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Are there any licensing or special bank account requirements for our company to hold funds for a customer and later deliver those funds back to the same customer? Similar to a savings account but for a consumer customer. Is this highly regulated in the U.S and if so what is necessary to accomplish this?

Also, I am thinking that an escrow type of account might handle this. Can we borrow against that escrow account or pledge it as collateral?

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    I would be very, very careful about this type of business, as this is the type of business bound to have little-known laws and regulations that in the US will get you sued and shut down in no time at all. If you later expand to Europe, this is likely to be even more of an issue. When millions of dollars that you don't even have are on the line, I'd speak to a bona-fide, real-life lawyer and not ask a bunch of sketchy folks on the internet. – TheEnvironmentalist Mar 30 '18 at 8:57
  • @TheEnvironmentalist Agreed, just getting some early information. I wouldn't dare make the leap to this without proper legal. – SupremeA Mar 30 '18 at 18:05
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It is sometimes necessary or desirable to hold customer money in a separate account because it is their property. For lawyers, this kind of account is highly regulated. For most other kinds of businesses, this kind if account is not highly regulated.

If you were required to have an account of this time, you could not borrow against it or pledge it as collateral. The whole point of having a separate account is to hold the property in trust for the benefit of the customers separate from your own funds and not subject to your creditors.

Sometimes a separate account of this type is set up to fund an employee retirement fund that does not qualify for the tax treatment of a 401(k) or IRA or similar account. An account set up for this purpose is called a "Rabbi Trust" (political correctness was not a big thing when this kind of trust was given its name, and the name has unfortunately stuck). But, in those circumstances the exposure to the firm's creditors is intended from the outset for tax purposes and to give the beneficiaries an incentive not to screw up the company, rather than being problematic.

  • Great answer! So if we are holding funds in an account to help customers save for a larger item, any account as long as we don't raid it is fine? What about protection from "our" creditors? Is a "Rabbi Account" commonly used in this instance or only in the one you describe. – SupremeA Mar 30 '18 at 4:14
  • @SupremeA To protect it from your creditors you agreement with the customer would say that it is held in trust for them by you. But, any account should do although the agreement should approve a low interest or no interest account expressly. A Rabbi Trust is pretty much only created for non-qualified employee benefits. It is inappropriate for customer or tenant funds. – ohwilleke Mar 30 '18 at 5:36

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