[Federal Register Volume 62, Number 56 (Monday, March 24, 1997)]
[Rules and Regulations]
[Pages 13801-13820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7156]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
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Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules
and Regulations
[[Page 13801]]
FEDERAL RESERVE SYSTEM
12 CFR Part 229
[Regulation CC; Docket No. R-0926]
Availability of Funds and Collection of Checks
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule.
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SUMMARY: The Board has adopted amendments to its Regulation CC relating
to the availability of funds and collection of checks. The amendments
do not represent any major policy changes and are intended to clarify
the regulation and, in some cases, reduce the compliance burden for
depository institutions.
EFFECTIVE DATE: April 28, 1997.
FOR FURTHER INFORMATION CONTACT: Florence Young, Assistant Director
(202/452-3955), Division of Reserve Bank Operations and Payment
Systems; Stephanie Martin, Senior Attorney (202/452-3198), Heatherun
Allison, Attorney (202/452-3565), Legal Division; Manley Williams,
Attorney (202/452-3667), Kyung Cho-Miller, Attorney (202/452-2412), and
Obrea Poindexter, Attorney (202/452-2412), Division of Consumer and
Community Affairs. For the hearing impaired only, contact Dorothea
Thompson, Telecommunications Device for the Deaf (TDD) (202/452-3544),
Board of Governors of the Federal Reserve System, 20th and C Streets,
N.W., Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION:
I. Overview
The Board has adopted amendments to its Regulation CC (12 CFR Part
229), Availability of Funds and Collection of Checks. The amendments
are clarifying and technical in nature and do not represent any major
policy changes. The amendments to subpart B of the regulation,
governing availability schedules and disclosures, address a variety of
issues, including the treatment of deposits received at ``contractual''
branches (such as affiliate banks 1). Many of the amendments are
designed to reduce the burden on banks of complying with the
regulation. For example, the amendments would provide more flexibility
for hold notices under emergency conditions, clarify the various media
by which banks may give written notices, and delete certain notice
content requirements. The Board has also updated the model forms in
Appendix C. Banks that use earlier versions of the model forms are
protected from civil liability under Sec. 229.21(e), but all banks are
encouraged to use the new versions when reordering or reprinting
supplies.
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\1\ ``Bank'' in Regulation CC and in this document includes all
depository institutions, such as commercial banks, savings
institutions, and credit unions.
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The amendments to subpart C, governing collection of checks,
clarify the interaction between Regulation CC and the Uniform
Commercial Code (U.C.C.); set forth rules for checks drawn on banks in
Guam, American Samoa, and the Northern Mariana Islands; and address
other check collection matters.
A red-lined version of the amendments to the regulation, model
forms, and commentary is available from the Board's Freedom of
Information Office or by calling 202-452-3684.
The Board received 64 comments to the proposed amendments from the
following types of institutions:
Banks/thrifts...................................................... 15
Bank holding companies............................................. 14
Credit unions...................................................... 10
Trade associations................................................. 9
Federal Reserve Banks.............................................. 7
Clearinghouses..................................................... 3
Banking service companies.......................................... 3
Credit card companies.............................................. 2
Federal Home Loan Banks............................................ 1
II. Section-by-Section Analysis
Available for withdrawal (Sec. 229.2(d)). The regulation defines
``available for withdrawal'' to mean available for all uses generally
permitted to the customer for actually and finally collected funds
under the bank's account agreement or policies. The commentary to this
definition clarifies that funds are considered available for withdrawal
even if they are being held to satisfy, among other things, the
customer's liability arising from the certification, guaranty, or
acceptance of a check or the sale of a cashier's or teller's check. The
Board proposed to revise the commentary to clarify that funds held to
meet contingent obligations of the customer related to the account are
considered to be available for withdrawal. For example, a depositary
bank might receive a notification that the customer has authorized a
debit to the account at a point-of-sale terminal. Banks often ``memo-
post'' these debits to the customer's account in advance of the
settlement date.
The Board received eighteen comments on the proposal. Ten
commenters favored the proposal. Eight commenters either opposed the
proposal or requested clarification. Apparently, these commenters
interpreted the proposal to prohibit ``memo-posting'' and to require a
bank to allow a customer to withdraw funds on which the bank had placed
a hold to satisfy a transaction to be debited from the customer's
account. The Board intended the opposite, however. A bank may ``memo-
post'' contingent account liabilities such as debit card transactions
to a customer's account without violating its obligations under this
subpart. The Board has adopted revised commentary language to clarify
this point.
Definition of ``bank'' (Section 229.2(e)). The regulation stated
that, for purposes of subpart C, the term ``bank'' includes any person
engaged in the business of banking, including a Federal Reserve Bank, a
Federal Home Loan Bank, and a state or unit of general local government
to the extent that the state or unit of general local government acts
as a paying bank. The Board proposed to amend the regulation's
definition of ``bank'' to clarify that the Federal Reserve Banks, the
Federal Home Loan Banks, and state or units of general local government
are not necessarily engaged in the business of banking, notwithstanding
the fact that they are included in this definition. The Board received
no comments on this change and has adopted the amendment as proposed.
Definition of ``traveler's check'' (Section 229.2(hh)). The
commentary stated that ``[t]raveler's checks that are not issued by
banks may not have any
[[Page 13802]]
words on them identifying a bank as drawee or paying agent * * * .''
Some people had interpreted this provision to mean that traveler's
checks were prohibited from having words on them identifying a bank.
The Board proposed to revise the commentary to clarify that only a
description of a possible situation, and not a prohibition, is
intended. The Board received two comments in support of this change and
has adopted a slightly revised version of the proposal.
Notice requirement to state amount of deposit (Sections 229.13(g)
and 229.16(c)). Regulation CC required a notice of an exception hold
(Sec. 229.13(g)(1)(i)(B)) or a case-by-case hold
(Sec. 229.16(c)(2)(i)(B)) to include the amount of the deposit from
which funds will be held. Some banks noted that when they learn that a
check is being returned by the paying bank several days after the day
of deposit, it is often difficult to trace the check back to a
particular deposit, especially in cases where a corporate customer
makes several multi-check deposits on a single day. The Expedited Funds
Availability Act (the Act) does not require the notice to contain the
amount of the deposit. The Board proposed to eliminate the ``amount of
deposit'' requirement for both exception and case-by-case hold notices.
The Board received thirty-one comments on this proposal, twenty-seven
of which expressed support. Two commenters indicated that the
requirement to state the amount of deposit was not burdensome, and two
commenters indicated that it would be beneficial to retain the
requirement ``to ensure the accuracy of the number of days being held
versus the policy or regulation requirements'' or to ``aid the consumer
in identifying which deposit the hold applies to.'' The Board believes
that depositors can identify the holds that the bank has applied based
on other information in the hold notice and has eliminated the ``amount
of deposit'' requirement as proposed.
The Board also requested comment on the burdens to depositary banks
and the benefits to customers of the requirement for hold notices to
include the date of deposit. The Board received twenty-seven comments
in response to this request. Eighteen commenters supported retention of
the date requirement, cited consumer benefits of the requirement, or
noted that the requirement imposed little or no burden for banks. In
general, these commenters indicated that the date requirement is an
important and necessary reference point for depositors in identifying a
transaction and also helps banks track particular checks. Seven
commenters favored eliminating the date requirement or stated that the
requirement imposed burden on banks. Two commenters supported
elimination of the date requirement as long as consumers could obtain
the necessary information regarding a hold from the other information
in the notice. The Board believes that the date requirement continues
to provide useful information to depositors and imposes only a minor
burden on banks. The Board, therefore, has retained the date
requirement for exception hold and case-by-case hold notices.
Emergency exception notices and length of holds (Sections 229.13
(g) and (h)). The regulation allows a depositary bank to place an
exception hold on funds deposited by check in the case of an emergency,
such as a computer or communications interruption, suspension of
payments by another bank, or war. The regulation required the
depositary bank to provide a notice to the customer of the emergency
hold in the same manner in which it provides notice under the other
exception holds, except that no notice was necessary if the funds were
made available before the notice had to be sent. (That is, the bank
would have to mail or deliver the notice to the customer no later than
the first business day following the day the facts upon which a
determination to invoke the hold became known to the depositary bank.)
Some banks argued that during a major disaster they would be unable to
meet the timing deadline for emergency exception hold notices due to
the time required to move to a backup processing site and the need for
the bank to focus on other customer service priorities in the event of
major disasters.
Section 604(f)(2)(C) of the Act requires depositary banks to send
emergency exception hold notices ``in accordance with regulations of
the Board.'' Therefore, the Board proposed to amend Sec. 229.13(g) of
Regulation CC to require a depositary bank to give reasonable notice of
emergency exception holds and to make conforming revisions to the
commentary. Reasonable notice in some situations might consist of
individual notices mailed to customers as soon as practicable or, in
other situations, may consist of general notices, such as postings at
branches or ATMs, or newspaper, television, or radio notices. The Board
also proposed clarifying amendments to Sec. 229.13(h) regarding the
length of exception holds and corresponding revisions to the
commentary.
The Board received twenty-eight comments on this proposal, all in
support. One commenter requested further guidance on the factors to
consider when determining what form the notice should take. The Board
believes that the factors as to what is reasonable will vary with the
situation and that specifying factors may be overly restrictive.
Another commenter recommended that a bank be permitted to provide
notices by posting or publication in all situations warranting an
emergency hold. The Board, however, believes that these methods may not
necessarily be reasonable in all situations. The Board believes its
proposal provides significant flexibility to banks under emergency
conditions and has amended Sec. 229.13(g) and revised the accompanying
commentary as proposed.
Written notices (Sections 229.13(g) and 229.15(a)). Section
229.13(g) requires a depositary bank to provide written exception hold
notices to customers. Section 229.15(a) requires banks to make
availability policy and other disclosures in writing and requires that
certain disclosures be in a form the customer may keep. The Board
proposed to revise the commentary to both these sections to clarify
that notices and disclosures delivered via fax or electronic media that
display text on a monitor or screen, such as electronic mail,
screenphone, or interactive television, are considered written notices
and disclosures if the customer agrees to receive notices and
disclosures through such means. The proposal also provided that a
customer may request a paper copy of an electronic notice or
disclosure. Twenty-one comments were received on the proposal, all in
favor of the proposed revisions. One commenter recommended that a
customer be allowed to request a paper copy of an exception notice only
within a reasonable period of time after receiving electronic notice.
The Board has re-examined the need to allow the customer to request
a paper copy of an electronic notice or disclosure, with an eye toward
providing banks with more flexibility in servicing their customers,
fostering innovation, and reducing costs while maintaining the level of
customer protection contemplated by Congress. The Act specifies that
certain notices and disclosures must be written but does not specify
that they must be on paper or in another form that must be retained.
