Several questions have arisen
concerning the transfer limits on savings deposits in section 204.2(d)(2)
of Regulation D. Although the questions refer to savings and money
market accounts as separate types of accounts, Regulation D no longer
makes this distinction. (See 56 Fed. Reg. 15493 at 15494, April
17, 1991.)
Question 1: A savings account is used for overdraft
protection for checks drawn on a demand deposit account. Does the
six-transfer limit apply to overdraft transfers? Are transfers to
cover overdrafts created as a result of credit card, ATM, and ACH
transactions subject to the six-transfer limit?
Regulation D defines “savings deposit” in
204.2(d)(2) and “transaction account” in section 204.2(e). Overdraft
protection can be accomplished by directly transferring funds from
a savings account to pay charges to the account or by posting those
charges to a line of credit. In some cases, however, it is accomplished
by a combination of these methods: a line of credit is extended to
the customer and drawings on the line of credit are satisfied by preauthorized
transfers from a savings account.
A transfer from a savings deposit to repay a bona fide
loan from the bank resulting from overdraft protection does not count
as a transfer subject to the transfer limit (see
2-342.13). Depending upon the facts and circumstances, section
204.2(e)(5)
might apply to an arrangement under which a depository institution
allows a customer to have draws on a line of credit to pay overdrafts
on an account and then allows the customer to satisfy those draws
by transfers from a savings deposit. If section
204.2(e)(5) applies,
the savings deposit will be reclassified as a transaction account.
(See
2-345.23.)
Generally, if by arrangement transfers are made from a
savings account to a transaction account, each transfer to the transaction
account counts toward the six-transfer limit in section 204.2(d)(2).
In that case, the use of the savings-account balance as a substitute
for a transaction-account balance is effectively limited by the six-transfer
limit. However, if the transfers from the savings account are used
to repay credit extended to the holder of the transaction account
because of overdrafts, the arrangement must also be analyzed under
section 204.2(e)(5) because the extension of credit, in conjunction
with the transfers, may increase the depositor’s ability to substitute
savings-account balances for transaction-account balances. In these
cases, a savings account may be considered a transaction account even
though fewer than six transfers per month are made from the savings
account.
In determining whether a line-of-credit overdraft arrangement
involving transfers from a savings account results in the savings
account being considered a transaction account under section 204.2(e)(5),
one must consider all the facts and circumstances, including the rates
of interest charged on the outstanding balance under the line of credit;
the interest rate earned on the savings account; the balance ordinarily
maintained in the transaction account; the activity in the transaction
account; the frequency with which advances on the line of credit are
satisfied from transfers from the savings account rather than other
funds from the customer; and the extent to which the depository institution
suggests, promotes, or otherwise furthers the establishment of the
arrangement.
The staff has also been asked whether transfers to cover
overdrafts created as a result of credit card, ATM, and ACH transactions
are subject to the six-transfer limit. A credit card transaction is
a transaction by which credit is extended to the cardholder. Although
credit extended by means of a credit card may be paid by means of
a transfer from a savings account, the individual credit card transactions
would not ordinarily count as transfers from the savings deposit.
A debit card, however, does access an account directly, and debits
from a savings account by means of a debit card are limited to three
per month. ACH transactions on a savings account are subject to the
six-transfer limit. ATM cash withdrawals or transfers from a savings
deposit to another account of the depositor at the same depository institution
are not subject to either the three- or six-transfer limit.
Question 2: If four checks
are overdrawn against an overdraft-protected demand deposit account
on the same day, should the system count one or four transfers if
(1) the processing system used by the bank transfers funds for each
check or (2) the system sums the four checks and makes one transfer
to cover all four checks.
These transactions are governed by section 204.2(d)(2),
which limits transfers from a savings account to another account of
the depositor at the same institution to six per month. Generally,
each separate transfer from a savings account to a transaction account
should be counted against the transfer limit. If four checks are processed
separately (for example, when each check is presented to the institution
at a different time during the day for payment over the counter in
cash) and the bank transfers funds from the customer’s savings account
to the customer’s transaction account at the time each check is paid,
then the savings account would be charged with four transfers. Likewise,
if transfers from a checking account would result in overdrafts and
a separate transfer from the savings account to the checking account
would be made to cover each funds transfer, then each transfer from
the savings account would count toward the six-transfer limit. The
making of separate transfers to cover individual checks, even if the
checks were presented together, ordinarily would result in separate
transfers for purposes of the transfer limit, unless the depository
institution could demonstrate that the separation of the transfers
was wholly unrelated to the separate payment of checks. If, however,
the checks that are presented on the transaction account are processed
in a batch rather than individually, and only one transfer equal to
the sum of the overdrafts is made from the savings account, then only
one transfer from the savings deposit need be charged against the
transfer limit.
If a transfer is made from a savings deposit to repay
a prior extension of credit by the bank and the credit was extended
to pay checks drawn on a transaction account, the transfer generally
would be considered a transfer to repay the loan from the bank and
usually would not count toward the six-transfer limit. In that case,
however, the savings-account balance could be a substitute for the
transaction-account balance, and the arrangement must be reviewed
to determine whether the savings account should be considered to be
a transaction account under section 204.2(e)(5).
Question 3: Do transfers from a savings
account to another deposit at the institution count toward the six-transfer
limit? Does it matter what type of account the funds are transferred
to—such as to a demand deposit account or an individual retirement
account? Does it matter whether the transfers are for a specific amount
and occur on the same day each month—such as to pay rent?
Transfers from a savings account
to another deposit account at the institution would count toward the
six-transfer limit if they were made by telephone or by any other
means listed in section 204.2(d)(2), regardless of whether the transfers
are made on a particular day each month or whether the amount of the
transfer varies or is constant from month to month and regardless
of the type of account the funds are transferred to.
Question 4: Verify that the following
list correctly categorizes the transactions that fall within each
category:
- Three-transaction limit. Point-of-sale transactions
with either ATM or credit card company debit cards and withdrawals
payable to third parties initiated by checks or drafts
- Six-transaction limit. Preauthorized transfers
through ACH or EFT; automatic transfers for overdraft protection;
telephone, fax, and computer transactions to transfer funds to another
account at the same institution; transfers between a parent’s account
and his or her child’s account; and withdrawals initiated by telephone
where the proceeds are paid to third parties
- Unlimited. Transfers to pay loans at the same
institution; withdrawals made (1) in person, (2) at an ATM, (3) by
messenger, or (4) by mail (via a check sent to the depositor); telephone
withdrawals where the withdrawn funds are mailed to the account holder;
and transfers between accounts of the depositor at the same institution
initiated (1) in person, (2) by mail, (3) by ATM, or (4) by messenger
The transfers listed under the three-transfer limit are
subject to that limit. The transfers listed under the six-transfer
limit are generally subject to that limit, and the transactions listed
in the unlimited-transfer category generally are not subject to specific
transfer limits. However, overdraft-protection arrangements and transfers
to pay loans at the same institution could result in a savings account
being classified as a transaction account under section
204.2(e)(5).
STAFF OP. of July 13, 1992.
Authority: 12 CFR
204.2(d)(2) and (e)(5). See also 2-342.13, 2-345.23, and 2-345.25.