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Financial Services Law Insights and Observations

NYDFS encourages banks to expand access to low-cost banking services

State Issues State Regulators NYDFS Consumer Finance Underserved Overdraft Fees New York

State Issues

On April 15, NYDFS issued guidance determining that offering a “Bank On” certified deposit accounts would satisfy a New York Basic Banking services law that requires institutions to offer low-cost banking services to consumers. According to NYDFS, Bank On accounts (which offer services that eliminate several fees, including overdraft, account activation, closure, dormancy, inactivity, and low balance fees) may be offered as an alternative to existing basic banking accounts. Following an assessment of the New York banking industry to determine the receptiveness and operational viability of offering Bank On accounts, NYDFS concluded that “all New York State regulated banking institutions, as defined under Section 14-f.9(a) of the New York Banking Law . . ., 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.” Banking institutions may offer Bank On accounts instead of Basic Banking accounts without the need to submit a separate application to the NYDFS for approval.  However, because the national standards for Bank On accounts are subject to change without input from NYDFS, institutions that offer the accounts should keep up to date on the national standards.

The guidance follows an announcement from New York Governor Kathy Hochul stating that the “COVID-19 pandemic has shown how important it is for every New Yorker to have financial security.” Stressing that “access to low-cost banking services is critical to managing and securing their financial needs,” Hochul stated that “[t]hese new accounts will help hard working individuals in underserved communities get the affordable, accessible banking options they need and is a crucial step towards ensuring a more inclusive economy for all.”