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FEDERAL RESERVE BANK OF NEW YORK No. 10264 1 [ Circular October 28, 1988 NEW BOARD PAMPHLET ON THE EXPEDITED FUNDS AVAILABILITY ACT To All Depository Institutions, and Others Concerned, in the Second Federal Reserve District: The Board of Governors of the Federal Reserve System has issued a pamphlet entitled “Making Deposits — When Will Your Money Be Available?” The pamphlet explains when, under the Ex pedited Funds Availability Act, funds deposited in a bank must be made available to customers. The following is quoted from the text of the Board’s statement in this matter: T h is n ew A c t re q u ire s all b a n k s, sa v in g s an d lo a n a sso c ia tio n s, sa v in g s b a n k s, a n d c re d it u n io n s to d isc lo se to th e ir cu sto m e rs th e ir fu n d s a v a ila b ility p o lic y w h en fu n d s are d e p o site d in c h e c k in g , sh are d ra ft o r N O W a c co u n ts. It also sp e cifie s h o w q u ic k ly d e p o site d fu n d s m u st b e m a d e a v a ila b le fo r w ith d raw als. T h e p a m p h le t o u tlin es th e a v a ila b ility sc h ed u le b y ty p e o f d ep o sit; n am es th e c irc u m sta n c e s w h en an in stitu tio n m a y d elay c u s to m e rs’ u se o f th e ir fu n d s b ey o n d th e n o rm al lim its; sta te s th e d isc lo su re re q u ire m e n ts; d e m o n stra te s e n d o rse m e n t p ro ce d u re s; an d p ro v id e s th e c o n su m e r w ith e rro r re so lu tio n in fo rm atio n . Copies of the pamphlet are available upon request from this Bank’s Public Information Department (Tel. No. 212-720-6134) or from Publications Services, Board of Governors of the Federal Reserve System, Room M-P-503, Stop 138, 20th and C Streets, N .W ., Washington, D.C. 20551. Questions regarding expedited funds availability or Regulation CC may be directed to John F. Sobala, Vice President, Check Processing Function of this Bank (Tel. No. 212-720-6334). E. Gerald Corrigan, President. M A K IN G DEPO SITS W hen W ill Your M oney Be Available? The Expedited Funds Availability Act MAKING DEPOSITS: When Will Your Money Be Available? ,-vTien y o u d e p o s it a c h e c k in y o u r c h e c k in g a c c o u n t, y o u m a y w a n t to u se th e m o n e y r ig h t a w a y — f o r in s ta n c e to g e t c a s h , p a y b ills, o r m a k e a p u r c h a s e . M a n y f in a n c ia l in s titu tio n s w ill m a k e d e p o s ite d f u n d s a v a ila b le to y o u im m e d ia te ly . O th e r s m a y w a n t to m a k e s u re th e c h e c k y o u h a v e d e p o s ite d is b a c k e d b y s u ffic ie n t f u n d s b e f o r e le ttin g y o u u s e t h a t m o n e y . C h e c k s h a v e to g o t h r o u g h a c le a rin g p ro c e s s , a n d th e r e 's s o m e r is k t h a t a c h e c k w ill b e r e tu r n e d u n p a i d b y th e in s t itu ti o n o n w h ic h it is w r i tte n . B e c a u se th e c le a rin g a n d r e tu r n p r o c e s s ta k e s tim e , s o m e in s t itu ti o n s m a k e y o u w a it a fe w d a y s b e f o r e le ttin g y o u u se th e d e p o s ite d fu n d s . In 1987, C o n g r e s s p a s s e d a la w t h a t lim its h o w lo n g fin a n c ia l in s t itu ti o n s m a y d e la y a c u s to m e r 's a b i lity to u se d e p o s ite d fu n d s . T h e n e w la w , c a lle d th e E x p e d ite d F u n d s A v a ila b ility A c t, b a la n c e s th e r is k to fin a n c ia l in s titu tio n s ith th e n e e d s o f c u s to m e rs . A s o f S e p te m b e r -l, 1 9 8 8 , a ll b a n k s , s a v in g s a n d lo a n a s s o c ia tio n s , s a v in g s b a n k s , a n d c r e d it u n io n s m u s t le t y o u u s e f u n d s d e p o s ite d in c h e c k in g , s h a re d r a f t, o r N O W a c c o u n ts w ith in a fix e d n u m b e r o f d a y s . T h e y a ls o m u s t te ll y o u , in w r itin g , h o w s o o n y o u m a y u s e th e m o n e y a f te r m a k in g a d e p o s it. T h e n e w la w d o e s n o t r e q u ir e a n in s t itu ti o n to d e la y y o u r a b ility to u s e d e p o s ite d fu n d s ; it o n ly lim its h o w lo n g th e d e la y m a y la s t. M a n y in s titu tio n s h a v e a lw a y s le t th e ir lo n g - te r m c u s to m e r s u se d e p o s ite d f u n d s r ig h t a w a y , a n d th e y m a y c o n tin u e to d o so u n d e r th e n e w la w . E v e n th o s e in s t itu ti o n s t h a t d o d e la y th e ir c u s to m e r s ' u se o f f u n d s m a y m a k e fu n d s a v a ila b le s o o n e r th a n th e lim its se t in th e n e w la w . S o m e in s titu tio n s , o f c o u r s e , m a y n o w ta k e a s m u c h tim e a s th e e s ta b lis h e d s c h e d u le a llo w s . S o , if a v a ila b ility o f f u n d s is a c o n s id e r a tio n f o r y o u , y o u m a y w a n t to c o m p a r e th e p o lic ie s o f d if fe r e n t in s titu tio n s b e f o r e d e c id in g w h e r e y o u w ill d e p o s it y o u r fu n d s . 