We are not aware of any law or rule that would prevent you from charging a dormancy fee on a health savings account (HSA). However, we caution that charging such a fee might be viewed as an unfair act or practice.

Given the nature of HSAs, many accounts may remain inactive because IRS rules penalize withdrawals that are not for a “qualified medical expense.” HSA funds carry over each year if they are not withdrawn, and owners are not required to make contributions or distributions. For those reasons, even if there are no transactions on the account, we caution against categorizing such accounts as dormant.

Charging a dormancy fee could be viewed by consumers or by your regulators as an unfair act or practice. An unfair act is one that causes an injury that is not reasonably avoidable. A customer may be unable to avoid a dormancy charge if a year passes without incurring any qualified medical expenses, unless the customer takes a taxable distribution (which would be subject to an additional penalty tax of 20%). Again, we recommend caution when charging dormancy fees on HSAs.

For resources related to our guidance, please see:

• Internal Revenue Code, Health Savings Accounts, 26 USC 223(f) (“Any amount paid or distributed out of a health savings account which is used exclusively to pay qualified medical expenses of any account beneficiary shall not be includible in gross income.”)

• Internal Revenue Code, Health Savings Accounts, 26 USC 223(f)(4) (Additional 20% tax on distributions not used for qualified medical expenses.)

• Consumer Financial Protection Act of 2010 (UDAAP), 12 USC 5331(c) (An unfair act is one that “is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers . . . .”)