Topic: Introducing New Products and Services
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In response to a prior question, you stated that we can advertise the cost of an optional add-on checking account product that includes ID protection, among other benefits, as a “subscription” fee (rather than a “service” fee) if customers are not charged for services they do not receive. May we still refer to the cost of this product as a “subscription” fee if we do charge customers for services they do not receive but clearly disclose that customers who purchase this product may be charged for services they do not receive? The enrollment form customers must sign for this product indicates that they understand that registration or activation may be required for certain benefits and that they will be charged a monthly fee even if they do not register for or activate those benefits. The form also acknowledges that the customer has received a guide with information on how to activate and register for such benefits.
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Whether you refer to the cost of the add-on product as a “service” fee or “subscription” fee, we believe you should exercise caution when charging a fee for an add-on product that customers will not receive unless they take certain steps, as many banks have been cited for charging such fees. In our view, it…
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For a monthly fee, we offer an optional add-on checking account product that includes ID protection, cell phone coverage, credit monitoring, travel and leisure discounts, insurance products, and more. When advertising this product, we would like to refer to the cost as a monthly “subscription” fee rather than a monthly “service” fee. Is this allowable?
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We are not aware of any law or regulation that would prohibit your bank from marketing the cost of an add-on checking account product as a “subscription” fee rather than a “service” fee — provided the fees are clearly disclosed and explained and customers are not charged for any services they do not receive. The…
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We have added a “device bar” at our main branch with Android and Apple devices that customers can use to access internet banking and sign up for mobile banking. Our wifi network is password-only, which we do not give out to our customers. Through the devices, customers have access to our wifi network, but they can access only our website and a few other specific sites, such as a mortgage calculator website. Do we need to provide any disclosures regarding our wifi network?
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No, you are not required to provide specific disclosures, although certain disclosures and policies may be prudent. For example, your bank may wish to require guests to agree to a “wifi acceptable use” policy; we have provided two examples of such policies below. In addition, we note that providing your customers access to a limited…
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We would like to revise the penalties on our certificates of deposit (CDs) that automatically renew. The increased penalty schedule will not take effect until after the CDs renew. Do we need to provide 30 days’ notice to our CD customers before implementing the increased penalties? As part of a promotion, we are also planning to offer a brand new type of CD that will have different penalties than our existing CDs. Do we need to provide any advance notice about that? The new CD product doesn’t have any customers yet.
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We believe you should include the increased penalty schedule in your prematurity notice, which generally must be sent at least 30 calendar days before the maturity of the existing CD accounts. However, we agree that you do not need to provide advance notice regarding the new type of CD accounts, because no customers have opened…
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We are purchasing a portfolio of indirect auto loans from another bank, which permitted discretionary dealer markups for the loans’ interest rates. What due diligence do you recommend from a fair lending perspective? Could we be held liable for fair lending issues from the purchased loans? Should we perform statistical analysis on the loans before purchasing?
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We believe it would be prudent to perform a statistical analysis as part of your institution’s decision to purchase the auto loan portfolio to help assess the potential legal and reputational risks involved. Purchased auto loans could pose fair lending risks to your institution, even though your institution did not originate the loans. The Equal…
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Because we are switching all of our savings accounts to new product types (without changing the account numbers), we are sending change-in-terms notices. Do we need to include our fee schedule with the account disclosures if none of the fees are changing?
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No, Regulation DD does not require you to mail a new fee schedule, provided that you alert your customers to the changed account terms. Based on your description, you are not switching customers out of their existing accounts, but rather are modifying some of the account terms. When changing account terms, you must provide notice…
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Can we offer a consumer-purpose revolving line of credit that requires no payments due (neither interest nor principal) until maturity under Illinois law? The borrowers would be natural persons, and the term of the loan would be for one year.
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Yes, you may offer a revolving line of credit with a term of one year and principal and interest due at the end of the term, although we recommend considering the regulatory guidance on small dollar loans discussed below. We are not aware of any law or regulation that would prevent it, and the Illinois…
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We are considering an arrangement in which a local business would solicit business in some of our branches, and in return, bank employees will hand out marketing materials promoting our institution at the business. What federal and state regulations should we consider?
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We are not aware of any federal or state laws or rules that would directly apply in this case. However, your arrangement should be structured to comply with Illinois and federal financial privacy laws, and we recommend that your employees be properly trained and aware of the privacy rules with respect to the arrangement. Particularly…
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We want to offer a credit monitoring service to customers affected by recent data breaches. We would offer the service with a discount and would receive a referral fee from the provider. Can we receive a referral fee, and do we need to disclose the referral fee?
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We believe that you may collect a referral fee for sales of credit monitoring services to your deposit customers, though with some caution, but we do not recommend selling the credit monitoring services to your residential loan customers, due to RESPA’s prohibition on referral fees. For your deposit customers, we are not aware of any…
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We would like to offer a new product, a consumer line of credit. The borrower will draw a fixed amount every month and would be paying interest only (not principal). Would this product be considered closed-end credit or open end credit? How should the disclosures be made?
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If the draw note is limited to a one-time maximum, and the customer cannot redraw up to the maximum after repaying the balance, then we believe the draw note should be considered closed-end credit under Regulation Z. Under Regulation Z, if a loan does not fall under the definition of open-end credit, then it is…