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FEDERAL RESERVE BANK
OF NEW YORK
[
Circular No. 10514
February 10, 1992
”1
J
REGULATION CC
Interim Rule on Extending Holds to “Next-Day” Availability Checks;
Proposed Amendment on ATM Deposits
Comment Invited by March 27
To A ll D epository Institutions, a n d O thers
Concerned, in the Second Federal R eserve D istrict:
Following is the text of the statement issued by the Board of Governors of the Federal Reserve
System:
The Federal Reserve Board has adopted amendments to Regulation CC as an interim rule and has
requested comment on other proposed changes to the regulation. The Regulation CC amendments im
plement provisions in the Federal Deposit Insurance Corporation Improvement Act of 1991 that amend
several provisions of the Expedited Funds Availability Act.
Comments are due by March 27, 1992.
The interim rule implements those provisions that would have an immediate effect on banks. Spe
cifically, the Board has adopted as an interim rule, and requests comment pending adoption of a final
rule, amendments to allow banks to extend holds, on an exception basis, to “next-day” availability checks
and to allow one-time notices of exception holds in certain cases.
The Board also has requested comment on proposed amendments to make permanent the current
availability schedules for deposits at nonproprietary automated teller machines and to expand adminis
trative enforcement to cover U.S. offices and branches of foreign banks.
Printed on the following pages is the text of the Board’s proposal on automated teller machines,
as published in the F e d e r a l R e g is te r of January 29. In addition, enclosed — for depository insti
tutions and those who maintain sets of Board regulations — is a copy of the Board’s interim rule,
effective January 15, on exception holds, also as published in the January 29th F e d e r a l R e g iste r.
Additional, single copies of this circular or of the interim rule may be obtained at this Bank (33
Liberty Street) in the Issues Division on the first floor, or by calling our Circulars Division (Tel.
No. 212-720-5215 or 5216).
Comments are invited on both the interim rule and the proposed amendment, and may be sent
to the Board, as indicated in the notices, or to our Check Function, b y M a r c h 2 7 , 1 9 9 2 .
E. G erald C o rr ig a n ,
P r e s id e n t.
1 u 514 4
FEDERAL RESERVE SYSTEM
b e lo w .1
12CFR Part 229
D e p o sits at N on p rop rietary A T M s
[Regulation CC; Docket No. R-0745]
Availability of Funds and Collection of
Checks
AGENCY: B oard o f G overn ors o f the
F ed eral R e se r v e S ystem .
ACTION: Proposed rule.
SUMMARY: T he B oard is p rop osin g to
am en d R egu lation CC to con form to
recen t a m en d m en ts to the E x p ed ited
F unds A v a ila b ility A ct. T he p ro p o sed
a m en d m en ts m ak e p erm an en t the
current a v a ila b ility sc h e d u le s for
d e p o sits at nonprop rietary a u to m a ted
teller m a c h in e s an d e x p a n d
a d m in istra tiv e en fo rcem en t to c o v e r
U .S. o ffic e s and b ra n ch es o f foreign
b an k s.
OATES: C om m en ts m ust b e su b m itted on
or b efo re M arch 2 7 ,1992.
ADDRESSES: C om m en ts, w h ich sh ou ld
refer to D o ck et N o. R -0745, m ay b e
m a iled to the B oard o f G overn ors o f the
F ed eral R e se r v e S ystem , 20th an d C
S treets, N W ., W a sh in g to n , DC 20551,
A tten tion : Mr. W illia m W . W ile s,
Secretary; or m a y b e d e liv e r e d to the
B oard's m ail room b e tw e e n 9 a.m . an d 5
p.m. A ll co m m e n ts r e c e iv e d at the a b o v e
a d d r e ss w ill b e in clu d ed in the p u b lic
file a n d m a y b e in s p e c te d at R oom B 1122 b e tw e e n 9 a.m . an d 5 p.m.
C urrently, un d er § 229.12(f)(1) o f
R egu lation CC, a d e p o sito r y b an k m ay
treat a ll d e p o sits m a d e b y its c u sto m ers
at a n on p rop rietary A T M 12 a s though the
d e p o sits w e r e n o n lo c a l c h e c k s un d er the
p erm an en t sc h e d u le , i.e., m a k e them
a v a ila b le b y th e fifth b u sin e ss d a y after
the d a y o f d e p o sit. T h is sp e c ia l
treatm en t w a s a c c o r d e d d e p o sits m ad e
at n on p rop rietary A T M s b e c a u s e the
d e p o sito r y b an k c a n n o t a sc e r ta in the
c o m p o sitio n o f th e s e d e p o sits (i.e.,
w h e th e r the d e p o sit c o n s is ts o f cash ,
c h e c k s g e n e r a lly su b ject to n e x t-d a y
a v a ila b ility , or lo c a l or n o n lo c a l ch eck s).
E ffectiv e N o v em b er 28,1 9 9 2 , h o w ev er,
§ 229.12(f)(2) req u ires d e p o sits o f cash ,
" n ext-day" (as d e sc r ib e d in
§ 229.10(c)(l)(i) through (v) and (vii)),
an d lo c a l and oth er c h e c k s (as d escrib ed
in § 229.12(b)) at a n onproprietary A TM
to b e m a d e a v a ila b le b y the se c o n d
b u sin e ss d a y fo llo w in g the b an k in g d ay
o f d ep o sit. N o n lo c a l ch e c k s d e p o site d at
a n onproprietary A TM w o u ld con tin u e
to b e m ad e a v a ila b le by the fifth
b u sin e ss d a y fo llo w in g the b an k in g d ay
o f d e p o sit.3
D ep o sito ry in stitu tio n s and A TM
op erators h a v e r a ised co n cern s w ith
C on gress an d the B oard ab ou t the
o p era tio n a l p rob lem s and p o ten tia l for
fraud under the shorter sc h e d u le s for
n onproprietary A TM d e p o sits. In tw o
rep orts to C on gress on the
im p lem en ta tio n o f the A ct an d tw o
reports sp e c ific a lly d isc u ssin g d e p o sits
to nonp rop rietary A T M s,4 the B oard
su m m arized th e se co n cern s and
reco m m en d ed that C on gress am en d the
A c t to p rovid e fifth -d ay a v a ila b ility for
a ll d e p o sits at n onproprietary A T M s on
a p erm an en t b a sis.
