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Federal R eserve bank OF DALLAS ROBERT D. M c T E E R , J R . P R E S ID E N T AND C H IE F E X E C U T IV E O F F IC E R March 12, 1991 DALLAS, TEXAS 7 5 2 2 2 Notice 91-20 TO: The Chief Operating Officer of each financial institution in the Eleventh Federal Reserve District SUBJECT Amendments to Regulation CC (Availability of Funds and Collection of Checks) DETAILS The Board of Governors of the Federal Reserve System has adopted in final form, with minor technical changes, its previously published interim rule amending Regulation CC to conform to recent amendments to the Expedited Funds Availability Act. The amendments extend the availability schedules for deposits at nonproprietary automated teller machines for a period of two years. The Regulation CC amendments have a retroactive effective date of September 1, 1990. ATTACHMENT Attached is a copy of the Board’s notice as it appears on pages 7799-7802, Vol. 56, No. 38, of the Federal Register dated February 26, 1991. MORE INFORMATION For further information, please contact Robert L. Whitman, (214) 698-4357, at the Dallas Office; Eloise Guinn, (915) 521-8201, at the El Paso Branch; Luke E. Richards, (713) 652-1544, at the Houston Branch; or Herb Barbee, (512) 978-1402, at the San Antonio Branch. For additional copies of this Bank’s notice, please contact the Public Affairs Department at (214) 651-6289. Sincerely yours, For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) Federal Register / Vol. 56, No. 38 / Tuesday, February 26, 1991 / Rules and Regulations_____ 7799 FEDERAL RESERVE SYSTEM 12 CFR Part 229 [Regulation CC; Docket No. R-0717] BIN 7100-AB01 Availability of Funds and Collection of Checks Board of Governors of the Federal Reserve System. a c t i o n : Final rule. AGENCY: s u m m a r y : T he Board is adopting in final form, w ith m inor technical changes, its interim rule amending Regulation CC to conform to recent am endm ents to the Expedited Funds A vailability A ct (see the Cranston-G onzales National Affordable Housing Act, Public Law 101-625, section 1001). The am endm ents extend the availability schedules for deposits at nonproprietary autom ated teller m achines for a period of two years. The am endm ents to the Expedited Funds Availability Act w ere signed into law on N ovember 28,1990, w ith a retroactive effective date of Septem ber 1.1990. EFFECTIVE DATE: Septem ber 1 , 1S90. FOR FURTHER INFORMATION CONTACT: Louise L. Roseman, A ssistant Director (202/452-3874), or Kathleen M. Connor, Senior Financial Services A nalyst (202/ 452-3917), Division of Reserve Bank O perations and P aym ent Systems: Oliver Ireland, A ssociate G eneral Counsel (202/452-3625), or Stephanie Martin, A ttorney (202/452-3198), Legal Division. For inform ation regarding modifications to disclosures or appendix C, contact T hom as J. Noto, Staff A ttorney (202/452-3667), or Jane E. Ahrens, S taff A ttorney (202/452-3667), Division of Consum er an d Community Affairs. For the hearing im paired only: Telecommunications Device for the Deaf, Dorothea Thom pson (202/4523544). SUPPLEMENTARY INFORMATION: The E xpedited Funds A vailability Act (“A ct”) specifies the time periods within which funds deposited a t ATMs m ust be m ade available for w ithdraw al. Under the tem porary schedule (which w as effective from Septem ber 1,1988, to August 31,1990), the rules that applied to deposits at nonproprietary ATMs 1 were different from those that applied to deposits at proprietary ATMs because of operational differences in the w ay these deposits are processed. During consideration o f the Act, banks reported to Congress on the processing limitations associated w ith accepting deposits at nonproprietary ATMs. They indicated that the account-holding bank does not have the inform ation necessary to place holds on nonproprietary ATM deposits because the deposits are rem oved and processed by the ATM operator rather than the account-holding bank. Given these limitations, the Act 1 A nonproprietary ATM is defined in the Act as one that is not proprietary. In the Act, proprietaiy ATM means an automated teller machine that is (1) located at or adjacent to a branch of the receiving institution or in close proximity, as defined by the Board, or (2) owned by, operated exclusively for. or operated by the receiving institution allow ed the account-holding b ank to treat such deposits as though they w ere com posed o f nonlocal checks under the temporary schedule. At that time, Congress anticipated that the processing lim itations that necessitated the special availability rule for nonproprietary ATM deposits