Under the proposal, a bank may send electronic notices and disclosures
only if the customer agrees. If a customer was not satisfied with its
arrangement with its bank, it could rescind the agreement and request
that the bank send all future notices and
[[Page 13803]]
disclosures on paper, or close its account. Customers interested in
retaining a paper copy presumably would agree to receive notices and
disclosures electronically only if they had the capability to print the
electronic information that they receive. The final commentary language
adopted by the Board states that the Regulation CC requirements would
be satisfied by an electronic notice or disclosure that displays the
text and is in a form that the customer may keep (for example,
electronic information that can be downloaded or printed). The Board
has dropped the proposed commentary provision stating that a consumer
may request a paper copy of a notice delivered. The Board is conducting
a comprehensive review of notice and disclosure requirements under
consumer protection regulations and may, in the future, request comment
on additional proposals regarding the use of electronic communications
to meet the various regulatory requirements. Future proposals may
affect Regulation CC as well as the other regulations.
Exception holds and the cash withdrawal rule (Section 229.13(h)).
Section 229.12(d) permits a depositary bank to extend holds on deposits
of local, nonlocal, and certain other checks by one business day for
purposes of withdrawals by cash or similar means, with the exception of
$400, which must be made available by 5:00 p.m. on the original
availability day (the ``cash withdrawal rule''). The purpose of the
cash withdrawal rule is to allow depositary banks an additional day to
learn if a check is being returned before allowing irrevocable
withdrawals from the customer's account. Some banks asked how the cash
withdrawal rule works in conjunction with the exception holds. For
example, when a large deposit exception hold is placed on a $7,000
local check, $100 must be made available for withdrawal on the next
business day. For check-writing purposes, $4,900 must be available by
the second business day after deposit. For withdrawal by cash or
similar means, $400 out of the $4,900 must be available by 5:00 p.m. of
the second day and the remainder of the $4,900 must be available by the
third business day after deposit. The banks asked whether the five-day
exception hold on the $2,000 excess over $5,000 is added to the second
business day for all purposes, or whether the hold period may be added
to the second day for check-writing withdrawals and to the third day
for cash and similar withdrawals. The Board proposed to clarify that
the exception hold periods should be added to the normal availability
schedules (to the second business day in the previous example). The
Board reasoned that it would not be necessary to extend the exception
hold period for cash withdrawal purposes, as in almost every case the
depositary bank should learn of a returned local check before the
morning of the seventh business day after deposit.
The Board received four comments on this proposal. One commenter
opposed the proposal, stating that it would require expensive and
extensive reprogramming. Two other commenters stated that adopting the
proposal would make regulatory compliance more difficult. One commenter
stated that additional clearing time is beneficial and may help prevent
losses. Upon consideration of these comments, the Board has decided
that, to avoid costly systems changes for banks and in an effort to
simplify the rule, the exception hold periods may be added to the
availability period as applicable to unlimited cash withdrawals.
Therefore, the Board has not adopted the proposed revision.
Disclosure of branch-specific policies (Section 229.16(a)). Section
229.16 requires banks to furnish notices of their specific availability
policies. Some banks have established different availability policies
at different branches (or for deposits accepted on behalf of the bank
by affiliates or ``contractual branches''). These banks asked about the
disclosure implications of different policies and whether such a bank
must disclose to every customer what routing numbers are local to each
location where deposits are accepted. The Board proposed to revise the
commentary to Sec. 229.16(a) to clarify that a bank may provide
customers with a branch-specific disclosure. The Board proposed that
banks, when determining which disclosure to provide, be allowed to
allocate customers between branches through good faith use of a
reasonable method, such as where the customer opened the account.
The Board received sixteen comments on this proposal. Some of the
commenters expressed concern about identifying customers with specific
branches, given the trends towards servicing accounts remotely or
through contractual branches. Accordingly, the Board has revised the
proposed commentary language to state that a bank may establish
different availability policies for different groups of customers and
may allocate customers for disclosure purposes by any reasonable
method. The allocation need not be branch-based. The final commentary
revision also states that a bank may establish different availability
policies for deposits at different locations, such as at contractual
branches. The Board also amended the commentary to Sec. 229.16(b) to
clarify that if a bank does not have a cut-off hour prior to its
closing time, the bank need not disclose a cut-off hour.
Initial disclosures (Section 229.17). The regulation requires a
bank to provide an availability policy disclosure to a potential
customer before opening an account. The commentary states that, if a
bank receives a written request by mail asking that an account be
opened and including an initial deposit, the bank may open the account
with the deposit but must mail the required disclosures not later than
the business day following the banking day on which the bank receives
the deposit. Although the Board proposed no changes to this section,
one commenter asked that the period for mailing a disclosure after
receiving an initial deposit through the mail be extended to ten days.
The commenter stated that additional time is necessary for the bank to
perform ``due diligence'' steps, such as conducting a credit check and
verifying the information submitted by the customer. The commenter
stated that, because a bank may ultimately decline an account and send
back the initial deposit, sending a disclosure before final acceptance
of the account could be confusing to the customer. As the Board did not
seek comment on any changes to the initial disclosure rules in
Sec. 229.17, it is not adopting any changes to this section at this
time. The Board will, however, consider seeking comment on this matter
in the future.
Deposits at contractual branches (Sections 229.2(s), 229.10(c),
229.14(a), 229.19(a)). Due to easing of branching restrictions, the
practice of one bank accepting deposits on behalf of another bank
(``contractual branching'') is growing more prevalent. The Board
proposed to clarify the commentary regarding treatment of deposits at
contractual branches. The proposed revision to the commentary to the
definition of local paying bank (Sec. 229.2(s)) stated that a branch of
a bank that is acting as an agent of the depositary bank is considered
a branch of the depositary bank. Therefore, a check would be deemed
local or nonlocal based on the location of the contractual branch with
respect to the location of the paying bank.
The Board also proposed to revise the commentary to Secs. 229.10(c)
and 229.19(a) to clarify that deposits at contractual branches would be
treated similarly to deposits at proprietary ATMs; deposits at
contractual branches
[[Page 13804]]
would be considered deposited when the funds are received by the
contractual branch teller. However, deposits at contractual branches
would not be considered deposited at a teller station staffed by an
employee of the depositary bank within the meaning of Sec. 229.10(c)
(ii)-(v) and therefore would not be subject to next-day availability
under those provisions. The Board also proposed to revise the
commentary to Sec. 229.19(a) to state that the depositary bank could
set a noon cut-off hour for deposits at contractual branches, as these
deposits are treated as received at ``off-premise'' facilities.
Finally, the Board proposed to revise the commentary to Sec. 229.14(a)
to clarify that, in the case of a deposit at a contractual branch,
interest must accrue when the account-holding bank receives credit for
the deposit, not when the contractual branch receives credit.
The Board received twenty-two comments on the proposal. Fourteen
commenters supported the proposal. Two commenters stated that deposits
made at contractual branches should be treated similarly to deposits
made at nonproprietary ATMs rather than at proprietary ATMs, as
proposed. The Board believes that, on balance, deposits made over the
counter to a teller at a branch, albeit a contractual branch, are more
akin to deposits at proprietary ATMs than those at nonproprietary ATMs.
The Board has retained the proposed treatment of contractual branch
deposits.
One commenter stated that ``local paying bank'' under Sec. 229.2(s)
should include paying banks that are members of the same local
clearinghouse as is the depositary bank. The Board notes that a bank is
free under Regulation CC to treat as local checks those checks that are
drawn on paying banks that are members of the same local clearinghouse
and that can be collected on a local basis regardless of the paying
bank's Federal Reserve check processing region. The Board has
determined, however, not to require banks to do so, because such a
requirement could make it extremely complicated for banks to assign
availability for a given check based on its routing number.
Another commenter asked that the Board provide additional guidance
on how to determine whether a check is local or nonlocal, particularly
when the paying bank has interstate branches. The Board believes that
the commentary to the definition of ``local check'' (Sec. 229.2(r))
already provides sufficient guidance on this issue. The commentary
states that, generally, a depositary bank may rely on a check's routing
number to determine whether the check is local or nonlocal. (The only
instance when a bank may not be able to rely on the routing number is
when the check is drawn on one bank and payable through another bank,
in which case the check is local or nonlocal based on the location of
the drawee bank rather than the location of the payable-through bank
whose routing number is on the check.)
Several commenters requested clarifications of various kinds. One
commenter asked whether a hold notice may be given by a contractual
branch or whether it must be given by the account-holding bank. The
Board believes that the regulation clearly places the responsibility
for providing notices with the account-holding bank, but a contractual
branch may agree to provide notices on behalf of the account-holding
bank. Another commenter asked whether the Board would allow up to one
year for banks to comply with the new contractual branching provisions.
The Board does not believe that a one-year lead time is necessary, as
the revisions represent a clarification of the existing rule rather
than new requirements. One commenter asked whether a bank's lobby
disclosure obligations under Sec. 229.18 require disclosure of the
availability of funds for all deposits at that location or only for
accounts maintained at that location. The Board added a clarification
to the commentary to Sec. 229.18(b) to clarify that lobby notices need
only describe the bank's availability policy, not the availability
policy of the bank for which it is acting as a contractual branch.
The Board adopted the other commentary revisions to Secs. 229.2(s),
229.10(c), 229.14(a), and 229.19(a) substantially as proposed. In
addition, to provide a single reference point for the definition of
``contractual branch,'' the Board has added a definition of this term
to Sec. 229.2. The Board has also added references to contractual
branches in Secs. 229.2(s) and 229.19(a).
Holds on other funds--notices (section 229.19(e)). Section
229.19(e) provides that when a bank accepts a deposit to an account
that is subject to the Regulation CC availability requirements, the
bank may not place a hold on any other funds of the customer (such as a
savings account) that exceeds those requirements. This section also
provides that when a bank cashes a check over the counter (other than
an ``on-us'' check), the bank may not place a hold on that customer's
account that exceeds the Regulation CC schedules that would apply if
the check were deposited. Section 229.19(e) does not explicitly address
whether the depositary bank must provide a hold notice (case-by-case or
safeguard exception) in these cases. The Board proposed to revise the
commentary to Sec. 229.19(e) to clarify that a hold notice would be
required if an exception or case-by-case notice would have been
required under Secs. 229.13 or 229.16 had the hold been placed on funds
deposited in an account subject to the regulation.
