Citibank Freaks Out Customers With Weird 7-Day Rule On Withdrawals, But It's Not As Devious As It Looks

Some Citibank customers recently received notice that the bank reserved the right to require 7 days written notice before authorizing a withdrawal on checking accounts. (It’s also on page 23 of Citi’s Client Manual [PDF].) As you can imagine, this freaked some people out. A Citibank rep quickly moved to clarify the rule, and he pointed out that it’s actually required by federal law for certain types of accounts, and it’s not unique to Citibank, and they don’t intend to enforce it.

Here’s the explanation that Citibank’s Robert Julavits supposedly provided, quoted from an email in a forum on Seeking Alpha:

When Citibank moved to unlimited FDIC coverage in 2009, we had to reclassify many checking accounts to allow for immediate withdrawals in order to ensure all customers qualified for the additional coverage. When we moved back to standard FDIC coverage with most major banks in 2010, Citibank decided to reclassify those accounts back to make them eligible again for promotional incentives. To do so, Federal Reserve Reg D requires these accounts, called NOW accounts, to reserve the right to require a 7-day notice of withdrawal. We recently communicated this technical requirement to our customers. However, we have never exercised this right and have no plans to do so in the future.

So what are NOW accounts? NOW stands for Negotiable Order of Withdrawal, and they’re special accounts structured to act like checking accounts but to also pay interest. That’s what Julavits is referring to when he mentions “promotional incentives.”

If you’ve got a checking account that has some sort of promotional incentive, odds are it’s a NOW account, and that it’s been subject to this rule for a while.

CHASE mentions the same requirement on page 9 of its Account Rules & Regulations document (click “Account Disclosures and Rates,” and in the pop-up window click the first link), and other banks that offer NOW accounts probably do too.

“Citigroup warns it may refuse to withdraw money to customers” [Digital Journal] (Thanks to David!)
“Citigroup Warns Customers It May Refuse To Allow Withdrawals” [Business Insider]