T he FDICIA a m en d m en ts to se c tio n
603(e) o f the A c t elim in a te the shorter
h o ld s for d e p o sits at n onproprietary
A T M s th at w e r e sc h e d u le d to tak e e ffect
in N o v em b er 1992 a n d e x te n d the
current 5-d ay h o ld p erm an en tly. T he
B oard is p rop osin g am en d m en ts to
§ § 229.12 (a) an d (f) o f the regu lation
an d r e v is io n s to the C om m entary to
reflect th e se ch a n g es.
A d m in istra tiv e E n forcem en t
T itle II, S u b title A o f the FDICIA
in c r e a s e s the su p ervisory
r e sp o n sib ilitie s o f U.S. b an k in g
regu latory a g e n c ie s o v er U.S. o ffic e s an d
b ra n ch es o f foreign b a n k s. S e c tio n
212(h) o f the FDICIA m a k e s conform ing
c h a n g e s to the ad m in istra tiv e
en fo rcem en t p r o v isio n s in se c tio n 610(a)
o f the A ct. T h e se a m en d m en ts w ere
e ffe c tiv e D ec e m b e r 1 9 ,1 9 9 1 . T he B oard
is p rop osin g con form in g a m en d m en ts to
§ 229.3(a) o f R egu lation CC. (U.S.
b ra n ch es an d a g e n c ie s o f foreign b a n k s
are a lrea d y su b ject to the su b sta n tiv e
req u irem en ts o f the A ct an d R egu lation
CC,)
Initial R egu latory F lex ib ility A n a ly sis
T he R egu latory F le x ib ility A c t (5
req u ires an a g e n c y to
p u b lish a n in itia l regu latory fle x ib ility
a n a ly s is w ith a n y n o tic e o f p rop osin g
rulem aking. T w o o f the req u irem en ts o f
an in itial regu latory fle x ib ility a n a ly s is
(5 U.S.C. 603(b))— a d escrip tio n o f the
FOR FURTHER INFORMATION CONTACT:
r e a so n s w h y the a c tio n b y the a g e n c y is
L ou ise L. R o sem an , A ss is ta n t D irector,
b ein g c o n sid e r e d an d a sta te m e n t o f the
D iv isio n o f R e se r v e Bank O p era tio n s
o b je c tiv e s of, an d leg a l b a s is for, the
an d P aym en t S y ste m s (202/452-3874);
p r o p o se d rule— are c o n ta in e d in the
O liv er Ireland, A s s o c ia te G en eral
su p p lem en ta ry in form ation a b o v e . T he
C o u n sel (202/452-3625), or S tep h a n ie
B oard 's p ro p o sed rule req u ires no
M artin, S en io r A tto rn ey (202/452-3198),
a d d itio n a l reporting or record k eep in g
Legal D iv isio n . For the h earin g im p aired
req u irem en ts, nor are there r ele v a n t
only: T ele c o m m u n ic a tio n s D e v ic e for
fed era l ru les that d u p licate, o verlap , or
1 Section 225 of the FDICIA am ends section 604 of
the D eaf, D oroth ea T h o m p so n (2 0 2 /4 5 2 c o n flic t w ith th e p r o p o se d rule.
the
Act
regarding
exception
holds
for
“n
ext
day"
3544).
A n o th er req u irem en t for th e in itial
a nd "second-day" availability checks a nd one-tim e
SUPPLEMENTARY INFORMATION: The
exception hold notices. To allow depository
regulatory fle x ib ility a n a ly s is is a
institutions
to
avail
them
selves
of
these
changes
F ed eral D e p o sit In su ran ce C orporation
d escrip tio n of, a n d w h e r e fe a s ib le , an
im m ediately, the B oard has adopted interim
Im p rovem en t A c t o f 1991 ("FDICIA,”
estim a te o f the n u m b er o f sm a ll e n titie s
am endm ents to Regulation CC and has requested
P ublic L aw 1 0 2 -2 4 2 ,1 0 5 Stat. 2236
com m ent pending a final rule. See D ocket R-0744,
to w h ic h th e p r o p o se d rule sh a ll ap p ly.
(1991)) a m e n d s th e E x p ed ited Funds
elsew here in tod ay 's F e d e r a l R e g is te r .
T h e p ro p o sed rule w ill ap p ly to all
* A nonproprietary ATM generally is an ATM that
A v a ila b ility A c t ("A ct") (12 U .S.C . 4001
d e p o sito r y in stitu tio n s, re g a r d le ss o f
is
not
ow
ned
or
o
perated
by
the
depository
bank.
et seq .), e ffe c tiv e D e c e m b e r 1 9 ,1 9 9 1 .
siz e , a s required b y the am en d m en ts to
3 The effective d a te for the shorter schedules for
S e c tio n 227 o f the FDICIA a m e n d s
the E x p e d ite d F u n d s A v a ila b ility A ct.
nonproprietary ATM deposits w as extended from
se c tio n 603(e) o f th e A c t regarding
T h e rule sh o u ld n o t h a v e a n e g a tiv e
A ugust 31.1990, to N ovem ber 28,1992, by the
d e p o sits at n on p rop rietary a u to m a ted
C ranston-G onzales N ational A ffordable Housing
econ om ic; im p act on sm a ll in stitu tio n s,
teller m a c h in e s (" A T M s”). S e c tio n
A ct of 1990 (Pub. L. No. 101-825: i 1001). The Board
but rather w ill d e c r e a s e th e risk an d
adopted conforming am endm ents to Regulation CC
212(h) o f th e FDICIA a m e n d s se c tio n
c o st for a ll d e p o sita r y b a n k s b y
at
that
time.
See
55
FR
50818,
D
ecem
ber
11,1990.
610(a) o f th e A c t to p ro v id e for
elim in a tin g .th e req u irem en t for shorter
(interim rule) and 58 FR 7799, February 26,1991
a d m in istra tiv e e n fo r c e m e n t o v e r U .S.
(final rule).
h o ld s o n d e p o s its m a d e ’to
b r a n c h e s an d a g e n c ie s o f foreign b a n k s.
