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Lessons Learned – Deposit Add-On Products



On July 26, 2018 the Federal Reserve Board issued a consent order against Community Trust Bank, Inc. of Pikeville, Kentucky, for unfair and deceptive practices, requiring the bank to pay approximately $4.75 million in restitution to approximately 11,000 consumers and make certain consumer compliance enhancements.

This $4.1 billion community bank offered packages of  deposit-related services including identity protection products (credit monitoring, payment card protection, and fraud support services), payment card protection, lost key protection, and medical emergency data cards to its customers. The customers paid a monthly fee for the services. The practices were in effect from 1997 to present.

It appears that the bank violated Section 5 of the Federal Trade Commission Act in its offering of deposit account add-on products to consumers. The bank represented to consumers that all of the add-on product benefits would be effective upon enrollment when, in fact, consumers had to take additional steps to receive some of their benefits. The bank did not adequately disclose the additional steps prior to enrollment and did not explain to consumers that they would be billed regardless of benefit activation.

The bank must begin making restitution payments to consumers after regulatory non-objection to the restitution plan, which is due within 60 days of the issuance of the consent order.

Issues related to deposit add-on products were a big deal years ago. Now unexpectantly the product is back in the news.


A banker recently stated in relation to this case, "This is so six years ago." While we can all agree that deposit add-on products have been in the regulatory spotlight for a considerable time, there are aspects of this case that are unique. There are new lessons to be learned by any financial institution offering deposit add-on products. Providing clear disclosures is a key concept in avoiding UDAP problems. The failure to disclose key terms, such as the fact that multiple steps are needed to complete enrollment, is a lesson worth remembering. Imposing a fee unless services are activated, even when activation is contingent on the consumer's action, was another problem. The lesson here is to either delay the fee until services are activated or clearly disclosing that fees will be imposed immediately, even if the consumer has not completed activation.


Upon completion of this one-hour program participants understand:

  • What practices lead to the Federal Reserve Board’s action;
  • How this practice went undetected in numerous examinations for over two decades;
  • The vendor's liability in this matter;
  • How the amount of restitution was calculated;
  • What corrective actions are required of the bank; and
  • What actions should other banks take to avoid similar problems.


The program is designed for senior management, the operations department, the marketing department, compliance staff, and auditors.


Jack Holzknecht is the CEO of Compliance Resource, LLC. He has been delivering the word on lending compliance for 42 years. In 37 years as a trainer over 130,000 bankers (and many examiners) have participated in Jack’s live seminars and webinars. Jack’s career began in 1976 as a federal bank examiner.  He later headed the product and education divisions of a regional consulting company. There he developed loan and deposit form systems and software. He also developed and presented training programs to bankers in 43 states. Jack has been an instructor at compliance schools presented by a number of state bankers associations. As a contractor he developed and delivered compliance training for the FDIC for ten years. He is a Certified Regulatory Compliance Manager and a member of the National Speakers Association.

Scott Carr, CRCM, CRMA, CAFP is the Executive Vice President and Chief Risk Officer at First Savings Bank located in Clarksville, IN.  His main responsibilities include managing the overall enterprise risk function for the organization; establishing and monitoring operating benchmarks, developing and reviewing methodologies to minimize overall risk and maintain the reporting structure established for measuring and managing the risk function. Scott has his Bachelor’s degree in Business Finance through Indiana University Southeast; he completed the LSU Graduate School of Banking, and admirably served in the United States Navy. Scott is a CRCM (Certified Regulatory Compliance Manager) from the ABA; a CAFP (Certified AML and Fraud Professional) from the ABA; and has a CRMA (Certification in Risk Management Assurance) from the Institute of Internal Auditors. He is also a member of the Indiana Bankers Association Compliance Committee.

*This program will start at 2:00 PM EDT, 1:00 PM CDT, 12:00 PM MDT, or 11:00 AM PDT

**Recording Available
This webinar will be recorded and sent to all registrants.  You will receive links to the recording following the program.  These recordings have unlimited viewings and are available for up to one year.

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