Refer-A-Friend Compliance Toolkit

Transcription

1 Refer-A-Friend Compliance Toolkit Prepared by: BancVue Compliance Team The information contained in this toolkit is for general information on matters of interest only. The application and impact of laws can vary widely based on the specific facts involved. Accordingly, the information contained herein is provided with the understanding that BancVue is not engaged in rendering legal, accounting, tax, or other such professional advice. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other advisers.

2 Table of Contents Purpose of Document.. 3 Refer-A-Friend Program Background. 4 Regulatory Considerations for Refer A Friend Controlling the Assault of Non-Solicited Pornography and Marketing Act 5 Privacy of Consumer Financial Information IRS Reporting. 6 Appendix A: Sample Documents.. 7 BancVue s Commitment to Ongoing Compliance.. 8 BancVue, Ltd. CONFIDENTIAL Page 2 of 8

3 Purpose of This Document This toolkit is being provided to participating financial institutions in order to provide an overview of the Refer-A-Friend program and Federal regulatory guidance. It is not intended as a substitute for the participating financial institution s own product review for compliance requirements. Furthermore, procedures for this account should take into consideration the financial institution s existing compliance and operational procedures in the accounts area. Not every possible new account is discussed herein. For example, Customer Identification Program and Overdraft Privilege issues are outside of the scope of this analysis. BancVue, Ltd. CONFIDENTIAL Page 3 of 8

4 Program Background: Refer-A-Friend Refer-A-Friend is a feature of BancVue s product suite that allows existing account holders to receive an incentive for referring other individuals to open new accounts provided by BancVue. Existing account holders will be able to refer friends, family members, colleagues, etc. by sending them an describing the product in their own words and asking them to sign up for the product. The basis behind offering such a program as Refer-A-Friend is to be able to continue to help community financial institutions grow their customer base by allowing existing account holders to help them market their products. In turn, the existing account holders and the new account holders could receive an incentive for the referral. BancVue, Ltd. CONFIDENTIAL Page 4 of 8

5 Compliance Considerations Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN- SPAM) The CAN-SPAM Act establishes requirements for entities that send commercial , defines penalties for spammers and companies whose products are advertised in spam if they violate the law, and gives consumers the right to ask an organization that is sending them to stop. The law also bans misleading header information, prohibits deceptive subject lines, and requires that an from a commercial business provides an opt-out method. Refer-A-Friend will allow the existing account holder to their friend about their current account with the financial institution in an attempt to persuade their friend to open an account. The s will show as coming directly from the financial institution, e.g., no-reply@financialinstitutionname.com. These communications must comply with CAN-SPAM. As a general matter, CAN-SPAM requirements include the following: Header information must not be false or misleading. In other words, it should be clear that the message is coming from the financial institution. The subject line should not be deceptive or misleading. Furthermore, the must contain a clear and conspicuous identification that the message is an advertisement or solicitation. The must include a valid postal address of the sender. There must be an ability to opt out electronically from future s of this nature. In addition to the content requirements, CAN-SPAM requires entities to have a mechanism to manage opt-out requests. Financial institutions also should have systems in place to prohibit the use of address harvesting or dictionary attacks as a means of obtaining consumer addresses. Financial institutions also should prevent the transmission of unlawful commercial messages by persons who access financial institution computers or computer network systems without authorization. BancVue, Ltd. CONFIDENTIAL Page 5 of 8

6 Sample Opt-Out language for CAN-SPAM: If you do not wish to receive s from us, then please click here or contact us at Please note that it may take up to ten business days to process your request. How to reach financial institution: Phone [800-xxx-xxxx], Fax [xxx-xxx-xxxx], internet mail [mailing address]. Privacy of Consumer Financial Information Under Regulation P, financial institutions are prohibited from sharing consumer information with third parties unless an opt out is provided or an exception is met. The mere fact that a person is a customer of a particular financial institution is by itself nonpublic personal information under Regulation P. However, an institution is allowed to share such information with the consumer s consent. Under any kind of customer referral program, paying the referral fee to the referring customer could inadvertently notify the referring customer that their friend opened an account at the institution. To avoid such an inadvertent Regulation P violation, we recommend obtaining a written consent from the referred friend at the time of account opening in order to meet the consumer consent exception. A sample consent form is available at the end of this Compliance Toolkit. IRS Reporting Incentives paid to new and existing account holders are required to be reported to the IRS on Form There are different IRS Forms 1099 depending on the nature of the payment made. Form 1099-INT is filed with the IRS to report interest payments that aggregate to $10 or more in a calendar year. Form 1099-MISC is filed with the IRS to report miscellaneous payments that aggregate to $600 or more in a calendar year. The IRS has not issued formal guidance on how to properly disclose incentives that are paid to deposit account holders. However, the IRS has notified us orally that incentives that are paid on interest bearing accounts should be reported on IRS Form 1099-INT if the filing threshold is met, and incentives paid on non-interest bearing accounts should be reported on IRS Form 1099-MISC if the filing threshold is met. As a result, referral fees paid on interest bearing accounts should be reported on IRS Form 1099-INT and referral fees paid on non-interest bearing accounts should be reported on IRS Form 1099-MISC, if the total incentives paid on those accounts meet the filing thresholds for such forms. BancVue, Ltd. CONFIDENTIAL Page 6 of 8

7 Sample Documents The institution will need a consent form on which to obtain the referred friend s consent to the institution sharing with the existing customer the fact that the friend has opened an account at the institution. A sample consent is provided below. The following language is intended to be used as sample language only and will need to be reviewed and modified by the financial institution s compliance officer or legal counsel prior to use. Sample Consent Form I have been referred to [Financial Institution s name] by an existing customer of the institution. I consent to [Financial Institution s name] notifying the existing customer that I have opened an account at the institution. Name Signature BancVue, Ltd. CONFIDENTIAL Page 7 of 8

8 BancVue s Commitment to Ongoing Compliance BancVue believes that, if implemented and operated in a manner consistent with the recommendations made herein, Refer-A-Friend complies with Federal banking compliance rules and regulations. BancVue s recommendations are built around diligent legal research and first hand discussions with members of various regulatory agencies. Nevertheless, BancVue recognizes that there might be a situation in which federal or state regulators and/or law enforcement agencies take a position that the Refer-A-Friend product is not compliant. In such an event, BancVue will work closely and diligently with: (1) Its clients; (2) Other affected financial institutions; (3) The applicable financial institution trade association(s); and (4) The applicable regulatory agencies and/or law enforcement agencies to overturn or reverse any such legal order or ruling if possible, and/or make modifications to the product as necessary in order for it to be compliant. BancVue believes that the Refer-A-Friend product represents a truly exceptional service to financial institutions and their account holders. BancVue is grateful to have the support of its clients and its clients account holders in the delivery of this revolutionary product. BancVue s mission is to provide products and services that allow community financial institutions to dramatically increase their profitability and compete with the industry s mega banks, while simultaneously empowering the financial institution to offer its account holders a truly exemplary level of service. BancVue sincerely believes that Refer-A-Friend delivers on this mission in a way very few products in the history of banking have. BancVue, Ltd. CONFIDENTIAL Page 8 of 8