Question & Answer

Question: We are hearing about banks being cited for allowing excess transactions on savings accounts in violation of Regulation D. My question is, how many times may a customer exceed the limits before the examiners will cite the bank?

Answer: Neither Regulation D nor examination procedures contain firm standards for this - and that is probably a good thing. It does leave you without clear guidance, but we've had to use our best judgment before.

What examiners will look for is: does the bank have a policy limiting transactions as required by Regulation D. Do employees understand the policy? Does the bank have procedures and controls to identify excess transactions and take action? Does this action involve notifying the customer and taking action to deter the customer?

Examiners will look at how the bank identifies or tracks excess transactions and what the bank communicates to the customer. For example, if the bank fines the customer for the first, second, or third excess transaction, that should be a fairly effective deterrent. The fine should be enough to be "not worth the price" to the customer. Obviously a fine of $0.50 or $1.00 won't discourage customers, but $5, $10 or $20 should stop the excess transactions pretty effectively.

It is also a good idea to remind customers every year or so of what the transaction limits are. If you introduce new banking services, such as computer banking, this would also be a good time to advise customers about the transaction limits and how the new types of transactions count.

Copyright; 1998 Compliance Action. Originally appeared in Compliance Action, Vol. 3, No. 13 & 14, 10/98