Regulation D, Transfers Of Funds: Do sweeps count against the transaction limit?

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Question:

This is a Regulation D question regarding the transfer of funds from a savings (or MMDA) to a transaction account like a "sweep" for overdraft protection. I have always heard that this is one of the types of transfers that does count against the six allowed per statement cycle. However, I just noticed, in 204.2(d)(2), in the portion of the paragraph that describes transactions that do not count against the limits, the following: "an account is not a transaction account by virtue of an arrangement...that permits the transfers of funds from this account to another account of the same depositor at the same institution". This sounds like a typical "sweep" transaction from a savings account to a transaction account. Please explain the difference.

Answer:

You didn't read far enough.

The complete phrase in Section 204.2(d)(2) reads:

"or that permits transfers of funds from this account to another account of the same depositor at the same institution or permits withdrawals (payments directly to the depositor) from the account when such transfers or withdrawals are made by mail, messenger, automated teller machine, or in person or when such withdrawals are made by telephone (via check mailed to the depositor) regardless of the number of such transfers or withdrawals."

I've emphasized the key words that tie the requirements (made by mail, messenger, ATM, in person, etc.) back to the transfers and withdrawals.

[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 8/05/02