Is an ACH deposit or withdraw considered "customer initiated" as it relates to activity that can prevent a checking or savings account from going dormant? We have customers who have monthly direct deposits, but have not had any other account activity for more than a year; therefore their account is now dormant.

It would depend on the type of ACH transaction and when it was set up. Remember that the purpose of dormant accounts as the precursor to escheatment is to determine that the customer is aware of the existence of the account. So if the ACH transactions are long-time ongoing transactions that simply occur automatically, they would not be considered "customer initiated". On the other hand, if the customer has participated this year in authorizing the ACH, that would be enough to be considered a "customer initiated" transaction. So, this could lead to an account being assessed a dormant fee for some time and not be escheated because statements are not being returned, unless the assessment of the dormant fee encourages the customer to contact the bank, and then performs a customer initiated transaction. I've spoken with the DFI about dormant accounts over the years, and they would not disagree with my analysis.

What you are stating is exactly how I have always interpreted how ACH transactions are treated. I am questioning myself because in discussing how our core system handles dormant accounts with other banks on the same core, I find that they handle ACH transactions various ways. A couple of the banks just send a dormant letter and have the customer sign stating that they want the account reactivated, which seems completely incorrect.

Are we required to notify a customer when their account goes dormant?

The provisions in the Indiana Code dealing with dormant accounts can be found at IC 28-1-20-1.1. The Indiana Code does not require any type of notice to customers when their accounts go dormant. According to the statute, the date of the last transaction is key in determining when an account goes dormant, so a letter signed by the customer would not rise to the level of a transaction on the account. It's been my experience over the years that many times folks confuse the requirements of abandoned property (found at IC 32-34-1 et seq.) with those of dormant accounts. That may be what is happening in some of the conversations that you are having. Abandoned property does require notice before the property is escheated to the state and an expression of interest in the property could conceivable include the customer signing a letter and sending it back.