April 15, 2022
To: All New York State Regulated Banks, Credit Unions, Trust Companies, and FDIC Insured Branches of Foreign Banking Corporations
Re: Offering Bank On Accounts as an Alternative to New York Basic Banking Accounts
The New York State Department of Financial Services (“Department” or “DFS”), as part of its mission, seeks to protect consumers, simplify their interactions with banking institutions and make available banking and other financial services to underserved communities particularly lower and middle income, immigrants, and people of color. Affordable bank accounts that eliminate overdraft, account activation, closure, dormancy, inactivity, and low balance fees are critical to attracting individuals from these underserved communities into the banking system.
Making Bank On accounts an alternative to the existing New York Basic Banking account offering is a step in that direction. To achieve this, DFS reached out to the New York banking industry to determine the receptiveness and operational viability of offering such alternative accounts and assessed applicable New York laws and regulations and the Bank On National Account Standards.
After this assessment, DFS has determined that all New York State regulated banking institutions, as defined under Section 14-f.9(a) of the New York Banking Law (“Banking Institutions”)1, will be deemed to satisfy the Basic Banking requirements under the New York Banking Law and the General Regulations of the Superintendent, by offering Bank On accounts as an alternative to Basic Banking accounts.
DFS hopes that by taking this approach, Banking Institutions will be encouraged to offer Bank On accounts, and individuals in underserved communities will be encouraged to open such bank accounts, feel more welcome in the banking system, and have a sustainable path forward to more affordable banking services. DFS further hopes it will help Banking Institutions compete on more even footing with national banks already offering Bank On accounts.
New York Basic Banking Law – Background and Requirements
In 1994, New York enacted a Basic Banking services law that requires Banking Institutions to offer lower cost banking services to consumers. This law, codified in Section 14-f of the New York Banking Law, requires all Banking Institutions to offer basic banking accounts or alternative accounts “determined by the superintendent to be at least as advantageous to consumers as the basic banking account.” See New York Banking Law Section 14-f, subsections 2 and 7. The current requirements for Basic Banking accounts are as follows:
The minimum initial deposit amount required to open the account cannot exceed $25;
The minimum balance required to maintain the account cannot exceed $.01;
The charge per periodic cycle for the maintenance of the account cannot exceed $3.00; and
Account holders must be allowed at least 8 withdrawals per periodic cycle at no additional charge (withdrawals include checks, ATM withdrawals and purchases using a debit card attached to the account). Account holders age 65 or older must be allowed at least 12 such withdrawals per periodic cycle at no additional charge.2
Bank On National Account Standards
In 2015, the Cities for Financial Empowerment Fund (CFE Fund), a nonprofit organization, worked closely with the Bank On Advisory Board and other key stakeholders to develop the Bank On National Account Standards.3 Bank participation in this program and offering Bank On accounts to consumers is voluntary. To date, over 200 banks and credit unions, mostly with national charters, have obtained this national certification. Banking Institutions with accounts that meet the Bank On National Account Standards can apply to the CFE Fund for free national certification.
The Bank On National Account Standards’ significant Core Features can be summarized as follows:
- Transaction Account at Insured Depository Institution:
- Checking account (including checkless checking) or bank- or credit union-offered prepaid
- Debit Card:
- Debit card network for point of sale and bill payment; free
- Minimum Opening Deposit:
- $25 or less
- Monthly Maintenance Fee:
- If not waivable: $5 or less
- If waivable: $10 or less; offer at least two options to waive fee entirely with a single transaction (e.g. direct deposit with no minimum deposit, online bill pay, or debit card purchase)
- Overdraft or Non-Sufficient Funds (NSF) Fees:
- Account Activation, Closure, Dormancy, Inactivity, and Low Balance Fees:
The authority of DFS to approve Bank On accounts as an alternative to New York Basic Banking accounts is based on New York Banking Law Section 14-f. While Section 14-f requires Banking Institutions to offer accounts that meet the requirements of that section, and any others as required by regulation of the Superintendent, Subsection 14-f .7 provides that:
“… a banking institution may make available an alternative account or other banking services determined by the superintendent to be at least as advantageous to consumers as the basic banking account.”
