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Regulation D Is Outdated

June 5, 2008 | Filed in: Miscellaneous | 3 comments

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I understand the purpose of a savings account completely: they are to be used to put money into and to keep it there.  However it would be an insane idea to think that one would not have the ability to access that money with any level of ease.  The Federal Reserve however seems to think otherwise; convenience to them is not something that we as consumers should be allowed to have when it comes to accessing our money.  Let me explain.

Last month I switched to a new brokerage account and transferred money from my savings to the brokerage account several times.  I also payed off a large credit card bill with money from my savings.  I also miscalculated the amount that I could transfer to my savings from my checking without leaving myself short on cash in the checking account.  I messed up, just a little bit.  I had to transfer money back from my savings to my checking to cover some basic expenses.  Pretty simple mistake to make really… I’m sure just about everyone out there has done that at some point in their life.

The point is that I made several transfers from my savings to my checking account throughout the month of May, as well as a few ACH transfers from my savings to my new brokerage account.  The problem with this is - as some of you may be aware - that the Federal Reserve board has set limitations on the number of transfers you can do OUT of your savings accounts in any given month.  The limit?  Six.  Oops… I went WAY over that.  So at the end of the month I notice a fee in my account for excessive transfers.  There goes my interest for the last five months.  Naturally I called my bank (USAA) to ask them to reverse the fee.  After I asked they offered to reverse half of it, which I gladly accepted.

I decided to do some research after this fiasco to learn more about the Federal Regulation that has caused me so much grief.  It’s called Regulation D and it can be found at the Fed’s Reg D site but so as to alleviate the pain that you would encounter trying to read such legal mumbo-jumbo I will paraphrase the relevant parts of Reg D…. right after I quote directly from it.

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 . . . 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, and no more than three of the six such transfers may be made by check, draft, debit card, or similar order made by the depositor and payable to third parties

That part is pretty straightforward.  You (as the depositor) are not authorized to take money out of your savings account more than six times a month (either by withdrawal or transfer) unless you do so at an ATM or at one of your banks branches.

Ok.  I understand the reasoning for the limits on taking money out of a savings account - after all it should not be used like a checking account (in that you take money out of it on a daily basis).  There should not be any reason, however, to limit a person to six or less convenient withdrawals or transfers from their savings account.

We are in a new age today.  We’re more technology savvy than any previous generation has ever been.  We demand convenience.  In the age of internet banking where I can literally do all of my banking without ever leaving my house there should be no reason to limit transfers from a savings account to six.  I understand the limit (a savings after all is not a transaction account), but six is just… not enough.  These limits were set in the 1980s when Reg D was first enacted.  If you ask me it’s more than just a little outdated.  When this was created the internet was hardly even known to be in existence, let alone internet banking.  If you ask me it’s time for a revision.

What do you think?

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Tags: ACH Withdrawals, Federal Reserve, Rants, Regulation D, Savings Transfer Limits

3 Responses to “Regulation D Is Outdated”

1. 

   rich Says:

   
   

   talk about too much government in our everyday life. i am ok with saftey regulations for our savings, but requireing me to drive my car to a branch office to withdrawl money for my own account is wasteful, and just plain lacks common sense.

   July 1st, 2008 at 2:23 pm
2. 

   Ali Salehian Says:

   
   

   The banks should put a notice out on their monthly statements and explain the regulation D for their customers. I had the same problem because I was not aware of such regulation. The check that I issued to my contractor was bounced and he was penalized for the check and above all his bank will not accept any deposit by check for three months. I paid the penalty for the bounced check and appologized a hundred times for the inconvenieces I caused him.
   One more thing, my bank should have notified me the moment that they realized they cannot make the transfer from saving to cover the check. I have been working with this bank for more than twenty years and I expected some curtasy.
   A. Salehian

   August 30th, 2008 at 9:59 pm
3. 

   Margaret Says:

   
   

   This is a response to Ali’s post. It is required by the Truth in Savings Act that the bank disclose the Reg D limitation to you when you open your account. If you have your original disclosures and they don’t mention anything about Reg D you can demand the fees be refunded and, in fact, they cannot limit the amount of withdrawals on your account until they provide you proper disclosures.

   September 10th, 2008 at 2:28 pm

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