Regulation D (FRB)

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Reserve Requirements for Depository Institutions (12 C.F.R. 204, Regulation D) is a Federal Reserve regulation which sets out reserve requirements for banks in the United States.

It also limits the number of preauthorized withdrawals and transfers from a savings account or money market account.

Six-transaction limit[edit]

In consumer banking, "Regulation D" often refers to §204.2(d)(2) of the regulation, which places a limit of six withdrawals or outgoing transfers per month[1] from savings or money market accounts via several transaction methods. Transactions counted against the limit include "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." Transactions not counted against the limit include "mail, messenger or in person or when such withdrawals are made by telephone (via check mailed to the depositor)."

The regulation was amended in 2009 to allow greater freedom for the depositor: beforehand, the limit was six withdrawals per month if the funds remained within the same institution (e.g., transfer to checking), but was only three drafts where the funds left the institution (e.g., check, ACH, or card based purchase).[2]

The number of deposits or incoming transfers into savings or money market accounts is not limited.

Regulation D does not emplace the six-time transfer limit on outbound savings or money market account transactions initiated in person, via messenger or mail; over-the-counter (OTC) withdrawals and transfers, ATM withdrawals and transfers.

Penalties for violation[edit]

Regulation D "penalties" or fees vary by financial institution. Discover Bank, for example, will close a savings account if Regulation D is exceeded 3 or more times in a 12-month period. USAA will close[3] an account if Regulation D is exceeded more than 3 times within a 12-month period. From a legal standpoint, notifications of exceeding the allowed 6 transfers have to be communicated to the account holder. Each financial institution will choose to charge (or not charge) fees for exceeding these limits. Wells Fargo, will not close the savings account, but will charge a $15 "Excess Activity Fee" for each item cleared after the regulation has been exceeded. PNC Financial Services will convert the savings/money market account to a non-interest bearing checking account[4]. Financial institutions are allowed to choose their own fee schedule related to this required Federal Reserve regulation.

See also[edit]

References[edit]

  1. ^ Savings Deposits, in Regulation D - Reserve requirements, Federal Reserve,
  2. ^ "Federal Register, Volume 74 Issue 102 (Friday, May 29, 2009)". edocket.access.gpo.gov. Retrieved 1 August 2017. 
  3. ^ "Depository Agreement and Disclosures" (PDF). United Services Automobile Association. USAA Federal Savings Bank. 2016. p. 15. Retrieved 2017-02-15. 
  4. ^ "PNC". PNC. Retrieved 2017-12-14. 

External links[edit]