*See. Board of G overnors of the Federal Reserve n on p rop rietary A T M s after N o v e m b e r
System , Report to Congress Under the Expedited
T he B oard is r eq u estin g co m m en t on
2 7 .1 9 9 2 .
p ro p o sed a m e n d m e n ts to R egu lation CC Funds Availability Act. Septem ber 1991 and M arch
1990, and Deposits at Nonproprietary Automated
List o f Subjects in 12 C FR Part 229
(12 CFR part 229) an d r e v is io n s to the
Teller Machines: Report to Congress Pursuant to
C om m en tary to im p lem en t the
the Expedited Funds Availability Act, O ctober 1989
Banks, baiiking, Federal Reserve
and July 1990.
a m e n d m e n ts to th e A ct, a s d e sc r ib e d
Systems.
2
U.S.C. 601-612)
*
105X4
For the r e a so n s se t out in the
p ream b le, 12 CFR part 229 is a m en d ed
a s fo llo w s:
PART 229— [AMENDED]
than m em b ers o f the F ed eral R eserv e
S y stem ) an d in su red S ta te b ra n ch es o f
foreign b a n k s, b y the B oard o f D irectors
o f the F ed eral D e p o sit In su ran ce
C orporation:
Appendix E— Commentary
*
*
*
*
*
§ 229.12
*
-*
Perm anent A v a ila b ility Schedule
*
*
*
(f) D eposits at nonproprietary A TM s. The
1. T he auth ority c ita tio n for part 229
Act and regulation provide a special rule for
co n tin u e s to rea d a s fo llo w s:
T he term s u se d in p aragraph (a)(1) o f
deposits made at nonproprietary ATMs. This
this se c tio n that are n o t d e fin e d in this
paragraph does not apply to deposits made at
Authority: Title Vi of Public Law 100-86.
part or o th e r w is e d e fin e d in se c tio n 3(s)
101 Stat. 552, 635.12 U.S.C. 4001 e t seq.
proprietary ATMs. All deposits at a
o f the F ed eral D e p o sit In su ran ce A c t (12 nonproprietary ATM must be made available
2. In § 229.3, paragraph (a)(1) is
for withdrawal by the fifth business day
U .S.C. 1813(s)) sh a ll h a v e the m ean in g
r e v ise d a n d co n clu d in g tex t to
following the banking day of deposit (i.e..
g iv en to them in se c tio n 1(b) o f the
paragraph (a) is a d d ed after paragraph
such deposits may be treated in the same
In tern ation al B anking A c t o f 1978 (12
(a)(3) to read a s fo llo w s:
manner as deposits of nonlocal checks under
U .S.C. 3101).
the permanent schedule). For example, a
*
*
*
*
*
§ 229.3 Administrative enforcement.
deposit made at a nonproprietary ATM on a
(a) * * *
3.
In § 229.12, p aragraph (a) is r e v ise dMonday, including any deposit by cash or
(1) S e c tio n 8 o f the F ed eral D ep o sit
a s fo llo w s, p aragrap h s (f)(l)(ii) an d (f)(2) checks that would otherwise be subject to
Insurance A c t (12 U .S.C . 1818 et seq.) in are rem oved , an d th e d e sig n a tio n
next-day (or second-day) availability, must
the c a s e o f—
be made available for withdrawal not later
“(l)(i)*' in paragraph (f) is rem oved:
than Monday of the following week. The
(i) N a tio n a l b an k s, an d F ed eral
provisions of § 229.10(c)(l)(vii) requiring a
b ran ch es an d F ed eral a g e n c ie s o f
§ 229.12 Permanent availability schedule.
depositary' bank to make up to $100 of an
foreign b a n k s, b y the O ffice o f the
(a) Effective date. T h e p erm an en t
aggregate daily deposit available for
C om ptroller o f the C urrency;
a v a ila b ility sc h e d u le c o n ta in e d in th is
withdrawal on the next business day after
(ii) M em b er b a n k s o f the F ed eral
se c tio n is e ffe c tiv e S ep tem b er 1 ,1 9 9 0 .
the banking day of deposit do not apply to
R eserv e S y ste m (oth er th an n a tio n a l
deposits to a nonproprietary ATM.
ban k s), an d o ffic e s, b ra n ch es, and
a g e n c ie s o f foreign b a n k s lo c a te d in the
U n ited S ta te s (other th an F ed eral
b ran ch es, F ed eral a g e n c ie s , and insured
S ta te b r a n c h e s o f foreign b an k s), b y the
Board: and
(iii) B an k s in su red b y the F ederal
D e p o sit In su ran ce C orporation (other
•
Appendix E to Part 229— [Amended]
*
•
*
*
By order of the Board of Governors of the
Federal Reserve System, January 15,1992.
4.
A p p e n d ix E to part 229 is a m en d ed ,
William W. Wiles,
in the C om m en tary u n d er § 229.12, b y
Secretary o f the Board.
rem ovin g th e la s t s e n te n c e o f paragraph
[FR Doc. 92-1475 Filed 1-28-92: 8:45 am|
(a) an d re v isin g paragraph (f) to read a s
BILLING CO PE 8210-01-M
fo llo w s:
3
10514 1
FEDERAL RESERVE SYSTEM
12 CFR Part 229
[Regulation
CC; Docket No. R-0744]
Availability of Funds and Coflection of
Checks
AGENCY: Board of Governors of the
Federal Reserve System.
a c t io n : Interim rule with request for
comment.
SUMMARY: The Board is amendment
regulation CC to conform to recent
amendments to the Expedited Funds
Availability Act. The amendments allow
banks to extend holds, on an exception
basis, to “next-day” and “second-day”
availability checks and allow one-time
notices of exception holds in certain
cases. The Board has adopted
conforming changes to regulation CC on
an interim basis. The Board is
requesting comment on the interim rule
pending adoption of a final rule and on
whether there are classes of consumer
accounts for which one-time notice
should be permitted.
DATES: Effective date: January 15,1992.
Comment date: Comments must be
submitted on or before March 27,1992.
ADDRESSES: Comments, which should
refer to Docket No. R-0744, may be
mailed to the Board of Governors of the
Federal Reserve System, 20th and C
Streets, NW., Washington, DC 20551,
attention: Mr. William W. Wiles,
Secretary; or may be delivered to the
Board’s mail room between 9 a.m. and 5
p.m. All comments received at the above
address will be included in the public
file and may be inspected at room B1122 between 9 a.m. and 5 p.m.
