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Federal R eserve Bank
OF DALLAS
W IL L IA M
H. W ALLACE
FIRST VIC E p r e s i d e n t
AND C H IE F O PER ATING O FFIC E R
Jlilv 7
1988
DALLAS, TEXAS 75222
*
C ir cu lar 88-44
TO:
The Chief Executive O ffic e r of all
member banks and ot h er f i n a n c ia l
i n s t i t u t i o n s in the Eleventh Federal
Reserve D i s t r i c t
SUBJECT
Expedited Funds Availability Act and Regulation CC Compliance
DETAILS
Attached is a special notice prepared by the Board of Governors of
the Federal Reserve System o u tli n i n g necessary procedures to comply with
Regulation CC which implements the provisions of the Expedited Funds
A v a i l a b i l i t y Act. All f i n a n c ia l i n s t i t u t i o n s t h a t o f f e r t r a n s a c ti o n accounts
are a f fe c te d by t h i s a c t even i f they do not delay t h e i r customers' a b i l i t y to
withdraw funds deposited by check. I n s t i t u t i o n s must be in compliance with
Regulation CC on September 1, 1988.
The notice provides a c h e c k l i s t to help i n s t i t u t i o n s prepare f o r the
operational changes t h a t will r e s u l t from the a c t . The notice covers the
three major areas of the new law c a l l i n g f o r compliance e f f o r t s : a v a i l a b i l i t y
schedules, di s c lo s u r e s and check processing. In a d d i t i o n , a f in a l se ctio n
summarizes other important aspects of the regulation including i n t e r e s t
payment requirements, employee t r a i n i n g and c i v i l l i a b i l i t y .
ATTACHMENTS
The Board's special notice on compliance procedures is attach ed .
MORE INFORMATION
For more information on Regulation CC or the Expedited Funds
A v a i l a b i l i t y Act, please con tact Dean Pankonien a t (214) 651-6662.
Sincerely yours,
For additional copies of any circular please contact the Public Affairs Department at (214) 651-6289. Banks and others are
encouraged to use the following incoming WATS numbers in contacting this Bank (800) 442-7140 (intrastate) and (800)
527-9200 (interstate).
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
.■&2SSS&*-
Special Notice
Board of Governors of the Federal Reserve System • Washington, DC 20551
You are Affected by the
Expedited Funds Availability Law
June 1988
TO:
Member Banks o f the Federal Reserve System
and other Financial Institutions
FROM:
Board of Governors o f the Federal Reserve System
SUBJECT:
Compliance with the Expedited Funds Availability
Act and Regulation CC
There have been some indications that many financial institutions
do not realize that they must comply with the new expedited funds
availability law. On SEPTEMBER 1, 1988, you must be in compli
ance with the new regulation, even if you do not delay your custom
ers’ ability to withdraw funds that they deposit by check.
Attached is a brief description o f the new law, and the actions you
will have to take to comply with it.
If you need further assistance or information contact your state or
federal regulatory agency, local Federal Reserve Bank, or the
Federal Reserve Board.
Special Notice
EXPEDITED FUNDS COMPLIANCE CHECKLIST
Every bank, savings bank, savings and loan association, and credit union with transaction accounts—such as
checking accounts, NOW accounts, and share draft accounts—is affected by the new expedited funds law. You
are affected by the new law even if you do not delay your customers’ access to deposits and, BY
SEPTEMBER 1, 1988, YOU MUST:
A. Comply with the Availability Schedules
EH
1. Make customer deposits available fo r withdrawal no later than the times required by the law. Funds
must be available within the times stated in the law even when you impose a case-by-case or
selective hold.
Review your availability policy. If you do not have a formal policy, you must formulate one.
Make any changes that are necessary to ensure that your policy and your actual practices comply
with the availability times required by the law.
B. Comply with the Disclosure Requirements
□
2. Give a disclosure o f your policy regarding when customers may withdraw deposited funds to:
• All existing customers in the first account statement mailed between September 1 and October 31
(unless you mail the disclosure before September 1).
• A new account customer before opening the new account.
• Any person who requests it.
EH
ED
ED
□
3. Post a notice summarizing your availability policy in the lobby of all your branches.
4. Post or provide a notice at each ATM that is owned or operated by you or for you.
5. Include a notice on all preprinted deposit slips.
6. Give a notice when you delay availability if your policy, for example, is to provide immediate or
next-day availability but you retain the right to place a hold on a deposit from time to time (or if
you delay a check for longer than the federal schedules based on an allowable exception).
C. Comply with the Changes in the Processing of Checks
□
7. Endorse checks with the specified information in the appropriate location using the appropriate
color ink.
