My bank offers a consumer checking account product titled “Free Checking.” This product currently has no maintenance or activity fees, and no minimum balance or transaction requirements. The bank is considering adding a nominal monthly paper statement fee to this product for customers who do not enroll in paperless e-statements.
Q Under Regulation DD (Truth in Savings Act), could the bank continue to title the product “Free Checking” and advertise the product as “free” if it implements a paper statement fee, or would this fee be considered a “maintenance or activity fee”?
A It is not 100% clear.
If the bank were to introduce this paper-statement fee, there is risk it could be considered a “maintenance or activity fee,” and the bank would not be permitted to continue to advertise the product as “free” under Regulation DD.
Regulation DD, 12 CFR § 1030.8(a)(2), prohibits describing an account as “free” (or using a similar term) “if any maintenance or activity fee may be imposed on the account.” Comment 3 to § 1030.8(a) explains that maintenance or activity fees include, among other things:
- “transaction and service fees that consumers reasonably expect to be imposed on a regular basis,” and
- “a flat fee, such as a monthly service fee.”
Here, a monthly paper-statement fee could be a service fee that “consumers reasonably expect to be imposed on a regular basis.” In addition, a monthly paper-statement fee may be considered a “flat fee, such as a monthly service fee,” even if consumers could avoid it by choosing to enroll in e-statements. The “free” nature of the product would be conditioned on the consumer taking affirmative action, and advertising the product as “free” without further qualification could be misleading.
On the other hand, Regulation DD does not expressly address the treatment of avoidable paper-statement fees, and because consumers could avoid this fee, there may be an argument that it is more analogous to the types of optional fees that may be charged on “free” accounts, such as fees for safe deposit boxes or cashier’s checks.
To mitigate risk, the bank could revise the product name and advertising to clearly reflect the condition (e.g., “Free Checking with E‑Statements”). This approach would improve accuracy and avoid misleading impressions.
For more information, contact ABA’s Leslie Callaway.
Please note that this section is not a substitute for professional legal advice.