FOR FURTHER INFORMATION CONTACT:
Louise L. Roseman, Assistant Director,
Division of Reserve Bank Operations
and Payment Systems (202/452-3874);
Oliver Ireland, Associate General
Counsel (202/452-3625), or Stephanie
Martin, Senior Attorney (202/452-3198),
Legal Division. For information
regarding modifications to Model Forms
or appendix C, contact Jane E. Ahrens,
Staff Attorney (202/452-3667), or Dale I.
Nishimura, Staff Attorney (202/4522412), Division of Consumer and
Community Affairs. For the hearing
impaired only: Telecommunications
Device for the Deaf, Dorothea
Thompson (202/452-3544).
SUPPLEMENTARY INFORMATION: The
Federal Deposit Insurance Corporation
Improvement Act of 1991 (“FDICLA,”
Pub. L. No. 102-242, section 225,105 Stat.
2236 (1991)) amends the provisions in
section 604 of the Expedited Funds
Availability Act (“Act”) (12 U.S.C. 4003)
regarding safeguard exceptions to the
availability schedules, effective
December 19,1991. The Board has
adopted interim amendments to
regulation CC (12 CFR part 229),
effective January 15,1992, to conform
the regulation to the amendments to the
Act. The Board is requesting comment
on the interim amendments and
Commentary revisions, which are
described below.1
account that has been repeatedly
overdrawn, checks the depositary bank
may reasonably expect to be
uncollectible, and checks deposited
during emergency conditions, such as a
computer failure, natural disaster, or
other emergency beyond the bank’s
control.
Background
The Board adopted regulation CC to
implement the Act, which was effective
September 1,1988. Among other things,
the regulation establishes availability
schedules to limit the holds banks 12 can
place on deposits to transaction
accounts and requires banks to disclose
their funds availability policy to their
customers.
As a general matter, the availability of
a deposit is linked to the degree of risk
associated with the deposit and the
amount of time necessary for a bank to
learn whether a deposited check will be
returned unpaid. Accordingly, nonlocal 3
checks must generally be made
available for withdrawal on the fifth
business day after deposit, local checks
on the second business day, and certain
“low-risk” checks, such as government,
cashier’s, certified, and teller’s checks,
on the next business day. (Most “nextday” checks, if not deposited in person
at a staffed teller facility, must be made
available for withdrawal on the second
business day after deposit.)
The Act (section 604) and the
regulation (§ 229.13) provide for certain
safeguard exceptions to the availability
schedules. Under these exceptions, the
depositary bank can extend the hold on
a deposit for a reasonable period of
time. The exception holds apply to
deposits to new accounts, daily
aggregate deposits in excess of $5,000,
checks that have returned unpaid and
redeposited, checks deposited into an
Prior to the enactment of the FDICIA,
most of the exception holds did not
apply to checks that must be accorded
next-day or second-day availability
under section 603(a)(2) of the Act and
§ 229.10(c) of the regulation, such as
government, cashier’s, certified, and
teller’s checks. In three reports to
Congress on the implementation of the
Act, the Board expressed concern that
the inapplicability of the exception
holds to next-day and second-day
checks exposed depositary banks to
substantial risk that such checks would
be returned after the proceeds had been
made available for withdrawal.4 The
Board noted that fraud loss reduction
would benefit depository institutions as
well as their customers, who otherwise
may face increased service fees or
decreased service levels.
Section 225 of the FDICIA amends
section 604 of the Act to authorize the
Board to prescribe regulations to apply
most of the safeguard exception holds to
checks that would otherwise receive
next-day or second-day availability
under section 603(a)(2) of the Act and
§ 229.10(c) of Regulation CC. The Board
is adopting amendments to the
regulation that will make the exceptions
for large deposits (§ 229.13(b)),
redeposited checks (§ 229.13(c)),
accounts with repeated overdrafts
(§ 229.13(d)), and emergency conditions
(§ 229.13(f)) available for checks
otherwise covered by § 229.10(c). In
addition, the amendment will make the
reasonable cause exception
(§ 229.13(e)), which previously had
applied to local and nonlocal checks
and only certain next-day or second-day
checks (i.e., checks drawn on Federal
Reserve Banks or Federal Home Loan
Banks and cashier’s, certified, and
teller’s checks), available for all checks
covered by § 229.10(c). The Board is
revising the corresponding Commentary
to reflect the broader scope of the
exception holds.
The Board is also amending
§ 229.13(h), which governs the
1 Section 227 of the FDICIA am ends section 603(e)
of the A ct to elim inate the shorter availability
schedules for deposits a t nonproprietary ATM s that
w ere to be effective N ovem ber 28,1992. Section
212(h) of the FDICIA am ends the adm inistrative
enforcem ent provisions in section 610(a) of the Act.
The B oard is requesting com m ent on am endm ents to
regulation CC to im plem ent these changes (see
D ocket R-0745, elsew here in to d a y ’s Federal
Register). The proposed am endm ents regarding
nonproprietary ATM deposits a nd adm inistrative
enforcem ent are not p art of the interim rule adopted
by the B oard in this docket.
2 For purposes of regulation CC, the term "bank"
includes com m ercial banks, savings institutions,
and credit unions.
3 A check generally is “local" if the ban k by
which it is payable a n d to w hich it is sent for
collection ("paying b a n k ”) is in the sam e F ederal
Reserve check processing region a s the ban k that
receives the check for deposit (“depositary bank").
2
Applicability of Exception Holds to
“Next-Day” and “Second-Day” Checks
* See, Board of G overnors of the Federal R eserve
System , Report to C ongress U nder the E xpedited
Funds A vailability Act, Septem ber 1991, M arch
1990. a nd June 1989.
10514 '
availability of deposits subject to the
exception holds. The Board’s
amendments provide that, with respect
to Treasury checks, U.S. Postal Service
money orders, checks drawn on Federal
Reserve Banks or Federal Home Loan
Banks, state and local government
checks, and cashier’s, certified, and
teller’s checks subject to the next-day
(or second-day) availability
requirement, the depositary bank may
extend the time funds must be made
available for withdrawal under the large
deposit, redeposited check, repeated
overdraft, or reasonable cause
exception by a reasonable period
beyond the delay that would have been
permitted under the regulation had the
checks not been subject to the next-day
(or second-day) availability
requirement The additional hold is
added to the local or nonlocal schedule
that would apply based on the location
of the paying bank. For on us checks
that must be available on the next
business day after the banking day of
deposit under § 229.10{c)(l)(vi), the
additional hold of one business day is
added to the next-day requirement.
