The Depository Institutions Deregulation Committee (DIDC) yesterday banned the payment of finder's fees and the repayment of interest on savings deposits, effective Dec. 31. It also sharply limited the value of gifts or premiums offered as inducements to open accounts.
In another action, the committee set the nationwide rate of payable on interest-bearing NOW (negotiable orer of withdrawal) checking accounts at 5 1/4 percent, also effective at year end. It did not raise current ceilings on other transaction accounts but indicated it intends to raise rates on savings accounts, which are now the same, within the next year.
The ban on finder's fees and restriction of premiums are a result of perceived abuses by banks and thrifts, particularly in the New York area. Savings banks there vie for customers, by offering them gifts as lavish as television sets and trips abroad as well as finder's fees amounting to between 1 percent and 2 percent of the deposit. The fees -- which in practice revert to the depositor -- in addition to the merchandise are seen by federal regulators as a way of circumventing ceilings on the amount of interest institutions are allowed to pay.
These practices have raised savings banks' costs appreciably at a time when substantial numbers are operating in the red, yet banks have not eliminated them for fear of losing customers. Comments received by the Federal Reserve showed that 8.7 percent of the institutions and their officers responding favored a prohibition on finder's fees.
The Fed estimates that gross sales of merchandise used in premium campaigns amounted to $325 million in 1979. Because of large opposition (70 percent to 30 percent) by banks and manufacturers against a local ban on all types of gifts, the DIDC voted to continue permitting them with the following limitations:
For the largest accounts, a maximum $20 value for gifts -- including shipping, handling and some advertising costs -- would be set.
No more than two gifts a year would be allowed for the same account.
Banks would no longer be able to average the cost of gifts, a practice that led banks to average out the cost of a television set with a nearly worthless item which was thrown away.