[scottpcarr]

Under the Internal Revenue Code (https://www.irs.gov/pub/irs-pdf/p969.pdf), Health Savings Accounts are “a tax-exempt trust or custodial account you set-up with a qualified trustee to pay or reimburse certain medical expenses incurred.” With that being said, most banks have set-up health savings account under a demand deposit account because of the transaction restrictions under a “savings account” when the trustee utilizes a debit card to pay for covered expenses. So you will want to provide the appropriate disclosures for the health savings account made available by the documentation provider and make sure you review these disclosures to ensure compliance with the Truth in Savings Act and its implementing Regulation DD. With this all being said, make sure the product complies with TISA and Reg. DD and do not really worry about the term “savings” in the IRS’ terminology.

[scottpcarr]

When I was previously researching this topic at another FI, I came across this item posted by Dan Persfull via BankersOnline. As in most cases, I had to trust what Dan shared but I also needed to verify his statements.I actually agree with this statements and will note that the greatest concern is that these cards will be covered under Regulation Z (12 C.F.R. Part 1026.12 – https://gov.ecfr.io/cgi-bin/text-idx?ID=cd0137fdd5ada388202c90b131fcb117&mc=true&node=se12.9.1026_112&rgn=div8).

Question:
Please provide some of the pros and cons — particular as related to fraud risk — of providing access to Home Equity Lines of Credit (HELOCs) via debit card.
Answer:

Pros:
* Convenient for the account holder.
* Less costly to bank than supplying paper checks.

Cons:
* The debit card will be a credit card and the account will be regulated by Reg. Z
* You lose the right to set off
* Visa/MC rules may not allow you to use their brand name

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