Reg CC: "Funds Availability" Deadline Is Here!

THE CHANGES IN REGULATION CC ARE IN EFFECT ON SEPTEMBER 1, 1990
The permanent schedule given to us by the U.S. Congress in Title VI of the Expedited Funds Availability Act, (translated into Regulation CC by the Federal Reserve Board of Governors) goes into effect on September 1, 1990.

The Competitive Equality Banking Act, which contains Title VI, was passed by the U.S.Congress in 1987. It spells out some very definite and specific rules concerning the availability of funds deposited into demand deposit accounts in all financial institutions in the United States. It also mandates that the final schedule for availability goes into effect September 1, 1990.

One of the directives of Title VI is that the Federal Reserve Board use whatever means it considers feasible to make the law work, and it gives Fed the ability to enforce the law. Federal Reserve described those methods in a 682 page, four pound book titled Regulation CC.

Congress and the Fed have been petitioned by concerned bankers to make changes to both the law and the regulation in order to give financial institutions better protection, and to try to reduce the tremendous cost incurred by the necessary compliance.

There are still some misconceptions about what changes have been made to the regulation. Here are some of the more important.

PERMANENT SCHEDULE-ATMs-Under the temporary schedule, non-proprietary ATM deposits were not available for withdrawal until seven days after deposit. The banking industry hoped for an amendment to maintain this seven day float time to be approved by Congress before they recessed for the summer. But the change WAS NOT passed. The permanent schedule mandates that deposits made at a non-proprietary ATM are to be given your disclosed availability for local and non-local deposits. (No more than two (2) days hold on any item.)

We are hoping that the recommended amendment will be approved when Congress returns in the fall. Encourage your congressional representative to support it! This is one of your most vulnerable areas under Reg CC.

PERMANENT SCHEDULE-Local checks-From three day maximum hold to two (2) days.

PERMANENT SCHEDULE-Non-local checks-From seven day maximum hold to five (5) days.

IMPORTANT FED CHANGE-Exception holds-An important change by Fed in 229.13(h)(4)-an extension of up to five business days for local checks (2+5 or 7 days possible hold); six business days for non-local (5+6 or 11 days possible hold).

Note on exceptions-The banking industry strongly recommended that the large-dollar exception be dropped from $5,000 to $2,500. Unfortunately, this can only be done by amendment to the law-Fed does not have the authority to make this change. It is still $5,000.

MINOR CHANGE-New Accounts-No change from the original except the disclosure change regarding electronic direct deposits. You may still hold local and non-local check deposits any number of days up to 30 if it is so stated in your disclosure. Next day available items must be made available next day up to $5,000 (if conditions are met). The proposed change to drop the amount to $2,500 in this ruling was not passed. This is another of your most vulnerable areas.

CHANGE-Disclosures-Fed has revised certain sections of its model disclosures. They have established a separate section for same-day availability items, expanded the explanation on payable-through items, and added a sentence regarding electronic direct deposits.

If you have used the earlier version of the model forms and you do not have to disclose the change of three days to two for local checks and seven days to five for non-local you are protected. However, Fed says you are "encouraged" to correct the disclosures when reordering or reprinting supplies of the form.

Of course, if you are making any change in your availability policy, you will be mailing out new disclosures to all your demand deposit customers. As long as your new availability schedule is favorable to the customer, this notice must be provided by October 1, 1990. (Any change favorable to the customer must be disclosed within thirty days after the change-any change reducing the availability schedule must be disclosed thirty days before the change.)

If you are having problems with Reg CC, or if you have unanswered questions, call or write us. The Federal Reserve Division of Consumer and Community Affairs has been very cooperative about getting answers for us.

Copyright © 1990 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 1, No. 8, 8/90