If we convert an account to a non-interest bearing account because the customer violated the transfer limitations - Can they open another interest bearing account and if so, how long do they have to wait before doing so?

Does the Reg address this?

It's totally up to you. You don't need customers who play games and waste your time and resources, so I'd make it clear that you will not simply reopen a new account and watch the abuses happen over and over.

Ditto Richard's response. While it may be frowned upon by any regulator, the real issue is how much you are going to spend to watch a repeat violators account. How many letters do you want to send them and how profitable does the account have to be to justify this. And worse yet, if your procedures malfunctioned and letters didn't go out as they were needed, how would you feel when cited for the infraction?

...and the citation could have VERY BIG teeth. Regulators will threaten to reclassify whole portfolios of MMDAs if you don't apply the appropriate discipline. Once reclassified, you are told to make up the deficient reserves with interest.

We usually convert the violators to NOW accounts, they don't get as ticked off as converting them to a non-int account. Usually our MMA customers have large balances, we don't necessarily want to lose them, but we also don't want to get into trouble with Reg D and reserves. It's another option.

Unless, of course, the owner is a non-qualified business, in which case opening a NOW account would move you out of the frying pan into the fire.

Ha ha, John! I am sorry that I was presumptive in thinking in terms of people and not entities.