Which of the following transactions is not a covered transaction under Reg D and may be unlimited in number?

The reason that the payment of credit extended by a depository to cover an overdraft is not a covered transaction under Regulation D is based on the nature of what qualifies as a "transaction" subject to limitations. Regulation D restricts the number of certain types of electronic transfers or withdrawals that can occur on accounts, specifically in regard to savings accounts, to ensure that these accounts serve their intended purpose as a savings vehicle rather than a transactional one.

When a depository institution extends credit to cover an overdraft, it fundamentally changes the nature of the transaction. This type of credit arrangement does not count towards the limits set by Regulation D, as it is classified differently than electronic transfers or pre-authorized debits that typically fall under its purview. As a result, there is no cap on the number of times this type of transaction can occur, making it unlimited.

In contrast, the transfer of funds from a savings account to a checking account to cover an overdraft, automatic transfers to third parties, and drafts are all subject to limits due to their habitual transactional nature, which Regulation D seeks to regulate. These are considered covered transactions and are therefore limited in frequency to encourage consumers to use these accounts in accordance with their intended purposes.