We allow automatic debits and credits to our customers' passbooks and these trans. can come from third parties. For example, we have customer that set up their phone bills to be paid through their accounts. We see recurring transactions as preauthorized, per Reg E. We also have customers that have arranged to pay one offs from their accounts, paying for purchases, for example. We also see one offs credits to the accounts, such as IRS refunds or similar. In each of these cases, we print and mail notices the following, advising of the deposits or withdrawals to the accounts. Therefore, we do not issue periodic statements. Customers come to the bank to periodically update their passbooks.

See anything wrong with our interpretation?

Yes, I do.

Reg E 1005.9 (c) Exceptions to the periodic statement requirement for certain accounts. (1) Preauthorized transfers to accounts. For accounts that may be accessed only by preauthorized transfers to the account the following rules apply:

(i) Passbook accounts. For passbook accounts, the financial institution need not provide a periodic statement if the institution updates the passbook upon presentation or enters on a separate document the amount and date of each electronic fund transfer since the passbook was last presented.

The key word is "TO." By allowing debits, you are allowing preauthorized transfers "FROM" the account. You either owe your passbook customers a periodic statement (monthly or quarterly depending on whether or not they had EFT activity.) or restrict the accounts to receiving credits only.

The periodic statement may be limited to EFT transactions if you choose.

5. Periodic statements limited to EFT activity. A financial institution that uses a passbook as the primary means for displaying account activity, but also allows the account to be debited electronically, may provide a periodic statement requirement that reflects only the EFTs and other required disclosures (such as charges, account balances, and address and telephone number for inquiries). See § 1005.9(c)(1)(i) for the exception applicable to preauthorized transfers for passbook accounts.

Aside from Reg. E--- I presume you are probably doing this but in the event you aren't, you need to monitor those accounts for excessive transactions under Reg. D as well.