I am the bank's internal auditor, and ran into some noncompliance concerning Reg D while doing our annual ACH audit. I need to report this to the board of course, but am wondering how serious this is. My question is, what is the penalty (if caught) for not limiting your savings accounts to 6 preauthorized debits per statement cycle?

My first question, "is this not being audited at least quarterly by compliance or are you, like lots of us, both compliance audit and internal audit?" Anyway, you should have an excess transaction report that lets you know when account holders are exceeding their limit. Be sure you know which types of transactions are limited. You should then track this to see if it has happened more than a couple times a year and if so you should contact them and let them know this practice can not continue and/or change the account to a non-interest bearing account. I am sure this was checked by examiners in your last compliance exam and so you should only have to be concerned about the violations that have happened since then. You probably still have time to remedy the situations. Good luck.

Susie - first welcome to BOL - we enjoy the input of all new members.

second - if you post a thread it usually is only necessary to post it under one topic as most main users review them all and it keeps the clutter down and also keeps the answers consolidated when later referred too.

Again, welcome!

No, I am we have someone else that handles compliance. I did talk to her and she had made it seem as if "yeah, I am aware of the Reg, but it really isn't anything that examiners look at", in other words, "it's no big deal".

No, we have someone else that handles compliance. I did talk to her and she had made it seem as if "yeah, I am aware of the Reg, but it really isn't anything that examiners look at", in other words, "it's no big deal".

Bank deposit products that bear interest must comply with Reg D. Otherwise, the product may be considered either a demand dep and thus be in violation of the rule against paying int on such an acct

OR
a transaction acct, and thus subject to the 10% reserve requirement for transaction accounts. You could be assessed civil penalties or penalties in the form of reserve-deficiency assessments. 12 CFR 204.7(a) and 204.7(b)

Are your savings accounts considered transaction accounts?

We classify our savings accounts as transaction accounts and meet reserve requirements. So we don't have to worry about the 6 transaction limit.

Then you're saying that you don't have any savings accounts - you have turned them all into NOW accounts??? So I take it you have no business customers - since they would not be eligible for a NOW account????? You also must be a small bank otherwise you are throwing a lot of money out the window in exchange for a rather inexpensive monitoring system.

throwing a lot of money out the window in exchange for a rather inexpensive monitoring system

Yep. However, I don't make those decsions...

But....you should try to advise your employer of the costly procedures. Maybe you have, but if you haven't I encourage you to print this string and present it to management.

I agree David, because if they do have business accounts, they have a problem with the violations due to the prohibition of paying interest on business transaction accounts.

I do, I've done it, I will do it....its like beating my head against a brick wall.



We don't allow businesses' interest bearing transaction accounts

Do you allow businesses to have, what you call, savings or MMDA accounts. Because if you are not monitoring them and reserving on them as transaction accounts, they are not savings or MMDA accounts - they are NOW accounts and businesses can't have them. I would find it very strange if you limited businesses to non-interest bearing checking accounts only. .