Would These CDs be Subject to Reg E?

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Question:

Generally our Certificates of Deposit are not accessible by EFTs; however, we do have two or three accounts in which we have a pre-authorized arrangement to transfer the interest earned monthly to an account for the customer at another financial institution. Does this make the accounts subject to periodic statements under Reg E? If so, exactly what type of disclosures are required and how often must they be submitted?

Answer:

Yes, those accounts and the transfers are subject to Regulation E, assuming they are consumer accounts and the interest is first posted to the CD account and then transferred out to the other bank. I believe that the following disclosure requirements will apply to the accounts, but only to those specific accounts and other CD accounts for which you will allow EFTs of interest to other banks.

Initial disclosures under section 205.7, to the extent that they apply to the accounts. You don't need to provide disclosures that only apply to card-accessed accounts, for example.
A written authorization from the customer for the preauthorized transfers, as required by section 205.10(b) and NACHA rules. The customer must be given a copy.
Include in the authorization a range of dollar amounts for the transfers (based on months of from 28 to 31 days), under section 205.10(d)(2).
If you fail to include the disclosure of the amount range in the authorization, you'll need to comply with 205.10(d)(1).
You must provide a monthly periodic statement that shows the transfers in accordance with the requirements of 205.9(b).
The periodic statement will not have to comply with Regulation DD requirements because a statement for a CD account is not considered a periodic statement under that regulation.

First published on BankersOnline.com 4/07/08