The Board received eight comments on this proposal. Four commenters
expressed support for the proposal. One commenter requested
clarification on whether notices are required when the hold is not
associated with a deposit to an account. Two commenters opposed the
imposition of additional regulatory burden with respect to accounts not
covered by Regulation CC. The Board has adopted revised commentary
language to clarify that a notice under this section is required only
when the funds being held are funds in an account that is covered by
Regulation CC. Another commenter observed that, if notice is required
where, for example, a bank cashes a check over the counter, the wording
of the notice should not refer to ``number of days following deposit,''
as no deposit is involved. The Board has revised the commentary to the
model notices to clarify how to amend the notices in these
circumstances. One commenter expressed concern that notices of such a
policy must be incorporated into a bank's availability policy. The
Board notes that model clauses C-6 (Holds on Other Funds (Check
Cashing)) and C-7 (Holds on Other Funds (Other Accounts)) provide
models for inclusion in a bank's availability policy.
Midnight deadline extension (section 229.30(c)). The regulation
(Sec. 229.30(c)(1)) allows a bank to return a check after the midnight
deadline, as long as it uses a means of delivery designed to get the
returned check to the receiving bank by the end of that receiving
bank's next banking day, or later if ``highly expeditious
transportation'' is used. Section 229.30(c)(2) allows a paying bank to
extend a Saturday midnight deadline if the checks get to a returning
bank by the cut-off hour for the returning bank's next processing cycle
or to a depositary bank by the end of the depositary bank's next
banking day. The Board proposed to amend the regulation to clarify that
Sec. 229.30(c)(1) pertains to all midnight deadlines other than
Saturday midnight deadlines, and that Sec. 229.30(c)(2) pertains only
to an extension of a Saturday midnight deadline. The Board received
nine comments, all of which supported the proposal. The Board has
adopted the amendment as proposed.
[[Page 13805]]
The Board also requested comment on whether further modifications
to the regulation would be desirable in light of problems posed by
nonstandard banking days other than Saturdays, such as mid-week
holidays. The Board received thirteen comments in response to this
request. Of these, nine commenters stated that further modifications to
the regulation were not necessary, and four commenters stated that
further modifications or clarification would be desirable. As none of
the commenters stated that nonstandard banking days raise significant
problems, the Board decided not to make any further modifications with
respect to nonstandard holidays at this time.
The Board also requested comment on whether the regulation's
conditions for extending a midnight deadline should require a
determination of motive or whether the regulation should simply set
forth a ``time-of-receipt'' test. Specifically, the Board asked whether
Sec. 229.30(c) should be available only ``in order to expedite
delivery'' (and not, for example, to avoid a kite) or whether extension
of the midnight deadline should be permitted for any reason so long as
the returned check is received by the receiving bank by the end of that
bank's next banking day (or later if ``highly expeditious
transportation'' is used). The Board received twelve comments on this
issue. All commenters expressed support for clarifying that no motive
test is intended in this section. The Board agrees that Sec. 229.30(c)
should not require a determination of motive for midnight deadline
extensions. To provide clarity on this point, the Board has deleted the
words ``in an effort to expedite delivery of a returned check to a
bank'' from Sec. 229.30(c)(1).
Extra day to create qualified returned checks (section 229.31(a)).
Section 229.31(a) allows a returning bank to convert a returned check
to a qualified returned check (that is, to encode the returned check
with the routing number of the depositary bank, the amount of the
check, and a return identifier so that it can be handled in an
automated manner). If the returning bank creates a qualified returned
check, Sec. 229.31(a) provides a one-day extension in the returning
bank's time frame for meeting the ``forward-collection'' expeditious-
return test in Sec. 229.31(a)(2) (but not the ``two-day/four-day''
test) and the deadlines for return under Regulation J and the U.C.C.
This extension does not apply if the returning bank returns the check
directly to the depositary bank, because in that case the preparation
of the qualified returned check will not expedite handling by other
banks. Given the improvements in the check return system since
Regulation CC was first implemented, the Board proposed to eliminate
the extension and to amend Sec. 229.31(a) of the regulation and revise
the accompanying commentary accordingly. The Board requested comment on
whether this extension is still necessary and, if so, a description of
the operational problems that elimination of the extension would cause.
The Board received twenty-three comments in response to this
proposal. Thirteen commenters supported eliminating the extra day to
create qualified returned checks, and ten commenters opposed
eliminating the extra day. One commenter stated that the extra day
should be retained if, without it, the use of qualified returns would
be likely to decrease. Similarly, another commenter stated that it did
not oppose the elimination of the extra day so long as the extra day is
no longer necessary as an incentive to create qualified returned
checks. One Reserve Bank commented that the extra day should be
retained, stating that it still receives more raw returns than it can
process overnight. One commenter, a clearinghouse, stated that if the
extra day were eliminated then paying banks would be likely to shift
returns to the Federal Reserve Banks, benefitting the public sector at
the expense of the private sector. As some returning banks may still
use the extra day, and to avoid unintended shifts in volume from the
private sector to the public sector, the Board has determined to retain
the extra day for creating qualified returned checks.
Midnight deadline warranty and U.C.C. defenses (Section
229.34(a)(1)). Section 229.34(a)(1) requires a paying or returning bank
that returns a check to warrant that the return is within its deadlines
under Regulation CC, Regulation J, and the U.C.C. The commentary to
Sec. 229.30(a) clarifies that a paying bank is not responsible for
failure to make expeditious return under that section to a party that
has breached a presentment warranty under U.C.C. 4-208. This commentary
is consistent with U.C.C. 4-302(b), which subjects the paying bank's
liability for missing its midnight deadline to defenses based on a
breach of a presentment warranty or fraud. The Board proposed to revise
the commentary to Sec. 229.34(a)(1) to clarify that a paying or
returning bank's warranty of timely return within the U.C.C. deadline
is subject to U.C.C. claims or defenses. The Board received six
comments on this proposal, all of which supported the proposed
commentary revision. The Board has adopted the revision as proposed.
Set-off rights (Sec. 229.34(c)(4)) and returning bank liability
(Sec. 229.31(a)). Under Sec. 229.34(c)(4), if a paying bank overpays a
presenting bank for checks presented, the paying bank may set off the
excess amount paid against subsequent settlements for checks presented
by that bank. The Board proposed to amend that section (and revise the
accompanying commentary) to give any bank in the collection or return
chain the right to offset excess settlement made to a particular bank
against settlement for subsequent checks or returned checks transferred
by that bank. The Board received six comments in response to this
proposal. Five commenters expressed support for the proposed revision,
citing increased efficiency and decreased administrative costs. One
commenter opposed the proposal, pointing out the potential for a
confusing cycle of correcting debits and credits if one bank
automatically sets off while the other bank affirmatively makes an
adjusting settlement for the excess amount. In addition to considering
the comments, the Board considered whether the proposal was necessary
to protect banks in the collection and return chain. The current
regulation allows set-off by the paying bank versus the presenting bank
because the paying bank is obligated to accept and settle for (or
return) checks presented to it even in the absence of a settlement
agreement with the presenting bank. A bank has a similar obligation to
accept returned checks for which it is the depositary bank.
Intermediary collecting and returning banks, however, are free to agree
with each other about the terms for handling checks, including
provisions for offset. These banks could structure their agreements as
netting contracts that are enforceable even in the event of a
counterparty failure, under the terms of Title IV of the Federal
Deposit Insurance Corporation Improvement Act of 1991.2 The Board,
therefore, has expanded the offset provisions of Sec. 229.34(c)(4), but
only to the depositary bank-returning bank relationship and not to the
relationships between intermediary collecting and returning banks.
---------------------------------------------------------------------------
\2\ 12 U.S.C. 4401 et seq.
---------------------------------------------------------------------------
The Board also proposed to revise the commentary to Sec. 229.31(a),
which discusses the returning bank's liability if it makes an encoding
error when creating a qualified returned check. The commentary pointed
out that the returning bank could be liable under Sec. 229.38 for
losses caused by negligence. The Board proposed to add that the
returning bank could also be liable for a breach of its encoding
warranty under
[[Page 13806]]
Sec. 229.34(c)(3). The Board received five comments on this proposal.
Four commenters supported the proposed revision, while one commenter
opposed it, stating that the depositary bank should be held liable for
encoding errors instead of a returning bank in order to encourage
depositary banks to provide legible endorsements. The Board notes that
the regulation provides for a chain of encoding warranties whereby an
intermediary bank could make a claim back against the encoding bank on
a mis-encoded check. The Board has adopted the revision as proposed.
Time limit for notice of warranty breach (Sec. 229.34(f)). Sections
4-207(d) and 4-208(e) of the U.C.C. provide that a claimant on a breach
of warranty must give notice to the warrantor within 30 days after the
claimant has reason to know of the breach and the identity of the
warrantor, or else the warrantor is discharged to the extent of any
loss caused by the delay in notice. The Board proposed to add this time
limitation for notices of warranty claims to Regulation CC to ensure
that the same time limitations apply for check-related warranty claims,
regardless of whether the claim is under state or federal law. The
Board received four comments in response to this proposal, all of them
supporting the proposed amendment. The Board has adopted the amendment
as proposed.
Electronic presentment (Sec. 229.36(c)). Section 229.36(c) allows a
bank to present a check electronically under an agreement with the
paying bank. That section and the accompanying commentary contained
references to check ``truncation'' (generally a term used to describe a
system in which the physical check is held at some point in the check
collection process). An electronic presentment arrangement may, but
does not necessarily, include truncation of the physical check.
Therefore, the Board proposed to amend Sec. 229.36(c) and revise the
accompanying commentary to apply it to ``electronic presentment''
arrangements, not merely ``truncation'' arrangements. The Board also
proposed to revise the commentary by adding an example of an electronic
presentment arrangement.
The Board received thirteen comments on this proposal. Ten
commenters opposed the proposed commentary example, most of them
stating that the example would appear to include within the scope of
``electronic presentment'' arrangements where the paying bank receives
presentment of the physical check after having previously received
information electronically about the check. These commenters stated
that the proposal should be limited to those check collection
arrangements under which presentment occurs upon receipt by the paying
bank of the information about the check rather than upon receipt of the
physical check itself. The Board did not intend to cover check
collection arrangements where presentment occurs upon receipt by the
paying bank of the physical check itself. The Board has, therefore,
adopted revised language to the regulation and the accompanying
commentary.
Labelling requirements for payable-through checks (Sec. 229.36(e)).
A bank that arranges for a check drawn on it to be payable through
another bank must ensure that certain information is printed on the
face of the check. Specifically, Sec. 229.36(e) requires that these
checks show (1) the name, location, and first four digits of the
routing number of the bank by which the check is payable, and (2) the
words ``payable through'' followed by the name and location of the
payable-through bank. The Board adopted these labelling requirements to
enable banks and their customers to identify payable-through checks and
to determine whether they are local or nonlocal. The provisions
regarding the ``payable through'' designation and the name and location
of the payable-through bank are similar to provisions in U.C.C. 4-106.
As these particular labelling requirements are covered by state law,
the Board proposed to eliminate them from Regulation CC.
