Reg D - Transfer Violations

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Question:

Is there a specific amount of times when Reg D is violated that the account should be closed or transferred to a transaction account?

Answer:

There is nothing in the regulation itself. However, there has evolved a best practice understanding that if a customer exceeds the limits three times in a rolling 12-month period, the bank should take steps to take away transfer capabilities, convert the account or close it. If a customer is clearly intent upon ignoring the restrictions, perhaps blatantly using the account as a transaction account, the bank should act sooner. That best practice is described in detail in a series of Federal Reserve Board Staff opinions published in the Federal Reserve Regulatory Service.

[Editors Note:As of 7/2/09, the separate limit of three per month for checks, POS debit card transactions, etc., has been eliminated, and those transactions are now only subject to the 6/month limit that applies to other restricted transfers and withdrawals.]

First published on BankersOnline.com 6/29/09