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Closing Account for 3rd Violation of Reg D

Question: 
When a customer has had their 3rd violation of Reg D and the bank is going to close the account, do we need to give the customer notice before the account is actually closed or can we just send them the final violation letter notifying them that it is closed and the account balance is enclosed or transferred to an account?
Answer: 

Although it's clear that the bank is responsible for putting a stop to excessive transactions on savings accounts, Regulation D does not dictate account closure as the only possible response. Thus, it does not dictate how account closure should take place.

If you intend to convert the account to a DDA (interest bearing or otherwise) I see no reason to give advance notice, assuming you would pay outstanding items without interruption. However, if you intend to literally close the account, I suggest you give the customer 10 - 14 days notice of your intent. The issues involved in "wrongful dishonor" of the customer's checks far outweigh the import of an isolated violation of Regulation D.

First published on BankersOnline.com 1/23/12

First published on 01/23/2012

Filed under: 
Compliance
Filed under compliance as: 
Checks
IT
Savings Accounts

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