No, a federal savings association is not required to provide the basic checking account mandated by the Illinois Consumer Deposit Account Act. Your institution may rely on a former Office of Thrift Supervision (OTS) opinion letter concluding that federal law preempts the Illinois law requiring basic checking accounts for seniors. However, this answer would change for institutions that are national banks — the OCC has not addressed whether the Illinois law is preempted by federal law.

The OTS opinion letter, from 1986, examined the Illinois Consumer Deposit Account Act and found that federal law preempted the Illinois law for federal savings associations. Because some aspects of the OTS opinion letter are now out-of-date, we contacted an OCC attorney to confirm that the 1986 opinion remained valid. The OCC attorney told us that yes, the opinion was valid and would remain valid unless or until the OCC takes action to rescind it. The OCC attorney also noted that while the Dodd-Frank Act altered the preemption analysis for federally-chartered institutions going forward, the Act also expressly states that all OTS guidance “shall continue in effect” and remains enforceable by and against the OCC.

Again, this reasoning would not apply to national banks, and the OCC itself has not taken a position on whether the Illinois law is preempted for a national bank. There are reasonable arguments to be made that the Consumer Deposit Account Act is preempted by federal law for national banks, but we are not aware of any national banks in Illinois that have taken up this argument in court or with OCC examiners, and accordingly it remains untested.

If you determine that your institution is subject to the Illinois law, we do not recommend charging a monthly service fee. Such fees could be viewed as contrary to the intent of the law, which is to provide basic checking accounts at a low cost to seniors. While the Illinois law places limits on minimum balance requirements and activity fees, it does not expressly prohibit other fees, such as monthly maintenance fees. However, charging a monthly fee would conflict with the Illinois law’s intent by adding costs to what was intended to be a simple, low-cost product.

For more information on basic checking accounts, see our Consumer Deposit Account Act Topic Page at GoToIBA.com.

For resources related to our guidance, please see:

• OTS Legal Opinion (May 7, 1986) (As described in a later OCC letter, this opinion concludes that the “Illinois law requiring all financial institutions to offer a Basic Checking Account to any persons 65 years or older who requests such an account was preempted for federal savings associations.”)

• The 1986 OTS Legal Opinion is not available online, but it is referenced in a later OTS Legal Opinion. See Preemption of State ATM Restrictions (July 1, 1998), page 13, footnote 50.

• Dodd-Frank Act, 12 USC 5414(b) (“All orders, resolutions, determinations . . . other interpretations, guidelines, procedures, and other advisory materials that have been issued, made, prescribed, or allowed to become effective by the Office of Thrift Supervision . . . shall continue in effect . . . and shall be enforceable by or against . . . the Office of the Comptroller of the Currency . . . .”

• Consumer Deposit Account Act, 205 ILCS 605/4(a) (“Every financial institution shall offer a Basic Checking Account to any natural person 65 years of age or older who requests such an account.”)

• Consumer Deposit Account Act, 205 ILCS 605/4(b) (“A Basic Checking Account shall be established by either (1) a minimum initial deposit of $100, or (2) a written agreement with the account holder requiring direct deposits with the financial institution by a third party of recurring payments due to the account holder on at least a monthly basis. Except as provided in subsection (d) of this Section, no other minimum balance or minimum deposit requirement may be imposed on a Basic Checking Account.”) 

• Consumer Deposit Account Act, 205 ILCS 605/4(c) (“No activity charge may be imposed for the first 10 checks drawn on a Basic Checking Account in any calendar month . . . .”)