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FEDERAL RESERVE BANK OF NEW YORK [ C irc u la r No. 10439 "I M a rc h 11, 1991 DEPOSITS AT NONPROPRIETARY ATMs Amendments to Regulation CC To All Depository Institutions, and Others Concerned, in the Second Federal Reserve District: Following is the text of a statement issued by the Board of Governors of the Federal Reserve System: The Federal Reserve Board has adopted final amendments to Regulation CC to conform the regulation to a recent amendment to the Expedited Funds Availability Act. The amendment to the Act extends the availability schedules for deposits at non proprietary automated teller machines for a two-year period. The Regulation CC amendments have a retroactive effective date of September 1, 1990. Enclosed — for depository institutions and those who maintain sets of Board regulations — is a copy of the final amendments, as published in the Federal Register of February 26; additional, single copies may be obtained at this Bank (33 Liberty Street) in the Issues Division on the first floor. Questions on this matter may be directed to our Compliance Examinations Department (Tel. No. 212-720-5914). E. G e r a l d C o r r i g a n , President. Board of Governors of the Federal Reserve System AVAILABILITY OF FUNDS AND COLLECTION OF CHECKS A M EN D M EN TS TO REGULATION CC (Effective September 1, 1990) G contact Thomas J. Noto, Staff Attorney (202/452-3667), or Jane E. 12 CFR Part 229 Ahrens, Staff Attorney (202/452-3667), Division of Consumer and Community [Regulation CC; Docket No. R -0717] Affairs. For the hearing impaired only: RiN 7100-AB01 Telecommunications Device for the Deaf, Dorothea Thompson (202/452Availability o f Funds and Collection o f 3544). Checks SUPPLEMENTARY INFORMATION: The Expedited Funds Availability Act AGENCY: Board o f Governors of the (“Act”) specifies the time periods within Federal Reserve System. which funds deposited at ATMs must be a c t io n : Final rule. made available for withdrawal. Under s u m m a r y : The Board is adopting in final the temporary schedule (which was form, with minor technical changes, its effective from September 1,1988, to interim rule amending Regulation CC to August 31.1990), the rules that applied conform to recent amendments to the to deposits at nonproprietary ATMs 1 Expedited Funds Availability Act. (see were different from those that applied to the Cranston-Gonzales National deposits at proprietary ATMs because Affordable Housing Act, Public Law of operational differences in the way 101-625, section 1001). Tlie amendments these deposits are processed. During extend the availability schedules for consideration of the Act, banks reported deposits at nonproprietary automated to Congress on the processing teller machines for a period of two limitations associated with accepting years. The amendments to the Expedited deposits at nonproprietary ATMs. They Funds Availability Act were signed into indicated that the account-holding bank law on November 28,1990, with a does not have the information necessary retroactive effective date of September to place holds on nonproprietary ATM 1,1990. deposits because the deposits are removed and processed by the ATM EFFECTIVE DATE: September 1,1990. operator rather than the account-holding FOR FURTHER INFORMATION CONTACT: bank. Given these limitations, the Act Louise L. Koseman, Assistant Director allowed the account-holding bank to (202/452-3874), or Kathleen M. Connor, Senior Financial Services Analyst (202/ treat such deposits as though they were composed of nonlocal checks under the 452-3917), Division of Reserve Bank Operations and Payment Systems; 1 A n o n p ro p rie ta ry A T M is defined in the Act as Oliver Ireland, Associate General one that is not proprietary. In the Act, p ro p rie ta ry A T M means an automated teller machine that is (1) Counsel (202/452-3625), or Stephanie located at or adjacent to a branch of the receiving Martin, Attorney (202/452-3198), Legal institution or in close proximity, as defined by the Division. For information regarding Board, or (2) owned by, operated exclusively for. or modifications to disclosures or appendix operated by the receiving institution FEDERAL RESERVE SYSTEM temporary schedule. At that time, Congress anticipated that the processing limitations that necessitated the special availability rule for nonproprietary ATM deposits under the temporary schedule would be addressed by the time the permanent schedule became effective in September 1990. Therefore, under the permanent schedule, deposits at nonproprietary ATMs generally had to be made available for withdrawal within the same time periods as deposits made at staffed teller facilities. During the past two years, ATM networks, banks, and the Board have investigated a number of potential alternatives both to address the processing limitations and to facilitate compliance with the permanent schedule. A viable operational solution to address the processing limitations has not been identified. All of the identified solutions are costly and would likely result in increased fees for customers who make deposits at nonproprietary ATMs. The possible operational solutions would degrade the efficiency of shared ATM networks and may slow the collection of checks, which would be contrary to the intent of the Act. In addition, banks and ATM operators have expressed concern that the potential for fraud will increase if banks must comply with the permanent availability schedule for nonproprietary ATMs. Under the permanent availability schedule, second-business-day availability is required for local checks. Thus, an account-holding bank that could not ascertain the composition of deposits at nonproprietary ATMs would PRINTED IN NEW YORK, FROM FEDERAL REGISTER, VOL. 56, NO. 38, pp. 7799-7802 For this Regulation to be complete, retain: 1) Regulation CC pamphlet, effective September 1, 1988. 