Compliance Alliance 3/3/2020

Question:
Our bank is trying to find the law or regulation that states what period of time the bank must give a customer to stop conducting excessive transactions before the savings account is converted or closed.

 

Answer: 
Reg. D discusses the requirement to monitor transfers in a footnote in the regulation, however, it does not specify a precise number of months which the customer has to "continue to violate those limits", in order for the Bank to close the account or take away the transfer and draft capacities. As a best practice recommendation, a three-month time frame is common among members as well as from regulators, but again, the regulation doesn't specifically set out a number.

...In order to ensure that no more than the permitted number of withdrawals or transfers are made, for an account to come within the definition of “savings deposit,” a depository institution must either:
(a) Prevent withdrawals or transfers of funds from this account that are in excess of the limits established by paragraph (d)(2) of this section, or
(b) Adopt procedures to monitor those transfers on an ex post basis and contact customers who exceed the established limits on more than occasional basis. For customers who continue to violate those limits after they have been contacted by the depository institution, the depository institution must either close the account and place the funds in another account that the depositor is eligible to maintain or take away the transfer and draft capacities of the account. An account that authorizes withdrawals or transfers in excess of the permitted number is a transaction account regardless of whether the authorized number of transactions is actually made. For accounts described in paragraph (d)(2) of this section, the institution at its option may use, on a consistent basis, either the date on the check, draft, or similar item, or the date the item is paid in applying the limits imposed by that section....

12 CFR 204.2(d)(2) FN 4:  https://www.ecfr.gov/cgi-bin/text-idx?SID=4cfab07594dfb576e5e767d0261cb1a4&mc=true&node=se12.2.204_12&rgn=div8

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