The Board received eight comments on this proposal. Two commenters
supported the proposal. One commenter suggested that the commentary
make reference to U.C.C. Sec. 4-106 to avoid the misperception that
``payable through'' language is not required at all. Six commenters
opposed the proposal. Two of these commenters desired a uniform
standard in Regulation CC as opposed to various state law requirements.
Two other commenters stated that U.C.C. Sec. 4-106 does not by its
terms require the location of a payable-through bank to be shown on a
check, and, therefore the Board should continue to require payable-
through information. One commenter suggested that the Board require all
checks to show on their face the name and location of the bank whose
routing number is used on the check.
The purpose of requiring conspicuous ``payable through'' labelling
was to ensure the ability of depositary banks to identify payable-
through checks visually. Accordingly, the Board has determined to
continue to require the words ``payable through'' and the name of the
bank on payable-through checks. However, there appears to be no
continuing reason to require payable-through checks to identify the
location of the payable-through bank. Accordingly, the Board has
deleted this requirement. The Board notes, however, that removing the
location of the payable-through bank from a payable-through check would
require the payable-through bank to accept the check at any branch or
head office under Sec. 229.36(b)(3).
Measure of damages (Sec. 229.38(a)). The commentary states that the
measure of damages provided in Sec. 229.38(a) ``derives from U.C.C. 4-
103(e) and 4-202(c).'' The Board proposed to revise the commentary to
clarify the effect of U.C.C. 4-202(c) upon the measure of damages, as
U.C.C. 4-202(c) does not state a measure of damages but rather limits
liability by providing that a bank that has exercised ordinary care is
not liable for the insolvency, neglect, misconduct, mistake, or default
of others, or for the loss or destruction of an item by others. The
Board received one comment on this change, in support, and has adopted
the revision as proposed.
Correction to commentary (section 229.38(d)). In the 1995 technical
amendments to Regulation CC (60 FR 51669, October 3, 1995), some words
were inadvertently dropped from the commentary to Sec. 229.38(d). The
Board proposed to correct the commentary. The Board received no
comments on this change and has adopted the revisions as proposed.
Preference against depositary bank (section 229.39(b)). Section
229.39(b) gives a bank a preferred claim against a closed paying or
depositary bank that ``finally pays'' a check or returned check without
settling for it. A paying bank ``finally pays'' (becomes accountable
for) a check if it doesn't settle for or return the check by the
applicable deadline. A depositary bank is obligated to ``pay'' for a
returned check under Sec. 229.32(b) but may not return the returned
check. The depositary bank can meet its obligations under
Sec. 229.32(b) only by settling for the returned check. Therefore, the
depositary bank cannot ``finally pay'' for a returned check without
settling for it. The Board proposed to amend Sec. 229.39(b) and revise
the accompanying commentary to clarify this distinction. The Board did
not receive any comments to this proposal. Accordingly, the Board has
adopted the amendment and revision as proposed.
Preference against presenting bank (section 229.39(d)). Section
229.39(d) gives a paying bank a preferred claim against a closed
presenting bank in the
[[Page 13807]]
event that the presenting bank breaches an amount or encoding warranty
as provided in Sec. 229.34(c) (1) or (3) and does not reimburse the
paying bank for adjustments for a settlement made by the paying bank in
excess of the value of the checks presented. This preference is
intended to have the effect of a perfected security interest and is
intended to put the paying bank in the position of a secured creditor
for purposes of the receivership provisions of the Federal Deposit
Insurance Act and similar provisions of state law.
The Board added Sec. 229.39(d) in 1992, as part of the ``same-day
settlement'' amendments to Regulation CC (57 FR 46956, October 14,
1992). At that time, some commenters suggested that the preferred claim
should extend to claims other than adjustments, such as breach of a
U.C.C. presentment warranty (such as warranties against forged or
missing indorsements and alterations). At that time, the Board noted
that a preferred claim against a failed presenting bank for forgeries,
missing indorsements, and alterations may reduce risk to the paying
bank. That risk, however, was not directly related to the obligation to
make same-day settlement and was not addressed in the original
proposal; therefore, the Board did not adopt the commenters' suggestion
at that time. The Board requested comment on whether Sec. 229.39(d)
should be expanded to cover the U.C.C. presentment warranties.
The Board received six comments in response to this proposal. Four
of the commenters expressed support for the proposal. One commenter
stated that the proposal should not be limited to the paying bank, but
should be broadened to consider whether such a preference would be
desirable for the benefit of collecting banks, returning banks, and
depositary banks that receive U.C.C. and Regulation CC warranties. One
commenter opposed the proposal, stating that although preferred claims
against failed presenting banks may reduce risk to paying banks, that
risk is not related to the obligation to make same-day settlement. For
this latter reason, the Board determined that Sec. 229.39(d) should be
narrowly targeted to warranties related to same-day settlement
situations (amount and encoding). Accordingly, the Board determined not
to adopt the proposal.
Exclusions (section 229.42). The regulation exempts certain checks
from the expeditious-return and notice-of-nonpayment requirements (such
as a check drawn upon the United States Treasury, a U.S. Postal Service
money order, or a check drawn on a state or a unit of general local
government that is not payable through or at a bank). The Board
proposed to amend the regulation to reflect that such checks are also
exempt from the same-day settlement requirements of Sec. 229.36(f). The
Board received six comments on the proposal. Three commenters supported
the proposal. Three commenters opposed the proposal, stating that no
justification exists for the existing exclusion of these checks from
the expeditious-return and notice-of-nonpayment requirements. The
exclusion provision has been in effect since the regulation was adopted
in 1988. At that time, the Board noted that handling of Treasury checks
is governed by Treasury rules and that the Board's authority over state
and local government checks is not clear. For these reasons, the Board
has adopted the amendment as proposed.
Checks payable in Guam, American Samoa, and the Northern Mariana
Islands (section 229.43). The Board has received inquiries as to the
applicability of Regulation CC to checks drawn on depository
institutions located in Guam, American Samoa, and the Northern Mariana
Islands (''Pacific island banks''). For purposes of the Board's
Regulation J, which governs collection of checks through Federal
Reserve Banks, Pacific island banks are deemed to be in the Twelfth
Federal Reserve District. Some checks drawn on these institutions
(''Pacific island checks'') bear U.S. routing numbers and are generally
handled by banks in the U.S. in the same manner as other checks.
Because the Act does not include Guam, American Samoa, or the
Northern Mariana Islands in the definition of ``United States,''
Pacific island banks are not ``banks'' and Pacific island checks are
not ``checks'' as defined in Regulation CC. Banks often handle Pacific
island checks in the same manner as other checks, however. The Board
believes that applying some of the provisions of subpart C to Pacific
island checks would provide an appropriate legal framework for the
handling of these checks. The Board proposed to add a new Sec. 229.43
to the regulation and accompanying commentary to set forth the
provisions of subpart C that apply to checks drawn on Pacific island
banks.
The Board received five comments on this proposal, generally
supporting the proposal. The Board had proposed that Pacific island
checks not be subject to expeditious-return requirements and that
depositary banks receiving notice of nonpayment of Pacific island
checks not be subject to the requirements of Sec. 229.33(d) for timely
notice to customers. The Board specifically sought comment on these two
issues. Two commenters agreed that the expeditious-return requirements
should not be applied to returning banks returning Pacific Island
checks. One commenter believed that Sec. 229.33(d) should apply to
Pacific island checks because these checks frequently take longer to be
dishonored. The Board's purpose in adopting Sec. 229.43, however, is to
empower banks to handle Pacific island checks in the same manner as
other checks (for example, to make direct returns of such checks) and
not to add new requirements or liability with respect to these checks
except insofar as is necessary to ensure the proper functioning of the
check collection system. The Board, therefore, has not applied
Sec. 229.33(d) or the expeditious-return rules to Pacific island
checks.
Another commenter expressed support for the proposal, but stated
that the proposal should not be limited to ``negotiable'' checks since
Subpart C of Regulation CC also applies to nonnegotiable checks
pursuant to Sec. 229.2(k). The Board adopted the changes generally as
proposed but has modified the proposal to cover nonnegotiable checks.
Model Forms (Appendix C). The Board proposed to make technical and
stylistic changes to facilitate use of the model forms and received
several suggestions for additional improvements. One commenter
suggested that the model availability policy disclosures would be
clearer if the first sentence indicated that the policy applies to
deposits of both cash and checks. The commenter also suggested that
models C-4 and C-5 would be clearer if, in the section on deposits not
made in person, the disclosure read ``the day we receive your deposit''
instead of ``the day of your deposit.'' Models C-1 through C-5 have
been modified accordingly. The commenter further suggested that the
Board insert the word ``generally'' before any statement of when funds
will be available, if the statement is subject to exceptions. The Board
believes that the heading ``longer delays may apply'' provides a
sufficient warning and did not adopt this suggestion.
Another commenter suggested that the model disclosures indicate
that a bank has the discretion to implement a new account exception
hold under section 229.13. As indicated in the commentary to section
229.16(a), the disclosure provided by a bank must reflect the
availability policy followed in most cases, and if a bank has a policy
of imposing delays in availability on any customers longer than those
specified in its disclosure, those customers must receive disclosures
that reflect the longer applicable availability
[[Page 13808]]
periods. Thus, if a bank places new account holds just on particular
classes of checks, such as checks over a certain amount, that policy
should be reflected in the account disclosures. If a bank has a policy
of placing new account holds on the accounts of certain customers, the
disclosure provided to those customers should reflect that practice.
The Board does not believe that additional model forms are necessary.
One commenter requested that the Board amend model notices C-17 and
C-18 concerning notices at locations where employees accept consumer
deposits. The commenter requested that the Board add language
indicating that this notice applies only to deposits made at that
location and to accounts maintained at that location. Although the
Board has revised the commentary to section 229.18(b) to clarify that a
lobby notice need only describe the bank's availability policy for that
branch, the Board does not believe that the lobby notice needs to
contain such a limitation. A bank may add such a limitation, however,
if it chooses.
The Board also requested comment on whether any models in addition
to those currently in Appendix C would be helpful. One commenter stated
that additional models are not necessary, while another commenter
stated that the models should include a model clause for inclusion in
the availability policy disclosures of banks in contractual branch
arrangements. If a bank's availability policy disclosure does not apply
to deposits at other locations (deposits at contractual or other
branches in different check processing regions, for example) the
disclosure should note that fact, or if a bank follows a case-by-case
hold policy, it could use the case-by-case hold provisions. The Board
has adopted a new model clause C-11A (Availability of funds deposited
at other locations), for banks that base the availability of funds on
the location where the funds are deposited. The Board has also adopted
commentary to that clause.
The Board proposed the following additional changes to the models.