2) Amendments effective October 25, 1988; April 10, 1989; August 10, 1989; February 1, 1990; May 22, 1990; September 1, 1990; and February 1, 1991. 3) This slip sheet. [Enc. Cir. No. 10439] have to provide second-business-day availability for all deposits made at ncnproprietary ATMs in order to ensure compliance with the availability schedules, even though longer holds could apply with respect to similar deposits, i.e., nonlocal checks, made at a staffed teller facility. Thus, deposits of nonlocal checks at nonproprietary ATMs would be available for withdrawal 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 consumer banking service. Based on this research and analysis, the Board submitted two reports 2 to Congress that recommended that the Congress amend the Act to treat nonproprietary ATM deposits under the permanent schedule in the same manner as such deposits were treated under the temporary schedule; i.e., permit banks to make deposits at nonproprietary ATMs available for withdrawal as if they were nonlocal checks (not later than the fifth business day following the banking day of deposit). ATM networks and participating institutions also have made this recommendation to the Congress. On November 28,1990, the President signed into law the Cranston-Gonzales National Affordable Housing Act (Pub. L. 101-625; section 1001), which amended the Expedited Funds Availability Act to extend the schedules applicable to deposits at nonproprietary ATMs for a two-year period. The Board implemented and requested comment on interim rules to conform Regulation CC to this recent amendment 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 bank holding companies, and two corporations). Twenty-three commenters supported the amendments and one commenter opposed them as overly complicating Regulation CC. Most of the commenters restated the concerns discussed above that were raised previously by banks and by the Board to Congress. Sixteen commenters expressed concern that viable cost-1 1 The reports on nonproprietary ATMs were transmitted to Congress in October 1989 and July 1990. An earlier report submitted in October 1988 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 that would eliminate the processing limitations associated with nonproprietary ATM deposits would not be available by November 1992, when the special treatment for these deposits would expire. Thirteen commenters expressed concern about the increased potential for fraud, and twelve noted that banks would probably cease accepting deposits at nonproprietary ATM3 if a solution is not found within two years. One commenter noted that, if banks generally cease to accept nonproprietary ATM deposits after November 1992, the rule could have anti-competitive effects for small banks because larger banks with strong branch networks could continue to do business in a large area, whereas small banks without such extensive branching networks could not do so without nonproprietary ATM deposits. Eight commenters encouraged the Board to renew its request to Congress for a permanent statutory extension of the nonproprietary ATM availability schedules. The Board has reviewed the comments and adopted the interim rule with minor technical changes. Section 229.12 of Regulation CC sets forth the permanent availability schedule under which funds deposited in an account by local and nonlocal checks must be made available for withdrawal. A new § 229.12(f) has been added to provide a special rule for deposits made at nonproprietary ATMs. This rule does not apply to deposits made at proprietary ATMs. Section 229.12(f) provides that during the period from September 1,1990, through November 27,1992, a depositary bank may treat all deposits made by its customers at a nonproprietary ATM as though the deposits were nonlocal checks under the permanent 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 must be made available by the second business day following the banking day of deposit, and nonlocal checks deposited at a nonproprietary ATM must continue to be made available by the fifth business day following the banking day of deposit. The Board received two comments that addressed the regulatory language of § 229.12(f)(2)(i)(B). That section in the interim rule provided that after November 28,1992, checks described in § 229.10(c)(1) that normally receive nextday availability would receive secondday availability when deposited in nonproprietary ATMs. Section 2 229.10(c)(1) describes certain "on us” checks, the first $100 of the aggregate amount deposited on any one banking day, as well as government checks, cashier’s checks, and other types of checks that may pose a lower risk of return. One commenter 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 would never meet the conditions specified in § 229.10(c)(l)(vi) for next-day availability of cn-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 day’s deposit, as provided in § 229.10(c)(l)(vii). Accordingly, the Board has amended § 229.12(f) to exclude on-us checks from coverage and to include the first $100 of a day’s deposit. In addition, the Board has amended § 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 and therefore are technically not “described” in § 229.10(c)(1). The Board has also made revisions to the Commentary to explain the applicability of the “$100 rule.” The Board also has adopted amendments 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 were amended to add crossreferences to the new paragraph (f) and, for clarification purposes, crossreferences to other paragraphs as well. In addition, in paragraph (b), which lists the types of deposits that must be accorded second-day availability under the permanent schedule, the Board has removed the language, “a check drawn on the Treasury 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 8 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. their