We have currently started preventing online banking transfers, external withdraws, overdraft protection withdraws etc. when a customer goes over their 6 transfers per month for the 3rd time in a 12 month period. We send out letters each time the customer goes over their limit. My question is this: Should we be shutting down these transfer capabilities after the 1st notification instead of after the 3rd notification. Upon reading the materials I received at a recent seminar I noticed that it states that:

In order to ensure that no more than the permitted number of withdrawals or transfers is made, a depository institution must either:

1.) Prevent withdrawals or transfers of funds from the account that are in excess of the limits; or
2.) Adopt procedures to monitor those transfers on an ex post basis and contact the customers who exceed the established limits on more than an occasional basis.

It then states:
Any account holder who exceeds the transfer or withdrawal limitations in three separate statement periods in a 12 month period should be notified that the account type will be changed to a transaction account or the account will be closed.

So I'm wondering if shutting down their transfer capabilities after their 3rd offense is too late. Should we be shutting down their transfer capabilities after sending them their 1st letter and then changing/closing their account after the 3rd letter is mailed out. Or are we ok in shutting down their transfer ability after the 3rd letter. Our thinking was once we shut down their ability to transfer funds then we will get them in the bank to make the necessary changes - because lets be honest - I'm not so sure they even read the letters or pay attention to them until something is "shut off"....

Thanks

We also send out a 1st and 2nd 'warning' letter and then take action after the 3rd time in a 12 month period. Most colleagues I've talked to take the action after the 3rd time as we do.

Your trainer (or his or her materials) was expressing an opinion about how far your bank should go in terms of flexibility. The outer marker he or she sets is a mile beyond the one I would have set; e.g. I would simply remove the interest bearing feature after the second offense in a rolling 12 month period. My second notice would say, "It's done; the disclosure for your non interest bearing DDA is enclosed." I'm not inclined to fool with people over trivia and that inclination has fallen with interest rates.

In essence, the "rule" is that you have a mechanism for putting a stop to it, not that you do it after X number of instances.

Thanks Ken - that makes sense to me. And I agree with you that I would change things sooner than after 3 violations. Unfortunately I don't know if I could get the powers who be to agree with me. And if we change their account to a non interest bearing checking then we have to close the savings and open a checking - which then requires new account documents. And getting the customer in to sign those documents is not easy.... Shutting down their transfer abilities seems to be helping though in getting the customer in the bank or at least calling in to see what needs done. So for now I will continue shutting down these options and work on getting the procedures changed to shutting it down sooner.

Thanks for your help!

Good Afternoon,

Is there a requirement for a bank to have a Reg D policy? I just assumed (lol) that all regs require a policy, but I cannot find any reference to it. I do see that banks must have a way to monitor the number of withdrawals..... etc.

We just merged with another bank. Our bank had a policy-the new bank doesn't. Hence, the question.
Thanks!

Here is a recent thread on required policies you might find useful.

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