□
8. Return checks you do not pay to the bank of first deposit expeditiously.
EH
9. Provide notice o f nonpayment on all checks over $2500 that are not being paid.
D. Comply with the Other Requirements of the Law
EH
10. Begin to accrue interest or dividends on deposits in an interest-bearing transaction account not
later than the business day you receive credit.
□
11. Limit holds on other funds a transaction-account customer has on deposit with you (including
funds in savings accounts) to the time periods specified in the regulation when you (1) cash
checks or (2) accept checks for deposit into an account.
□
12. Train your employees and furnish a copy o f procedures to them.
• ' o f COw- ■
.
Compliance with the Expedited Funds
Availability Act and Regulation CC
This information is designed to help you understand
and comply with the requirements of the Federal
Reserve Board's Regulation CC that implements the
Expedited Funds Availability Act. It describes, in
general terms, the requirements of the regulation and
the changes that you may need to make to comply
with the law.
The following information is aimed particularly at
small institutions and those that have rather simple
funds availability policies, such as immediate or nextday availability in most cases. By following the steps
outlined on the next few pages, you should be able to
comply fairly easily with the law.
The Act and regulation are complex, however, and if
you delay availability on all deposits, or most of a
certain category of deposits, you will probably have to
make many changes to your policies and practices,
and provide detailed disclosures to your customers.
Even if you have a policy of providing immediate or
next-day availability in most cases, and place holds
only on an exception or case-by-case basis, you must
familiarize yourself with the regulation.
The material that follows is organized along the same
lines as the checklist set forth on the preceding page.
It covers the three major areas of the new law calling
for compliance efforts: availability schedules, disclo
sures, and check processing. In addition, a final sec
tion summarizes other important aspects of the regula
tion including interest payment requirements, em
ployee training, and civil liability.
Remember, as you review these requirements, that the
law, except as indicated, applies equally to all of your
transaction accounts (as defined in the Board's
Regulation D, dealing with reserve requirements). For
example, you must provide a disclosure of your
availability policy for business as well as consumer
accounts.
In addition, please keep in mind that this information
does not describe all of the requirements and details of
the law. References are contained to the sections of
the regulation and the commentary that describe the
regulatory requirements in more detail. You should
contact your state or federal regulatory agency, local
Federal Reserve Bank, or private counsel for addi
tional information and guidance.
You may call the following numbers at the Federal
Reserve Board for assistance:
Division of C onsum er and
Com m unity Affairs
(202) 452-3667
Division of Federal
Reserve Bank O perations
(202) 452-3874
Legal Division
(202) 452-2489
A. Complying with the
Availability Schedules
Starting on Septem ber I, 1988, you must allow your
customers to withdraw funds that they deposit no later
than a specific number of business days after the day
of the deposit. The number of days depends upon the
type of deposit and ranges from the first business day
up to the seventh business day following the day of
the deposit.
Special Notice
2
The deposits that must be made available on the first
business day include cash, cashier's checks, checks
drawn on your institution, and federal, state, and local
government checks. Funds from "local checks,"
meaning those drawn on an institution within your
check processing region, must be made available for
withdrawal no later than the third business day follow
ing the day of deposit. "Nonlocal checks," meaning
checks drawn on an institution located in a different
check processing region than yours, must be
available for withdrawal no later than the seventh
business day following the day of the deposit. In ad
dition, the first $100 of a day’s total deposits of local
and nonlocal checks must be made available on the
first business day following the day of the deposit.
(See sections 229.10 and 229.11 of the regulation.)
On September 1, 1990, shorter time periods become
effective. Institutions must make funds from local
checks available by the second business day following
the day of the deposit, and funds from nonlocal
checks by the fifth business day. (Se6 section 229.12.)
The regulation provides for certain exceptions to the
specified time periods. As a general rule, if the bank
imposes one of these “exception holds” it may delay
the deposit for four business days longer than the
maximum times set by the regulation. (See section
229.13.)
Attachment A discusses the availability requirements
and the exceptions in more detail.
Make any changes that are necessary to ensure
that your policies and your actual practices comply
with the availability times required by the law.
What actions, if any, you will have to take to comply
with these requirements by September 1 depends on
your current policy regarding the availability of de
posits. If you currently do not have a formal policy,
you must formulate one. Without a formal policy you
will be unable to ensure that you comply with the law
and you will be unable to meet the disclosure require
ments of the law.
If your policy is, in most cases, to allow customers to
withdraw deposits immediately or on the day follow
ing the day of deposit, you may not have to make any
changes in your policy. You must make sure, how
ever, that the way you handle deposits and make
funds available does in fact result in immediate or
next-day availability. For example, you need to make
sure that deposits made in person to an employee of
your institution are considered received on the day the
deposit is made, and that mail deposits are considered
received when the mail room receives them—not
when they are actually processed by the mail teller.