Model C-3 Next-day availability, case-by-case holds to statutory
limits, and Sec. 229.13 exceptions. The Board proposed to revise Model
C-3 to clarify the availability of funds subject to a hold. Generally,
the first $100 is available on the first business day after the day of
deposit. The first $100 is not available, however, if the funds are
subject to an exception hold under Sec. 229.13 other than a large
deposit exception. The Board received two comments on this proposal.
One commenter supported the proposal. The other commenter suggested
that the Board enumerate the circumstances in which the $100 would not
be available. Because the availability of that $100 depends on the type
of the hold, it is not possible to provide concise additional guidance,
and the Board believes that a lengthy explanation would not be useful.
Accordingly, the Board has adopted the model substantively as proposed.
Model C-5 Holds to statutory limits on all deposits. The Board
proposed to revise Model C-5 to facilitate use of the form by banks
that elect to impose the limitation on withdrawals by cash under
Sec. 229.12(d). One commenter suggested the Board include a cross-
reference to the section on local checks the first time the phrase
``local check'' is used. Because the disclosure is relatively short,
the Board does not believe that a cross reference is necessary and has
adopted the model substantively as proposed.
Model C-10 Cash withdrawal limitation. The Board proposed to
revise Model C-10 to facilitate the incorporation of the clause into
the various model availability policy disclosures. The Board received
no comments on this proposal and has adopted the model as proposed.
Model C-12 Exception hold notice. The Board proposed to revise
Model C-12 to clarify that the optional provision concerning overdraft
or returned check fees applies only to the last category of reasons,
reasonable cause to doubt collectibility. In addition, to reflect the
change to Sec. 229.13(g)(1)(i)(B), the Board proposed to delete the
reference to the amount of the deposit. One commenter requested that
the Board add natural disasters to the examples of emergency
conditions. The Board believes that additional examples are unnecessary
and has adopted the model as proposed.
Model C-13 Reasonable cause hold notice. To reflect the change to
Sec. 229.13(g)(1)(i)(B), the Board proposed to delete the reference to
the amount of the deposit. The Board received no comments on the model
notice, and has adopted it as proposed.
Model C-16 Case-by-case hold notice. The Board proposed to revise
the model notice to incorporate optional language for banks that elect
to impose the cash withdrawal limitation. In addition, to reflect the
change to Sec. 229.16(c)(2)(i)(B), the Board proposed to delete the
reference to the amount of the deposit. The Board received no comments
on the model notice, and has adopted it as proposed.
Commentary to model forms. The Board proposed to make technical and
stylistic changes to the Commentary to the model disclosures, clauses,
and notices. For example, the Board proposed to clarify that the Act's
protection from liability for banks that use the models properly
applies to the model clauses and notices as well as to the model
disclosures. The Board also proposed to revise the commentary to Models
C-2 through C-5 to clarify that in disclosing that a longer delay may
apply, a bank may disclose when funds will be generally available based
on when the funds would be available if the deposit were of a nonlocal
check. Finally, the Board proposed to revise the commentary to model
notices C-12 through C-16 to clarify that a bank should modify the
notices if it places a hold on other funds. One commenter requested
additional guidance on how to modify the notices if it places a hold on
other funds. The commentary to Model Notices C-12 through C-21 has been
revised to provide specific wording a bank could use to modify the
notices.
Another commenter recommended that the Board clarify that if a bank
does not have a cut-off hour prior to its closing, it need not disclose
a cut-off hour. The introductory commentary to the models has been
modified accordingly, as has the commentary to Sec. 229.16(b), as
discussed above.
Civil liability. Banks that use earlier versions of the models are
protected from civil liability under Sec. 229.21(e), but are encouraged
to use new versions when reordering or reprinting supplies.
III. 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 a
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 final amendments will apply to all depository institutions,
regardless of size, and represent relatively small changes to the
existing rule. The amendments should not have a negative economic
impact on small institutions, and, therefore, there were no significant
alternatives that would have minimized the economic impact on those
institutions. The amendments will clarify rights and duties of
depository
[[Page 13809]]
institutions and, in some cases, reduce economic burden on all affected
entities.
IV. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3506; 5 CFR 1320 Appendix A.1), the Board reviewed the rule under the
authority delegated to the Board by the Office of Management and
Budget.
The collection of information requirements amended in this rule are
found in 12 CFR 229.13, 229.16(c), 229.34(f), 229.36(e), and Appendix
C. This information is intended to alert consumers about their
financial institutions' checkhold policies and to help prevent
unintentional (and costly) overdrafts. The respondents are for-profit
financial institutions, including small businesses. The Board's
Regulation CC applies to all types of depository institutions, not just
state member banks. However, under Paperwork Reduction Act regulations,
the Federal Reserve accounts for the burden of the paperwork associated
with the regulation only for state member banks. Any estimates of
paperwork burden for institutions other than state member banks that
would be affected by the amendments would be provided by the federal
agency or agencies that supervise those lenders.
The Federal Reserve may not conduct or sponsor, and an organization
is not required to respond to, this information collection unless it
displays a currently valid OMB control number. The OMB control number
is 7100-0235.
The amendments are not expected to change the ongoing annual
burden. The estimated burden per response ranges from 3 minutes (for a
notice of exception, a case-by-case hold notice, or a notice to a
potential new customer or to any person upon request) to 20 hours for
notices of changes in policy. There are 1,042 state member banks and an
average frequency of 3,314 responses per respondent each year. The
total amount of annual burden is estimated to be 183,711 hours. Based
on an hourly cost of $20, the annual cost to the public is estimated to
be $3,674,220. There is not estimated to be any annual cost burden over
the annual hour burden.
Additionally, the Federal Reserve estimated that there would be
associated capital or start up cost in the amount of $80 per bank for
revising the notices to conform with the new model availability policy
disclosures, clauses, and notices when a bank exhausts its current
supply. The Board received one comment from a commercial bank which
pointed out that ``many financial institutions deliver these
disclosures to their customers either in pre-printed format, with other
account rules or information, or in computer format. This commenter
further stated that ``in terms of creation of documents, review and
final drafting, printing and forms destruction, the costs of the
revisions . . . will exceed $10,000 for large financial institutions.''
The notice of proposed rulemaking stated on page 27806 that ``banks
that use earlier versions of the model forms would be protected from
civil liability under Sec. 229.21(e), but would be encouraged to use
new versions when reordering or reprinting new supplies.'' This final
rule makes the same statement in the ``Supplementary Information''
section, before the section-by-section analysis. The regulation does
not require destruction or disposal of any notices currently in use.
The $80 cost estimate is intended to represent only the costs
associated with complying with the revisions to disclosure requirements
in the regulation, not the cost of complying with the regulation on an
on-going basis. Since, as the commenter pointed out, the Board's
revision of twelve model disclosures will cause many financial
institutions to revise more than twelve of its disclosures, forms, and
computer programs, the Board is revising its estimate of the one-time
cost of complying with the revisions to $400 per state member bank, for
a total of $416,800.
Because the notices are not provided to the Federal Reserve, no
issue of confidentiality under the Freedom of Information Act arises.
The disclosure of information to consumers with regard to the
availability of funds is available to the public. The account
information regarding the availability of funds in an individual's
account is confidential between the institution and the consumer.
The Federal Reserve has a continuing interest in the public's
opinions of our collections of information. At any time, comments
regarding the burden estimate, or any other aspect of this collection
of information, including suggestions for reducing the burden, may be
sent to: Secretary, Board of Governors of the Federal Reserve System,
20th and C Streets, N.W., Washington, DC 20551; and to the Office of
Management and Budget, Paperwork Reduction Project (7100-0235),
Washington, DC 20503.
List of Subjects in 12 CFR Part 229
Banks, banking, Federal Reserve System, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, 12 CFR Part 229 is
amended as set forth below:
PART 229--AVAILABILITY OF FUNDS AND COLLECTION OF CHECKS
(REGULATION CC)
1. The authority citation for part 229 continues to read as
follows:
Authority: 12 U.S.C. 4001 et seq.
2. In Sec. 229.2, the first sentence in paragraph (e) concluding
text is revised, paragraph (s) is revised, paragraph (pp) is
redesignated as paragraph (qq), and a new paragraph (pp) is added to
read as follows:
Sec. 229.2 Definitions.
* * * * *
(e) * * *
For purposes of subpart C of this part and, in connection therewith,
this subpart A, the term bank also includes any person engaged in the
business of banking, as well as a Federal Reserve Bank, a Federal Home
Loan Bank, and a state or unit of general local government to the
extent that the state or unit of general local government acts as a
paying bank. * * *
* * * * *
(s) Local paying bank means a paying bank that is located in the
same check-processing region as the physical location of the branch,
contractual branch, or proprietary ATM of the depositary bank in which
that check was deposited.
* * * * *
(pp) Contractual branch, with respect to a bank, means a branch of
another bank that accepts a deposit on behalf of the first bank.
* * * * *
3. Section 229.13 is amended as follows:
a. In paragraphs (g)(1) introductory text and (g)(1)(ii)(A), the
phrase ``paragraphs (b) through (f)'' is revised to read ``paragraphs
(b) through (e)'';
b. Paragraphs (g)(1)(i)(B) and (g)(1)(i)(E) are revised;
c. Paragraph (g)(1)(ii)(B) is removed and the paragraph designation
(g)(1)(ii)(A) is removed;
d. Paragraph (g)(4) is redesignated as paragraph (g)(5) and new
paragraph (g)(4) is added; and
e. Paragraph (h)(4) is revised.
The addition and revisions read as follows:
Sec. 229.13 Exceptions.
* * * * *
(g) Notice of exception--(1) * * *
(i) * * *
(B) The date of the deposit;
* * * * *
[[Page 13810]]
(E) The time period within which the funds will be available for
withdrawal.
* * * * *
(4) Emergency conditions exception notice. When a depositary bank
extends the time when funds will be available for withdrawal based on
the application of the emergency conditions exception contained in
paragraph (f) of this section, it must provide the depositor with
notice in a reasonable form and within a reasonable time given the
circumstances. The notice shall include the reason the exception was
invoked and the time period within which funds shall be made available
for withdrawal, unless the depositary bank, in good faith, does not
know at the time the notice is given the duration of the emergency and,
consequently, when the funds must be made available. The depositary
bank is not required to provide a notice if the funds subject to the
exception become available before the notice must be sent.
* * * * *
(h) Availability of deposits subject to exceptions. * * *
(4) For the purposes of this section, a ``reasonable period'' is an
extension of up to one business day for checks described in
Sec. 229.10(c)(1)(vi), five business days for checks described in
Sec. 229.12(b) (1) through (4), and six business days for checks
described in Sec. 229.12(c) (1) and (2) or Sec. 229.12(f). A longer
extension may be reasonable, but the bank has the burden of so
establishing.
