Under Reg E (section 205.9b), it states that “for an account to or from which electronic transfers can be made, a financial institution shall send a periodic statement at least quarterly, even if no transfer has occurred.” Would this apply to situations where the customer chooses not to transfer credited interest electronically, however the bank offers this option on all of its CD accounts? This is the only type of electronic transfer that can be made on such accounts.

If the transfers of CD interest are intra-institutional (to another one of the consumer's accounts in your institution), they are not considered covered EFTs under Regulation E (see 12 CFR 205.3(c)(5)).


The wording you've quoted from the regulation refers to situations in which a customer has signed up for EFT access to an account (for example a savings account), but has not made any such transfers. Probably the classic example would be a savings account for which you have provided a customer access with an ATM or debit card.

Thanks for the response! What if the customer didn't sign up for the service, but rather the bank offers ACH transfers of interest on ALL of its CD accounts?

The fact that the service is available does not mean that a particular account uses or is set up with the service. A customer must accept the service before you consider it attached to the account.

So John, if I understand you correctly, if one of the options for payment of interest on a CD (quarterly, monthly, etc.) is by ACH to an account outside of our institution, we must provide the consumer with a Reg E disclosure, correct?

Would we also be required to provide a periodic statement? IMO, this transaction would meet the definition of a pre-authorized EFT transaction and I'm not seeing an exception for pre-authorized transfers OUT of a consumer asset account (which I think a CD is) to an account OUTSIDE our financial institution.

We are not yet offering this option but are trying to set it up. I guess the two questions I need answered are:

1) Is this transaction covered under Reg E? I say yes but I'm not 100% positive

2) if it is covered, is a periodic statement required if the only EFT is the debit of an interest payment to a third party? I'm not sure...I'm not finding it as an exception.

Yes to your first question. If the debit side of the transaction posts to the CD account (a consumer asset account) and it's done electronically, you are creating an EFT subject to Regulation E.

Yes to your second question, for all the reasons you've cited.

Yes to your first numbered question. In fact, a recent update to the Official Staff Interpretations (Comment 10(d)(2)-2) specifically addresses a CD account with transfers out to an account at another institution.

Yes to your second numbered question. There is no exception for this type of transfer. And don't forget that the periodic statement will have to comply with Regulation DD, too.

Thanks for the quick response John! I was afraid I was looking at this correctly and really hoping I was wrong!!!

Maybe we don't want this as a payment option given the extra hassles it appears to impose.

Actually, since you should be giving everyone a Reg. E disclosure just for "showing up" these days, the only real challenge to providing this service is the requirement to either notify the customer of each debit to their CD account (for transfer to the other bank) or give them a "range" disclosure up front -- clearly the better choice. The statement thing could be combined with statements for other accounts. But if the customer doesn't have other accounts that you can combine the CD statements on, I admit the CD statement thing can be a hassle. Extra postage expense, statement costs, etc.