You must be sure that cut-off hours for receipt of de
posits are no earlier than 2:00 p.m. (or 12:00 noon for
ATMs). In addition, you must be certain that funds
from deposits are available for withdrawal immedi
ately or at the beginning of the first business day fol
lowing the day of the deposit— that is, by 9:00 a.m. or
the time when facilities are available for withdrawals
by customers, whichever is later.
What do I have to do to comply?
1. Make customer deposits available for
withdrawal no later than the times required by
the law. Funds must be available within the times
stated in the law even when you impose a case-bycase or selective hold.
Review your availability policy. If you do not
have a formal policy, you must formulate one.
If you have a policy of delaying only on a case-bycase basis— for example, you usually give next-day
availability but do place a hold on deposits from time
to time—you must make sure, when you do hold
funds, that you still provide availability as required by
the law. Specifically, be sure that you:
(1) do not place a case-by-case hold on a deposit that
must be given next-day availability under the
regulation,
Special Notice
3
(2) make the first $100 of the deposit that is being
delayed available to the customer on the first
business day following the day o f the deposit;
and
(3) make the rest of the funds available no later than
the day specified for the type of check being
deposited, for example, the third business day
following the day of deposit for a local check.
(If there is a specific reason for your placing a
hold and the reason is listed as one of the
exceptions to the regulation discussed in
Attachment A— for example, the check being
deposited was previously returned unpaid— the
check may be held for the longer time period
applicable to “exception holds.”)
If your current availability policy is to hold all depos
ited checks for specific time periods depending on the
type of check being deposited, you must be sure that
the time periods you use for the various types of
checks are no longer than the time periods set forth in
the regulation. In addition, you must insure that the
first $100 of a day’s total deposits of checks plus all
deposits of next-day availability checks (that is,
checks that must be made available on the first
business day following the day of deposit) are avail
able for withdrawal on the first business day following
the day of deposit. (See Table I of Attachment A.) It
is very likely that you will need to revise your current
systems to conform to the time periods in the regula
tion; in some cases these changes may be extensive.
Of course, one option is to change your availability
policy to one of immediate or next-day availability
with holds placed only on a case-by-case basis and/or
an exception basis.
Your decision regarding what policy to adopt should
be based upon considerations such as:
(1) the costs involved in making changes to your
current policies and systems to comply with
the law;
(2) the potential losses that you see from a particular
policy;
(3) the alternative means of addressing any increased
risk of loss that may result from a particular
policy (for example, adopting policies and
procedures to minimize the risk by reviewing new
accounts and monitoring deposit activity); and
(4) the customer relations aspects of your
availability policy.
B. Complying with the
Disclosure Requirements
Once you have determined the type of policy that you
wish to follow and have examined that policy to be
sure that it complies with the availability time periods
set forth in the regulation, you must disclose your
policy to your customers. You are required to dis
close your specific policy as to when deposited funds
are available for withdrawal. In addition, you must
furnish several reminder notices to your customers
and provide them with a notice upon the occurrence
of certain events. The regulation includes several
model disclosure forms, clauses, and notices that you
may adapt to make these disclosures. Model
disclosures that could be used if your policy is one
of next-day availability with holds only placed on a
case-by-case and exception hold basis are attached as
Attachment B. (Other model forms are included in
Appendix C to Regulation CC.)
Special Notice
4
How do I disclose my specific availability policy?
2.
Give a disclosure of your policy regarding when
customers may withdraw deposited funds to:
• All existing customers in the first account
statement mailed between September 1 and
October 31 (unless you mail the disclosure
prior to September 1).
• A new account customer before opening the
new account.
• Any person who requests it.
The specific disclosure of your policy concerning
when deposited funds are available for withdrawal
must be given under three circumstances. First, you
must include a copy of this disclosure in the first regu
larly scheduled mailing to all existing account custom
ers after September 1, 1988, unless you have fur
nished a disclosure that meets the requirements of the
regulation before that date. Second, you must provide
a copy of the policy disclosure before opening any
account on or after September 1, 1988. Third, starting
on September 1, 1988, you must furnish a copy of the
policy to any person who makes an oral or written re
quest for it. (See sections 229.17 and 229.18(d).)
The specific policy disclosure must tell the customer
when you will, in most cases, make deposited funds
available for withdrawal. You must disclose your ac
tual policy as to when deposited funds are available
for withdrawal. You may not disclose something other
than the policy you follow in most cases; for example,
you may not disclose the maximum availability times
under the regulation when, in fact, you make funds
available sooner.