4. Section Sec. 229.16(c)(2)(i)(B) is revised to read as follows:
Sec. 229.16 Specific availability policy disclosure.
* * * * *
(c) Longer delays on a case-by-case basis. * * *
(2) * * * (i) * * *
(B) The date of the deposit;
* * * * *
5. In Sec. 229.19, paragraph (a)(1) and the first sentence of
paragraph (a)(5)(ii) are revised to read as follows:
Sec. 229.19 Miscellaneous.
(a) * * *
(1) Funds deposited at a staffed facility, ATM, or contractual
branch are considered deposited when they are received at the staffed
facility, ATM, or contractual branch;
* * * * *
(5) * * *
(ii) After a cut-off hour set by the depositary bank for the
receipt of deposits of 2:00 p.m. or later, or, for the receipt of
deposits at ATMs, contractual branches, or off-premise facilities, of
12:00 noon or later. * * *
* * * * *
6. In Sec. 229.30, paragraph (c) is revised to read as follows:
Sec. 229.30 Paying bank's responsibility for return of checks.
* * * * *
(c) Extension of deadline. The deadline for return or notice of
nonpayment under the U.C.C. or Regulation J (12 CFR part 210), or
Sec. 229.36(f)(2) is extended to the time of dispatch of such return or
notice of nonpayment where a paying bank uses a means of delivery that
would ordinarily result in receipt by the bank to which it is sent--
(1) On or before the receiving bank's next banking day following
the otherwise applicable deadline, for all deadlines other than those
described in paragraph (c)(2) of this section; this deadline is
extended further if a paying bank uses a highly expeditious means of
transportation, even if this means of transportation would ordinarily
result in delivery after the receiving bank's next banking day; or
(2) Prior to the cut-off hour for the next processing cycle (if
sent to a returning bank), or on the next banking day (if sent to the
depositary bank), for a deadline falling on a Saturday that is a
banking day (as defined in the applicable U.C.C.) for the paying bank.
* * * * *
7. In Sec. 229.34, the section heading and paragraph (c)(4) are
revised and a new paragraph (f) is added to read as follows:
Sec. 229.34 Warranties.
* * * * *
(c) Warranty of settlement amount, encoding, and offset. * * *
* * * * *
(4) If a bank settles with another bank for checks presented, or
for returned checks for which it is the depositary bank, in amount
exceeding the total amount of the checks, the settling bank may set off
the excess settlement amount against subsequent settlements for checks
presented, or for returned checks for which it is the depositary bank,
that it receives from the other bank.
* * * * *
(f) Notice of claim. Unless a claimant gives notice of a claim for
breach of warranty under this section to the bank that made the
warranty within 30 days after the claimant has reason to know of the
breach and the identity of the warranting bank, the warranting bank is
discharged to the extent of any loss caused by the delay in giving
notice of the claim.
8. In Sec. 229.36, the heading and the last sentence of paragraph
(c) and paragraph (e)(1)(ii) are revised to read as follows:
Sec. 229.36 Presentment and issuance of checks.
* * * * *
(c) Electronic presentment. * * * An electronic presentment
agreement may not extend return times or otherwise vary the
requirements of this part with respect to parties interested in the
check that are not party to the agreement.
* * * * *
(e) Issuance of payable-through checks.
(1) * * *
(ii) The words ``payable through'' followed by the name of the
payable-through bank.
* * * * *
9. In Sec. 229.39, paragraph (b) is revised to read as follows:
Sec. 229.39 Insolvency of bank.
* * * * *
(b) Preference against paying or depositary bank. If a paying bank
finally pays a check, or if a depositary bank becomes obligated to pay
a returned check, and suspends payment without making a settlement for
the check or returned check with the prior bank that is or becomes
final, the prior bank has a preferred claim against the paying bank or
the depositary bank.
* * * * *
10. Section 229.42 is revised to read as follows:
Sec. 229.42 Exclusions.
The expeditious-return (Secs. 229.30(a) and 229.31(a)), notice-of-
nonpayment (Sec. 229.33), and same-day settlement (Sec. 229.36(f))
requirements of this subpart do not apply to a check drawn upon the
United States Treasury, to a U.S. Postal Service money order, or to a
check drawn on a state or a unit of general local government that is
not payable through or at a bank.
11. A new Sec. 229.43 is added to read as follows:
Sec. 229.43 Checks payable in Guam, American Samoa, and the Northern
Mariana Islands.
(a) Definitions. The definitions in Sec. 229.2 apply to this
section, unless otherwise noted. In addition, for the purposes of this
section--
(1) Pacific island bank means an office of an institution that
would be a bank as defined in Sec. 229.2(e) but for the fact that the
office is located in Guam, American Samoa, or the Northern Mariana
Islands;
(2) Pacific island check means a demand draft drawn on or payable
[[Page 13811]]
through or at a Pacific island bank, which is not a check as defined in
Sec. 229.2(k).
(b) Rules applicable to Pacific island checks. To the extent a bank
handles a Pacific island check as if it were a check defined in
Sec. 229.2(k), the bank is subject to the following sections of this
part (and the word ``check'' in each such section is construed to
include a Pacific island check)--
(1) Sec. 229.31, except that the returning bank is not subject to
the requirement to return a Pacific island check in an expeditious
manner;
(2) Sec. 229.32;
(3) Sec. 229.34(c)(2), (c)(3), (d), and (e);
(4) Sec. 229.35; for purposes of Sec. 229.35(c), the Pacific island
bank is deemed to be a bank;
(5) Sec. 229.36(d);
(6) Sec. 229.37;
(7) Sec. 229.38(a) and (c) through (h);
(8) Sec. 229.39(a), (b), (c) and (e); and
(9) Secs. 229.40 through 229.42.
12. Appendix C to Part 229 is amended as follows:
a. The appendix heading is revised;
b. The introductory text is revised;
c. The heading above the contents listing for models C-1 through C-
5 is revised;
d. A new item is added to the end of the contents listing for Model
Clauses;
e. The heading immediately above model policy disclosure ``C-1--
Next-day availability'' is revised; and
f. Model Availability Policy Disclosures C-1 through C-5, Model
Clauses C-9 and C-10, and Model Notices C-12 through C-16 are revised,
and a new Model Clause C-11A is added.
The revisions and additions read as follows:
Appendix C to Part 229--Model Availability Policy Disclosures, Clauses,
and Notices
This Appendix contains model availability policy disclosures,
clauses, and notices to facilitate compliance with the disclosure
requirements of Regulation CC (12 CFR Part 229). Although use of
these models is not required, banks using them properly to make
disclosures required by the Regulation CC are deemed to be in
compliance.
Model Availability Policy Disclosures
* * * * *
Model Clauses
* * * * *
C-11A Availability of Funds Deposited at Other Locations
* * * * *
Model Availability Policy Disclosures
C-1--Next-Day Availability
Your Ability to Withdraw Funds
Our policy is to make funds from your cash and check deposits
available to you on the first business day after the day we receive
your deposit. Electronic direct deposits will be available on the
day we receive the deposit. Once the funds are available, you can
withdraw them in cash and we will use them to pay checks that you
have written.
For determining the availability of your deposits, every day is
a business day, except Saturdays, Sundays, and federal holidays. If
you make a deposit before (time of day) on a business day that we
are open, we will consider that day to be the day of your deposit.
However, if you make a deposit after (time of day) or on a day we
are not open, we will consider that the deposit was made on the next
business day we are open.
C-2--Next-day availability and Sec. 229.13 exceptions
Your Ability to Withdraw Funds
Our policy is to make funds from your cash and check deposits
available to you on the first business day after the day we receive
your deposit. Electronic direct deposits will be available on the
day we receive the deposit. Once they are available, you can
withdraw the funds in cash and we will use the funds to pay checks
that you have written.
For determining the availability of your deposits, every day is
a business day, except Saturdays, Sundays, and federal holidays. If
you make a deposit before (time of day) on a business day that we
are open, we will consider that day to be the day of your deposit.
However, if you make a deposit after (time of day) or on a day we
are not open, we will consider that the deposit was made on the next
business day we are open.
Longer Delays May Apply
Funds you deposit by check may be delayed for a longer period
under the following circumstances:
We believe a check you deposit will not be paid.
You deposit checks totaling more than $5,000 on any one
day.
You redeposit a check that has been returned unpaid.
You have overdrawn your account repeatedly in the last
six months.
There is an emergency, such as failure of computer or
communications equipment.
We will notify you if we delay your ability to withdraw funds
for any of these reasons, and we will tell you when the funds will
be available. They will generally be available no later than the
(number) business day after the day of your deposit.
Special Rules for New Accounts
If you are a new customer, the following special rules will
apply during the first 30 days your account is open.
Funds from electronic direct deposits to your account will be
available on the day we receive the deposit. Funds from deposits of
cash, wire transfers, and the first $5,000 of a day's total deposits
of cashier's, certified, teller's, traveler's, and federal, state
and local government checks will be available on the first business
day after the day of your deposit if the deposit meets certain
conditions. For example, the checks must be payable to you (and you
may have to use a special deposit slip). The excess over $5,000 will
be available on the ninth business day after the day of your
deposit. If your deposit of these checks (other than a U.S. Treasury
check) is not made in person to one of our employees, the first
$5,000 will not be available until the second business day after the
day of your deposit.
Funds from all other check deposits will be available on the
(number) business day after the day of your deposit.
C-3--Next-Day Availability, Case-by-Case Holds to Statutory Limits, and
Sec. 229.13 Exceptions
Your Ability To Withdraw Funds
Our policy is to make funds from your cash and check deposits
available to you on the first business day after the day we receive
your deposit. Electronic direct deposits will be available on the
day we receive the deposit. Once they are available, you can
withdraw the funds in cash and we will use the funds to pay checks
that you have written.
For determining the availability of your deposits, every day is
a business day, except Saturdays, Sundays, and federal holidays. If
you make a deposit before (time of day) on a business day that we
are open, we will consider that day to be the day of your deposit.
However, if you make a deposit after (time of day) or on a day we
are not open, we will consider that the deposit was made on the next
business day we are open.
Longer Delays May Apply
In some cases, we will not make all of the funds that you
deposit by check available to you on the first business day after
the day of your deposit. Depending on the type of check that you
deposit, funds may not be available until the fifth business day
after the day of your deposit. The first $100 of your deposits,
however, may be available on the first business day.
If we are not going to make all of the funds from your deposit
available on the first business day, we will notify you at the time
you make your deposit. We will also tell you when the funds will be
available. If your deposit is not made directly to one of our
employees, or if we decide to take this action after you have left
the premises, we will mail you the notice by the day after we
receive your deposit.
If you will need the funds from a deposit right away, you should
ask us when the funds will be available.
In addition, funds you deposit by check may be delayed for a
longer period under the following circumstances:
We believe a check you deposit will not be paid.