under the tem porary schedule w ould be addressed by the time the perm anent schedule becam e effective in Septem ber 1990. Therefore, under the perm anent schedule, deposits at nonproprietary ATMs generally had to be m ade available for w ithdraw al w ithin the sam e time periods as deposits m ade a t staffed teller facilities. During the p ast tw o years, ATM networks, banks, a n d the Board have investigated a num ber of potential alternatives both to add ress the processing limitations an d to facilitate compliance w ith the perm anent schedule. A viable operational solution to address the processing limitations has not been identified. All of the identified solutions are costly and w ould likely result in increased fees for customers w ho m ake deposits a t nonproprietary ATMs. The possible operational solutions would degrade the efficiency of shared ATM netw orks and m ay slow the collection of checks, w hich would be contrary to the intent of the Act. In addition, bank s and ATM operators have expressed concern that the potential for fraud will increase if banks must comply w ith the perm anent availability schedule for nonproprietary ATMs. U nder the perm anent availability schedule, second-business-day availability is required for local checks. Thus, an account-holding bank that could not ascertain the composition of deposits a t nonproprietary ATMs would 7800 Federal Register / Vol. 56, No. 38 / Tuesday, February 26, 1991 / Rules and Regulations have to provide second-business-day availability for all deposits m ade at nonproprietary ATMs in order to ensure compliance w ith the availability schedules, even though longer holds could apply w ith respect to similar deposits, i.e., nonlocal checks, m ade at a staffed teller facility. Thus, deposits of nonlocal checks at nonproprietary ATMs w ould be available for w ithdraw al several days before the checks could be returned if not paid, and therefore such deposits would be an attractive vehicle for check fraud. Substantial increases in operating costs or fraud losses could lead some institutions to cease accepting deposits at nonproprietary ATMs, thereby limiting a convenient consum er banking service. Based on this research and analysis, the Board subm itted two reports 2 to Congress that recom m ended that the Congress am end the Act to treat nonproprietary ATM deposits under the perm anent schedule in the same m anner as such deposits w ere treated under the tem porary schedule; i.e., permit banks to make deposits at nonproprietary ATMs available for w ithdraw al as if they were nonlocal checks (not later than the fifth business day following the banking day of deposit). ATM netw orks and participating institutions also have made this recom m endation to the Congress. On November 28,1990, the President signed into law the Cranston-Gonzales N ational A ffordable Housing Act (Pub. L. 101-625; section 1001), which am ended the Expedited Funds A vailability Act to extend the schedules applicable to deposits at nonproprietary ATMs for a tw o-year period. The Board im plem ented an d requested comment on interim rules to conform Regulation CC to this recent am endm ent of the Act (55 FR 50816, December 11,1990). The Board received letters on the interim rule from 24 commenters (six commercial banks, five trade associations, four savings institutions, three Federal Reserve Banks, two credit unions, two b ank holding companies, and two corporations). Twenty-three commenters supported the am endm ents and one com menter opposed them as overly complicating Regulation CC. Most of the commenters restated the concerns discussed above that w ere raised previously by banks and by the Board to Congress. Sixteen commenters expressed concern that viable cost2 The reports on nonproprietary ATMs were transmitted to Congress in October 1989 and July 1990. An earlier report submitted in October 1938 provided background information on the processing of deposits at nonproprietary ATMs but did not include a legislative recommendation because there was limited research available at that time. effective technology th at would elim inate the processing lim itations associated w ith nonproprietary ATM deposits w ould not be available by November 1992, w hen the special treatm ent for these deposits w ould expire. Thirteen com m enters expressed concern about the increased potential for fraud, and tw elve noted that banks w ould probably cease accepting deposits at nonproprietary ATMs if a solution is not found within two years. One com m enter noted that, if banks generally cease to accept nonproprietary ATM deposits after N ovem ber 1992, the rule