Good Morning,

Question regarding the steps we take after a customer violates Reg D for the 3rd time in a 12 month period. We are not a fan of closing our customers accounts so we put steps in place to shut down the services that allow them to go over their transaction limits. Once we mail the customer the 3rd Reg D letter in a 12 month period we take the steps to shut down online banking transfer ability, automated phone transfer ability, overdraft protection withdraws, ACH/External withdraws and any other pre-authorized transfers. My question is this - Is there any kind of repercussion to us as a bank when we shut down the customers overdraft protection or pre-authorized transfers to another account. My biggest concern is overdraft protection as if we do this and they overdraw their attached checking account then they will begin receiving overdraft fees when we shut down the overdraft protection. I don't want to be hit with any type of UDAAP violation. We do notify the customer with 3 different letters and we call the customer when the 3rd letter is mailed out to discuss options. The steps to shut down their services are not taken for 4 days after the letter is mailed.

Any input is appreciated!

Thanks,
Lisa

I think that your series of letters has to be very clear on what your action will be if the customer doesn't stop exceeding the transfer limits. If that action is the shut-down of an ODP transfer service, be sure you say so and even go so far as to warn that could mean the customer will start getting hit with overdraft charges and/or checks will be returned unpaid, with a fee. If you make those facts crystal clear, I don't see how the UDAAP bogeyman can be a problem.

And when you do act, tell the customer what you have done.

Thanks John. Our second and third letter do spell out that the services will be shut down, however, we do not mention the possibility of NSF fees. So we may want to look at updating our letters.

I appreciate the information!