The disclosure must be detailed enough to allow cus
tomers to determine the categories of deposits that will
be subject to different availability times and when the
various categories of deposits will be available for
withdrawal. The disclosure must also describe any
policy of delaying the availability of deposited funds
longer than your stated time periods on a case-by-case
basis, and any of the exceptions that your institution
may apply to impose a longer delay on a deposit.
(See section 229.16.)
The complexity o f the specific policy disclosure will
depend on the policy you have decided to adopt. If
your policy is to provide next-day or immediate
availability in most cases, you will make a much
shorter and less complex disclosure than an institution
that has a policy of delaying availability to the full ex
tent allowed under the regulation. This would be true
even if you were, in addition to giving next-day or
immediate availability, sometimes holding deposits
longer on a case-by-case basis and placing holds un
der the circumstances allowed under the exceptions
provisions of the regulation.
The specific policy disclosure must be made in writing
and must be in a form that the customer can keep.
Disclosures must be made to all customers, both con
sumer and business account-holders, although your
availability policies of course need not be the same for
both groups.
In addition, all of the disclosures required by the regu
lation must refer to the time when funds are available
for withdrawal in a uniform manner. That is, all insti
tutions must state that funds will be available for with
drawal on “the first, second, third, etc. business day”
after the day of the deposit. The number of the busi
ness day is determined by counting the number of
days until the funds will be available, starting with the
business day following the day of the deposit and end
ing with the day the funds are available. For example,
if an institution had a policy of making certain check
deposits available for withdrawal after two intervening
business days, it would state that funds are available
for withdrawal on “the third business day” after the
day of the deposit. (See section 229.15(b).)
Special Notice
5
What other notices are required?
3.
Post a notice summarizing your availability
policy in the lobby of all your branches.
4.
Post or provide a notice at each ATM that is
owned or operated by you or for you.
5. Include a notice on all preprinted deposit slips.
Other disclosures that you are required to make take
the form of reminder notices. Reminder notices are
required in branch lobbies, at ATMs, and on pre
printed deposit slips. They are much shorter and more
general than the specific policy disclosure notice. The
notice posted at each location where employees accept
consumer deposits need only state the times when
consumers may withdraw deposited funds. The notice
posted or provided at ATMs need only state that
deposited funds may not be available for immediate
withdrawal, and refer the customers to their
institution’s policy. The notice on preprinted deposit
slips (those that are personalized with the customer’s
name and account number) you furnish to your cus
tomers is the shortest of all— it need only state that
deposits may not be available for immediate with
drawal. (See section 229.18.)
These disclosures must be in writing but, unlike the
specific policy disclosures, the reminder notices need
not be in a form that the customer can keep. All o f the
reminder notice requirements become effective on
September 1, 1988.
6.
Give a notice when you delay availability if
your policy, for example, is to provide immediate
or next-day availability but you retain the right to
place a hold on a deposit from time to time (or if
you delay a check for longer than the federal
schedules based on an allowable exception).
The last category of disclosures includes notices you
must give when certain events occur or notices that
you have taken certain actions. If you impose caseby-case or exception holds, you must generally give
the customer a notice at the time the deposit is made.
The notice may be given later in three situations:
(1) if the deposit is not made in person to an
employee of your institution;
(2) if the decision to place a case-by-case hold is
made after the deposit was made (for example, if
it’s made by the teller’s supervisor after the
customer has left the branch); or
(3) if you learn of the facts that give rise to an
exception hold after the deposit was made.
In these situations, the notice for a case-by-case hold
must be mailed or delivered to the customer no later
than the business day following the day of the deposit.
The exception hold notice can be given on the day
following either the day of the deposit or the day the
institution learns of the facts giving rise to the excep
tion hold, whichever is later. (See sections 229.13(g)
and 229.16(c).)
These notices about holds must include the customer’s
account number, the date and amount of the deposit,
the amount of the deposit being held, and the day the
held funds will be available for withdrawal. When
Special Notice
6
an exception hold is placed, the notice must also state
the reason for the delay. If you are imposing a delay
because you doubt the collectibility of the check being
deposited, you must state the particular reason that the
check is believed to be uncollectible. If the reason is
based on confidential information, you may state that
fact without further elaboration on the notice; how
ever, you must indicate on the copy of the notice you
retain as a record of compliance the specific reasons
that gave rise to the delay.
One notice requirement in the regulation does not
present a compliance issue for September 1, but
should be noted for the future. If you change your
availability policy on consumer accounts, you must
notify affected consumers. The notice must be sent 30
days prior to the effective date of the change if the
change results in deposited funds being available later
than was the case before the change. If the change
results in faster availability, the notice may be sent as
late as 30 days after the effective date of the change.
