I have read several posts on the repeal of Reg Q and its effect on Reg D's NOW AC restrictions and just cannot seem to get my mind wrapped around it. If we can pay interest on all accounts, business & consumer, how do Reg D's restrictions on NOW accounts come into play? Isn't a NOW account just an interest bearing account - so any customer can now have an interest bearing account? I'm confused! Can anyone "dummy" it down for me? Thanks for any help that can be provided!

NOW account restrictions are contained in a section of law that was not changed by the Dodd-Frank Act. So NOW accounts continue to be legal, and their ownership restrictions, set out in Federal Reserve Board Regulation D section 204.130, remain in effect.

Anyone can have a DDA (with or without interest). Only certain customers can have NOW accounts, and those restrictions were born of the way in which NOW account came to exist as consumer savings accounts on which Negotiable Orders of Withdrawal could be issued.

In addition to their ownership restrictions, the other distinguishing characteristic of NOW accounts is the requirement that the bank reserve the right to require at least seven days' written notice of an intended withdrawal. Such a requirement also applies to savings accounts and MMDAs. It cannot apply (by definition) to a demand deposit account.

So, by definition, DDAs and NOW accounts are mutually exclusive.

For whatever it's worth, there's no longer a "need" for NOW accounts to exist as a separate bank offering, except for the fact that a lot of banks haven't yet felt the need to offer interest on demand deposits, thus seeing no compelling reason to make the change.

Perfect! Thank you so much!!

I wonder why the FDIC Exam manual still says that "regulations prohibit the payment of interest by banks on demand deposit accounts"

Can I not rely on the Exam Manuals to be up to date or am I missing something?

The FDIC exam manual has probably not yet been brought current to reflect the change in the law as of 7/21/11. And by the way, your choice of subject for your post is problematic. NOW account restrictions were not affected by the change in the law. The limitations in FRB Regulation D section 204.130 still apply.

No you cannot assume exam manuals are up to date when laws and regulations change. You must adjust for the change until it is republished.

For a novice, would you recommend me doing that on my own or buying an audit program from a vendor? Can you recommend a good vendor?

Whether exam manual or vendor product there could always be some delay you will have to adjust for. Vendor products will probably be updated sooner. You could just maintain data on recent changes.

What's the best way you have found to monitor changes? Is alphabet soup a good place? I notice they have all tables with proposed and finalized rules. I get so confused with all the proposals and finalizations...I need to way to keep them all straight!

In addition to our efforts to keep you updated via Alphabet Soup (we're waiting for the Federal Register publication of the recent Reg D and J final changes so we can post them in advance of their effective dates), we also try to make sure that we mention each proposal and final rule at least once in our Top Stories compilation (see http://www.bankersonline.com/topstory/topstory.html or click the link on our Front Page) and in our daily Compliance Briefing. Frequently, we mention them when announced by the regulator and again when the proposal or final rule is actually published in the Federal Register.

I subscribe to several email notifications. BOL daily updates, BOL weekly updates, FRB & FDIC press releases/FILs, FRB Consumer Compliance Outlook are the ones right off the top of my head. The Fed used to keep a running calendar of all the recent changes and upcoming mandatory compliance dates; however, since many of the regs have moved to the CFPB, I don't think the Fed will keeping that "current" with all reg changes. OUr CBT vendor also provides a monthly email with a calendar of all recent issuances.

When final rules are published, I print them, put a sticky note on them with the mandatory compliance date, and then stack them in order of what's coming due first. Then I'll read and work through what we have to do to comply.

That's my process. Maybe it will give you a few ideas of how to keep abreast of the changes and a starting place on how to deal with them.

That is SO helpful! Thank you VERY much!

Dani - May I ask what CBT vendor you use?

Bankers Edge

I am really confused on this NOW account vs. demand account change! If I'm getting this - if we previously had NOW accounts and required 7 day notice - they could now become demand accounts if we took the seven day notice out of our disclosure?

If the 7 day disclosure was in our account agreement which is given on all accounts if when it was not applicable, is this an issue?

Does anyone have any good resource material on this that will explain it in a simple format?

We are considering moving all our NOW accounts to interest bearing demand deposit accounts. Our account agreements list the same 7 day disclosure as Becky S. mentioned above.

Would we need to give 30 days advance notice of this change? We were considering changing the name in a statement message.

The reservation of right to require up to seven days' notice is not required to be disclosed under Regulation DD [Comment 4(b)(5)-1.iii to § 1030.4(b)(5)] Consequently, there's no requirement that you provide advance notice of eliminating the requirement. In addition, the change is not adverse to the depositor, giving you a second reason for not providing the notice.

However, changing the account type from a NOW account to an interest-bearing DDA could involve other changes that would require delivery of change in terms notices.

Our tems and conditions are the same for all accounts. The interest rate would stay the same, as would the other terms on the TISA, so they shouldn't need a new TISA.

Am I missing something?

I'm not suggesting that you missed something. I only wanted to make sure that you and others reading this discussion don't focus only on the reservation of right non-disclosure issue. If your DDA account will have different rate characteristics or fees, you'll need to make an account disclosure or a change in terms disclosure, as appropriate, in connection with converting NOW accounts to DDAs.

Thanks for the help and advice!