Answer by Ken Golliher: Your TISA disclosure must reflect any limitations on the account. Since it was originally accessible by check, you would be required to give 30 days notice in advance of removing the check writing capabilities.
That said, as a practical matter this is a wholesale change in the type of account your customer opened. The reality is that customers read very little of the correspondence they receive from their bank. In this case, the effect on them could be significant.
The biggest issue is what do you intend to do with checks drawn against the MMDA after the check writing feature is removed? If you intend to return them, what would your reason for return be? "Wrongful dishonor" looms large in the possible reactions of a customer whose check has been bounced.
Without advocating the elimination of MMDAs from your portfolio, I'll suggest you may want to develop a Plan B wherein you change MMDAs to a different kind of account, but still one that is accessible by check.
Answer by John Burnett: I wholeheartedly support Ken's comments and suggestion, particularly if you are contemplating making a change to the product offering.
I also want to look at your question from a different perspective. You could be asking about taking away check-writing capability from a specific customer who has been exceeding the savings transfer and payment limitations contained in Federal Reserve Board Regulation D, section 204.2(d)(2). If that is the case, and if the customer already has a savings account open, you could transfer the MMDA balance to the savings account. If your deposit agreement includes language allowing you to move the funds to a new account type, you could set up a new savings account, provide account disclosures for the new account, and move the funds.
Neither of those moves would require a 30-day change in terms notice, but I do recommend some advance notice before completing the change for the same reason Ken explained -- the customer could have MMDA checks outstanding, and you don't want to risk a wrongful dishonor claim. You could agree to pay checks from the new savings balance on an interim basis to cover any payments that are outstanding, but you should include some reasonable cutoff date for those payments.
Answer by Ken Golliher: If you are talking about removing check writing capabilities from a single MMDA based on excessive activity, I agree with John's response. Presumably, your warning letter(s) would put the customer on at least 30 days advance notice of your plans.
First published on BankersOnline.com 5/27/13