You deposit checks totaling more than $5,000 on any one
day.
You redeposit a check that has been returned unpaid.
You have overdrawn your account repeatedly in the last
six months.
[[Page 13812]]
There is an emergency, such as failure of computer or
communications equipment.
We will notify you if we delay your ability to withdraw funds
for any of these reasons, and we will tell you when the funds will
be available. They will generally be available no later than the
(number) business day after the day of your deposit.
Special Rules for New Accounts
If you are a new customer, the following special rules will
apply during the first 30 days your account is open.
Funds from electronic direct deposits to your account will be
available on the day we receive the deposit. Funds from deposits of
cash, wire transfers, and the first $5,000 of a day's total deposits
of cashier's, certified, teller's, traveler's, and federal, state
and local government checks will be available on the first business
day after the day of your deposit if the deposit meets certain
conditions. For example, the checks must be payable to you (and you
may have to use a special deposit slip). The excess over $5,000 will
be available on the ninth business day after the day of your
deposit. If your deposit of these checks (other than a U.S. Treasury
check) is not made in person to one of our employees, the first
$5,000 will not be available until the second business day after the
day of your deposit.
Funds from all other check deposits will be available on the
(number) business day after the day of your deposit.
C-4--Holds to Statutory Limits On All Deposits (Includes Chart)
Your Ability To Withdraw Funds
Our policy is to delay the availability of funds from your cash
and check deposits. During the delay, you may not withdraw the funds
in cash and we will not use the funds to pay checks that you have
written.
Determining the Availability of a Deposit
The length of the delay is counted in business days from the day
of your deposit. Every day is a business day except Saturdays,
Sundays, and federal holidays. If you make a deposit before (time of
day) on a business day that we are open, we will consider that day
to be the day of your deposit. However, if you make a deposit after
(time of day) or on a day we are not open, we will consider that the
deposit was made on the next business day we are open.
The length of the delay varies depending on the type of deposit
and is explained below.
Same-Day Availability
Funds from electronic direct deposits to your account will be
available on the day we receive the deposit.
Next-Day Availability
Funds from the following deposits are available on the first
business day after the day of your deposit:
U.S. Treasury checks that are payable to you.
Wire transfers.
Checks drawn on (bank name) [unless (any limitations
related to branches in different states or check processing
regions)].
If you make the deposit in person to one of our employees, funds
from the following deposits are also available on the first business
day after the day of your deposit:
Cash.
State and local government checks that are payable to
you [if you use a special deposit slip available from (where deposit
slip may be obtained)].
Cashier's, certified, and teller's checks that are
payable to you [if you use a special deposit slip available from
(where deposit slip may be obtained)].
Federal Reserve Bank checks, Federal Home Loan Bank
checks, and postal money orders, if these items are payable to you.
If you do not make your deposit in person to one of our
employees (for example, if you mail the deposit), funds from these
deposits will be available on the second business day after the day
we receive your deposit.
Other Check Deposits
To find out when funds from other check deposits will be
available, look at the first four digits of the routing number on
the check:
BILLING CODE 6210-01-P
[[Page 13813]]
[GRAPHIC] [TIFF OMITTED] TR24MR97.000
BILLING CODE 6210-01-C
Some checks are marked ``payable through'' and have a four-or
nine-digit number nearby. For these checks, use this four-digit
number (or the first four digits of the nine-digit number), not the
routing number on the bottom of the check, to determine if these
checks are local or nonlocal. Once you have determined the first
four digits of the routing number (1234 in the examples above), the
following chart will show you when funds from the check will be
available:
----------------------------------------------------------------------------------------------------------------
First four digits from routing When funds are available if a deposit is made
number When funds are available on a Monday
----------------------------------------------------------------------------------------------------------------
[local numbers].................... $100 on the first business Tuesday.
day after the day of your
deposit.
Remaining funds on the Wednesday.
second business day after
the day of your deposit.
All other numbers.................. $100 on the first business Tuesday.
day after the day of your
deposit.
Remaining funds on the Monday of the following week.
fifth business day after
the day of your deposit.
----------------------------------------------------------------------------------------------------------------
If you deposit both categories of checks, $100 from the checks
will be available on the first business day after the day of your
deposit, not $100 from each category of check.
Longer Delays May Apply
Funds you deposit by check may be delayed for a longer period
under the following circumstances:
We believe a check you deposit will not be paid.
You deposit checks totaling more than $5,000 on any one
day.
You redeposit a check that has been returned unpaid.
You have overdrawn your account repeatedly in the last
six months.
There is an emergency, such as failure of computer or
communications equipment.
We will notify you if we delay your ability to withdraw funds
for any of these reasons, and we will tell you when the funds will
be available. They will generally be available no later than the
(number) business day after the day of your deposit.
Special Rules for New Accounts
If you are a new customer, the following special rules will
apply during the first 30 days your account is open.
Funds from electronic direct deposits to your account will be
available on the day we receive the deposit. Funds from deposits of
cash, wire transfers, and the first $5,000 of a day's total deposits
of cashier's, certified, teller's, traveler's, and federal, state
and local government checks will be available on the first business
day after the day of your deposit if the deposit meets certain
conditions. For example, the checks must be payable to you (and you
may have to use a special deposit slip). The excess over $5,000 will
be available on the ninth business day after the day of your
deposit. If your deposit of these checks (other than a U.S. Treasury
check) is not made in person to one of our employees, the first
$5,000 will not be
[[Page 13814]]
available until the second business day after the day of your
deposit.
Funds from all other check deposits will be available on the
(number) business day after the day of your deposit.
C-5--Holds to Statutory Limits on All Deposits
Your Ability To Withdraw Funds
Our policy is to delay the availability of funds from your cash
and check deposits. During the delay, you may not withdraw the funds
in cash and we will not use the funds to pay checks that you have
written.
Determining the Availability of a Deposit
The length of the delay is counted in business days from the day
of your deposit. Every day is a business day except Saturdays,
Sundays, and federal holidays. If you make a deposit before (time of
day) on a business day that we are open, we will consider that day
to be the day of your deposit. However, if you make a deposit after
(time of day) or on a day we are not open, we will consider that the
deposit was made on the next business day we are open.
The length of the delay varies depending on the type of deposit
and is explained below.
Same-Day Availability
Funds from electronic direct deposits to your account will be
available on the day we receive the deposit.
Next-Day Availability
Funds from the following deposits are available on the first
business day after the day of your deposit:
U.S. Treasury checks that are payable to you.
Wire transfers.
Checks drawn on (bank name) [unless (any limitations
related to branches in different states or check processing
regions)].
If you make the deposit in person to one of our employees, funds
from the following deposits are also available on the first business
day after the day of your deposit:
Cash.
State and local government checks that are payable to
you [if you use a special deposit slip available from (where deposit
slip may be obtained)].
Cashier's, certified, and teller's checks that are
payable to you [if you use a special deposit slip available from
(where deposit slip may be obtained)].
Federal Reserve Bank checks, Federal Home Loan Bank
checks, and postal money orders, if these items are payable to you.
If you do not make your deposit in person to one of our
employees (for example, if you mail the deposit), funds from these
deposits will be available on the second business day after the day
we receive your deposit.
Other Check Deposits
The delay for other check deposits depends on whether the check
is a local or a nonlocal check. To see whether a check is a local or
a nonlocal check, look at the routing number on the check:
BILLING CODE 6210-01-P
[GRAPHIC] [TIFF OMITTED] TR24MR97.001
BILLING CODE 6210-01-C
If the first four digits of the routing number (1234 in the
examples above) are (list of local numbers), then the check is a
local check. Otherwise, the check is a nonlocal check. Some checks
are marked ``payable through'' and have a four-or nine-digit number
nearby. For these checks, use the four-digit number (or the first
four digits of the nine-digit number), not the routing number on the
bottom of the check, to determine if these checks are local or
nonlocal. Our policy is to make funds from local and nonlocal checks
available as follows.
1. Local checks. The first $100 from a deposit of local checks
will be available on the first business day after the day of your
deposit. The remaining funds will be available on the second
business day after the day of your deposit.
For example, if you deposit a local check of $700 on a Monday,
$100 of the deposit is available on Tuesday. The remaining $600 is
available on Wednesday.
[[Page 13815]]
2. Nonlocal checks. The first $100 from a deposit of nonlocal
checks will be available on the first business day after the day of
your deposit. The remaining funds will be available on the fifth
business day after the day of your deposit.
For example, if you deposit a $700 nonlocal check on a Monday,
$100 of the deposit is available on Tuesday. The remaining $600 is
available on Monday of the following week.
Longer Delays May Apply
Funds you deposit by check may be delayed for a longer period
under the following circumstances:
We believe a check you deposit will not be paid.
You deposit checks totaling more than $5,000 on any one
day.
You redeposit a check that has been returned unpaid.
You have overdrawn your account repeatedly in the last
six months.
There is an emergency, such as failure of computer or
communications equipment.
We will notify you if we delay your ability to withdraw funds
for any of these reasons, and we will tell you when the funds will
be available. They will generally be available no later than the
(number) business day after the day of your deposit. If you deposit
both categories of checks, $100 from the checks will be available on
the first business day after the day of your deposit, not $100 from
each category of check.
Special Rules for New Accounts
If you are a new customer, the following special rules will
apply during the first 30 days your account is open.
Funds from electronic direct deposits to your account will be
available on the day we receive the deposit. Funds from deposits of
cash, wire transfers, and the first $5,000 of a day's total deposits
of cashier's, certified, teller's, traveler's, and federal, state
and local government checks will be available on the first business
day after the day of your deposit if the deposit meets certain
conditions. For example, the checks must be payable to you (and you
may have to use a special deposit slip). The excess over $5,000 will
be available on the ninth business day after the day of your
deposit. If your deposit of these checks (other than a U.S. Treasury
check) is not made in person to one of our employees, the first
$5,000 will not be available until the second business day after the
day of your deposit.
Funds from all other check deposits will be available on the
(number) business day after the day of your deposit.
Model Clauses
* * * * *
C-9--Automated Teller Machine Deposits (Extended Hold)
Deposits at Automated Teller Machines
Funds from any deposits (cash or checks) made at automated
teller machines (ATMs) we do not own or operate will not be
available until the fifth business day after the day of your
deposit. This rule does not apply at ATMs that we own or operate.
(A list of our ATMs is enclosed. or A list of ATMs where you can
make deposits but that are not owned or operated by us is enclosed.
or All ATMs that we own or operate are identified as our machines.)
C-10--Cash Withdrawal Limitation
Cash Withdrawal Limitation
We place certain limitations on withdrawals in cash. In general,
$100 of a deposit is available for withdrawal in cash on the first
business day after the day of deposit. In addition, a total of $400
of other funds becoming available on a given day is available for
withdrawal in cash at or after (time no later than 5:00 p.m.) on
that day. Any remaining funds will be available for withdrawal in
cash on the following business day.
