We have a customer who has written 7 checks in two different periods in the last twelve months on her MMDA account. We are removing her draft capabilities. The phrase in question is, "remove the account's transfer and draft capabilities."

Are there any type of transfers available to her, provided they are not pre-authorized? Could she, for instance, make telephone transfers or in-person or ATM transfers on this account?

We close the accounts but if you are limiting the ability to withdraw funds, you may be able to restrict the transaction capabilities to only the unlimited such as over the counter or in person withdrawals. These would be unlimited for Reg. D purposes and should meet the spirit of "D".

You'd have to consider when fees may be assessed since you have restricted the capabilities of the account and what parts of your deposit agreement may need to be altered since you will have effectively created a new account type.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

While many banks dealing with an excessive-transfer MMDA account either close the account or convert it to a NOW or DDA, what the Feds are really getting at is getting the account to conform. So, if you can "reform" your customer by taking away check/draft capability, and successfully limit his/her thirst for transactions like ACH/telephone/auto tran/home banking and the like to the allowable numbers, you've complied with the reg. What you've in essence done is made the account a savings account.
The advice above concerning new disclosures is excellent. It's a new account, even if you use the same account number and nothing changes except you broke the customer's checkwriting hand!
Now that's an interesting idea to include in a Reg D warning notice! You stop writing so many checks, or we'll bust your fingers!

OK John, I can't resist.

You charge the customer a fee for excessive transactions. You send them annoying letters about accessing their own money. Then you tell them you're going to further restrict their access. When you ask them which finger they want broken, which do you think they'll offer?

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

Priceless, Andy! I'm ROFL.

Memo to self: Make sure we break ALL the fingers!