could have anti-competitive effects for small ban k s because larger banks with strong branch netw orks could continue to do business in a large area, w hereas small banks w ithout such extensive branching netw orks could not do so w ithout nonproprietary ATM deposits. Eight commenters encouraged the Board to renew its request to Congress for a perm anent statutory extension of the nonproprietary ATM availability schedules. The Board has review ed the comments and adopted the interim rule w ith minor technical changes. Section 229.12 of Regulation CC sets forth the perm anent availability schedule under w hich funds deposited in an account by local and nonlocal checks m ust be m ade available for w ithdraw al. A new § 229.12(f) has been added to provide a special rule for deposits m ade at nonproprietary ATMs. This rule does not apply to deposits m ade at proprietary ATMs. Section 229.12(f) provides th at during the period from Septem ber 1,1990, through November 27,1992, a depositary bank may treat all deposits m ade by its customers at a nonproprietary ATM as though the deposits w ere nonlocal checks under the perm anent schedule, i.e., make them available by the fifth business day after the banking day of deposit. Effective November 28,1992, deposits of cash, “next-day” checks, and local checks at a nonproprietary ATM m ust be m ade available by the second business day following the banking day of deposit, and nonlocal checks deposited at a nonproprietary ATM must continue to be m ade available by the fifth business day following the banking day of deposit. The Board received two comments that ad dressed the regulatory language of § 229.12(f)(2)(i)(B). That section in the interim rule provided that after N ovember 28,1992, checks described in § 229.10(c)(1) that normally receive nextday availability would receive secondday availability w hen deposited in nonproprietary ATMs. Section 229.10(c)(1) describes certain "on us" checks, the first $100 of the aggregate amount deposited on any one banking day, as w ell as government checks, cashier's checks, and other types of checks that may pose a low er risk of return. One com m enter noted that “on us” checks should be excluded from § 229.12(f)(2)(i)(B) because, by definition, a check deposited into a nonproprietary ATM w ould never meet the conditions specified in § 229.10(c)(l)(vi) for next-day availability of on-us checks.3 Another commenter noted that the second-day availability rule of § 229.12(f)(2)(i)(B) should also apply to the first $100 of a d ay ’s deposit, as provided in § 229.10(c)(l)(vii). Accordingly, the Board has am ended § 229.12(f) to exclude on-us checks from coverage and to include the first $100 of a d ay ’s deposit. In addition, the Board has am ended § 229.12(f) to clarify that “next-day" checks, such as government checks and cashier’s checks, will receive second-day availability even though they are not deposited to a staffed teller station an d therefore are technically not “described” in § 229.10(c)(1). The Board has also made revisions to the Com m entary to explain the applicability of the “$100 rule.” The Board also has adopted am endm ents to other paragraphs of § 229.12 to conform that section to the statutory requirements of the Act. Paragraphs (a), (b), (c), and (d) of § 229.12 w ere am ended to add crossreferences to the new paragraph (f) and, for clarification purposes, crossreferences to other paragraphs as well. In addition, in paragraph (b), w hich lists the types of deposits that m ust be accorded second-day availability under the perm anent schedule, the Board has rem oved the language, “a check draw n on the T reasury of the United States that is deposited at a nonproprietary ATM.” Deposits of these checks are now governed by the provisions of new paragraph (f) and are subject to a fiveday availability schedule until November 27,1992, and a second-day availability schedule after that date. Section 229.16(b)(5) requires banks wishing to take advantage of the extended hold for deposits at nonproprietary ATMs to disclose this to 5 Section 229.10(c)(l)(vi) provides next-day availability for certain "on-us” checks, i.e., checks deposited in a branch of the depositary bank drawr on the same or another branch of the same bank. Deposits of checks at an off-premise ATM, whether or not proprietary to the depositary bank, are not considered deposits made to a branch of the depositary bank, and thus could never be classified as "on-us" checks. Federal Register / Vol. 56, No. 38 / Tuesday, February 26, 1991 / Rules and Regulations their customers in their initial disclosures. Model Clause C-10, which can be