One-Time Hold Notices
Prior to the enactment of the FDICIA.
section 604(f) of the Act and § 229.13(g)
of the regulation provided that each time
a depositary bank invoked an exception
of the availability schedules under
§ 229.13 (b) through (f) of the regulation
(the large deposit, redeposited check,
repeated overdraft, reasonable cause,
and emergency conditions exceptions,
respectively), it had to notify the
customer of the exception hold. Section
229.13(g) required that the exception
hold notice be given at the time of the
deposit or by the first business day
following the day the facts upon which
the exception hold is based become
known to the depositary bank.
Although individual notices may be
appropriate in the case of the
reasonable cause or emergency
conditions exceptions, which must be
invoked on a case-by-case basis, they
are less appropriate for the large
deposit, redeposited check, or repeated
overdraft exceptions. In these latter
cases, it would be more efficient and
less costly to depositary banks if the
notice requirement could be tailored to
the exception invoked. Customers would
also benefit from receiving advance
notice of any exception holds that will
be in effect under certain conditions or
for a certain period of time, rather than
receiving on-the-spot or after-the-fact
notices upon each deposit. In its three
reports to Congress regarding
implementation of the Act, cited above,
the Board recommended that the Act be
amended to provide banks with greater
flexibility in giving notices of exception
holds.
Section 225 of the FDICIA amends
section 604(f) of the Act to authorize the
Board to prescribe regulations to allow
the depositary bank, in certain cases, to
send one notice of an exception hold
applicable to a customer’s future
deposits rather than sending a separate
notice for each deposit. The
amendments to section 604(f) set out
two types of one-time notices and the
circumstances under which they apply,
as follows:
Under the Board's interim
amendment, consumer account-holders
must continue to receive large deposit
and redeposited check exception hold
notices upon each deposit to which the
exception is applied. The amendment to
section 604(f) of the Act authorizes the
Board to apply the one-time notice
provision for the large deposit and
redeposited check exceptions to classes
of consumer accounts that generally
have a large number of such deposits.
The Board requests comment on
whether the one-time notice provision
for these types of exceptions should be
1. Large D e p o sit a n d R e d e p o site d C heck extended to certain classes of consumer
accounts, and if so, how those classes of
E xception H o ld N o tic e s
accounts should be categorized.
Sections 229.13(b) and (c) of the
Specifically, the Board requests
regulation provide that a depositary
comment on the following questions:
bank may apply exception holds to
i. Are there classes of consumer
aggregate daily deposits of checks in
accounts, such as high balance
excess of $5,000 and to deposits of
accounts, that would generally have a
checks that have been returned unpaid large number of daily aggregate deposits
and redeposited. Under the amendments of checks in excess of $5,000?
to section 604(f) of the Act, if a
ii. What is a proper measurement of a
depositary bank applies the large
“large
number” of large deposits or
deposit or redeposited check exception
to nonconsumer accounts, it may give its redeposited checks, and over what
nonconsumer customers a single notice period of time should such a
measurement be taken?
at or prior to the time notice must
iii. Would it be operationally feasible
otherwise be given. The Board has
for depositary banks to monitor deposits
adopted interim amendments to
to consumer accounts to determine
§ 229.13(g) and revisions to the
which accounts have a large number of
Commentary to implement these
daily aggregate deposits of checks in
amendments to the Act.
excess of $5,000 or a large number of
As provided in the interim
deposits of redeposited checks?
amendments to § 229.13(g)(2) adopted
by the Board, the one-time notice for the 2. R e p e a te d O ve rd ra ft E xception H old
large deposit and redeposited check
N o tice
exceptions must explain the reason the
Section 229.13(d) of the regulation
exception(s) may be invoked and the
provides that a depositary bank may, for
time period within which deposits
a six-month period, apply longer holds
subject to the exception(s) would be
to deposits to an account that has been
available for withdrawal. The notice
repeatedly overdrawn. Under
should reflect the bank's priorities in
§ 229.13(d), an account is repeatedly
placing exception holds on deposits
overdrawn if it is overdrawn on six or
consisting of different types of checks,
more banking days within the preceding
such as next-day, local, and nonlocal
six months or is overdrawn by $5,000 or
checks.
A depositary bank may provide a one more on two or more banking days
time notice to a nonconsumer customer within the preceding six months.
under § 229.13(g)(2) only if each
Section 229.13(g) of the regulation
exception cited in the notice (the large
provides that, when invoking the
deposit and/or the redeposited check
repeated overdraft exception, a
exception) will be invoked for most
depositary bank must provide a notice
check deposits to the customer’s account to the customer upon each deposit.
to which the exception could apply. The Under the amendments to section 604(f)
Board has adopted Model Notice C-13B, of the Act, if an account (either
which may be used by those banks that consumer or nonconsumer) is subject to
want to provide a one-time notice of
the repeated overdraft exception, the
these exception holds to their
depositary bank may provide one notice
nonconsumer customers. A depositary
to its customer for each time period
bank may continue to send hold notices during which the exception will apply,
for each deposit subject to the large
rather than giving a notice upon each
deposit or redeposited check exception deposit during that time period. The
in accordance with § 229.13(g)(1) (see
Board has adopted interim amendments
Model Notice C-13).
to § 229.13(g) and revisions to the
3
10514
Commentary to implement the
amendments to the Act.
Section 229.13(g)(3) of the interim
amendment provides that the one-time
repeated overdraft notice must state the
customer’s account number, the fact that
the exception was invoked under the
repeated overdraft exception, the time
period within which deposits subject to
the exception will be made available for
withdrawal and the time period during
which the exception will apply. A
depositary bank may provide a one-time
notice to a customer under § 229.13(g)(3)
only if the repeated overdraft exception
will be invoked for most check deposits
to the customer's account. A depositary
bank may send a notice, such as that
contained in Model Notice C-13C, to its
customer at the start of each period for
which the repeated overdraft exception
will be in effect.
Amendment
The Board believes that it is
necessary to amend the regulation with
an interim amendment, so that
depositary banks may take immediate
advantage of the new provisions
regarding exception holds and hold
notices without violating the regulation.
The provisions of the FDICIA reflect the
intent of the Congress to reduce risk and
cost for banks by broadening the scope
of the exception holds and providing the
one-time notice requirement in certain
cases. If the Board's rule is not effective
immediately, banks would not be able to
take advantage of the FDICIA
amendments because attempting to
apply the broader statutory hold
provisions would result in violation of
Regulation CC and attendant potential
civil liability.
