When the customer violates the transaction limits the third/fourth time you should be closing the account or transferring it to a transaction account. How do you handle those customers that have direct deposits and preauthorized transfers? Do you keep the account open and stop all debits until that is taken care of, manually transfer these funds to another account until it's corrected?

I typically just change the account type, not the number. I send them a letter along with disclosures for the new account type explaining what I've done.