Reg CC Training

Sample Transactions Under Reg CC
by Bonnie Mizrahi

The following pages contain some sample transactions to practice placing holds under Reg CC. This exercise is designed to stimulate thought on different aspects of placing holds.

1. Any holds placed must be done within compliance of Regulation CC. This means that holds cannot be placed for a longer period of time than allowed by the Regulation. Of course, holds can always be placed for a shorter period of time.
2. Regulation CC is a risk management tool. Every time the bank accepts a deposit, it is accepting a risk. One risk is that the item will not be paid, and the bank may face a loss. The other risk is losing a good customer if a hold is placed when the situation doesn?t really warrant a hold. So the risk management assessment that must be done is to balance the total protection of the Bank with the need to preserve customer goodwill and facilitating the opportunity to grow a profitable relationship.
3. Some situations call for a judgement of if a hold should be placed, and if a hold should be placed on one or more checks in the deposit.
4. Some situations will require you to look at the hold schedule to make sure you don?t place a hold for too long. Look at all of the exceptions including New Accounts, Large Deposit, Reasonable Cause to Doubt Collectability, and Repeated Overdrafts.
5. You can do this exercise as a group or individually. If done individually, then it would be helpful to go over the individual results with a group.
6. Finally, when this exercise has been completed, send one set of hold notices back to the Compliance Department for review. This set should represent what the branch staff, as a whole, decided the best course of action should be and should also represent the most accurate completion of the Hold Notice itself.

Sample Transactions

1. Make copies of a Hold Notice to use for practice. Write "PRACTICE" on the top.
2. Complete the hold information on the photocopy of the Hold Notice.
3. Discuss your results.

A & B CONSTRUCTION ENGINEERS, INC.

$25,657.00

This account has been open for 8 years.

The average balance in the account is $50,000.

They have had no NSF activity.

Would you place a hold on any of these checks?

If so, which ones and for how long?

$25,657.00

Same transaction as above EXCEPT, this account has been open for 3 weeks.

Would the risk assessment of this deposit be different than above?

If so, how would you treat a hold on this deposit?

$13,107.00

This account has shown a wide range of balances.

There has been very recent NSF activity, but not enough to warrant an Exception Hold due to NSF activity.

How would you treat a hold on this deposit?

$13,107.00

Same transaction as above EXCEPT:

This account has been handled in a satisfactory manner.

The account maintains an average balance of $9,500.

You call on the $2,450 check and are told there are not enough funds to pay the check.

$8,020.00

This account has been a chronic overdraft.

In the last month, the account has been overdrawn 10 times.

$8,020.00

Same transaction as above EXCEPT:

This account has been handled in a satisfactory manner.

Average balance in the account has been $6,500.00

Don?t forget:

• CASH is always available Next Day
• New Accounts have a slightly different Hold Schedule ? be aware of the limitations on Cashier?s Checks, Treasury Checks, Postal Money Orders, State/Local Government checks, Federal Reserve and Federal Home Loan Bank checks, and Travelers Checks.

Sample Transactions

1. Make copies of a Hold Notice to use for practice. Write "PRACTICE" on the top.
2. Complete the hold information on the photocopy of the Hold Notice.
3. Discuss your results.

JAMES MADISON MONROE

$4,220.00

This account has been open for 5 years.

The average balance in the account is $8,000

The account has had no NSF activity.

Would you place a hold on any of these checks?

If so, which ones and for how long?

$4,200.00

Same transaction as above EXCEPT:

You call on the check for $950 and are told there are insufficient funds in the account to pay the check.

$7,607.00

This deposit is made at 3:00 p.m. and it?s too late to call 1st State Bank in Chicago to verify that this is a valid Cashier?s Check.

The customer keeps an average balance of $2,300.00

$7,607.00

Same transaction as above EXCEPT:

This deposit is made at 3:00 p.m. and it?s too late to call 1st State Bank in Chicago to verify that this is a valid Cashier?s Check.

The account was opened 20 days ago with an average balance of $5,000.

$4,800.00

The account has been a chronic overdraft and has been overdrawn 8 times in the last 2 months.

$4,800.00

Same transaction as above EXCEPT:

The account was opened last week and has had no overdraft activity.

Don?t forget:

• CASH is always available Next Day
• New Accounts have a slightly different Hold Schedule ? be aware of the limitations on Cashier?s Checks, Treasury Checks, Postal Money Orders, State/Local Government checks, Federal Reserve and Federal Home Loan Bank checks, and Travelers Checks.

ACCESS Bonnie's other Reg CC Compliance Tools.

Bonnie Mizrahi
I am Vice President / Compliance Officer for a $1 Billion Bank. I have worked in Compliance full time since 1992. Prior to that, I have been involved in Compliance at one level or another since 1979, usually focusing on Reg Z, HMDA and Reg B for loan documentation.

I got started in banking after a temporary summer job turned into an offer for full time work. I got involved in the compliance side of lending because, quite frankly, no one else wanted that job!

I know that many people find Reg CC confusing and frustrating, but to me it's a lot simpler than many of the byzantine rules of HMDA, RESPA, and the new Privacy laws, and it's not nearly as intimatading as some aspects of the Bank Secrecy Act.

First published on BankersOnline.com 8/27/01