FDIC FAQs-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 aninterest-bearing account will no longer be eligible for unlimited coverage?

Compliance > Deposit Operations > FDIC FAQs on Insurance and Payment of Interest on Demand Deposit Accounts

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

 

 

 

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