Electronic Debits & Passbook Accounts

Do you allow electronic debits from passbook accounts. If not, how do you prevent them from occuring?

If it's truly a passbook account, you CAN'T allow electronic debits.

This may be a stupid question, but why not?

Sure, you can allow e-debits, but that will mean you have to provide periodic statements under Regulation E, and that means you won't have a true passbook account any longer.

If you want to keep the passbook accounts, you have to block and return any ACH debits, which means you need to have a customer-relations campaign to advise them why they can't be authorizing debits against their savings accounts.

Your bank presumably knows its customer base. If it thinks it has to keep savings passbook accounts, it can't allow ACH debits to post to them. The trade-off is that customers may perceive that as an inconvenience.

Besides FDIC told me I couldn't!

When we were examined earlier this summer we had 'grandfathered' passbooks accounts, but they informed me you can't grandfather debits, they just were not allowed.

I had to run reports to show we hadn't actually received any debits on these accounts in the last 6 months and then put an ach debit block on those grandfathered accounts (all others get a debit and credit block upon account opening) and then they were happy again!

In today's electronic world, I am amazed that customers still want to bring a passbook to the bank for updating. It just seems so simple to convert to statement savings. But, as John said, you know your customer base.

Passbook accounts are becoming increasingly outmoded as the rest of the world moves toward more electronification.

Years ago when we converted an acquired bank's passbook savings to statement savings, we had to teach our tellers what a passbook was. We went ahead and updated them if they were brought in by the customer. Some of the customers were really happy to get a statement, but some still held on to the passbooks for a little while. They eventually all went away.

I wish we could get rid of the passbooks....not my decision though. What about ACH credits to a passbook? Should we block those also?? We send out the annual reg e error resolution notice to all passbook customers with ACH credits...does that cover us?

Preauthorized EFT credits to a passbook don't trigger a statement requirement if they are the only EFTs that can post to the account, and you can provide transaction details (amount and date) in a passbook update on request. The exception for passbooks is set out in Reg E, section 205.9(c)(1)(i).

We still promote passbooks like they are the best thing since canned beer and sliced bread

The blue-haireds love us

John - you stated that Preauthorized EFT credits to a passbook don't trigger a statement requirement if they are the only EFTs that can post to the account, and you can provide transaction details (amount and date) in a passbook update on request.

I'm reading the following in the reg:

Exceptions to the periodic statement requirement for certain accounts -- (1) Preauthorized transfers to accounts. For accounts that may be accessed only by preauthorized transfers to the account the following rules apply:
Passbook accounts. For passbook accounts, the financial institution need not provide a periodic statement if the institution updates the passbook upon presentation, or enters on a separate document the amount and date of each electronic fund transfer since the passbook was last presented.

This line is throwing me off: For accounts that may be accessed only by preauthorized transfers to the account the following rules apply.

If the customer can access in person, does this exception still apply? I'm not sure I'm understanding this correctly.

Preauthorized transfers to accounts include SSA or VA benefits payments, payroll direct deposit, etc. Those sorts of EFTs don't need to trigger a statement requriement for a passbook account.

However, if the customer has personal EFT access - an ATM card or debit card, for example, that exception disappears.

The fact that the customer can make an in-person withdrawal with the passbook doesn't kill the exception; the fact that other types of EFTs (ACH debits, ATM or debit card transactions, for example) are allowed to hit the account would eliminate the exception.

Got it...Thank you, John!