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#1588764 - 08/08/11 01:18 PM Excessive Money Market Transactions - Reg D
Anonymous
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We have a customer that has been exceeding the transactions but has been doing it one month and then ok another month. Management wanted to know if the excessive transactions need to be consecutive or aggregated.

I say that it should reviewed as an aggregated and consecutive months is incorrect. I told them that but I wanted someone else's interpretation.

Thanks

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#1588792 - 08/08/11 01:47 PM Re: Excessive Money Market Transactions - Reg D Anonymous
Doug Hendrickson Offline
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Doug Hendrickson
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Posts: 3,927
Aggregate over a 12-month period. We use three months over a rolling 12-month period. If they exceed in one month, then are okay the next, then exceed, that's "two out of three" in the 12-month rollling. For each month they exceed, they get a letter which gets more strongly worded until the third time in a 12-month period, and then the account is closed/transferred.
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#1588841 - 08/08/11 02:57 PM Re: Excessive Money Market Transactions - Reg D Doug Hendrickson
Anonymous
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Our bank doesn't do a very good job with the letter routine Doug describes above. In other words, we seond out the first letter and the second letter but we don't close follow through by closing the account. This has been an audit finding. Now management wants to return checks to avoid an account from exceeding the limit. My opinion is that is far worse as it may cause embarassment to a customer and damage relationship.

Just wondering if anyone has experience with the return checks method to comply with Reg D? And, if we switch to this method is the requirement to inform customers about it? Management says if return check due to exceeding limit, there would not be an overdraft charge. Way too much work keeping it straight in my opinion.

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#1588913 - 08/08/11 04:06 PM Re: Excessive Money Market Transactions - Reg D Anonymous
Anonymous
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What would you use as your return reason on the checks???

So, you're going to do all the extra work of returning checks and not charge anything for it?

Why not just close the account and be done with it? Or change the account to a checking account, not a money market account?

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#1588949 - 08/08/11 04:37 PM Re: Excessive Money Market Transactions - Reg D Anonymous
Marnie Offline
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Joined: Nov 2007
Posts: 437
Nevada
You don't have a valid reason to return checks, as they have the funds in the account--you do have a valid reason as the REG requires it to either close the account or convert to a different account type. Your account disclosure should have indicated to the customer this is what will happen.

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#1588956 - 08/08/11 04:45 PM Re: Excessive Money Market Transactions - Reg D Marnie
Anonymous
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You could be sued for wrongful dishonor of checks if you just arbitrarily start returning checks when there are adequate funds with which to cover these checks. That's far worse than a little embarrassment to the customer; that would be a major public relations nightmare for your bank if it goes to court. You're headed down a very slippery slope, and it's time for you to tell management the following:

The regulation is very clear on this topic, you must close the account or convert it to an account not restricted to number of debits (i.e. a checking account). The customer has been warned and is not complying. The onus is on you, the bank, to follow the regulation. You can't punish the customer by not honoring his checks!

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#1588986 - 08/08/11 05:07 PM Re: Excessive Money Market Transactions - Reg D Anonymous
Jafo Offline
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Jafo
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State of Confusion
You do have a valid reason for returning the checks - Nontransactional account.

Last Anon take a closer look at Reg D Section 204.2

In order to ensure that no more than the permitted number of withdrawals or transfers are made, for an account to come within the definition of “savings deposit,” a depository institution must either:

(a) Prevent withdrawals or transfers of funds from this account that are in excess of the limits established by paragraph (d)(2) of this section, or

(b) Adopt procedures to monitor those transfers on an ex post basis and contact customers who exceed the established limits on more than an occasional basis.

For customers who continue to violate those limits after they have been contacted by the depository institution, the depository institution must either close the account and place the funds in another account that the depositor is eligible to maintain, or take away the transfer and draft capacities of the account. An account that authorizes withdrawals or transfers in excess of the permitted number is a transaction account regardless of whether the authorized number of transactions is actually made. For accounts described in paragraph (d)(2) of this section, the institution at its option may use, on a consistent basis, either the date on the check, draft, or similar item, or the date the item is paid in applying the limits imposed by that section.
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#1589103 - 08/08/11 07:08 PM Re: Excessive Money Market Transactions - Reg D Jafo
Marnie Offline
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Joined: Nov 2007
Posts: 437
Nevada
The big questions are (1)how did you disclose to the customer initially, and (2) what is your current policy and procedures?

Lots of luck with "taking away the transfer and draft capacities of the account", when you gave them the checks to use to begin with, which is why the majority of institutions don't go that route, but shut down or convert. But it goes back to what you have adopted as your policy and how you disclosed.

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#1589111 - 08/08/11 07:14 PM Re: Excessive Money Market Transactions - Reg D Jafo
BurntSienna Offline
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Joined: Aug 2006
Posts: 2,407
Midwest
Thank you, Jafo. I have learned something new today. I would have thought I couldn't return excessive items because I didn't have a legitimate reason for return. Never thought to use "Nontransactional account". We may have to consider this route.
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#1589117 - 08/08/11 07:17 PM Re: Excessive Money Market Transactions - Reg D BurntSienna
Jafo Offline
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Jafo
Joined: Apr 2008
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State of Confusion
As Marine said make sure you disclose properly if you are going to limit the transactions. Most banks simply convert the account to a transactional account, that is a much cleaner route and not near as big a pain in the back side.
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A common mistake people make designing something completely foolproof is to underestimate the ingenuity of complete fools.

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#1589281 - 08/08/11 09:48 PM Re: Excessive Money Market Transactions - Reg D Jafo
John Burnett Offline
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John Burnett
Joined: Oct 2000
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Cape Cod
Jafo hints at an answer, but I caution you against bouncing checks unless you have first informed your customer that you're cancelling his check-writing ability. Under Reg D, that's a 30-day notice requirement.

You probably have a much shorter notice requirement in your account agreement for closing the account.
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