Regulation D and Restricting Transactions to Fewer than Six Per Month

Issue/Inquiry

Under Regulation D, can a depository institution restrict transactions from savings accounts to fewer than six per month?

Response Summary

Regulation D does not prevent a depository institution from imposing a more stringent limitation than is required by the regulation.

Response Detail

Regulation D limits the number of transfers that can be made from a savings account, as follows:

The depositor is permitted or authorized to make no more than six transfers and withdrawals, or a combination of such transfers and withdrawals, per calendar month or statement cycle (or similar period) of at least four weeks, to another account (including a transaction account) of the depositor at the same institution or to a third party by means of a preauthorized or automatic transfer, or telephonic (including data transmission) agreement, order or instruction, or by check, draft, debit card, or similar order made by the depositor and payable to third parties. 12 CFR §204.2(d)(2).

In addition, a Federal Reserve Board interpretive letter offered the following comment regarding this section:

The definition serves only to determine whether an account is a savings account or a transaction account, and there is no prohibition against accounts which permit withdrawals and transfers in excess of the specified limits. However, a depository institution must limit preauthorized transfers and telephonic instructions (including those transmitted from a home computer and those automated using touch-tone telephone) from a deposit account in order to classify the deposit as a savings deposit. FRB Interpretive Letter 97-3.

This indicates that the restriction of Regulation D on the number of transactions that can be made from a savings account is a limitation, not a prescription. Any number of transfers or withdrawals can be allowed from a deposit account, but if the account is to be considered a savings account, there can be no more than six transfers or withdrawals per calendar month or statement cycle.

That a depository institution can impose more stringent standards than those of Regulation D is recognized by another Federal Reserve Board interpretive letter, which considered whether a bank could restrict transfers or withdrawals to six per quarterly statement cycle rather than per calendar month or four-week statement cycle:

The definition of savings deposit requires a limitation on certain transfers and withdrawals, per calendar month or statement cycle (or similar period) of at least four weeks…Thus, a depository institution may use either a calendar month or a similar period. While nothing prevents a depository institution from using a quarterly period if that is its statement cycle period, such a choice is more restrictive than required by the Regulation. FRB Interpretive Letter 97-1.

In the matter before the Federal Reserve Board, restricting the number of savings account transactions to six per quarterly statement cycle meant that there would be fewer than six transactions per calendar month, which was permitted. It follows, then, that it would also be permitted for a depository institution to limit the number of transactions to fewer than six per calendar month or statement cycle of at least four weeks, although this would be more restrictive than required by Regulation D.

 

This entry was posted on Monday, November 20th, 2017 at 6:00 am.