customers in their initial disclosures. Model Clause C-10, which nan 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 Commentary to appendix C and the Commentary to § 229.16. In addition, the list of model forms, clauses, and 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 must 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 requirement may be fulfilled by mailing Model C-10 prefaced with language indicating the effective date of the change. The Board received two comments regarding the specifics of the disclosure requirements of the interim rule. One commenter 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. Another commenter requested that the Board allow a standard 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 commenter argued that this option should be permissible under the Act because the shortened nonproprietary ATM schedules are a statutory change, not merely a bank policy change. The Board has not implemented the changes suggested by these commenters. The Board believes that most banks that want to place five-day holds on deposits at nonproprietary ATMs have already made the necessary disclosures based on the interim rule and that it is not necessary to provide a full model disclosure letter at this time. In addition, the Board has not provided that a standard disclosure at ATMs may replace individual disclosures. Section 605(c)(2) of the Act requires that a bank send written notice 30 days before implementing any changes that would lengthen the availability schedule for consumer accounts. That section of the Act Applies to policy changes stemming from changes in the statute as well as those made for other reasons. Section 553(d) of the Administrative Procedure Act (5 U.S.C. 553(d)) requires publication of a rule 30 days before its effective date 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 as of September 1,1990, as was the interim rule, rather than 30 days after publication. This effective date is necessary so that the regulation conforms to the statutory requirements, which were effective September 1,1990, and so that banks that permit their customers to make deposits at nonproprietary ATMs can rely on the Board’s regulation in providing availability in accordance with the amended requirement. There was no opportunity for the Board to publish the rule prior to the effective date of the amendment 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 September 1,1990, without regard for the 30-day period provided for in 5 U.S.C 553(d). PART 229—[AMENDED] 1. The authority citation for part 229 continues to read as follows: Authority: Title VI of Pub. L 100-80,101 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) and (b)(4), newly redesignated paragraph (b)(4) is revised, paragraph (c)(1) introductory text and the first and third sentences of paragraph (d) are revised, and a new paragraph (f) is added to read as follows: § 229.12 Permanent availability schedule. (a) Effective date. Except as provided in paragraph (f)(2) of this section, the permanent availability schedule contained in this section is effective September 1,1990. (b) Local checks and certain other checks. Except as provided in paragraphs (d), (e), and (f) of this section, a depository bank shall make funds deposited in an account by a check available for withdrawal not later than the second business day following the banking day on which funds are deposited, in the case of— a * * * * * Final Regulatory Flexibility Analysis Two of the three requirements of a final regulatory flexibility analysis (5 U.S.C. 604), (1) a succinct statement of the need for and the objectives of the rule and (2) a summary of the issues raised by the public comments, the agency’s assessment of the issues, and statement of the changes made in the final rule in response to the comments, are discussed above. The third requirement of a final regulatory flexibility analysis is a description of significant alternatives to the rule that would minimize the rule’s economic impact on small entities and reasons why the alternatives were rejected. The rule will apply to all depository institutions, regardless of size, as required by the amendments to the Expedited Funds Availability Act. The rule should not have a significant negative economic impact on small institutions, but rather will decrease the risk to all depositary banks by enabling them to impose longer holds on deposits made 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 part 229 is amended as follows: 3 (4) A check drawn on a Federal Reserve Bank or Federal Home Loan Bank: a check drawn 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 requirements of § 229.10(c). (c) Nonlocal 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 withdrawal not later than the fifth business day following the banking day on which funds are deposited, in the case of— * * * * * (d) Time period adjustment for withdrawal by cash or similar means. A depositary bank may extend by one business day the time that funds deposited in an account by one or more checks subject to paragraphs (b), (c), or (f) of this section are available for withdrawal by cash or similar means. * * * A depositary bank shall, however, make $400 of these funds available for withdrawal by cash or similar means not later than 5:00 p.m. on the business day on which the funds are available available until the fifth business day after the more deposits to the same account on the under paragraphs (b), (c), or (f) of this same day at another location, such as a day of your deposit. * * * section. * * * staffed teller station, the $100 rule is applied * * * * * Appendix E to Part 229—[Amended] to the aggregate of all deposits made on that (f) Deposits at nonproprietary ATMs. day. In this situation, the $100 rule is applied 4. Appendix E is amended as set forth (l)(i) A depositary bank shall make first to funds for which the $100 must