Even though you must give an initial disclosure
regarding availability to all commercial and business
accounts, as well as consumer accounts, these notice
requirements when you make changes in your availa
bility policy do not apply to commercial or business
accounts. (See section 229.18(e).)
C. Complying with the Changes
in the Processing of Checks
The Federal Reserve Board has adopted several
changes in the rules governing the collection and
return of checks to speed up the return of unpaid
checks to the institution of first deposit (the depositary
bank). Under the current check collection system,
checks that are returned often would not be received
by the depositary bank until after the time funds must
be made available for withdrawal under the Act. The
new regulation is designed to reduce the risk to the de
positary bank resulting from the prompt availability
requirements in two ways:
(1) expedite returns to the depositary bank; and
(2) expand the notice of nonpayment requirements for
large-dollar returned checks.
One of the obstacles to the efficient processing of
returns is the lack of uniformity in depositary banks’
endorsements. The regulation includes an endorse
ment standard which becomes effective on September
1, 1988. The endorsement standard is one aspect of
the regulation that will require many banks to make
changes in their equipment. As a result, it is important
that banks review their operations in preparation for
the effective date.
What are the new rules regarding endorsements?
7. Endorse checks with the specified information in
the appropriate location using the appropriate
color ink.
The first change adopted by the Board to improve the
processing of return items is a uniform endorsement
standard. The uniform endorsement standard requires
the depositary bank to place its endorsement in a
specific location on the back of the check, to include
certain information in its endorsement, and to use
either black or purple ink to apply the endorsement.
Subsequent bank endorsements must avoid the area
designated for the depositary bank endorsement and
may not use purple ink. As a result, it should be
easier for paying or returning banks to identify the
depositary bank and return an unpaid check directly to
that bank or provide notification of nonpayment.
Special Notice
7
The depositary bank endorsement is to be made in the
area beginning 3.0 inches from the leading edge of the
check and ending 1.5 inches from the trailing edge of
the check. (See Figure 1.) The entire endorsement
need not be within this area; however, the endorse
ment must be placed so that the routing number of the
bank is wholly within this area. The endorsements of
subsequent banks are required to appear in the area
from the leading edge to 3.0 inches from the leading
edge, avoiding the area to be used by depositary
banks. (See Appendix D of the regulation.)
The depositary bank endorsement must include the
bank’s nine-digit routing number, set off by arrows at
each end of the number that point toward the number;
the bank’s name and location; and the endorsement
date. The depositary bank endorsement also may
contain optional information, such as a branch identi
fication, a trace/sequence number, or a telephone
number for receipt of notification of large-dollar return
checks. The inclusion of optional information must
not interfere with the readability of the endorsement.
Subsequent collecting bank endorsements must avoid
the area where the depositary bank endorsement must
be placed, must provide only certain information in
the endorsement, and must not use purple ink. These
endorsements may include only the bank’s nine-digit
routing number (without arrows), the endorsement
date, and an optional trace/sequence number.
Figure 1. Endorsement Standard: Depositary Bank
1 1/2*
Special Notice
8
What do I need to do to comply with the require
ment for expedited processing of returned checks?
8.
Return checks you do not pay to the bank of first
deposit expeditiously.
Another change made by the Board to reduce the time
required for unpaid checks to be returned from the
paying bank to the depositary bank is the requirement
that paying banks return checks expeditiously to the
depositary bank. Under the new rule, banks should
dispatch their returned checks on the same type of
transportation used to dispatch their forward collection
checks or by other means that expedite the receipt of
the check by the depositary bank.
The paying bank may return a check directly to the
depositary bank, or to a Reserve Bank or a bank
providing check return services. Today, many banks
mail returns to the prior endorser because their courier
does not deliver to that location. The regulation
removes the two primary reasons why banks often
mail returns today :
(1) Today, in order to meet their midnight deadline,
many banks mail returns if their courier leaves
after midnight. The regulation extends the
midnight deadline to facilitate courier returns.
(2) Under the new rule, checks do not have to be
returned through the same banks that handled the
check for forward collection.
The regulation also imposes duties on returning banks
to expedite the return process. A returning bank must
handle a returned check as expeditiously as a check
handled for forward collection.
An additional way to speed the return process is to
prepare the returned check for automated processing.
Returned checks can be automated by placing the
return in a carrier envelope, or by placing a strip on
the bottom o f the check, and encoding the envelope or
strip with the routing number of the depositary bank,
the amount of the check, and a special returned check
identifier. Automated returns allow for far more
efficient processing by a subsequent returning bank.
(See sections 229.30 to 229.32.)
What are the new rules concerning notice of non
payment for checks over $2500?
9. Provide notice of nonpayment on all checks over
$2500 that are not being paid.