used to make this disclosure, has been revised to reflect the new rules for nonproprietary ATM deposits. Conforming changes have also been made to the Com m entary to appendix C a n d the Com m entary to § 229.16. In addition, the list of model forms, clauses, an d notices in appendix C has been updated to reflect the new title to Model Clause C-10. Section 229.18(e) requires banks to disclose changes in their availability policies to their consumer account holders. Changes other than those that result in faster availability m ust be disclosed 30 calendar days before they are implemented. Accordingly, banks wishing to take advantage of the extended hold for nonproprietary ATM deposits must provide 30-day advance notice to their consumer account holders. This requirem ent m ay be fulfilled by mailing Model C-10 prefaced w ith language indicating the effective date of the change. The Board received two comments regarding the specifics of the disclosure requirem ents of the interim rule. One com m enter requested that the Board provide the full text of a change-in-terms letter that banks may send to customers, rather than merely providing the model clause language. A nother commenter requested that the Board allow a stand ard disclosure at any ATM used as a non-proprietary ATM stating the maximum hold for nonproprietary deposits, rather than requiring a changein-terms disclosure to each individual customer. The com menter argued that this option should be perm issible under the Act because the shortened nonproprietary ATM schedules are a statutory change, not merely a bank policy change. The Board has not implem ented the changes suggested by these commenters. The Board believes th at m ost banks that w ant to place five-day holds on deposits a t nonproprietary ATMs have already m ade the necessary disclosures based on the interim rule an d that it is not necessary to provide a full model disclosure letter at this time. In addition, the Board has not provided th at a stand ard disclosure at ATMs may replace individual disclosures. Section 605(c)(2) of the A ct requires that a bank send w ritten notice 30 d ays before implementing any changes that would lengthen the availability schedule for consum er accounts. T hat section of the A ct applies to policy changes stemming from changes in the statute as well as those m ade for other reasons. Section 553(d) of the A dm inistrative Procedure Act (5 U.S.C. 553(d)) requires publication of a rule 30 days before its effective d ate unless the agency finds that there is good cause to do otherwise. The Board believes it is necessary for the final rule to be effective a s of Septem ber 1,1990, as w as the interim rule, rath er than 30 days after publication. This effective date is necessary so that the regulation conforms to the statutory requirem ents, w hich w ere effective Septem ber 1,1990, and so that banks that perm it their customers to make deposits at nonproprietary ATMs can rely on the Board's regulation in providing availability in accordance w ith the am ended requirem ent. There w as no opportunity for the Board to publish the rule prior to the effective date of the am endm ent to the Act. The Board finds that, for the reasons stated above, there is good cause under 5 U.S.C. 553(d)(3) to make the final rule effective on Septem ber 1,1990, w ithout regard for the 30-day period provided for in 5 U.S.C 553(d). Final Regulatory Flexibility Analysis Two of the three requirem ents of a final regulatory flexibility analysis (5 U.S.C. 604), (1) a succinct statem ent of the need for and the objectives of the rule and (2) a sum m ary of the issues raised by the public comments, the agency’s assessm ent of the issues, and a statem ent of the changes m ade in the final rule in response to the comments, are discussed above. The third requirem ent of a final regulatory flexibility analysis is a description of significant alternatives to the rule th at w ould minimize the rule’s economic im pact on sm all entities an d reasons w hy the alternatives w ere rejected. The rule will apply to all depository institutions, regardless of size, as required b y the am endm ents to the Expedited Funds Availability Act. The rule should not have a significant negative economic im pact on small institutions, but rather will decrease the risk to all depositary banks by enabling them to impose longer holds on deposits m ade to nonproprietary ATMs. There are no significant alternatives to the rule, within the Board’s regulatory authority under the Act, that would further reduce the risk to small entities resulting from deposits accepted at nonproprietary ATMs. List of