It’s official! On July 14, 2011, the Federal Reserve issued a final rule to repeal Regulation Q. And as expected, the rule was effective July 21, 2011. These changes allow banks to pay interest on demand deposit accounts held by business customers. Doing so; however, could affect their FDIC insurance coverage and notification would need to be provided to the customer. Please refer to our June and July newsletters for more information on these issues.
One other perk to repealing Regulation Q is that offering a bonus to open, increase or maintain an account is now a whole lot easier. Prior to its repeal, Regulation Q prohibited paying and/or greatly limited the amount of any bonuses. It imposed a lot of hoops to jump through and aggravated even the most seasoned marketing professionals. Several years ago, we even wrote a three page article on the topic because paying a bonus was so complicated. Regulation Q, Regulation D, Regulation DD (TISA) and IRS reporting requirements all came into play. Fortunately, Regulation Q was the most difficult to comply with, so we are very happy to see it go.
While Regulation D and TISA were also amended to remove any references to Regulation Q, the TISA and IRS reporting requirements STILL apply to bonuses. Thus, we amended our Bonus on Account article (available on the free downloads page) to continue to guide you through these requirements.