Reclassifying Savings with EFT Access

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Question:

This is a Regulation D question regarding savings accounts. We are looking at moving the balances of all savings accounts that have ACH debits currently set up, as well as all accounts that have an ATM or debit card, into a separate general ledger and classifying those accounts as "Transaction Accounts" for call report purposes. These accounts would not be closed or transferred to another type of account. This would leave the savings accounts as they are now. This would be an internal move only of the balances to a transaction account that the customer would not be aware of. The accounts would continue to earn interest and the customer would continue to pay the bank's excessive W/D fees. Would this eliminate the necessity to notify customers of limitation requirements on existing accounts? Could this make monitoring of any of the savings accounts possibly unnecessary? Could you continue to pay interest on this type of account? Or would this be considered a total violation of Reg. D?

Answer:

With regard to consumers, you will have created a NOW account. You will have to continue to reserve the right to require 7 days' notice, etc., to avoid making them demand deposits.

With regard to businesses that don't qualify for NOW accounts, you will have created a Reg. D/Q compliance problem. They can't have NOW accounts. So you'd have to stop paying them interest.

[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 11/15/04