Just want to make sure I understand 205.3(c)(5). Internal transfers made from a deposit account to make a loan payment are not applicaple to Reg. E. Correct?

True - As long as they are both at the same institution and are held by the same customer (except the compulsory use provision, of course).

Let's clarify a bit. The exemption only applies to pre-authorized (automatic) transfers made by the bank without a specific request by the consumer.

In other words, if the loan payment is a recurring debit the consumer has authorized the bank to make from his account, it's exempt.

But if the individual transfers to the loan account are initiated by the consumer (as in an e-banking scenario), those transfers are subject to Regulation E.