The regulation changes the rules regarding when a
paying bank must provide the depositary bank with
notice of nonpayment on large-dollar returned checks.
Specifically, the regulation:
(1) expands the large-dollar notice requirement to
include all checks of $2500 or more that are
returned, regardless o f the channel through which
they were cleared; and
(2) reduces the time period within which notice must
be received. The depositary bank must receive
notice of nonpayment by 4:00 p.m. on the second
business day following the day the check was
presented to the paying bank. The physical
returned check can serve as notice if received by
this deadline.
(See section 229.33.)
Special Notice
9
D. Complying with the Other
Requirements of the Law
There are several other important aspects of the regu
lation that you should be aware of. The regulation
includes provisions on the accrual of interest on funds
deposited into interest-bearing transaction accounts;
the placing of holds on funds that a transactionaccount customer has on deposit in other accounts
with you, including savings accounts; and the training
of employees. In addition, you should be aware of
your potential liability under the civil liability provi
sions of the regulation if you fail to comply.
What are the other requirements in the law that I
must comply with?
comply with the interest payment requirements if they
disclose their interest payment policy in the disclosure
of their specific availability policy. (See section
229.14(b).)
11. Limit holds on other funds a transaction-account
customer has on deposit with you (including funds
in savings accounts) to the time periods specified
in the regulation when you (1) cash checks or (2)
accept checks for deposit into an account.
Another aspect of the regulation that is important to
keep in mind is that the regulation affects your ability
to place a hold on any funds of your customer, even
funds in a savings account, under certain circum
stances.
10. Begin to accrue interest or dividends on deposits
in an interest-bearing transaction account not later
than the business day you receive credit.
You may not place a hold on any funds that a transac
tion-account customer has on deposit with you that
exceeds the time periods specified in the regulation for
deposits into a transaction account when:
You must begin to accrue interest or dividends on
funds deposited in an interest-bearing transaction
account not later than the business day on which you
receive credit for the funds. (As with the availability
and disclosure requirements, non-transaction ac
counts, such as savings accounts and money market
deposit accounts, are not affected by this require
ment.) In determining when you receive credit for
funds, you may rely on the availability schedule of
your Reserve Bank, Home Loan Bank, or correspon
dent bank. (See section 229.14(a).)
(1) you cash a check for the customer; or
Credit unions have a special exemption from the
payment of interest requirements if they begin to
accrue interest on all deposits, both cash and check
deposits, later than the day on which they receive
credit for the deposits. These credit unions need not
(2) you accept a check for deposit into any
transaction account of the customer.
As a result, if you cash a check for a checking-account
customer and place a hold on the customer’s savings
account, the hold on the savings account is limited to
the amount and period of time that would apply if the
cashed check had been deposited into the customer’s
checking account. Similarly, if a checking-account
customer makes a deposit into the checking account
and requests that any hold be placed on other funds
that are already on deposit in another checking or
savings account, the hold that is placed on the other
funds must comply with the regulation. (See section
229.19(e).)
Special Notice
10
W hat are the consequences if I fail to comply with
the new requirem ents?
12. T rain your employees and furnish a copy of
procedures to them.
The Act and the regulation specifically require you to
establish procedures to ensure compliance with the
law. In addition, you are required to furnish a copy of
the procedures to each employee that performs duties
related to compliance with the availability schedules,
disclosures, and payment of interest requirements.
You are only required to furnish a copy of those
portions of the procedures to an employee that relate
to that employee’s responsibilities. (See section
229.19(0.)
The law imposes certain liabilities on you if you fail to
comply with the law. You may be liable for damages
if you fail to comply with the availability schedules or
the disclosure requirements, as well as the rules for
returning checks. In fact, the law provides for mini
mum penalties for failures to follow the availability
and disclosure requirements even if there are no actual
damages to the customer. It is very im portant th at
you understand your responsibilities un d er the law.
(See sections 229.21 and 229.38.)
• ’ o f c O lW •
Special Notice
11
ATTACHMENT A
When Customers Must Be Able
to Withdraw Deposits Under the
Expedited Funds Availability Act
and Regulation CC
Temporary Schedule
(September 1, 1988— August 31, 1990)
Starting on September 1,1988, institutions are
required to allow their customers to withdraw funds no
later than a specific number of business days after the
funds are deposited. The number o f days depends
upon the type of deposit. It ranges from the first
business day following the day the deposit is made for
certain deposits— including cash, U.S. Treasury
checks, cashier’s checks, checks drawn on your bank,
and state and local government checks— up to the
seventh business day following the day of the deposit
for “nonlocal checks,” meaning checks drawn on an
institution that is located in a different check process
ing region than yours. Funds from “local checks” —
those drawn on an institution within your check
processing region— must be made available for with
drawal no later than the third business day following
the day of the deposit; however, an institution may
sometimes limit cash withdrawals from a local check
deposit to $400 on the third business day. The first
$100 of a day’s total deposits of local and nonlocal
checks must be made available on the first business
day following the day of the deposit. In addition, the
law allows an institution to delay a customer’s ability
to withdraw all deposits made at ATMs that are not
owned or operated by the institution until the seventh
business day following the day of the deposit. (See
Table 1.) (See sections 229.10 and 229.11.)