Under Section 9.7 of the General Regulations of the Superintendent, any banking institution wishing to offer an alternative account may submit an application that includes specified features of the account. In considering whether to approve an alternative account, Section 9.7(d) provides that:
“… the superintendent shall consider whether the account or service meets the stated purpose of Banking Law, section 14-f to make lower cost banking services available to consumers.”
Section 14-f.7 and Section 9.7 clearly permit the Superintendent, based on an individual application, to approve an alternative to the Basic Banking account, provided the alternative is at least as advantageous to consumers. However, neither Section 14-f.7 nor Section 9.7 require an individual application to the Superintendent in order for the Superintendent to make a determination that “an alternative account [is] at least as advantageous to consumers.”
After reviewing the Bank On National Account Standards, DFS has determined that Bank On accounts are “at least as advantageous to consumers as the basic banking account” under Section 14-f (7) of the New York Banking Law. Since the Department has broad authority to interpret the regulations it has promulgated, see, e.g., Andryeyeva v. New York Health Care, Inc., 33 N.Y.3d 152 (2019), the Department is permitting Banking Institutions to offer Bank On accounts instead of Basic Banking accounts without submitting applications under Section 9.7 of the General Regulations of the Superintendent.
DFS will continue to examine Banking Institutions for compliance with New York Basic Banking account requirements, and expects that Banking Institutions offering Bank On accounts in lieu of New York Basic Banking accounts will comply with all Bank On National Account Standards as they currently are required to comply with all New York Basic Banking account requirements. In addition, the marketing requirements for New York Basic Banking accounts in Section 14-f (8) shall also be applicable to Bank On accounts, and DFS expects Banking Institutions to effectively communicate the availability of such accounts to their customers and the public if they choose to offer such accounts.
Because the Bank On National Standards are subject to change without input from the Department, Banking Institutions that choose to offer Bank On accounts instead of Basic Banking accounts should follow the Bank On National Account Standards, as may be updated from time- to-time. The Standards as of 2021-2022 can be found at: Bank On National Account Standards--2021-2022. The Department is also requiring Banking Institutions that want to offer Bank On accounts instead of Basic Banking accounts to submit a notice filing with the Department 30 calendar days prior to doing so. Banking Institutions that offer Bank On accounts in addition to Basic Banking accounts do not need to submit a notice with the Department.
The Department reserves the right to review any changes to the Bank On National Account Standards and determine whether subsequent guidance is necessary.
If you have any questions, please contact your primary point-of-contact at the Department.
Adrienne A. Harris, Superintendent
New York State Department of Financial Services
1 Pursuant to Section 14-f.9(a), a “banking institution” is defined to include:
“…any bank, trust company, savings bank, savings and loan association, or credit union, or branch of a foreign banking corporation the deposits of which are insured by the Federal Deposit Insurance Corporation, which is incorporated, chartered, organized or licensed under the laws of this state or any other state or the United States, and, in the ordinary course of its business, offers consumer transaction accounts to the general public or, in the case of credit unions, to its members.”
2 In 2019, a law was enacted, amending the limitation on withdrawals, and expanding it to 12 withdrawals for account holders age 65 or older. This amendment to the Basic Banking law is reflected in Part 9, Section 9.3(a)(5) of the General Regulations of the Superintendent.
3 The CFE Fund identifies its mission as leveraging “municipal engagement to improve financial stability of low- and moderate-income households by embedding financial empowerment strategies into local government infrastructure.” CFE Fund The Bank On National Account Standards’ stated purpose is to “identify critical product features for bank and credit union accounts appropriate to those currently outside of the mainstream banking system.” Overview--Bank On National Account Standards 2021-2022 The Bank On National Account Standards include both “Core Features” and “Strongly Recommended Features.”