Ms. Caren J. Seaman
Compliance Officer
XP Systems
405 Science Drive
Moorpark, CA 93021-2093

Dear Ms. Seaman:

This is in response to your letter of July 20, 1997, regarding the status of transfers from a savings account of one depositor to make payments on a loan of a different depositor held at the same depository institution.

The Board's Regulation D limits savings accounts, among other limitations, to accounts

from which . . . the depositor is permitted . . . no more than six transfers and withdrawals . . . per calendar month or statement cycle . . . to another account (including a transaction account) of the depositor at the same institution or to a third party by means of a preauthorized or automatic transfer, or telephonic (including data transmission) agreement, order or instruction. . . .

112 CFR 204.2(d)(2).

The Regulation provides an exception, however, for certain debt service payments.

Such an account is not a transaction account by virtue of an arrangement that permits transfers for the purpose of repaying loans and associated expenses at the same depository institution (as originator or servicer) . . . .

This exception has always been limited to loans of the depositor. It was originally adopted in connection with preauthorized or automatic payments on a depositor's FHA loan, and was based on its being the depositor's loan. The exception was thus consistent with the Board's longstanding policy of regarding payments for the account of a depositor as payments to that depositor. Since a transfer to make payment on a loan to a third party is a transfer to the third party, this exception does not apply to such a transfer. Accordingly, transfers to make payments on a loan to a third party fall under the six-per-month limitation.

I hope this information is helpful. Further questions may be directed to Rick Heyke (202/452-3688) of my staff, or to the undersigned.

Very truly yours,

(signed) Oliver Ireland

Oliver Ireland