In an earlier Knowledge Brief, Excessive Transaction Monitoring, we highlighted three options for handling excessive withdrawals after the amendment of Regulation D. Those were:
- Discontinue excessive transaction limitations, monitoring, and fees for “savings deposits” (i.e., savings and money market accounts).
- Alter the institution’s excessive transaction limitation policy.
- Maintain institution’s excessive transaction limitation policy.
Since the amendment of Regulation D, some institutions continue to charge fees for excessive withdrawals but have discontinued monitoring efforts.
If your institution continues to charge fees for excessive withdrawals, we recommend ensuring controls to mitigate compliance risks are present. These controls may include:
- Written excessive withdrawal procedures (not driven by old Regulation D restrictions);
- Review customer facing disclosures and marketing material to ensure clear and accurate disclosure of account limitations;
- Periodic testing of the system to ensure it accurately captures the number of withdrawals subject to fees;
- Notifying customers who utilize their savings and money market accounts as transaction accounts of possible alternative account types; and
- Limiting the amount of fees allowed per statement cycle.
In a post-Regulation D world, what constitutes “excessive” is defined by each institution, rather than the law. We suggest your institution consider the cost to process an excessive transaction versus the amount of the fee charged to the customer. Is the fee fair or excessive (no pun intended)?
From the field: Through review of periodic statements, we revealed one customer with upwards of $250 in excessive withdrawal fees in one statement cycle.
Might the CFPB treat excessive withdrawal fees as a “junk fee” similar to the way overdraft fees and NSFs have been treated; an unnecessary punitive fee with no benefit to the customer? Only time will tell.
Email info@sentryadvisory.com with any questions!
Copyright © 2024 Sentry Advisors, LLC, All rights reserved.
(No claim to original U.S. government material.)
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher. This article is intended to inform recipients of new or changed laws, rules or regulations. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have. Regulatory guidance is subject to change or modification, retroactively or prospectively, by varying interpretation and by subsequently issued pronouncements, legislation, and regulatory, administrative, or judicial decisions. Any such change or modification could affect the accuracy of this article.