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federal
R e s e r v e Ba n k
DALLAS. TEXAS
of
D allas
75222
Circular No. 81-51
March 6, 1981
TITLE 12 - CHAPTER XII - INTEREST ON DEPOSITS
Temporary Amendment - Rule Regarding Use of Premiums
TO ALL MEMBER BANKS
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
The Depository Institutions Deregulation Committee adopted a rule,
effective December 31, 1980, concerning the use of premiums by depository
institutions. Since then, an increasing number of depository institutions have
been promoting premium programs which circumvent the objective of the
premium rule.
Effective February 26, 1981, the Committee adopted a temporary
amendment to prohibit depository institutions from soliciting or otherwise
promoting the opening of multiple accounts by a depositor in order to provide
multiple premiums. The Committee is asking for public comment by April 1,
1981, on this rule and on alternative methods that also might be adopted on a
permanent basis.
Interested parties are invited to submit written data, views, or
arguments regarding the proposed rules to Normand Bernard, Federal Reserve
Building, 20th Street and Constitution Avenue, N.W., Washington, D. C. 20551,
Please refer to Docket Number D-0018 when submitting material.
Printed on the following pages is a copy of the material as it was
submitted for publication in the Federal Register. These pages more fully
explain the Comm ittee's action.
Any questions concerning the temporary
amendment should be directed to the Consumer Affairs Section of our Bank
Supervision and Regulations Department, Ext. 6171.
Sincerely yours,
William H. Wallace
First Vice President
Banks and others are encouraged to use the following incoming W A TS numbers in contacting this Bank:
1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the
extension referred to above.
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
TITLE 12— BANKS AND BANKING
CHAPTER XII— DEPOSITORY INSTITUTIONS DEREGULATION COMMITTEE
[Docket No. D-0018]
PART 1204— INTEREST ON DEPOSITS
Premiums, Finders Fees, and the Payment of Interest
AGENCY:
Depository Institutions Deregulation Committee.
ACTION:
Temporary amendment of final rule; request for public comment.
SUMMARY: Effective December 31, 1980, the Depository Institutions Deregulation
Committee ("Committee") adopted a rule concerning the use of premiums
by depository institutions (12 C.F.R. § 1204.109). An increasing number
of depository institutions are promoting premium programs in which a
lump sum deposit is split up by the institution and placed in multiple
accounts for the purpose of enabling the institution to give a premium
for each account.
In order to eliminate this unintended result which
circumvents the objective of the premium rule, the Committee has adopted
a temporary amendment to prohibit depository institutions from soliciting
or otherwise promoting the opening of multiple accounts by a depositor
in order to provide multiple premiums.
The Committee also requests
comment from the public on whether this rule should be permanent and
on alternative methods that might be adopted on a permanent basis.
EFFECTIVE DATE:
1981.
February 26, 1981.
Comments must be received by April 1,
ADDRESS:
Interested parties are invited to submit written data, views,
or arguments regarding the proposed rules to Normand Bernard, Federal
Reserve Building, 20th Street and Constitution Avenue, N.W., Washington,
D.C. 20551. All material submitted should include the Docket Number D-0018.
Such material will be made available for inspection and copying upon
request except as provided in Section 1202.5 of the Committee's Rules
Regarding Availability of Information (12 CFR § 1202.5).
FOR FURTHER INFORMATION CONTACT: Rebecca Laird, Senior Associate General
Counsel, Federal Home Loan Bank Board (202/377-6446), Debra A. Chong,
Attorney, Office of the Comptroller of the Currency (202/447-1632),
F. Douglas Birdzell, Counsel, Federal Deposit Insurance Corporation
(202/389-4261), John Harry Jorgenson, Attorney, Board of Governors of
the Federal Reserve System (202/452-3778), or Allan Schott, AttorneyAdvisor, Treasury Department (202/566-6798).
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SUPPLEMENTARY INFORMATION: Effective December 31, 1980, the Committee
adopted a rule that premiums, whether in the form of merchandise, credit
or cash, will not be regarded as a payment of interest if:
(1) the
premium is given to a depositor only when a new account is opened, an
existing account is renewed, or funds are added to an existing account;
(2) no more than two premiums per account are given in any 12-month
period; and (3) the value of the premium, or, if merchandise is given,
its total cost to the institution, is no more than $10 for deposits
of less than $5,000 or $20 for deposits of $5,000 or more.
(45 F.R.
68641). Since the rule became effective, an increasing number of depository
institutions have been promoting premium programs in which a lump sum
brought in by a depositor will be broken up by the institution and placed
in multiple accounts for the purpose of enabling the institution to
give a premium for each account. This results in the ability of the
institution to provide more premiums than would otherwise be permitted
if the funds had been placed in one account. While these programs technically
comply with the Committee's existing premium rule, they appear to undermine
the intent of the Committee and render the rule meaningless.
In order to curtail the practice of opening multiple accounts
for a depositor, the Committee has adopted a temporary rule to prohibit
a depository institution from soliciting or promoting deposits from
customers on the basis that the funds will be divided into more than
one account by the institution for the purpose of providing more than
two premiums per deposit within a 12-month period. However, an institution
will not be prohibited from providing more than two premiums if the
depositor, without being encouraged by the institution, establishes
more than one account.
This rule is being adopted on a temporary basis in order to
provide the public with an opportunity to comment on this and alternative
methods to deal with this problem on a permanent basis. For example,
the Committee requests comment on whether the rule should be changed
to permit the giving of premiums on a per depositor rather than on a
per account basis and the operational problems, if any, that such a
change might present for affected institutions. The Committee also
requests suggestions on other alternatives. Comments must be received
by April 1, 1981.
This action was taken by the Committee in order to clarify
its original intent in adopting its premium rule and in view of the
increasing solicitations that have occurred for time deposits on the
basis that the funds will be divided into more than one account for
the purpose of paying multiple premiums. Such solicitations are having
adverse effects on the normal flow of funds among depository institutions
and on the competitive balance among depository institutions.
In view
of these considerations and to facilitate the orderly administration
of currently prescribed deposit interest rate regulations, the Committee
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finds that application of the notice and public participation provisions
of 5 U.S.C. § 553 to this action would be contrary to the public interest
and that good cause exists for making this action effective in less
than 30 days.
Pursuant to its authority under Title II of Public Law 96
221, 94 Stat. 142 (12 U.S.C. § 3501 et seq.), to prescribe rules governing
the payment of interest and dividends on deposits of mutual savings
banks, and commercial banks and savings and loan associations insured
by the Federal Deposit Insurance Corporation and the Federal Savings
and Loan Insurance Corporation, effective February 26, 1981 the Committee
amends Part 1204 (Interest on Deposits) by adding the following sentence
to section 109 (a):
PART 1204— INTEREST ON DEPOSITS
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§ 1204.109— Premiums Not Considered Payment of Interest
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A depository institution is not permitted directly or indirectly
to solicit or promote deposits from customers on the basis that the
funds will be divided into more than one account by the institution
for the purpose of providing more than two premiums per deposit within
a 12-month period.
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By order of the Committee, February 26, 1981.
(Signed)
Normand Bernard
Normand Bernard
Executive Secretary
[SEAL]
@FedFRASER