1 How Quickly Must an Institution Make Deposited Funds Available to You? H o w q u ic k ly th e f u n d s m u s t b e a v a ila b le d e p e n d s o n th e ty p e o f c h e c k y o u d e p o s it a n d o n th e lik e lih o o d t h a t it w ill b e p a id . F o r e x a m p le , y o u m a y b e a b le to u s e th e m o n e y s o o n e r w h e n y o u d e p o s it a U .S . T r e a s u r y c h e c k t h a n w h e n y o u d e p o s it a c h e c k f r o m a n in d iv id u a l o r a b u s in e s s . T h e tim e y o u h a v e to w a it m a y a ls o d e p e n d o n w h e r e th e in d iv id u a l o r b u s in e s s t h a t g a v e y o u th e c h e c k h a s th e ir c h e c k in g a c c o u n t. Y o u r in s t itu ti o n c a n e x p e c t to f in d o u t m o r e q u ic k ly f r o m a h o m e to w n in s t itu ti o n th a n f r o m a d is ta n t, o u t- o f - s ta te in s t itu ti o n w h e th e r a c h e c k is b a c k e d b y s u ffic ie n t f u n d s . T h e f o llo w in g a r e u s u a lly th e lo n g e s t tim e s t h a t in s t itu ti o n s c a n d e la y y o u r u s e o f d e p o s ite d f u n d s u n d e r th e n e w la w . Type of deposit • cash • the first $100 of any deposit of checks • government, cashier's, certified, or teller's checks • checks written on another account at the same institution • direct deposit and other electronic credits When the funds must be available to you . ir f '\ 1 \i , • checks written on local institutions • checks written on nonlocal institutions • deposits made at an automated teller machine not belonging to your institution the next business day after the day of deposit (certain conditions may apply—check with your institution) the third business day after the day of deposit \ 1 \ ( | / 2 the seventh business day after the day of deposit These times, based on business days, include all days except Saturdays, Sundays, and federal olidays. Now let's look at how these rules affect the availability of your funds. Let's say that your institution decides to hold deposited funds for the longest time allowed by law. If you deposit a local check* on a M onday, you can use the deposited funds on Thursday—the third busi ness day after the day of deposit. If you deposit the check on a Wednesday, however, you will have to wait until M onday to use your funds, because Saturday and Sunday are not business days and are not counted in figuring the time. If you deposit the check on a day when your institution is closed, on a Saturday, or on any business day after the cut-off time (usually 2 p.m .), the institution m ay treat the deposit as though you actually made it on the following business day. *Under the law, a check is a local check if it is deposited in an insti tution located in the same Federal Reserve check processing region as the paying bank. There are 48 Federal Reserve check processing regions in the nation. 3 At the end of the waiting period, your insti tution will pay checks that you have written, but it m ay not allow you to w ithdraw all the money in cash right away. Contact your institu tion to see whether it has special rules for cash withdrawals. The Federal Reserve has been working to speed the check-clearing process so that institu tions can find out more quickly whether a check is backed by sufficient funds. Because improvements in the clearing process are expected, the new law calls for shorter delay periods after September 1, 1990. O n local checks, funds must be available by the second business day instead of the third; and on non local checks, funds must be available by the fifth business day instead of the seventh. Deposits at an autom ated teller machine not belonging to your institution must be available on the same schedule as other deposits. Are There Special Rules for New Accounts? When you open an account, be sure to ask whether the institution has special rules regard ing availability of funds for new customers. An institution m ay delay a new customer's use of deposited funds longer because it is not familiar with that person's history in using a checking account. These longer delays are allowed only during the first 30 days the account is open. 4 May an Institution Delay Your Use of Deposited Funds leyond the Usual Limits? In certain instances, the new law allows an institution to delay a customer's use of deposited funds longer than the usual limits, generally for four more business days. This longer limit gives an institution extra time to make sure a deposit is backed by sufficient funds. An institution may use this longer limit in the following circumstances: • you redeposit a check that was returned unpaid. • you have overdraw n your account repeatedly in the previous six months. (That is, you have not had enough m oney in the account to cover checks you wrote.) • you deposit checks totalling more than $5,000 on any one day. • your institution has reason to believe that the check you are depositing will not be paid. c your institution uses the longer limit, it must tell you w hy it has done so and when you will be able to use the deposited funds. 