We (the bank) will do a transfer from a customer's savings to cover would be NSF items in a their checking account. This is done via a keyboard transfer in our core system. This is done by the bank - not directed by the customer. We figure its for their benefit because it saves them the NSF fees.

My question is this: Would this type of transfer count towards the 6 limit on savings accounts? It isn't an automatic OD protection transfer or done via phone/internet at the customer's request...both of which I would count towards the 6 limit. Does it make a difference if we use paper tickets to make the transfers?

Yes, this counts toward the 6 limit. If the customer comes in to the bank and makes the transfer in person, then it would not count.

We were told the same thing by the FRB. They also agreed it goes against the thinking for the OD guidance coming in July.

Some at my bank feel that if we begin using tickets to do the transfers from savings to checking instead of electronic keyboard transfer, it will be coded as a "withdrawal" instead of a "transfer". Only transfers are tracked and reported on the Excess Transaction Report. If they don't flag on the report, then no violation of Reg D.

In my opinion, this is sidestepping the regulation (creating a process that gets desired results) and will result in a violation if found.

A blatent disregard for the transfer limitations may result in the reclassification of your whole savings portfolio into transaction accounts and make them subject to back payment of reserves, since this is totally due to actions by the bank and not the customer.

"This is done by the bank - not directed by the customer."

Also, without some sort of agreement with the customer, under what authority are you doing this? Are you really claiming your right of offset in each of these instances?

I do not beleive 'linked savings' account are included in the definition of OD Payment Programs. Technically, if funds are transferred from savings accounts, the checking account is not overdrawn.

The question here isn't whether or not the account was overdrawn, it's whether the transfers from savings to prevent it from going overdrawn are countable against the Regulation D limit of 6 per month. The answer: Yes.

The fact that the bank is making those transfers via paper tickets to change the apparent nature of the transfers is only putting rouge and lipstick on the pig.

And absent any instruction from your customer to make those transfers, I share Randy's concern that the bank is likely causing more trouble that it realizes.

I could readily analyze the issue of employees taking the initiative to help reduce the bank's fee income a bit more sharply, but will simply agree with John & Randy instead. First, the transfer counts. Second, if the customer did not request it in writing, you have no right to do it.

Thanks everyone! Now I know my way of thinking isn't out in left field since the other responses match mine. Now on to convince Senior Management...

AuditorK, one solution to this problem of transfers not directed by the customer you should consider is informing your business unit they may make the transfer only at the request of the customer. Meaning, they may call the customer then get consent to transfer, but just not transfer as they see fit.

Agreed. That's one of the suggestions I have made. At least get a verbal OK from the customer over the phone.