Subjects in 12 CFR Part 229 Banks, Banking, Federal Reserve System, Reporting and recordkeeping requirements. For the reasons set out in the preamble, 12 CFR p art 229 is am ended as follows: 7801 PART 229—[AMENDS)] 1. The authority citation for part 229 continues to read as follows: Authority: Title VI of Pub. L. 100-86,101 Stat. 552, 635,12 U.S.C. 4001 et seq. 2. In § 229.12, paragraph (a) and the introductory text to paragraph (b) are revised, paragraph (b)(3) is removed, paragraphs (b)(4) and (b)(5) are designated as (b)(3) an d (b)(4), newly redesignated paragraph (b)(4) is revised, paragraph (c)(1) introductory text a n d the first an d third sentences of paragraph (d) are revised, and a new paragraph (f) is added to read as follows: § 229.12 Permanent availability schedule. (a) E ffective date. Except as provided in paragraph (f)(2) of this section, the perm anent availability schedule contained in this section is effective Septem ber 1,1990. (b) L ocal ch ecks a n d certain oth er checks. Except as provided in paragraphs (d), (e), an d (f) of this section, a depository bank shall make funds deposited in an account by a check available for w ithdraw al not later than the second business day following the banking day on which funds are deposited, in the case of— * * * * * (4) A check draw n on a Federal Reserve Bank or Federal Home Loan Bank; a check draw n by a state or unit of general local government; or a cashier's, certified, or teller’s check; if any check referred to in this paragraph (b)(4) is a local check that is not governed by the availability requirem ents of | 229.10(c). (c) N onlocal checks— (1) In general. Except as provided in paragraphs (d), (e). and (f) of this section, a depositary bank shall make funds deposited in an account by a check available for w ithdraw al not later than the fifth business day following the banking day on w hich funds are deposited, in the case of— * * * * * (d) Tim e p erio d a djustm ent fo r w ithdraw al b y cash or sim ila r m eans. A depositary bank may extend by one business day the time that funds deposited in an account b y one or more checks subject to paragraphs (b), (c), or (f) of this section are available for w ithdraw al by cash or similar means. * * * A depositary bank shall, h o w ev er make $400 of these funds available for w ithdraw al by cash or similar m eans not later than 5:00 p.m. o n the business day on w hich the funds are available 7802 Federal Register / Vol. 56, No. 38 / Tuesday, February 26, 1991 / Rules and Regulations under paragraphs (b), (c), or (f) of this section. * * * * * * * * a. In the Com m entary to § 229.12, a new sentence is added to the end of paragraph (a), the second paragraph of (f) D eposits a t nonproprietary A TM s. paragraph (b) is revised, and a new paragraph (f) is add ed to read as (l)(i) A depositary b an k shall m ake follows: funds deposited in an account at a nonproprietary ATM by cash or check S ection 229.12 P erm anent A v a ila b ility available for w ithdraw al not later than S chedule the fifth business day following the (a) E ffective date. * * * Paragraph (f) banking day on w hich the funds are provides special effective dates for deposits deposited. m ade a t nonproprietary ATMs. (ii) Paragraph (f)(1) of this section is (b) Local ch ecks a n d certain o th er checks. effective Septem ber 1,1990, through * * * * * N ovember 27,1992. In addition, the proceeds of Treasury (2)(i) A depositary b an k shall make checks and U.S. Postal Service money orders funds deposited in an account at a not subject to next-day (or second-day) nonproprietary ATM available for availability under | 229.10(c): checks draw n on Federal Reserve Banks and Federal Home w ithdraw al not later than the second Loan Banks; checks d raw n by a 9tate or unit business day following the banking day of general local government; and cashier’s, on which the funds are deposited, in the certified, and teller’s checks not subject to case of— next-day (or second-day) availability under (A) Cash; § 229.10(c) and payable in the sam e check (B) A check or checks described in processing region as the depository bank, § 229.10(c)(1) (i) through (v) an d (vii), m ust be m ade available for w ithdraw al by even though the check or checks are not the second business day following deposit. * * * * * deposited in person to an em ployee of the depositary bank; and (f) D eposits a t nonproprietary A TM s. The (C) A check described in paragraph Act and regulation provide a special rule for (b) of this section. deposits m ade a t nonproprietary ATMs. This paragraph does not apply to deposits m ade at (ii) A depositary bank