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"Work-Arounds" on MMDA Transaction Limitations

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Question: 
When evaluating restricted vs non-restricted transactions for MMDA accounts, would a transfer between accounts taken over the phone and recorded via handwritten tickets be any different than a transfer taken over the phone and electronically reported as a "Telephone Transfer"? Our previous Compliance Manager told all of our CSRs that a phoned in transfer is not a telephone transfer if you write tickets for the transfer. This sounds like evading the issue to me. What do you think? How would this be different than taking funds from a savings (regular share) account to cover debit card charges in a share draft account (which acts as a checking account)?
Answer: 

The key here is not that the request was hand-written but how it was conducted. The purpose here is not to restrict the use of funds in total, but they are not meant to be as accessible as when in a demand deposit account. If the funds were sent to the customer in the form of a check, for example, that would be excluded. If the customer came into the bank to transfer the funds, that would be excluded. This may be where the hand-written debits are disguising who requested the funds and how. The examples I gave are an inconvenient way to receive one's funds. They are generally not limited. But transferring funds from one deposit account to another over the phone, whether in an automated or manual mode, is a limited transaction and contributes to a sweep arrangement expressly prohibited in Reg. D.

The second scenario is a direct "sweep" arrangement which effectively allows the payment of interest on an account prohibited from receiving it and violates Reg. D when you allow excessive transactions.

There is a Reg. D Limitations Chart in the Banker Tools you may find helpful.

[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 06/21/04

First published on 06/21/2004

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