I am wondering if we are handling our exceeding on money markets & savings incorrectly. If a customer has exceeded 3 times over a 12 month period due to too many online banking transfers, we discontinue the online transfer capability. From reading further information I am thinking this is incorrect. We need to change the account to a DDA or close the account correct?

You could discontinue the online transfer capability after the 2nd month to prevent hitting a 3rd month and/or offer the customer the opportunity to select another account that would better suit his/her banking needs. Being proactive could help minimize the unpleasant consequences of having the bank convert the account.

We do send out a warning after the 2nd offense to inform them that they will lose the ability to transfer online once they hit 3 times. My concern is that we shouldn't even be giving them this option. I think we need to close it upon the 3rd offense or change the account.

You have the option to close/transfer the account or restrict "all" transfer capabilities. Most banks do not want to manage this on an account by account basis and choose to close/transfer.

We give a first and second 'warning'. On the third time, we send a letter that says they have 15 days to discuss the type of account to which their current account will be converted; otherwise we will transfer account funds into their DDA or set up a DDA account and close the 'offending' account(I'd prefer just sending them a check if they have no other accounts with us).

Do you have any recommendations as to when you would allow the account to reopen? Or when would they be allowed to open up another savings/money market if we closed it?

I hadn't given any thought to that yet. However, since it appears that at the end of this month we will have our first 'conversion/closing', I guess I'd better. I'm thinking a 3 or 6 month time period between; and if they do it again and we have to 'convert/close', I'd say never!

Anyone else have any other time-tested practices?

One year minimum before a new savings/MMDA can be opened for the customer.

Thank you!

There's no "best practice" on this question. Remember that the compliance test is that your bank's monitoring and enforcement program will be successful in preventing your customers from exceeding the transfer and withdrawal limits in the regulation more than occasionally. That's pretty gray, really.

What you do about allowing customers a "second chance" after having pulled the plug on them once (by taking away transfer capability, moving the funds into a transaction account (new or current) or closing out the account) should be a matter of policy that is reduced to a straightforward procedure, controlled centrally (rather than in branches). It should probably permit no more than one second chance, and probably not allow the same "third strike means you're out" tolerance that you undoubtedly have in your policy for customers who haven't yet strayed.

Is it a requirement (and where can I find that citation) to close a MMA after 3 times exceeding the number of withdrawals? Thanks.

There is no hard and fast rule. The closest guidance you will find is in an old staff opinion:

Ideally, controls on excess transfers should be sufficiently flexible to address both excess transfers in nonconsecutive months as well as the level of excess transfers in a particular month. Such controls would help depository institutions distinguish inadvertent violations of the transfer limits from abuses of the transfer limits. Thus, when a customer ignores the transfer limits applicable to an MMDA, the depository institution should take steps to close the account more quickly than it would an account from which the depositor inadvertently, and occasionally, exceeds the transfer limits by a single transfer. Nevertheless, a monitoring system that would detect and prevent all excess transfers may be costly to administer. For this reason, the staff has applied a general rule that an institution may continue to consider an account an MMDA even if there are excess transfers so long as those excess transfers are not the result of an attempt to evade the transfer limits, and if the excess transfers occur in not more than three months during any 12-month period. This working rule is not absolute, however, and the facts and circumstances must be considered in each case. STAFF OP. of Feb. 15, 1990.

We have one system generated excess debit notice that informs the customer that they've exceeded the number of transactions allowed and to contact "jane" to discuss changing the account to a transaction account.

Do you use system generated notices or have you created your own letters? My supervisor is interested in incorporating letters but would like examples of what others are using. PM me if you're willing to share. Thanks so much.

quote=Doug Hendrickson]We give a first and second 'warning'. On the third time, we send a letter that says they have 15 days to discuss the type of account to which their current account will be converted; otherwise we will transfer account funds into their DDA or set up a DDA account and close the 'offending' account(I'd prefer just sending them a check if they have no other accounts with us). [/quote]

You give them 15 days to discuss the type of account to move into. Because they have been receiving notices warning them of the pending account change, if they don't change their ways, we tell them, "We are changing your account." without additional notice.

Initiate a $10 fee for any in excess..... it amazingly stops immediately!