I heard some people say that a tranfer to cover a overdraft (not affiliated with an overdraft protection program) is considered a preauthorized transfer. We have all along considered this as a sweep debit and gave customers unlimited transactions for this type. Would this be correct thinking?

You heard correctly. The seventh transfer in the calendar month or statement cycle (of approximately the same length) would be a violation. Some internal transfers do not count as EFTs under Regulation E - one of your predecessors may have gotten the concepts confused.

So, really you are saying that the other person may have confused the Regs? Because Reg E covers EFT's and this sweep debit really doesn't fall into that category. I went and looked at Reg E 205.3 and could see how it might be confused. So, the sweep debit to cover a preauthorized transfer (not related to a ODP) does count?

If you are sweeping from a savings or MMDA account to cover overdrafts in an account, yes those transfers are limited to six per month.