Request OD Protection Again After Reg D Violation

Answered by:

Question:

A customer's savings account is set up to protect his checking via overdraft protection and he has violated Reg D for three consecutive months and the bank has removed the overdraft capability, following all requirements of course. When can he or can he request overdraft protection from his savings to his checking again?

Answer:

Answer by Randy Carey: That is the bank's call. There is no guidance.

Answer:

Answer by John Burnett: In making that call, I suggest it would be wise to have a standard procedure or practice in order to avoid criticism from examiners and auditors. As part of such procedures, the customer should be reminded of the limits imposed on transfers from their savings or money market deposit accounts and informed that exceeding them again will result in permanent loss of transfer access. Branches should be informed of the procedure and it should be enforced centrally.

As Randy said, there is no official guidance on the question, but your bank should avoid making it too easy for customers to gain reinstatement, or its compliance controls over the transfer limits could be deemed ineffective.

First published on BankersOnline.com 4/1/13