Credit union trade groups are calling for the Federal Reserve to raise the threshold on transfer limits imposed by current regulations.
The rule, called Regulation D: Reserve Requirements of Depository Institutions or Regulation D for short, imposes a six transfer limit per month on a savings or money market account when transfers or withdraws are executed through "convenient" methods. Convenient methods include transaction completed online or through a mobile device.
Once the six transfer threshold is hit, consumers are no longer able to electronically transfer funds from the affected account and instead, must use an ATM or visit a branch.
Both the Credit Union National Association and the National Association of Federally-Insured Credit Unions wrote letters urging the Federal Reserve to explore the issue.
“It makes it a little more difficult for managing personal finances, and as we noted in our letter, there’s overdraft implications that if you’ve already reached your limit and your overdraft is set up to transfer from your savings to your checking, [...], if you hit that limit, that overdraft option would not be available at that point,” said Luke Martone, CUNA’s senior director of advocacy and counsel.
Martone’s letter, which was sent last week, to the Fed seeks to raise the threshold from six transfers a month to 25 transfers.
“[W]e believe it is long overdue for the Board to update this limit that has its roots in the early 1980s,” he wrote.
The purpose of Regulation D is to regulate reserve levels at financial institutions, but some have argued that this creates a burden on consumers.
The Federal Reserve wrote a letter in March about possibly amending Regulation D and subsequently opened up a comment period. However, the agency didn’t key in on the consumer transfer levels in its letter and instead focused on pass-through investment entities.
Still, the credit union industry is hopeful that the Fed will take up its concerns over the consumer transfers.
“NAFCU is encouraged to see that the Federal Reserve is evaluating changes to Regulation D, but the most important change they should consider is increasing the six withdrawal or transfer limit,” said Ann Kossachev, NAFCU’s director of regulatory affairs. “As we have noted in our Report on Credit Unions to the Federal Reserve, this arbitrary and outdated limitation creates an undue burden for both consumers and credit unions and should be modified to allow consumers to transfer their funds with ease and convenience.”
