Reg DD Apply to NOW/DDA Used for Personal?

Answered by:

Question:

If a customer has 50% of their total sum in investment products and on occasion uses their NOW or DDA account for personal payments, would regulation DD apply? It is the banks policy not to open consumer accounts. We are Private Banking, and open accounts mainly for investment purposes but do offer for convenience,other types of bank accounts. For these instances we also require the customer to sign a certification letter that states that accounts are being maintained for facilitating the acquisition of investments and only incidentally personal, family or household purposes, which in no event will involve use of more than 50% of the account balance.

Answer:

Reg DD applies to "consumer" accounts which are those primarily for personal, family and household purposes. You are getting purpose statements that would exclude these. If, however, in an audit an account was found that was used primarily for personal, family or household purposes, you should have a procedure to close that account as it is in fact Reg DD applicable. The account could also be converted and the Reg DD disclosures made. I would worry that giving an indication/approval to the customer that they can use the account for personal, family or household putrposes could turn into a UDAAP issue. You are encouraging personal use, but not providing personal protections. How the bank and how a regulator or court define "primarily" may differ.

First published on BankersOnline.com 7/08/13