5 What Information Must an Institution Give You About Delays? Starting in September 1988, all institutions must send a notice explaining to their customers when they m ay use deposited funds. Institutions must send a notice regardless of w hether they usually delay customers' use of deposited funds or allow immediate availability. They will explain their policies in the following ways: • The institution will tell you when you usually m ay use deposited funds (such as right away or by the next business day after deposit) and that if it delays your use of funds from a p ar ticular deposit beyond the usual time, it will inform you of the delay and how long it will last. • The institution will tell you when you m ay use deposited funds by type of deposit. For example, if it makes you wait longer for non local checks than for local checks, it will explain how you can distinguish one from the other, perhaps by showing you how to com pare the routing num ber on the check you are depositing to a list (which it will give you) of the routing num bers for local checks. In m any cases, of course, you will know auto m atically whether a check is nonlocal—for instance, if your account is with an institution in New York and the check you are depositing is written on a California institution. Besides receiving a notice for accounts that you already have, you will get a notice when ever you open an account at another institu tion. Also, you can obtain the inform ation from any institution just by asking—w hether or not you have a checking account there. Personal Check Jane Q. Public 1 Main Street Hometown, State 1 Pay to the order o f Y L ffa 0-Cs_______________ ® 19 f) Q X d V CuKcl /W /?/l0D D ollars AB C Bank City, Stats Q.■Pu4Ao 0000000000 000 Routing Num ber Business Check Name of Company 1 Main Street Hometown, State P ay to the ord er o f 200 B tP TE M B LR - ' Jft-NS- 0. F ip ra A*t) m o / i oo------- 19 a S PUBLIC-________ S 5 0 °% OO ------------------------------------- Dollars AB C Bank City, Stats 000000000 123458789 0000000000 000 Routing Num ber What Is Your Institution's Policy? When you receive the notice from your institu tion explaining when you m ay use deposited funds, take the time to review it carefully. If you do not understand it, ask someone at your institution for help. If you write checks against funds not yet available for your use, you could end up owing charges on returned checks to your institution, as well as to the merchants or others who receive these checks from you. Keep in mind that the new law does not change your obligation should a check you deposit be returned unpaid. If you have already used some or all of the funds, you will have to reimburse your institution prom ptly. 7 How Can You Help Speed the Check-Clearing Process? The way you endorse a check for deposit could help hasten its clearing. W hen you endorse a check, make sure that your signature is near the edge of the left side on the back of the check. When you sign in this space, you leave room for all the financial institutions handling the check to make their endorsements. This way, the endorsements can be easily read, and the check can move more quickly from one institu tion to another. 8 What Do You Do When You Have a Problem? All banks, savings and loan associations, savings banks, and credit unions must follow the new law. The new law applies whether the institution is chartered by the federal or state government, and w hether or not it is federally insured. If you have a question or a problem, you should first discuss it with someone at your institution. If you cannot reach a satisfactory solution, and you believe the institution is not adhering to the new law, contact the federal agency that enforces the law for your type of institution. 9 Following is a list of the federal enforcement agencies: State Member Banks of the Federal Reserve System Division of Consumer and Com m unity Affairs Board of Governors of the Federal Reserve System 20th & C Streets, N.W. Washington, D.C. 20551 (202) 452-3000 Non-Member Federally Insured Banks Office of Consumer Programs Federal Deposit Insurance C orporation 550 Seventeenth Street, N.W. W ashington, D.C. 20429 (800) 424-5488 or (202) 898-3536 National Banks Consumer Examinations Division Office of the Com ptroller of the Currency 490 L'Enfant Plaza, S.W. Washington, D.C. 20219 (202) 447-1600 Federal Savings and Loans Office of Com m unity Investment Federal Home Loan Bank Board 1700 G Street, N.W. Fifth Floor Washington, D.C. 20552 (202) 377-6237 10 Federal C red it U nions National Credit Union Administration 1776 G Street, N.W. Washington, D.C. 20456 (202) 357-1065 A ll O th e r A c c o u n t-H o ld in g In stitu tio n s Division of Consumer and Community Affairs Board of Governors of the Federal Reserve System 20th & C Streets, N.W. Washington, D.C. 20551 (202) 452-3000 11 For additional copies of this brochure contact: Publication Services Board of Governors of the Federal Reserve System Room M-P-503, Stop 138 20th and C Streets, N.W. Washington, D.C. 20551 FRB 1-500,000-8/88 Board of Governors of the Federal Reserve System 20th and C Streets, N.W. Washington, D.C. 20551
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