Truth in Savings Advertising – Bonuses FAQs

Today’s blog focuses on advertising bonuses under the Truth in Savings Act (TISA). We’ll start with a brief overview of the regulatory requirements before turning to a couple of examples that illustrate how these rules apply in practice. We’ll finish the blog by pointing out exemptions for certain advertisements.

What is a Bonus and What Are the Requirements?

To start, what do we mean by “bonus”? Under section 707.2(e) , a bonus is defined as the following:

“(e) Bonus means a premium, gift, award, or other consideration worth more than $10 (whether in the form of cash, credit, merchandise, or any equivalent) given or offered to a member during a year in exchange for opening, maintaining, or renewing an account, or increasing an account balance. The term does not include dividends, other consideration worth $10 or less given during a year, the waiver or reduction of a fee, the absorption of expenses, non-dividend membership benefits, or extraordinary dividends.”

If a bonus is stated in an advertisement, section 707.8(d) has specific disclosure requirements for such an advertisement:

“(d) Bonuses. Except as provided in paragraph (e) of this section, if a bonus is stated in an advertisement, the advertisement shall state the following information, to the extent applicable, clearly and conspicuously:

                (1) The “annual percentage yield,” using that term;

                (2) The time requirements to obtain the bonus;

                (3) The minimum balance required to obtain the bonus;

                (4) The minimum balance required to open the account, if it is greater than the minimum balance necessary to obtain the bonus; and

                (5) When the bonus will be provided.”

Importantly, not every reference to a “bonus” triggers these disclosure requirements. The commentary to section 707.8(d) provides a helpful example of when the above requirements are not triggered:

“1. General reference to “bonus.” General statements such as “bonus checking” or “get a bonus when you open a checking account” do not trigger the bonus disclosures.” 

Now, let’s take a look at two real world examples.

Bonuses and Gift Cards FAQ

Question – Is a promotion that offers a $20 gift card to someone who opens a new account considered a bonus under Truth in Savings?

Answer – As we know, a bonus is defined as “a premium, gift, award, or other consideration worth more than $10 (whether in the form of cash, credit, merchandise, or any equivalent) given or offered to a member during a year in exchange for opening , maintaining, or renewing an account, or increasing an account balance.” (Emphasis added).

The use of a gift card as opposed to cash does not prevent this item from meeting the definition of a bonus. To be considered a bonus, the value of the gift card must be more than $10. Additionally, the gift card must be given to a member in exchange for opening, maintaining, renewing an account or increasing an account balance to qualify as a bonus. Here, since the promotion offers a $20 gift card to a person for opening a new account, it meets both requirements and would be considered a bonus. 

Bonuses and Referrals FAQ

Question – Is a promotion that offers a $20 gift card to any current member that brings a new member to the credit union considered a bonus under Truth in Savings?

Answer – Since this promotion offers a gift card to a member in exchange for bringing in a new member, and not for opening, maintaining, renewing or increasing an account balance, it would not be considered a bonus under TISA.

Please note, the above FAQs are meant to serve as examples. For credit unions unsure about whether a specific advertisement contains a “bonus”, it may be helpful to consult with legal counsel.

Exemptions for Certain Advertisements

Section 707.8(e) discusses exemptions for certain advertisements, such as television and radio advertisements, indoor signs, and newsletters. For our purposes, we’re only going to look at the exemptions that relate to bonuses. First, section 707.8(e)(1) states that:

“(e) Exemption for certain advertisements —

(1) Certain media. If an advertisement is made through one of the following media, it need not contain the information in   paragraphs (c)(1) ,  (c)(2) ,  (c)(4) ,  (c)(5) ,  (c)(6)(ii) ,  (d)(4) and  (d)(5) of this section :

(i) Broadcast or electronic media, such as television or radio;

(ii) Outdoor media, such as billboards; or

(iii) Telephone response machines.” (Emphasis added). 

Based on the above, television and radio ads, billboards, and telephone response machines would not need to include the following bonus-related disclosures:

• “The minimum balance required to open the account, if it is greater than the minimum balance necessary to obtain the bonus” ( section 707.8(d)(4) ); and
• “When the bonus will be provided” ( section 707.8(d)(5) ). 

With respect to indoor signs, section 707.8(e)(2)(i) notes, in part, that “[s]igns inside the premises of a credit union (or the premises of a share or deposit broker) are not subject to” the bonus disclosure requirements in paragraph (d).

Lastly, when it comes to newsletters “sent by a credit union to existing members only”, section 707.8(e)(3)(i) states that such newsletters are also not subject to paragraph (d).