There was no opportunity for the
Board to publish proposed regulations
for comment prior to the enactment of
the FDICIA amendments to the Act,
which were effective December 19,1991.
Accordingly, the Board, for good cause,
finds that the notice and public
comment procedure normally required is
impractical and contrary to the public
interest under 5 U.S.C. 553(b)(B). The
Board further finds that, for the same
reasons, there is good cause under 5
U.S.C. 553(d)(3) to make the interim
amendment effective on January 15,1992
without regard for the 30-day period
provided for in U.S.C 553(d).
N e e d for Interim
Initial Regulatory Flexibility Analysis
The Regulatory Flexibility Act (5
U.S.C. 601-612) requires an agency to
publish an initial regulatory flexibility
analysis with any notice of proposed
rulemaking. Two of the requirements of
an initial regulatory flexibility analysis
(5 U.S.C. 603(b))—a description of the
reasons why the action by the agency is
being considered and a statement of the
objectives of, and legal basis for, the
proposed rule—are contained in the
supplementary information above. The
Board's interim rule requires no
additional reporting or recordkeeping
requirements, nor are there relevant
federal rules that duplicate, overlap, or
conflict with the proposed rule.
Another requirement for the initial
regulatory flexibility analysis is a
description of, and where feasible, an
estimate of the number of small entities
to which the proposed rule shall apply.
The interim 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 negative
economic impact on small institutions,
but rather will decrease the risk and
cost for all depositary banks by
broadening the scope of the exception
holds and providing the one-time notice
requirement in certain cases.
List of Subjects in 12 CFR Part 229
Banks, banking, Federal Reserve
System.
For the reasons set out in the
preamble, 12 CFR part 229 is amended
as follows:
PART 229—[AMENDED]
1. The authority citation for part 229
continues to read as follows:
Authority: T itle V I of Pub. L. 100-86,101
Stat. 552,835.12 U.S.C. 4001 e t seq.
2. In § 229,13, the term “229.10(c)," is
added immediately preceding the term
“229.11" in paragraphs (b), (c)
introductory text, (d) introductory text,
(f) introductory text, (h)(1), and (h)(3);
the first sen ten ce o f paragraph (e)(1),
paragraph (g)(1) introductory text and
(i), paragraph (h)(2), and the first
sen ten ce of paragraph (h)(4) are revised;
paragraphs (g)(1) (ii) through (v) are
removed; paragraphs (g)(2) heading,
(g) (2)(i). (g)(2)(ii), and (g)(3) are
redesignated as paragraphs (g)(1)(h)
heading. (g)(l)(ii)(A), (g)(l)(ii)(B). and
(g)(4), respectively; in newly designated
paragraph (g)(l)(ii)(B), the reference
“paragraph (g)(2)(i)" is revised to read
“paragraph (g)(l)(ii)(A)"; and new
paragraphs (g)(2) and (g)(3) are added to
read as follows:
§ 229.13
★
*
Exceptions.
*
*
*
(e) R ea so n a b le ca u se to do ub t
c o lle c tib ility —(1) In gen eral. Sections
229.10(c), 229.11, and 229.12 do not apply
to a check deposited in an account at a
depositary bank if the depositary bank
has reasonable cause to believe that the
4
4
check is uncollectible from the paying
bank.* * *
*
*
*
*
*
(g) N o tic e o f ex c ep tio n —(1) In
gen eral. Subject to paragraphs (g)(2) and
(g)(3) of this section, when a depositary
bank extends the time when funds will
be available for withdrawal based on
the application of an exception
contained in paragraphs (b) through (f)
of this section, it must provide the
depositor with a written notice.
(1) The notice shall include the
following information—
(A) The account number of the
customer;
(B) The date and amount of the
deposit;
(C) The amount of the deposit that is
being delayed;
(D) The reason the exception was
invoked; and
(E) The time period within which the
funds will be available for withdrawal,
unless the emergency conditions
exception in paragraph (f) of this section
has been invoked, and the depositary
bank, in good faith, does not know the
duration of the emergency and,
consequently, when the funds must be
made available at the time the notice
must be given.
*
*
*
*
*
(2) O n e-tim e excep tio n notice. In lieu
of providing notice pursuant to
paragraph (g)(1) of this section, a
depositary bank that extends the time
when the funds deposited in a
nonconsumer account will be available
for withdrawal based on an exception
contained in paragraph (b) or (c) of this
section may provide a single notice to
the customer that includes the following
information—
(i) The reason(s) the exception may be
invoked; and
(ii) The time period within which
deposits subject to the exception will be
available for withdrawal.
This one-time notice shall be provided
only if each type of exception cited in
the notice will be invoked for most
check deposits in the account to which
the exception could apply. This notice
shall be provided at or prior to the time
notice must be provided under
paragraph (g)(l)(ii) of this section.
(3) N o tic e o f re p e a te d o verdrafts
ex cep tio n . In lieu of providing notice
pursuant to paragraph (g)(1) of this
section, a depositary bank that extends
the time when funds deposited in an
account will be available for withdrawal
based on the exception contained in
paragraph (d) of this section may
provide a notice to the customer for
each time period during which the
10514
exception will be in effect. The notice
C-13B One-time notice for large deposit and
redeposited check exception holds
shall include the following
C-13C One-time notice for repeated
information—
overdraft exception holds
(1) The account number of the
*
*
*
*
*
customer;
(ii) The fact that the availability of
M odel N otices
funds deposited in the customer’s
*
*
*
*
*
account will be delayed because the
C-13B— One-Time Notice for Large Deposit
repeated overdrafts exception will be
and Redeposited Check Exception Holds
invoked;
(iii) The time period within which
Notice of Hold
deposits subject to the exception will be
If you deposit into your account:
available for withdrawal; and
• Checks totaling more than $5,000 on any
(iv) The time period during which the one day, the first $5,000 deposited on any one
exception will apply.
banking day will be available to you
This notice shall be provided at or prior according to our general policy. The am ount
in excess of $5,000 will generally be available
to the time notice must be provided
under paragraph (g)(l)(ii) of this section on the [number] business day for checks
draw n on [bank], the [number] business day
and only if the exception cited in the
for local checks and [number] business day
notice will be invoked for most check
for nonlocal checks after the day of your
deposits in the account
deposit. If checks (not draw n on us) that
* * * * *
otherw ise w ould receive next-day
(h)
Availability of deposits subject toavailability exceed $5,000, the excess will be
treated as either local or nonlocal checks
exceptions.
