Q: Does 12 C.F.R. § 330.16(c)(3) require IDIs to notify existing and future sweep account
customers that funds swept from a noninterest-bearing transaction account to an
interest-bearing account will no longer be eligible for unlimited coverage under the
Dodd-Frank Deposit Insurance Provision?
A: Yes. Pursuant to 12 C.F.R. § 330.16(c)(3), IDIs must notify existing and future sweep
account customers, whose funds are swept from a noninterest-bearing transaction account to
an interest-bearing deposit account, that the swept funds will not be eligible for unlimited
coverage.
Sweep arrangements requiring this notice include the following:
-"Target-balance" sweeps where, upon reaching a designated balance, funds are swept
from a noninterest-bearing transaction account to an interest-bearing account.
-Automated, recurring transfers of funds from a noninterest-bearing transaction account to
an interest-bearing account specifically provided for in a deposit agreement signed by the
customer.
The following types of arrangements will not require notification under Section
330.16(c)(3):
-Ad hoc transfers of funds (not provided for in the deposit agreement) from a noninterest-bearing
transaction account to an interest-bearing account, where the transfer is initiated
by the customer, whether on-line or in-person at the IDI.
-"Round-up" arrangements consisting of small transfers of funds to consumers savings
account based solely on debit card usage.
-Pre-arranged periodic transfers of funds initiated by the customer, whether on-line or in person,
that are not part of the deposit agreement (for example, where a customer
establishes a noninterest-bearing transaction account and thereafter opts to have funds
transferred on a monthly basis to an interest-bearing account).
-Prearranged periodic sweeps or transfers from a noninterest-bearing transaction account
to make loan or other bill payments.
- -Transfers initiated by an IDI for overdraft purposes.
-Sweeps to repurchase accounts or money market mutual funds. (These covered
under 12 C.F.R. § 360.8(e).)
This can be found in - FAQ#35 of FDIC’s FAQs. FDIC’s FAQs can be found at: http://www.fdic.gov/deposit/deposits/unlimited/faq.pdf