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Reg E and CD Interest Transfers

Are agreements to transfer interest paid on a certificate of deposit via the ACH to a customer's account at another financial institution covered under Reg E? If so, would the certificate then be subject to the periodic statement requirement?

This question has come up before in the Threads. HERE is probably the most exhaustive discussion. As you will see, Randy Carey and I disagreed on the answer.

A synopsis --

  • Randy didn't think the transfers would be subject to Regulation E; I did (and still do).

  • We agree that examiners hadn't made this an issue back in 2002 when we discussed it; I hope our discussion hasn't added the topic to examiners' radar screens.

  • We didn't say it then, but the topic doesn't appear in the Staff Interpretations appendix to the regulation.

  • If Regulation E applies, there is more to contend with than just a monthly statement requirement. There is, for example, the matter of disclosing varying amounts under Section 205.10(d)).

I will be the first to admit that, because of the way the EFTA and Regulation E are written, it's relatively easy to argue that all kinds of things could be subject to it. An obvious example is the vast array of stored-value cards, which could arguably be considered "accounts" under the rule. Yet the Fed and other regulators have apparently taken the view that, unless something definitive is added to the regulation, they'll take the narrower view and exclude these products from the scope of the rule.

That stance obviously works for the industry. And to keep my response here as balanced as possible, I have to say that the Fed might consider the question of CD interest transfers equally "excludable."

First published on 2/21/05

First published on 02/21/2005

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