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#1778333 - 01/21/13 03:48 PM Sweeps under FDIC part 360
notuntermywatch Offline
Gold Star
Joined: Jun 2006
Posts: 392
For a loan sweep,

If we have a overdraft protection type sweep set-up (i.e. when DDA hits zero, funds from the line of credit sweep to the DDA account) is this covered under the Sweep rule?

I've always thought of these loan sweeps covered by the rule as being "two sided sweeps" where funds transfer between DDA and loan accounts on a regular basis. Not the OD type loan sweeps. But now I'm questioning myself.

Are OD loan sweeps covered by this rule?

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Deposits and Payments
#1778339 - 01/21/13 04:36 PM Re: Sweeps under FDIC part 360 notuntermywatch
J Hunt Offline
100 Club
Joined: Feb 2002
Posts: 132
Phoenix, AZ
Excluded from the sweep definition are: Sweeps to pay down (amortize) loan accounts where there is no return sweep to the originating deposit account (which will typically include overdraft protection lines of credit attached to deposit accounts).

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#1778386 - 01/22/13 01:46 PM Re: Sweeps under FDIC part 360 notuntermywatch
RayLynch Offline
Platinum Poster
Joined: Oct 2003
Posts: 544
The last sentence in FDIC Regulation 360.8(e) sets forth the exclusions to this sweep disclosure rule:

The disclosure requirements imposed under this provision do not apply to sweep accounts where: The transfers are within a single account, or a sub-account; or the sweep account involves only deposit-to-deposit sweeps, such as zero-balance accounts, unless the sweep results in a change in the customer's insurance coverage.

The FDIC issued some FAQs to illustrate the exclusions and provide guidance to complying with FIL 39-2009. Here is a link to the FAQs:

You should look at question 1:

1. Q: Could you clarify the types of sweep accounts subject to the disclosure requirements?

A: For the purposes of disclosure, a sweep account involves the pre-arranged transfer of funds from a deposit account to: (1) an investment vehicle located outside the depository institution or (2) another account or investment vehicle located within the depository institution. Sweep arrangements subject to the disclosure requirements are those allowing for the recurring movement of funds, typically daily, between the deposit account and the other account or sweep investment vehicle. Excluded from this definition are accounts involving:

a. Customer-initiated transactions not pre-arranged through the deposit account agreement.

b. Transactions used to amortize a loan according to a regular payment schedule, such as monthly or biweekly.

c. Deposit-to-deposit sweeps that do not result in a change in insurance status of the funds. These include zero-balance accounts (ZBAs) and reserve sweeps. ZBAs involve a master concentration account connected with one or more subsidiary accounts. The account instructions typically call for any funds residing in the subsidiary accounts at the end of the day to be swept to the master concentration account. All accounts associated with a ZBA usually are owned by the same legal entity; thus, the movement of funds between the master and subsidiary accounts will not involve a change in insurance status for the customer. Likewise, reserve sweeps typically involve a transaction deposit account connected to a money market deposit account, usually structured as a sub-account, between which funds are moved on a periodic basis. In some cases, the customer may not be aware that a sub-account has been established. Whether or not the customer is aware of such arrangements, a deposit-to-deposit sweep where the insurance status of the customer is unchanged is not covered by the disclosure requirements.

d. Bill-paying arrangements.

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