TABLE 1
For this type o f deposit
• cash
• direct deposit and other electronic credits
• government, cashier's, certified,
or teller's checks
• checks written on accounts
at your instituuon
• the first $100 of a day’s total deposits of other checks
Effective Septem ber 1 ,1 9 8 8 , you m ust make funds available to your custom ers no later than
the first business day after the day o f deposit (certain conditions may be
imposed on some checks; and if certain deposits are not made in person to an
employee o f your institution the funds need not be made available until the
second business day after the day of deposit)
• local checks
the third business day after the day of deposit (cash withdrawals may be limited)
• nonlocal checks
the seventh business day after the day of deposit
• any deposit made at an ATM
not owned or operated by your institution
the seventh business day after the day of deposit
These times are based on business days. Every day is considered a business day except Saturdays, Sundays, and federal holidays. A deposit is considered
received, however, only on a business day that your institution is actually open for business.
Special Notice
12
Permanent Schedule
Exceptions
(September 1, 1990 and thereafter)
(To the Temporary and Permanent Schedules)
On September 1, 1990, a permanent schedule requir
ing shorter time periods becomes effective. Institu
tions must make the funds from the deposit of a local
check available no later than the second business day
following the day of the deposit, and funds from
nonlocal checks must be made available no later than
the fifth business day following the day of the deposit.
Under the permanent schedule, institutions may limit
cash withdrawals on the second and the fifth business
days for both local and nonlocal checks. The perma
nent schedule generally requires institutions to treat
deposits at ATMs the same whether or not the institu
tion owns or operates the machine where the deposit
was made. (See section 229.12.)
The regulation provides for certain exceptions to the
specified time periods in both the temporary and the
permanent schedules. There are exceptions for:
•
•
•
•
New accounts (less than 30 days old)
Large deposits (over $5,000)
Accounts that have been repeatedly overdrawn
Deposited checks that have previously been
returned
• Checks that the bank has reason to believe are
uncollectible
As a general rule, if the institution imposes one of
these “exception holds” it may delay the availability
of deposited funds for four business days longer than
the maximum times set by the regulation. (An institu
tion may impose a delay longer than four days but the
institution must prove that the longer delay is reason
able.) Finally, keep in mind that the exception rules
are rather complex in the way they apply to those
items in Table 1 that must be available for withdrawal
on the first business day after the day of deposit, for
example, cashier’s checks and U.S. Treasury checks.
(See section 229.13.)
Special Notice
13
ATTACHMENT B
Specific policy disclosure for next-day availability, case-by-case holds to statutory
limits under the temporary schedule, and section 229.13 exceptions (Form C-3)
Your Ability to Withdraw Funds
at
5£5;
(bank name and location)
Our policy is to make funds from your deposits
available to you on the first business day after the
day we receive your deposit. At that time, you
can withdraw the funds in cash and we will use
the funds to pay checks that you have written.
For determining the availability of your deposits,
every day is a business day, except Saturdays,
Sundays, and federal holidays. If you make a
deposit before (time o f day) on a business day
that we are open, we will consider that day to be
the day o f your deposit. However, if you make a
deposit after (time o f day) or on a day we are not
open, we will consider that the deposit was made
on the next business day we are open.
Longer delays may apply
In some cases, we will not make all o f the funds
that you deposit by check available to you on the
first business day after the day o f your deposit.
Depending on the type of check that you deposit,
funds may not be available until the seventh
business day after the day of your deposit. How
ever, the first $100 o f your deposits will be avail
able on the first business day.
If we are not going to make all of the funds from
your deposit available on the first business day,
we will notify you at the time you make your
deposit. We will also tell you when the funds
will be available. If your deposit is not made di
rectly to one of our employees, or if we decide to
take this action after you have left the premises,
we will mail you the notice by the day after we
receive your deposit.
If you will need the funds from a deposit right
away, you should ask us when the funds will be
available.
In addition, funds you deposit by check may be
delayed for a longer period under the following
circumstances:
•
•
We believe a check you deposit will not be
paid.
You deposit checks totaling more than
$5,000 on any one day.
•
•
•
You redeposit a check that has been returned
unpaid.
