply if the gift is worth more than $10, and IRS reporting requirements apply to gifts valued at $10 or more and $600 or more.

Both the Illinois Savings Bank Act and Illinois Banking Act expressly permit minors to hold deposit accounts, and federal law does not prohibit minors from opening savings accounts. However, if a minor is too young to sign a signature card and their parent signs for them, it is unclear whether Illinois courts would uphold a parent’s signature on behalf of a minor in the event of a dispute. (We are aware of conflicting Illinois case law on the question of whether contracts signed by parents on behalf of minor children are enforceable.)

Additionally, we are not aware of a dollar limit on account opening gifts. Regulation DD requires that any advertisement of a “bonus” (including an account opening gift) worth more than $10 must clearly and conspicuously state: “(1) the ‘annual percentage yield,’ using that term, (2) the time requirement to obtain the bonus, (3) the minimum balance required to obtain the bonus, (4) the minimum balance required to open the account, if it is greater than the minimum balance necessary to obtain the bonus, and (5) when the bonus will be provided.” Regulation DD also requires that bonus information be included in your account disclosures.

We also believe the account opening gifts would be considered “prizes” under the Illinois Prizes and Gifts Act, since they will be awarded using a selection process (the spinner) that involves an element of chance. Consequently, any written promotions regarding the account opening gifts must contain nine specific disclosures, including the restriction that the gifts are available only to those opening minor savings accounts. The Illinois Consumer Fraud and Deceptive Business Practices Act also requires you to clearly and conspicuously disclose all material terms and conditions relating to the gifts at the outset of the offer.

Regarding IRS reporting, if the account opening gift costs your bank more than $10 (or more than $20 for an opening deposit of $5,000 or more), you will need to issue an IRS Form 1099-INT, since such gifts are considered interest, and a Form 1099-INT must be issued when interest aggregating $10 or more is paid. Also, if the account opening gift costs your bank more than $600, you must issue an IRS Form 1099-MISC.

For resources related to our guidance, please see:

• Illinois Savings Bank Act, 205 ILCS 205/7005 (“Deposit accounts of a savings bank may be held as follows: (1) by any individual in his own right, regardless of age or marital status, or by 2 or more individuals; . . .”)

• Illinois Banking Act, 205 ILCS 5/45.1 (“A state bank may accept deposits made by a minor and may open an account in the name of such minor and the rules and regulations of such bank with respect to each such deposit and account shall be as binding upon such minor as if such minor were of full age and legal capacity.”)

• Interagency, Guidance to Encourage Financial Institutions’ Youth Savings Programs and Address Related Frequently Asked Questions (February 24, 2015) (“No federal law prohibits minors from opening savings accounts. Rather, a deposit account relationship is based on a contract governed by state law. In general, minors are deemed to not have the legal capacity to enter into a contract, including opening an account at a financial institution, meaning that a contract with a minor is potentially ‘voidable.’ However, some states specifically allow a minor to open a savings account.”)

• Villalobos v. Cicero School Dist. 99, 362 Ill.App.3d 704, 712 (1st Dist. 2005) (“Illinois courts have held that neither a next friend nor a court-appointed guardian can approve a settlement of a minor’s claim without court approval. . . . [The minor] is not in the same position as minors who were actual signatories, like those involved in the cases cited by defendants. . . . Thus, we are inclined to think that disaffirmance and ratification do not play the same role in cases, such as this, where the minor is not a party to the original contract but, rather, is purportedly represented by his parents.”)

• Leonard C. Arnold, Ltd. v. Northern Trust Co., 116 Ill.2d 157, 166 (1987) (“We therefore hold that a contingent-fee agreement, entered into on behalf of a minor by his next friend, is enforceable unless the terms are unreasonable.”)

• Regulation DD, 12 CFR 1030.2(f) (“Bonus means a premium, gift, award, or other consideration worth more than $10 (whether in the form of cash, credit, merchandise, or any equivalent) given or offered to a consumer during a year in exchange for opening, maintaining, renewing, or increasing an account balance. The term does not include interest, other consideration worth $10 or less given during a year, the waiver or reduction of a fee, or the absorption of expenses.”)

• Regulation DD, 12 CFR 1030.8(d) (“Except as provided in paragraph (e) of this section, if a bonus is stated in an advertisement, the advertisement shall state the following information, to the extent applicable, clearly and conspicuously:

(1) The ‘annual percentage yield,’ using that term;

(2) The time requirement to obtain the bonus;

(3) The minimum balance required to obtain the bonus;

(4) The minimum balance required to open the account, if it is greater than the minimum balance necessary to obtain the bonus; and

(5) When the bonus will be provided.

• Regulation DD, 12 CFR 1030.8(b)(7) (“Account disclosures shall include the following, as applicable: . . . The amount or type of any bonus, when the bonus will be provided, and any minimum balance and time requirements to obtain the bonus.”)

• Illinois Prizes and Gifts Act, 815 ILCS 525/10 (“‘Prize’ means a gift, award, or other item or service of value that is offered or awarded to a participant in a real or purported contest, competition, sweepstakes, scheme, plan, or other selection process that involves an element of chance.”)

• Illinois Prizes and Gifts Act, 815 ILCS 525/25 (“A written promotional prize offer must contain each of the following in a clear and conspicuous statement at the onset of the offer:

(1) the true name or names of the sponsor and the address of the sponsor's actual principal place of business;

(2) the retail value of each prize the person receiving the notice has been selected to receive or may be eligible to receive;

(3) a disclosure that no purchase is necessary to enter such written promotional offer;

(4) a disclosure that a purchase will not improve the person's chances of winning with an entry;

(5) a statement of the person's odds of receiving each prize identified in the notice;

(6) any requirement that the person pay the actual shipping or handling fees or any other charges to obtain or use a prize, including the nature and amount of the charges;

(7) if receipt of the prize is subject to a restriction, a description of the restriction

(8) any limitations on eligibility; and

(9) if a sponsor represents that the person is a ‘finalist’, has been ‘specially selected’, is in ‘first place’, or is otherwise among a limited group of persons with an enhanced likelihood of receiving a prize, the written prize notice must contain a statement of the maximum number of persons in the group or purported group with this enhanced likelihood of receiving a prize.”)