*
*
*
*
*
(2) If a depositary bank invokes an
exception contained in paragraphs (b)
through (e) of this section with respect
to a check described in § 229.10(c)(1) (i)
through (v) or § 229.10(c)(2), it shall
make the funds available for withdrawal
not later than a reasonable period after
the day the funds would have been
required to be made available had the
check been subject to § § 229.11 or
229.12.
*
*
*
*
*
(4)
For the purposes of paragraphs
(h)(1), (h)(2), and (h)(3) of this section, a
reasonable period is an extension of up
to one business day for checks subject
to § 229.10(c)(l)(vi), five business days
for checks subject to § 229.12(b) and
checks that would be subject to
§ 229.12(b) under in paragraph (h)(2) of
this section, and six business days for
checks subject to § 229.12(c) and checks
that would be subject to § 229.12(c)
under paragraph (h)(2) of this section.
last sentence of the second paragraph is
removed; in paragraph (b), the first two
paragraphs are revised; in paragraph (c)
a new sentence is added to the end of
the first paragraph and the last sentence
of the last paragraph is revised; in
paragraph (d), two new sentences are
added to the end of the last paragraph;
in paragraph (e), the second sentence of
the first paragraph is revised and a new
sentence is added immediately
following the second sentence of the
first paragraph; in paragraph (f), two
new sentences are added immediately
preceding the last sentence, and the
second and last sentences are revised;
in paragraph (g), the first paragraph and
the first sentence of the second
paragraph are revised, and four new
paragraphs are added immediately
preceding the last paragraph; and in
paragraph (h), the second sentence of
the first paragraph, and the third, fourth,
and fifth paragraphs are revised; and
b. In Appendix E, in the Commentary
under appendix C, two new paragraphs
are added in numerical order to read as
follows:
depending on the location of the paying bank.
If your check deposit, exceeding $5,000 on
any one day, is a m ix of local checks,
nonlocal checks, checks draw n on [bank], or
checks that generally receive next-day
availability, the excess will be calculated by
first adding together the [
], then the (
]. then the [
], then the [
].
• A check th at has been returned unpaid,
the funds will generally be available on the
[number] business day for checks draw n on
[bank], the [number] business day for local
checks and the [number] business day for
nonlocal checks after the day of your deposit.
Checks (not draw n on us) that otherw ise
would receive next-day availability will be
treated as either local or nonlocal checks
depending on the location of the paying bank.
§ 229.13
C-13C— One-time notice for repeated
overdraft exception hold
*
Appendix E— Commentary
*
*
*
*
*
Exceptions.
* * * These exceptions apply to local and
nonlocal checks as well as to checks that
must otherwise be accorded next-day (or
second-day) availability under $ 229.10(c).
Many checks will not be returned to the
depositary bank by the time funds must be
made available for withdrawal under the
next-day (or second-day), local, and nonlocal
schedules. * * *
*
*
*
*
(b)
Large deposits. Under the large deposit
exception, a depositary bank may extend the
Notice of Hold
hold placed on check deposits to the extent
Account Number: [Number]
that the amount of the aggregate deposit on
Date of Notice: [Date]
W e are delaying the availability of checks any banking day exceeds $5,000. This
exception applies to local and nonlocal
deposited into your account due to repeated
checks, as well as to checks that would
overdrafts of your account. For the next six
otherwise be made available on the next (or
months, deposits will generally be available
second) business day after the day of deposit
★
*
*
on the [number] business day for checks
draw n on [6anA], the [number] business day under § 229.10(c). Although the first $5,000 of
a day's deposit is subject to the availability
for local checks, the [number] business day
Appendix C to Part 229— [Amended]
otherwise provided for checks, the amount in
for nonlocal checks after the day of your
excess of $5,000 may be held for an
3.
Appendix C is amended as set forthdeposit. Checks (not draw n on us) that
additional period of time as provided in
otherw ise w ould have received next-day
below:
§ 229.13(h). When the large deposit exception
availability will be treated as either local or
a. In the introductory text, two new
is applied to deposits composed of a mix of
nonlocal
checks
depending
on
the
location
of
headings are added in numerical order
checks that woidd otherwise be subject to
paying bank.
under the heading “Model Notices”; and the
differing availability schedules, the
*
*
*
*
*
b. New model notices C-13B and Cdepositary' bank has the discretion to choose
13C are added in numerical order to
the portion of the deposit to which it applies
Appendix E to Part 229— [Amended]
the exception. Deposits by cash or electronic
read as follows:
4.
Appendix E to part 229 is amendedpayment are not subject to this exception for
large deposits.
Appendix C-Model Forms, Clauses,
as set forth below:
The following example illustrates the
and Notices
a. In appendix E, in the Commentary operation of the large deposit exception. If a
*
*
*
*
*
under section 229.13, in the introductory customer deposits $2,000 in cash and a $9,000
text, the last sentence of the first
local check on a Monday, $2,100 (the
M odel N otices
paragraph and the first sentence of the proceeds of the cash deposit and $100 from
the local check deposit) must be made
second paragraph are revised, and the
5
10514
*
available for withdrawal on Tuesday. An
additional $4,900 of the proceeds of the local
check must be available for withdrawal in
accordance with the local schedule (i.e.
W ednesday under the permanent schedule],
and the remaining $4,000 may be held for an
additional period of time under the large
deposit exception.
*
*
*
*
*
(c) R edeposited checks. * * * This
exception applies to local and nonlocal
checks, as well as to checks that would
otherwise be made available on the next (or
second) business day after the day of deposit
under § 229.10(c).
*
*
*
*
*
* * * A depositary bank that made $100
of a check available for withdrawal under
§ 229.10(c)(l)(vii) can charge back the full
amount of the check, including the $100, if the
check is returned unpaid, and the $100 need
not be made available again if the check is
redeposited.
(d) R epeated O verdrafts. * * *
*
*
*
*
*
* * * This exception applies to local and
nonlocal checks, as well as to checks that
would otherwise be made available on the
next (or second) business day after the day of
deposit under § 229.10(c). Wrhen a bank
extends a hold under this exception, it need
not make the first $100 of a deposit available
for withdrawal on the next business day, as
would otherwise be required by
§ 229.10(c)(l)(vii).
