Is it permissible to charge both a dormancy fee and a service fee if they are disclosed to the customer as separate fees? Our dormancy fees are charged every month an account goes unused, provided that the account balance is under a certain level and the account has been inactive for at least a year. Our service fees vary based on the account type. For example, we charge a service fee on certain checking accounts if they do not have at least one ACH credit during a statement cycle and charge a service fee on certain savings accounts if the account balance falls below a certain level. We disclose the dormancy fees on our fee schedule and our service fees on our Truth in Savings Act disclosure.

We are not aware of any Illinois or federal laws that would generally prohibit you from charging both a dormancy fee and a service fee if they are disclosed to the customer as separate fees and agreed to by the customer.

Under the Illinois Revised Uniform Unclaimed Property Act (Illinois RUUPA), dormancy fees may be charged pursuant to a valid contract that specifies the time in which the dormancy fee will be charged. Additionally, dormancy fees must be “not unconscionable considering all relevant factors, including the marginal transactional costs incurred by the holder in maintaining the apparent owner’s property and any services received by the apparent owner.” More generally, the Illinois Banking Act provides that account service charges may be charged if contracted for and established according to prudent business judgment and safe and sound operating standards.

As your dormancy fee and service fees are separate charges that are fully disclosed, either in your Truth in Savings disclosure or fee schedule, and agreed to by your customers, you should be able to charge both.

Be aware that federal law prohibits financial institutions from committing or engaging in unfair, deceptive, or abusive acts or practices (UDAAP) in connection with any transaction or offering of a financial product or service. These fees could raise UDAAP questions as to the fairness and business justification for charging two separate fees related to an account’s inactivity. We believe that the risk of a UDAAP concern or finding could be mitigated by undergoing the analysis required by the Illinois UDAAP — considering all relevant factors with respect to the fee amounts, including your costs and services provided to the accountholder (keeping in mind that many inactive accounts will be subject to both dormancy and service fees).

For resources related to our guidance, please see:

Illinois RUUPA, 765 ILCS 1026/15-602(a) (“A holder may deduct a dormancy charge or an escheat fee from property required to be paid or delivered to the administrator if: (1) a valid contract between the holder and the apparent owner authorizes imposition of the charge for the apparent owner’s failure to claim the property within a specified time; and (2) the holder regularly imposes the charge and regularly does not reverse or otherwise cancel the charge.”)

Illinois RUUPA, 765 ILCS 1026/15-602(b) (“The amount of the deduction under subsection (a) is limited to an amount that is not unconscionable considering all relevant factors, including the marginal transactional costs incurred by the holder in maintaining the apparent owner’s property and any services received by the apparent owner.”)

Illinois Banking Act, 205 ILCS 5/5e(a) (“Notwithstanding the provisions of any other law in connection with extensions of credit, a State bank may elect to contract for and receive interest, fees, and other charges for extensions of credit subject only to the provisions of subsection (1) of Section 4 of the Interest Act, except for extensions of credit secured by residential real estate, which shall be subject to the laws applicable thereto.”)

Illinois Banking Act. 205 ILCS 5/5e(b) (“The establishment of account service charges and the amounts of the charges not otherwise limited or prescribed by law is a business decision to be made by a bank according to prudent business judgment and safe and sound operating standards. In establishing account service charges, the bank may consider, but is not limited to considering, the costs incurred by the bank, plus a profit margin, for providing the service, the deterrence of misuse of the bank’s services, the establishment of the competitive position of the bank in accordance with the bank’s marketing strategy, and the maintenance of the safety and soundness of the bank.”)

UDAAP, 12 USC 5531(c)(1) (“The Bureau shall have no authority under this section to declare an act or practice in connection with a transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service, to be unlawful on the grounds that such act or practice is unfair, unless the Bureau has a reasonable basis to conclude that—

(A) the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers; and

(B) such substantial injury is not outweighed by countervailing benefits to consumers or to competition.”)

UDAAP, 12 USC 5531(d) (“The Bureau shall have no authority under this section to declare an act or practice abusive in connection with the provision of a consumer financial product or service, unless the act or practice—

(1) materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or

(2) takes unreasonable advantage of—

(A) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service;

(B) the inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service; or

(C) the reasonable reliance by the consumer on a covered person to act in the interests of the consumer.”)

UDAAP, 12 USC 5536(a) (“It shall be unlawful for—

(1) any covered person or service provider—

(A) to offer or provide to a consumer any financial product or service not in conformity with Federal consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial law; or

(B) to engage in any unfair, deceptive, or abusive act or practice.”)