Regulation DD and its accompanying commentary describe the types of fees that can be charged on a “free” checking account, along with those that should be avoided. The question of whether a customer can be required to sign up for a fee-free service in connection with “free” checking is not directly addressed. However, the commentary to the advertising rules provides the following example of a permissible condition:

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.

Based on this example, an argument could be made that a requirement to establish online bill payments, even when no fee is imposed for this service, is a condition “related to deposit accounts,” and as such it would be an impermissible condition on a “free” checking account. (Even if the bank is not charging a fee for the online bill payment service, arguably the bank is saving money by reducing the number of checks the customer writes and thereby not having to process as many paper checks.)

The regulatory concerns over the use of the term “free” seem to stem from the general prohibition on misleading advertising. If the disclosures and promotional advertising for the account are not misleading, and it is made clear that online bill payments and other services are being required, you may — if done properly — be able to use the term “free.” In other words, a promotional banner outside the bank stating “Free Checking Available” could be deemed misleading based on the above example. However a promotional banner stating “Free Checking Available When You Register for Online Banking” may be permissible.

Again, unfortunately, there is no definitive guidance on this issue of which we are aware. You may want to call the Consumer Regulations Division of the Federal Reserve Bank of Chicago, (888) 372-2446, and run these examples by them.