Does the 6/3 transactional limitations in 329 apply to internal-bank use accounts.

"Internal" = an account of the bank holding company used for internal purposes (Dividend Acct.)

As far as the account that the holding company has, it would just be considered another commercial customer of the bank and all laws and regulations would apply to that account as it would any other savings or MMDA account.

Based on the following excerpt from 204.2, do I understand correctly that ACH transactions from a saving account will count toward the 6/3 limited transactions, if they are for "external" purposes? (e.g., monthly cable bill)

Please help!

12 CFR 204.2(d)(2)
A preauthorized transfer includes any arrangement by the depository institution to pay a third party from the account of a depositor upon written or oral instruction (including an order received through an automated clearing house (ACH)) or any arrangement by a depository institution to pay a third party from the account of the depositor at a predetermined time or on a fixed schedule. Such an account is not a transaction account by virtue of an arrangement that permits transfers for the purpose of repaying loans and associated expenses at the same depository institution

ACH transactions such as the one you describe are subject to the transfer limits in Regulation D. They are considered preauthorized transfers, and count toward the six/month limit, but are not considered checks subject to the three/month limit.

Thank you John!

In relation to rlcarey's post, I found a MMDA under our bank's holding company name where they pay dividends via check. Are they only allowed to pay three checks per cycle?

I would think that an internal account like this should have some exemption to it. However, I do not find that stated in the Reg.

What say you?

John, if a customer does not exceed 6 transaction per monthly cycle but exceeds the limit of 3 to third parties, should the bank still notify the customer and if need by change or close the account type? Is there a recommendation on how many times the limitations can be exceeded before the bank takes action? Is it a 1 stike and you're out situation?

You won't find it in the regulation because it isn't there. There are no exemptions permitted to a class of customers.

If the bank allows customers to exceed either the 6 per month or the 3 per month limit, the bank can be cited and/or penalized.

The "best practice" seems to be to allow customers an occasional slip. That takes in the "late presentment" problem (Christmas checks cashed in January) and human error. But those slips shouldn't be more than one or maybe two items in a month. When a customer exceeds the limits, though, you should be communicating with the customer to get his/her behavior changed.

If you need to contact the customer more than three times in a rolling 12-month period, you should take away transfer ability, close the account, or convert it to a transaction account.

John,

In theory, could the bank set up a non-savings account to which a single monthly sweep/transfer from the MMDA could transact and then dividend checks could be written out of that checking account unlimited.
Would this solve the problem?
Any other ideas are certainly welcomed!
Thank you.

I'm not John, but yes - you could set up a DDA account and fund the DDA account with a single sweep from the MMDA account for the amount of the dividend checks issued. It should be no problem. This would be pre-funding and not post funding of checks that have been presented during the month. Post funding (leaving the account in overdraft until the sweep) most likely would be disallowed as being just a method to avoid the transaction limitations - not to mention the 23A implications.