You have overdrawn your account repeatedly
in the last six months.
There is an emergency, such as failure of
communications or computer equipment.
We will notify you if we delay your ability to
withdraw funds for any of these reasons, and we
will tell you when the funds will be available.
They will generally be available no later than the
(,number) business day after the day o f your de
posit.
Special rules for new accounts
If you are a new customer, the following special
rules will apply during the first 30 days your ac
count is open.
The first $5,000 from a deposit of U.S. Treasury
checks will be available on the first business day
after the day of your deposit. The excess over
$5,000 will be available on the ninth business day
after the day o f your deposit. Funds from wire
transfers into your account will be available on
the first business day after the day we receive the
transfer.
Funds from deposits o f cash and the first $5,000
o f a day’s total deposits of cashier’s, certified,
teller’s, traveler’s, and state and local government
checks will be available on the first business day
after the day of your deposit if the deposit meets
certain conditions. For example, the checks must
be payable to you [and you may have to use a
special deposit slip). The excess over $5,000 will
be available on the ninth business day after the
day of your deposit. If you do not make the de
posit in person to one o f our employees, the first
$5,000 will not be available until the second busi
ness day after the day o f your deposit.
Funds from all other check deposits will be avail
able on the (number) business day after the day of
your deposit.
!;5g
Special Notice
14
Exception hold notice (Form C-13)
Notice of Hold
Account number:
Date o f deposit:
Amount of deposit:
We are delaying the availability o f %{amounl being held) from this deposit. These funds will be
available on the (number) business day after the day o f your deposit.
We are taking this action because:
I I
A check you deposited was previously returned unpaid.
I I
You have overdrawn your account repeatedly in the last six months.
□
The checks you deposited on this day exceed $5,000.
I I
An emergency, such as failure o f communications or computer equipment, has occurred.
I I
We believe a check you deposited will not be paid for the following reasons:
[If you did not receive this notice at the time you made the deposit and the check you deposited is paid,
we will refund to you any fees for overdrafts or returned checks that result solely from the additional
delay that we are imposing. To obtain a refund of such fees, (description o f procedure fo r obtaining
refund).]
Special Notice
15
Reasonable cause hold notice (Form C-13A)
§
Notice of Hold
Account number: _________________________________________
Date of deposit:
Amount of deposit: _______________________________________
We are delaying the availability of the funds you deposited by
the following check: ______________________________________
(description of check, such as amount and drawer)
These funds will be available on the (number) business day after the day of your deposit.
The reason for the delay is explained below:
I
I
We received notice that the check is being returned unpaid.
□
We have confidential information that indicates that the check may notbe paid.
□
The check is drawn on an account with repeated overdrafts.
(HI
We are unable to verify the indorsement of a joint payee.
□
Some information on the check is not consistent with other information on the check.
I
I
There are erasures or other apparent alterations on the check.
I
1
The routing number of the paying bank is not a current routing
EH
number.
The check is postdated or has a stale date.
m
I
I
Information from the paying bank indicates that the check may
not be paid.
I
I
We have been notified that the check has been lost or damaged in collection.
Other:
[If you did not receive this notice at the time you made the deposit and the check you deposited is
paid, we will refund to you any fees for overdrafts or returned checks that result solely from the
additional delay that we are imposing. To obtain a refund of such fees, (description o f procedure
fo r obtaining refund).)
'
finis*
Special Notice
16
Case-by-case notice (Form C-14)
Notice of Hold
Account number: _________________________________________
Date of deposit: _____ ______ _____
Amount of deposit: _______________________________________
W e are delaying the availability o f $(amount being held) from this deposit. These funds will be
available on the {number) business day after the day of your deposit.
[If you did not receive this notice at the time you made the deposit and the check you deposited is
paid, we will refund to you any fees for overdrafts or returned checks that result solely from the
additional delay that we are imposing. To obtain a refund o f such fees, (description o f procedure fo r
obtaining refund).]
.
..... ...... —
— —--------- :
-----
Notice at locations where employees accept consumer deposits
(case-by-case holds) (Form C-15A)
Funds Availability Policy
Our general policy is to allow you to withdraw funds deposited in your account on the
(number) business day after the day we receive your deposit. In some cases, we may
delay your ability to withdraw funds beyond the (number) business day. Then, the
funds will generally be available by the seventh business day after the day of deposit.
.......... — '
------------------------;.... ......' ....
..
W .W .W .'.W .W .
Special Notice
17
Notice at automated teller machines (Form C-16)
Availability of Deposits
Funds from deposits may not be available for immediate withdrawal. Please
refer to your institution’s rules governing funds availability for details.
Deposit slip notice (Form C-18)
@FedFRASER