Topic: Regulation Q
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Can you confirm that the prohibition against offering interest-bearing business checking accounts has been repealed? Also, are businesses eligible for NOW accounts?
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Yes, you are correct that the prohibition against paying interest on business checking accounts has been repealed. The Dodd-Frank Act eliminated Regulation Q’s prohibition against paying interest on business demand deposit accounts as of July 21, 2011. However, for-profit businesses generally are prohibited from maintaining NOW accounts, since they do not meet the criteria for…
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Can we convert a NOW account to an interest bearing demand deposit account?
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Yes, we believe that you can convert a NOW account to an interest bearing demand deposit account. We are not aware of any prohibition on converting from one account type to another (including business accounts in the wake of Dodd-Frank’s elimination of Regulation Q’s prohibition on paying interest on commercial deposit accounts). However, you are…
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Can a business open an interest bearing checking account?
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Yes a business may hold an interest bearing checking account. The Dodd-Frank Act removed the prohibition on paying interest on ordinary demand deposit accounts held by businesses, and that provision has been in effect since July 21, 2011. For resources related to our guidance, please see: FDIC Final Rule, Interest on Deposits, 76 Fed. Reg. 41392 (July 14,…
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Can an LLC have an interest-bearing checking account?
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Yes, an LLC can open an interest-bearing checking account. The Dodd-Frank Act repealed the prohibition on paying interest on business demand deposit accounts. Banks now may offer interest-bearing accounts to any business, including an LLC. For resources related to our guidance, please see: FDIC Final Rule, Interest on Deposits, 76 Fed. Reg. 41392 (July 14,…
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Can a for-profit organization open a NOW account?
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We do not believe a for-profit organization may open a NOW account. However, we believe that you may allow the for-profit organization to open an ordinary interest-bearing account and you should note that the Dodd-Frank Act repealed the prohibition of paying interest on demand deposit accounts. See 76 Fed. Reg. 41392 (July 14, 2011). The Federal…
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We learned that when Regulation Q was repealed, the premium restriction rules were moved. Where can we find those rules now?
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You had asked where the rules from former Section 217.101 of Regulation Q, which excluded certain account premiums from the definition of “interest,” can be found after Regulation Q’s repeal. The FDIC decided to republish the premium rule in a new location, 12 CFR 330.101. In the accompanying notice, the FDIC explained that while the…
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With all the changes from Dodd-Frank, are corporations and LLCs still prohibited from having NOW accounts?
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We do not believe that an LLC can open a “NOW account,” but under changes made by the Dodd-Frank Act, you can allow any type of business (LLCs/limited liability companies, partnerships, and corporations) to open ordinary deposit accounts that earn interest. While there may be no major differences between NOW accounts and checking accounts, one…
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Can an LLC open a NOW account?
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We do not believe that an LLC can open a “NOW account,” but you may allow the business to open an ordinary interest-bearing account. The Federal Deposit Insurance Act authorizes NOW accounts (accounts which allow for withdrawals and on which you pay interest) only when “the entire beneficial interest is held by one or more…