shall make proprietary ATMs. During the period from funds deposited in an account by a Septem ber 1,1990 through Novem ber 27, check described in paragraph (c) of this 1992, ali deposits at a nonproprietary ATM section at a nonproprietary ATM m ust be m ade available for w ithdraw al by available for w ithdraw al not later than the fifth business day following the banking the fifth business day following the day of deposit (i.e., such deposits m ay be banking day on w hich the funds are treated in the sam e m anner as deposits of deposited. nonlocal checks under the perm anent (iii) Paragraph (f)(2) of this section is schedule). For exam ple, during that time period, a deposit m ade at a nonproprietary effective November 28,1992. Appendix C to Part 223—[Amended] 3. A ppendix C is am ended as set forth below: a. In the listing following the first paragraph of Appendix C, the entry for Model Clause C-10 is revised to read as follows: * * * * * C-10 A utom ated teller machine deposits (perm anent schedule, extended hold) * * * * * b. In model clause C-10, the heading and the first sentence under the subheading “Deposits at A utom ated Teller M achines” are revised to read as follows: C-10—A utom ated Teller Machine Deposits (Permanent Schedule, Extended Hold) Deposits at Automated Teller Machines Funds from any deposits (cash or checks) m ade at autom ated teller m achines (ATMs) w e do not own or operate will not be available until the fifth business day after the day of your deposit. * * * Appendix E to Part 229— [Amended] 4. A ppendix E is am ended as set forth below: ATM on a Monday, including any deposit by cash or checks that w ould otherw ise be subject to next-day (or second-day) availability, m ust be m ade available for w ithdraw al not later than M onday of the following week. Effective Novem ber 28,1992, deposits of cash, "next-day" checks, and local checks at a nonproprietary ATM must be made available by the second business day following the banking day of deposit. In addition, the first $100 of the aggregate deposit at a nonproprietary ATM on any one banking day must be m ade available for w ithdraw al on the second business day after the banking day of deposit (rather than on the next day, as required by 1 229.10(c)(l)(vii) for deposits at staffed teller stations and proprietary ATMs). If a custom er m akes a deposit at a nonproprietary ATM and one or more deposits to the sam e account on the sam e day a t another location, such as a staffed teller station, the $100 rule is applied to the aggregate of all deposits m ade cn that day. In this situation, the $100 rule is applied first to funds for which the $100 must be available for w ithdraw al on the next day (e.g., funds deposited a t a staffed teller station) and then to funds deposited at nonproprietary ATMs for which the $100 m ust be m ade available for w ithdraw al on the second day. For example, if a customer deposits a $75 nonlocal check at a staffed teller station and a $100 nonlocal check at a nonproprietary ATM on the sam e banking day, $75 m ust be available for w ithdraw al on the next business day (as required by § 229.10(c)(l)(vii)) and an additional $25 m ust be available for w ithdraw al on the second business day after the banking day of deposit (as required by this paragraph). Nonlocal checks deposited a t a nonproprietary ATM after Novem ber 28,1992, m ust continue to be made available for w ithdraw al by the fifth business day following the banking day of deposit. b. In the Commentary to § 229.13, the first sentence of the seventh paragraph of paragraph (b) is revised to read as follows: Section 229.16 S p e cific A v a ila b ility P olicy D isclosure * * * * * * * (b) * * * * * * A ba n k taking advantage of the extended time period for making deposits at nonproprietary ATMs available for w ithdraw al under § 229.12(f)(1) m ust explain this in the initial disclosure. * * * * * * * * c. In the Commentary to A ppendix C, under the subheading “Model C-10,” the first sentence is revised to read as follows: A p p en d ix C.— M odel Forms, Clauses, and N o tices * * * * * M o d el C-10. This clause m ust be incorporated in the specific availabilitypolicy disclosure by banks that reserve the right to delay availability of deposits at nonproprietary ATMs until the fifth business day following the date of deposit, as perm itted by § 229.12(f)(1). * * * * * * * * By order of the Board of Governors of the Federal Reserve System, February 20,1991. W illiam W. Wiles, S e creta ry o f the Board. [FR Doc. 91-4460 Filed 2-25-91; 8:45 am] BILLING CODE 6210-01-M
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