(e) R easonable cause to doubt
collectibility. * * * This exception applies to
local and nonlocal checks, as well a3 to
checks that would otherwise be made
available on the next (or second) business
day after the day of deposit under § 229.10(c).
When a bank extends a hold under this
exception, it need not make the first $100 of a
deposit available for withdrawal on the next
business day, as would otherwise be required
by § 229.10(c)(l)(vii). * * *
*
*
*
*
*
(f) E m ergency conditions. * * * In the
circumstances specified in this paragraph, the
depositary bank may extend the holds that
are placed on deposits of checks that are
affected by such delays, if the bank exercises
such diligence as the circumstances require.
* * * This exception applies to local and
nonlocal checks, as well as checks that
would otherwise be made available on the
next (or second) business day after the day of
deposit under § 229.10(c). When a bank
extends a hold under this exception, it need
not make the first $100 of a deposit available
for withdrawal on the next business day, as
would otherwise be required by
§ 229.10(c)(l)(vii). In cases where the
emergency conditions exception does not
apply, as in the case of deposits of cash or
electronic payments under § 229.10 (a) and
(b), the depositary bank may not be liable for
a delay in making funds available for
withdrawal if the delay is due to a bona fide
error such as an unavoidable computer
malfunction.
(g) N otice o f exception. If a depositary
bank invokes any of the safeguard exceptions
to the schedules listed above, other than the
new account exception, and extends the hold
on a deposit beyond the time periods
permitted in §§ 229.10(c), 229.11, and 229.12, it
must provide a notice to its customer. Except
in the cases described in paragraphs (g)(2)
and (g)(3) of the regulation, notices must be
given each time an exception hold is invoked
and must state the customer’s account
number, the date of deposit, the reason the
exception was invoked, and the time period
within which funds will be available for
withdrawal.
With respect to paragraph (g)(1), the
requirement that the notice state the time
period within which the funds shall be made
available may be satisfied if the notice
identifies the date the deposit is received and
information sufficient to indicate when funds
will be available and the amounts that will
be available at those times. * * *
*
*
*
*
*
In those cases described in paragraphs
(g)(2) and (g)(3), the depositary bank need not
provide a notice every time an exception hold
is applied to a deposit. W hen paragraph (g)(2)
or (g)(3) requires disclosure of the time period
within which deposits subject to the
exception will be available for withdrawal,
the requirement may be satisfied if the one
time notice states when on us, local, and
nonlocal checks will be available for
withdrawal if an exception is invoked.
Under paragraph (g)(2), if a nonconsumer
account is subject to the large deposit or
redeposited check exception, the depositary
bank may give its customer a single notice at
or prior to the time notice must be provided
under paragraph (g)(1). Notices provided
under paragraph (g)(2) must contain the
reason the exception may be invoked and the
time period within which deposits subject to
the exception will be available for
withdrawal (see Model Notice C-13B). A
depositary bank may provide a one-time
notice to nonconsumer customer under
paragraph (g)(2) only if each exception cited
in the notice (the large deposit an d /o r the
redeposited check exception) will be invoked
for most check deposits to the customer’s
account to which the exception could apply.
A depositary bank may to continue send hold
notices for each deposit subject to the large
depositor redeposited check exception in
accordance with § 229.13(g)(1) (see Model
Notice C-13).
In the case of a deposit of multiple checks,
the depositary bank has the discretion to
place an exception hold on any combination
of checks in excess of $5,000. The notice
should enable a customer to determine the
availability of the deposit in the case of a
deposit of multiple checks. For example, if a
customer deposits a $5,000 local check and a
$5,000 nonlocal check, under the large deposit
exception, the depositary bank may make
funds available in the amount of (1) $100 on
the business day after deposit, $4,900 on the
second business day after deposit (local
check), and $5,000 on the eleventh business
day after deposit (nonlocal check with 6-day
exception hold), or (2) $100 on the first
business day after deposit, $4,900 on the fifth
business day after deposit (nonlocal check),
and $5,000 on the seventh business day after
deposit (local check with 5-day exception
hold).The notice should reflect the bank’s
priorities in placing exception holds on next6
day (or second-day), local, and nonlocal
checks.
Under paragraph (g)(3), if an account is
subject to the repeated overdraft exception,
the depositary bank may provide one notice
to its customer for each time period during
which the exception will apply. Notices sent
pursuant to paragraph (g)(3) must state the
customer's account number, the fact the
exception was invoked under the repeated
overdraft exception, the time period within
which deposits subject to the exception funds
will be made available for withdrawal, and
the time period during which the exception
wili apply (see Model Form C-13C). A
depositary bank may provide a one-time
notice to a customer under paragraph (g)(3)
only if the repeated overdraft exception will
be invoked for most check deposits to the
customer’s account.
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(h)
A vailability o f deposits subject to
exceptions. * * * This provision establishes
that an extension of up to one business day
for on us checks, five business days for local
checks, and six business days for nonlocal
checks is reasonable. * * *
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With respect to Treasury checks, U.S.
Postal Service money orders, checks drawn
on Federal Reserve Banks or Federal Home
Loan Banks, state and local government
checks, and cashier’s, certified, and teller’s
checks subject to the next-day (or secondday) availability requirement, the depositary
bank may extend the time funds must be
made available for withdrawal under the
large deposit, redeposited check, repeated
overdraft, or reasonable cause exception by a
reasonable period beyond the delay that
would have been permitted under the
regulation had the checks not been subject to
the next-day (or second-day) availability
requirement. The additional hold is added to
the local or nonlocal schedule that would
apply based on the location of the paying
bank.
One business day for on us checks, five
business days for local checks, and six
business days for nonlocal checks, in
addition to the time period provided in the
schedule, should provide adequate time for
the depositary bank to learn of the
nonpayment of virtually all checks that are
returned.
In the case of the application of the
emergency conditions exception, the
depositary bank may extend the hold placed
on a check by not more than a reasonable
period following the end of the emergency or
the time funds must be available for
withdrawal under §§ 229.10(c), 229.11 or
229.12, whichever is later.
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A ppendix C—M odel Forms. Clauses, ana
N otices
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M odel C-13B. This form satisfies the notice
requirements of $ 229.13(g)(2).
M odel C-13C. This form satisifies the
notice requirements of § 229.13(g)(3).
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