IBA Compliance Connection

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Our auditors told us that a “Doing Business As” (“d/b/a”) checking account was subject to Regulation E because it is held under the sole proprietor’s social security number, not a business tax ID. Is that true? Also, if we offer our consumer Internet banking product to business customers, would that make those business accounts subject to Regulation E?

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No, Regulation E does not apply to a business customer.

Regulation E applies only to accounts “established primarily for personal, family, or household purposes.” It would not apply to an account established for a business, regardless of the tax identification number used for the account. Also, a business operating under a fictitious d/b/a name is not necessarily required to obtain a separate employer identification number (EIN) and may operate under the owner’s SSN.

While Regulation E does not apply to your business customers, we recommend that you check your agreements and disclosures related to your Internet banking product. If your account agreements or Internet banking disclosures include Regulation E disclosures, you will be contractually obligated to comply with those provisions even for business accounts using the same Internet banking product.

For resources related to our guidance, please see:

  • Regulation E, 12 CFR 1005.2(b)(1) (The term “account” is defined as “a demand deposit (checking), savings, or other consumer asset account . . . established primarily for personal, family, or household purposes.”)
  • IRS FAQ, Form SS-4 & EIN (“Question: Does a small company that operates as a sole proprietorship need a tax ID number? Answer: A sole proprietor without employees and who does not file any excise or pension plan tax returns does not need an employer identification number (EIN) (but can get one if they choose). In this instance, the sole proprietor uses his or her social security number as the taxpayer identification number. . . .”)