Permissibility To Offer A Personal Checking Account Containing A "Sweep" Feature - Q1 1999

By the Division of Banks

A bank seeks to offer a checking account to personal account holders containing a feature that "sweeps" excess funds into a repurchase instrument and back into the checking account as needed to pay checks. Mass. Gen. Laws chapter 167D provides banks the authority to offer a broad variety of deposit products to consumers solely as a matter of contract. However, bank investments are governed by Mass. Gen. Laws chapter 167F. It is the opinion of the Division that the bank may offer this type of account provided that the repurchase feature of the account must, to the extent applicable, be in compliance with said chapter 167F and all relevant federal requirements, including guidelines as to non-deposit investment products. The bank must also make clear and conspicuous disclosure to depositors that the repurchase agreement is not an insured deposit and may contain risk including the loss of principal.