be below: funds deposited in an account at a available for withdrawal on the next day a. In the Commentary to § 229.12, a (e.g., funds deposited at a staffed teller nonproprietary ATM by cash or check station) and then to funds deposited at available for withdrawal not later than new sentence is added to the end of paragraph (a), the second paragraph of nonproprietary ATMs for which the $100 the fifth business day following the must be made available for withdrawal on paragraph (b) is revised, and a new banking day on which the funds are the second day. For example, if a customer paragraph (f) is added to read as deposited. deposits a $75 nonlocal check at a staffed (ii) Paragraph (f)(1) of this section is follows: teller station and a $100 nonlocal check at a effective September 1,1990, through nonproprietary ATM on thq same banking Section 229.12 Permanent A vailability November 27,1992. day, $75 must be available for withdrawal on Schedule (2)(i) A depositary bank shall make the next business day (as required by (a) Effective date. * * * Paragraph (f) funds deposited in an account at a § 229.10(c)(l)(vii)) and an additional $25 must provides special effective dates for deposits nonproprietary ATM available for be available for withdrawal on the second made at nonproprietary ATMs. withdrawal not later than the second (b) Local checks and certain other checks. business day after the banking day of deposit (as required by this paragraph). Nonlocal business day following the banking day * * * * * checks deposited at a nonproprietary ATM on which the funds are deposited, in the In addition, the proceeds of Treasury after November 28,1992, must continue to be case of— checks and U.S. Postal Service money orders made available for withdrawal by the fifth (A) Cash; not subject to next-day (or second-day) business day following the banking day of (B) A check or checks described in availability under § 229.10(c); checks drawn deposit. § 229.10(c)(1) (i) through (v) and (vii), on Federal Reserve Banks and Federal Home b. In the Commentary to § 229.16, the even though the check or checks are not Loan Banks; checks drawn by a state or unit of general local government; and cashier's, first sentence of the seventh paragraph deposited in person to an employee of certified, and teller’s checks not subject to of paragraph (b) is revised to read as the depositary bank; and next-day (or second-day) availability under follows: (C) A check described in paragraph § 229.10(c) and payable in the same check (b) of this section. processing region as the depository bank, (ii) A depositary bank shall make Section 229.16 Specific A vailability Policy must be made available for withdrawal by funds deposited in an account by a Disclosure the second business day following deposit. * * * * * check described in paragraph (c) of this * * * * * section at a nonproprietary ATM (f) Deposits at nonproprietary A TMs. The (b) * * * * * * * available for withdrawal not later than Act and regulation provide a special rule for * the fifth business day following the deposits made at nonproprietary ATMs. This A bank taking advantage of the extended paragraph does not apply to deposits made at time period for making deposits at banking day on which the funds are proprietary ATMs. During the period from deposited. nonproprietary ATMs available for withdrawal under § 229.12(f)(1) must explain (iii) Paragraph (f)(2) of this section is September 1,1990 through November 27, 1992, all deposits at a nonproprietary ATM this in the initial disclosure. * * * effective November 28,1992. must be made available for withdrawal by * * * * * the fifth business day following the banking Appendix C to Part 229—[Amended] c. In the Commentary to Appendix C, day of deposit (i.e., such deposits may be 3. Appendix C is amended as set forth under the subheading “Model C-10,” the treated in the same manner as deposits of below: first sentence is revised to read as nonlocal checks under the permanent a. In the listing following the first schedule). For example, during that time follows: paragraph of Appendix C, the entry for period, a deposit made at a nonproprietary Model Clause C-10 is revised to read as ATM on a Monday, including any deposit by cash or checks that would otherwise be Appendix C.—Model Forms, Clauses, and follows: subject to next-day (or second-day) Notices * * * * * availability, must be made available for * * * * * C-10 Automated teller machine deposits (permanent schedule, extended hold) * * * * * withdrawal not later than Monday of the following week. Effective November 28,1992, deposits of b. In model clause C-10, the heading cash, “next-day” checks, and local checks at a nonproprietary ATM must be made and the first sentence under the available by the second business day subheading “Deposits at Automated following the banking day of deposit. In Teller Machines” are revised to read as addition, the first $100 of the aggregate follows: C-10—Automated Teller deposit at a nonproprietary ATM on any one Machine Deposits (Permanent Schedule, banking day must be made available for Extended Hold) withdrawal on the second business day after the banking day of deposit (rather than on the Deposits at Automated Teller Machines next day, as required by § 229.10(c)(l)(vii) for Funds from any deposits (cash or checks) deposits at staffed teller stations and made at automated teller machines (ATMs) proprietary ATMs). If a customer makes a we do not own or operate will not be deposit at a nonproprietary ATM and one or 4 Model C-10. This clause must 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 permitted by § 229.12(f)(1). * * * * * * * * By order of the Board of Governors of the Federal Reserve System, February 20,1991. William W. Wiles, Secretary of the Board. [FR Doc. 91-4460 Filed 2-25-91; 8:45 am] B'LLING CODE 6210-01-M
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