We would like to eliminate automatic transfer notices for transfers between linked accounts held at our financial institution. We currently mail a notice whenever there is an automatic transfer from an account to cover an overdraft in another account belonging to the same customer. Our customers have agreed to the transfers, and we charge a general transfer fee for each automatic transfer. We believe these transfers are exempted from coverage under Regulation E. If we show the transfer on the demand deposit account statement, are we required to send other notices?

No, we are not aware of any laws or regulations requiring you to send notice when you make transfers between linked accounts to prevent overdrafts.

The 2005 Joint Guidance on Overdraft Programs recommends that banks “[p]romptly notify” their customers each time “overdraft protection has been accessed, for example, by sending a notice to consumers the day the overdraft protection program has been accessed.” However, that guidance distinguishes an overdraft protection service from automatic transfers between linked accounts. Consequently, we do not believe the prompt notice recommendation would apply to the service you are describing.

Additionally, Regulation E requires financial institutions to provide notice and an opportunity to opt-in before charging a fee for paying an overdraft on an ATM or on a one-time debit card transaction. While you are charging a fee for these automatic transfers, we do not believe that Regulation E’s opt-in and notice requirements apply to linked account transfers — the regulation expressly exempts transfers from another customer held by the same customer (individually or jointly) from the definition of “overdraft service.”

For resources related to our guidance, please see:

Joint Guidance on Overdraft Protection Programs, 70 Fed. Reg. 9127, 9132 (February 24, 2005) (“Promptly notify consumers of overdraft protection program usage each time used. Promptly notify consumers when overdraft protection has been accessed, for example, by sending a notice to consumers the day the overdraft protection program has been accessed. . . . .”)
Joint Guidance on Overdraft Protection Programs, 70 Fed. Reg. 9127, 9127 (February 24, 2005) (“The Agencies have developed this final joint guidance to address a service offered by insured depository institutions commonly referred to as ‘bounced-check protection’ or ‘overdraft protection.’ This service is sometimes offered to transaction account customers as an alternative to traditional ways of covering overdrafts (e.g., overdraft lines of credit or linked accounts).”)
Joint Guidance on Overdraft Protection Programs, 70 Fed. Reg. 9127, 9128 (February 24, 2005) (“More recently, some depository institutions have offered ‘overdraft protection’ programs that, unlike the discretionary accommodation traditionally provided to those lacking a line of credit or other type of overdraft service (e.g., linked accounts), are marketed to consumers essentially as short-term credit facilities. These marketed programs typically provide consumers with an express overdraft ‘limit’ that applies to their accounts.”)
Regulation E, 12 CFR 1005.17(b)(1) (“Except as provided under paragraph (c) of this section, a financial institution holding a consumer’s account shall not assess a fee or charge on a consumer’s account for paying an ATM or one-time debit card transaction pursuant to the institution’s overdraft service, unless the institution: (i) Provides the consumer with a notice in writing, or if the consumer agrees, electronically, segregated from all other information, describing the institution’s overdraft service; (ii) Provides a reasonable opportunity for the consumer to affirmatively consent, or opt in, to the service for ATM and one-time debit card transactions; (iii) Obtains the consumer’s affirmative consent, or opt-in, to the institution’s payment of ATM or one-time debit card transactions; and (iv) Provides the consumer with confirmation of the consumer’s consent in writing, or if the consumer agrees, electronically, which includes a statement informing the consumer of the right to revoke such consent.”)
Regulation E, 12 CFR 1005.17(a) (“For purposes of this section, the term ‘overdraft service’ means a service under which a financial institution assesses a fee or charge on a consumer’s account held by the institution for paying a transaction (including a check or other item) when the consumer has insufficient or unavailable funds in the account. The term ‘overdraft service’ does not include any payment of overdrafts pursuant to: . . . (2) A service that transfers funds from another account held individually or jointly by a consumer, such as a savings account; . . .”)