MMDA - Electronic Conversions & Bill Payments

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Question:

When a customer writes a check to a third party and the third party electronically converts the check and it comes through as an ACH ARC transaction, shouldn't the bank treat these as checks and not ACH, if the system can distinguish these? Also, if the customer uses online bill payment and requests that a check be issued to a third party, should these be counted under the "6" or "3" rule? The request was made online, but a check is issued.

Answer:

Taking the bill payment question first -- if the check that is issued is drawn on the customer's MMDA, then it will get counted as a check for Regulation D transfer monitoring purposes. If the customer uses your online bill payment system (or your outsourced solution for same) and payment is made from the customer's account by EFT from his account, and the payment to the third party is made by ACH credit or a demand draft or check drawn on the bank or its outsource service provider, the EFT debit to the bank's customer's account is subject to the six/month limit, and is not counted as a check.

An ARC or BOC or RCK ACH entry to an MMDA should be counted as a check for Regulation D transaction monitoring purposes, if your system is capable of doing so based on the Standard Entry Class (SEC) of the transaction. It fits the "similar order" language of the regulation and clearly derives from a third-party check. What really should happen, though, is that the Fed will finally get around to simplifying the restriction, as it proposed way back in February 2008. Then the separate restriction on checks, drafts, POS debit card transactions and similar orders would be moot as a thing of the past.

Editor's Note: This question is less problematic beginning July 2, 2009 when the need to classify savings debits into a 3/6 category is removed. At that time six withdrawals will be the determining factor for compliance to this rule.

First published on BankersOnline.com 6/01/09