Removing Barriers Blog

CUNA pushes for Partial Regulation D Relief
Posted March 31, 2020 by CUNA Advocacy

CUNA has sent two letters to the Federal Reserve Chairman Jerome Powell over the last two weeks asking for the Federal Reserve Board (“Board”) to eliminate Regulation D’s six convenient transfer limit for savings accounts. Credit unions have long believed that the six transfer limit is outdated, unnecessary and confusing to consumers.  Now with the shelter in place and stay home orders in place for many Americans  to help fight the spread of Covid-19, consumers more easily run afoul of the limit as they make transfers electronically, which count against the limit, instead of in-person, which does not count against the limit. 

On March 15 the Board announced the reduction of reserve requirements to zero percent, which was effective March 26.  According to the Federal Reserve, the “action eliminates the need for thousands of depository institutions to maintain balances in accounts at Reserve Banks to satisfy reserve requirements, thereby freeing up liquidity in the banking system to support lending to households and businesses.” An Interim Final Rule enacting this change was subsequently published in the Federal Register.  A biproduct of the elimination of the reserve requirement is the financial institutions can offer accounts that are not subject to the six transfer limit, but the process is needlessly complex.

The Federal Reserve published FAQs addressing the impact of the changes to the reserve requirements.   FAQs Q.7. through Q.14. specifically relate to the impact of the elimination of reserve requirements upon the six convenient transfer limit and detail steps a credit union must take to bypass the transfer and withdrawal limit that remains. Unfortunately, the change to the reserve requirement as detailed in the FAQs do not adequately address CUNA’s request to remove the six transfer limit, which remains in § 204.2(d). The FAQs do give credit unions a path to eliminate the transfer limits but the process is more complex and burdensome than if the Board had removed the transfer limits from § 204.2(d). CUNA noted other burdensome issues with this method of removing transaction limits in our March 30 letter to the Chairman Powell:

  • Credit unions will likely need to provide members with new account disclosures if they re-designate savings accounts as transaction accounts;
  • Core processing systems will require updates to change account reporting to generate FR 2900 reports that reclassify accounts, which will be difficult and time-consuming to make at this time;
  • As acknowledged in the FAQ, financial institutions will have difficulty notifying and explaining changes to consumers during the current challenging operating environment.  

We still believe that credit unions need a less burdensome solution, which is why we continue to pursue the elimination of the transfer and withdrawal limit in § 204.2(d).