When advertising or promoting “free” checking accounts, banks may want to take a closer look at how the advertisement or promotion is handled. Recent regulatory action by the Consumer Financial Protection Bureau (“CFPB”) demonstrates that advertising an account as “free” carries risks if there are “strings attached” that are not disclosed in the advertisement. In particular, the failure to indicate in an advertisement an important condition that must be met in order for the account to remain free may subject an institution to liability based on the Dodd-Frank Act’s prohibition on “unfair, deceptive, or abusive acts and practices” and the Truth in Savings Act. Not only is an institution subject to regulatory fines and penalties for such a violation, it is also subject to damage claims from customers.

Advertising a free checking account without disclosing a minimum activity or balance requirement that must be met in order for the account to remain free may be deemed “deceptive” based on recent regulatory action. Such advertising may also run afoul of the Truth in Savings Act’s Regulation DD, which prohibits “misleading or inaccurate” advertising. The regulatory action reflects that disclosing the condition in separate account disclosure documents may not be enough; the focus is on the advertisements themselves. Banks may want to pay more attention to free checking account features and the content of their advertisements for such accounts in light of this development.