VIDEO: Reporting Savings Accounts as Transactions Accounts
In this Compliance Clip (video), Adam explains the recent Reg D changes and how savings accounts can now be reported as transaction accounts. This video also outlines some problems to watch out for when reporting savings accounts as transaction accounts and Adam even provides a few reasons why you may want to continue reporting your savings accounts as savings deposits.
Video Transcript
The following is a transcript of this video.
This Compliance Clip is going to talk about reporting savings accounts as transaction accounts. What has happened in the recent months here is the regulators have essentially rescinded the rules for Regulation D. These rules, what they traditionally required, is that financial institutions must monitor savings accounts to make sure that customers do not have more than six restricted transactions coming out of a savings account at any given period, which is typically a month based on statement cycle or calendar month. What has happened is that restriction has gone away. So the question that I've seen quite a few financial institutions ask is this, “If a depository institution suspends enforcement of the six transfer limit on a savings deposit, may the depository institution report the account as a transaction account rather than reporting it as a deposit account?”
It's a good question. If you're no longer monitoring these savings account restricted transactions, which in the past has made it a savings account, then do you still have to report it on your special reports as a savings deposit or can you call it a transaction account? And/or do you need to call it a transaction account if you are not monitoring it? Which is one of the questions I've seen come up several times as well.
Fortunately, the answer for this was released by the Federal Reserve and they say this in their answer. They say that yes, you can now report this as a transaction account you want to. It says, if a depository institution suspends enforcement of the six transfer limit on a savings deposit, the depository institution may report that account as a transaction account on its FR 2900 reports. However, it also says this, it says a depository institution may instead, if it chooses, continue to report the account as a savings deposit. So what has happened is these rules have changed under Regulation D, where financial institutions no longer have to monitor for restricted transactions. And remember restricted transactions were things like checks or using a debit card or an ACH transaction. Things where the customer did not physically come to your location, where they were sort of lazy, like an online transfer. Those were all restricted transactions. And previously those were all restricted to six transactions per cycle. That's what the rules were.
The Federal Reserve has changed those rules here in 2020. You now have the option of continuing to report these as savings deposits or to report them as transaction accounts. Here you can see the answer says you can do either. However, I would suggest something. I would suggest you continue to report them as savings deposits. Why Adam, why would you want to continue to report them as savings deposits? Number one, you're probably still going to call them savings accounts in your marketing material. Not really a UDAAP issue there because the regulators have said that's not a concern. However, it could be confusing to your customers. Secondly, and more importantly, if you start reporting your savings accounts as transaction accounts, there are a couple of things that are going to kick in and cause some challenges for you as far as consumer compliance that you're going to have to comply with.
The first thing of course is holds. Regulation CC would apply if you are reporting a product type as a transaction account. If you continue to report it as a savings deposit, Reg CC is not going to apply. But if you start to report your savings accounts as transaction accounts, it is going to be covered under Regulation CC and hold rules would apply to those accounts. You probably don't want to go there. The second reason is that Reg D has other restrictions on NOW accounts. If your current savings accounts restrict the account in having a “reservation of right” provision, then what's going to happen is these could potentially become NOW accounts, and your business customers could not have these such accounts. There could be conflicts there. So I would recommend continuing to report these as savings deposits for now.
That’s all I have in this Compliance Clip.