* * * * *
C-11A--Availability of Funds Deposited at Other Locations
Deposits at Other Locations
This availability policy only applies to funds deposited at
(location). Please inquire for information about the availability of
funds deposited at other locations.
Model Notices
C-12--Exception Hold Notice
Notice of Hold
Account number: (number)
Date of deposit: (date)
We are delaying the availability of $(amount being held) from
this deposit. These funds will be available on the (number) business
day after the day of your deposit.
We are taking this action because:
--A check you deposited was previously returned unpaid.
--You have overdrawn your account repeatedly in the last six months.
--The checks you deposited on this day exceed $5,000.
--An emergency, such as failure of computer or communications
equipment, has occurred.
--We believe a check you deposited will not be paid for the
following reasons [*]:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
[*If you did not receive this notice at the time you made the
deposit and the check you deposited is paid, we will refund to you
any fees for overdrafts or returned checks that result solely from
the additional delay that we are imposing. To obtain a refund of
such fees, (description of procedure for obtaining refund).]
C-13--Reasonable Cause Hold Notice
Notice of Hold
Account number: (number)
Date of deposit: (date)
We are delaying the availability of the funds you deposited by
the following check: (description of check, such as amount and
drawer.)
These funds will be available on the (number) business day after
the day of your deposit. The reason for the delay is explained
below:
--We received notice that the check is being returned unpaid.
--We have confidential information that indicates that the check may
not be paid.
--The check is drawn on an account with repeated overdrafts.
--We are unable to verify the endorsement of a joint payee.
--Some information on the check is not consistent with other
information on the check.
--There are erasures or other apparent alterations on the check.
--The routing number of the paying bank is not a current routing
number.
--The check is postdated or has a stale date.
--Information from the paying bank indicates that the check may not
be paid.
--We have been notified that the check has been lost or damaged in
collection.
--Other:
----------------------------------------------------------------------
[If you did not receive this notice at the time you made the
deposit and the check you deposited is paid, we will refund to you
any fees for overdrafts or returned checks that result solely from
the additional delay that we are imposing. To obtain a refund of
such fees, (description of procedure for obtaining refund).]
C-14--One-Time Notice for Large Deposit and Redeposited Check Exception
Holds
Notice of Hold
If you deposit into your account:
Checks totaling more than $5,000 on any one day, the
first $5,000 deposited on any one banking day will be available to
you according to our general policy. The amount in excess of $5,000
will generally be available on the (number) business day after the
day of deposit for checks drawn on (bank name), the (number)
business day after the day of deposit for local checks and (number)
business day after the day of deposit for nonlocal checks. If checks
(not drawn on us) that otherwise would receive next-day availability
exceed $5,000, the excess will be treated as either local or
nonlocal checks depending on the location of the paying bank. If
your check deposit, exceeding $5,000 on any one day, is a mix of
local checks, nonlocal checks, checks drawn on (bank name), or
checks that generally receive next-day availability, the excess will
be calculated by first adding together the (type of check), then the
(type of check), then the (type of check), then the (type of check).
A check that has been returned unpaid, the funds will
generally be available on the (number) business day after the day of
deposit for checks drawn on (bank name), the (number) business day
after the day of deposit for local checks and the (number) business
day after the day of deposit for nonlocal checks. Checks (not drawn
on us) that otherwise would receive next-day availability will be
treated as either local or nonlocal checks depending on the location
of the paying bank.
[[Page 13816]]
C-15--One-Time Notice for Repeated Overdraft Exception Hold
Notice of Hold
Account Number: (number) Date of Notice: (date)
We are delaying the availability of checks deposited into your
account due to repeated overdrafts of your account. For the next six
months, deposits will generally be available on the (number)
business day after the day of your deposit for checks drawn on (bank
name), the (number) business day after the day of your deposit for
local checks, and the (number) business day after the day of deposit
for nonlocal checks. Checks (not drawn on us) that otherwise would
have received next-day availability will be treated as either local
or nonlocal checks depending on the location of the paying bank.
C-16--Case-by-Case Hold Notice
Notice of Hold
Account number: (number)
Date of deposit: (date)
We are delaying the availability of $(amount being held) from
this deposit. These funds will be available on the (number) business
day after the day of your deposit [(subject to our cash withdrawal
limitation policy)].
[If you did not receive this notice at the time you made the
deposit and the check you deposited is paid, we will refund to you
any fees for overdrafts or returned checks that result solely from
the additional delay that we are imposing. To obtain a refund of
such fees, (description of procedure for obtaining refund).]
* * * * *
13. In appendix E to Part 229, under section II,
a. In paragraph E.2., the last sentence is revised;
b. Paragraph S.1. is revised;
c. In paragraph HH.2., the last sentence is revised; and
d. A new paragraph PP. is added.
The revisions and additions read as follows:
Appendix E to Part 229--Commentary
* * * * *
II. Section 229.2 Definitions
* * * * *
E. 229.2(d) Available for Withdrawal
* * * * *
2. * * * For example, a bank does not violate its obligations under
this subpart by holding funds to satisfy a garnishment, tax levy, or
court order restricting disbursements from the account; or to satisfy
the customer's liability arising from the certification of a check,
sale of a cashier's or teller's check, guaranty or acceptance of a
check, or similar transaction to be debited from the customer's
account.
* * * * *
S. 229.2(s) Local Paying Bank
1. ``Local paying bank'' is defined as a paying bank located in
the same check-processing region as the branch, contractual branch,
or proprietary ATM of the depositary bank. For example, a check
deposited at a contractual branch would be deemed local or nonlocal
based on the location of the contractual branch with respect to the
location of the paying bank.
* * * * *
HH. 229.2(hh) Traveler's Check
* * * * *
2. * * * Sometimes traveler's checks that are not issued by banks
do not have any words on them identifying a bank as drawee or paying
agent, but instead bear unique routing numbers with an 8000 prefix that
identifies a bank as paying agent.
* * * * *
PP. 229.2(pp) Contractual Branch
1. When one bank arranges for another bank to accept deposits on
its behalf, the second bank is a contractual branch of the first
bank. For further discussion of contractual branch deposits and
related disclosures, see Secs. 229.2(s) and 229.19(a) of the
regulation and the commentary to Secs. 229.2(s), 229.10(c),
229.14(a), 229.16(a), 229.18(b), and 229.19(a).
* * * * *
14. In appendix E, under section IV, in paragraph D.3.a., two new
sentences are added to the end of the paragraph to read as follows:
* * * * *
IV. Section 229.10 Next-Day Availability
* * * * *
D. 229.10(c) Certain Check Deposits
* * * * *
3. * * *
a. * * * Employees of a contractual branch would not be
considered employees of the depositary bank for the purposes of this
regulation, and deposits at contractual branches would be treated
the same as deposits to a proprietary ATM for the purposes of this
regulation. (See also, Commentary to Sec. 229.19(a).)
* * * * *
15. In appendix E, under section VII:
a. In paragraph H.1.a, the first sentence is revised and two new
sentences are added to the end of the paragraph;
b. Paragraph H.1.e. is removed and paragraph H.1.f. is redesignated
as paragraph H.1.e.;
c. Paragraph H.4. is redesignated as paragraph H.5. and new
paragraph H.4. is added;
d. The second sentence in paragraph I.1. is revised; and e. The
first sentence in paragraph I.4. is revised.
The additions and revisions read as follows:
* * * * *
VII. Section 229.13 Exceptions
* * * * *
H. 229.13(g) Notice of Exception
1. * * *
a. If a depositary bank invokes any of the safeguard exceptions
to the schedules listed above, other than the new account or
emergency conditions exception, and extends the hold on a deposit
beyond the time periods permitted in Secs. 229.10(c) and 229.12, it
must provide a notice to its customer. * * * A depositary bank
satisfies the written notice requirement by sending an electronic
notice that displays the text and is in a form that the customer may
keep, if the customer agrees to such means of notice. Information is
in a form that the customer may keep if, for example, it can be
downloaded or printed.
* * * * *
4. Emergency conditions exception notice.
a. If an account is subject to the emergency conditions
exception under Sec. 229.13(f), the depositary bank must provide
notice in a reasonable form within a reasonable time, depending on
the circumstances. For example, a depositary bank may learn of a
weather emergency or a power outage that affects the paying bank's
operations. Under these circumstances, it likely would be reasonable
for the depositary bank to provide an emergency conditions exception
notice in the same manner and within the same time as required for
other exception notices. On the other hand, if a depositary bank
experiences a weather or power outage emergency that affects its own
operations, it may be reasonable for the depositary bank to provide
a general notice to all depositors via postings at branches and
ATMs, or through newspaper, television, or radio notices.
b. If the depositary bank extends the hold placed on a deposit
due to an emergency condition, the bank need not provide a notice if
the funds would be available for withdrawal before the notice must
be sent. For example, if on the last day of a hold period the
depositary bank experiences a computer failure and customer accounts
cannot be updated in a timely fashion to reflect the funds as
available balances, notices are not required if the funds are made
available before the notices must be sent.
* * * * *
I. 229.13(h) Availability of Deposits Subject to Exceptions
1. * * * 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 and checks
deposited in a nonproprietary ATM is reasonable. * * *
* * * * *
4. One business day for ``on us'' checks, five business days for
local checks, and six business days for nonlocal checks or checks
deposited in a nonproprietary ATM, 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. * * *
* * * * *
[[Page 13817]]
16. In appendix E, under section VIII, a new sentence is added to
the end of paragraph A.1. to read as follows:
* * * * *
VIII. Section 229.14 Payment of Interest
A. 229.14(a) In General
1. * * * In the case of a deposit at a contractual branch,
credit is received on the day the depositary bank receives credit
for the amount of the deposit, which may be different from the day
the contractual branch receives credit for the deposit.
* * * * *
17. In appendix E, under section IX, two new sentences are added
immediately following the second sentence of paragraph A.1. to read as
follows:
* * * * *
IX. Section 229.15 General Disclosure Requirements
A. 229.15(a) Form of Disclosures
1. * * * A depositary bank satisfies the written disclosure
requirement by sending an electronic disclosure that displays the
text and is in a form that the customer may keep, if the customer
agrees to such means of disclosure. Information is in a form that
the customer may keep if, for example, it can be downloaded or
printed. * * *
* * * * *
18. In appendix E, under section X, three new sentences are added
to the end of paragraph A.2., one new sentence is added to the end of
paragraph B.6., and the last sentence of paragraph C.2.a. is revised to
read as follows:
* * * * *
X. Section 229.16 Specific Availability Policy Disclosure
A. 229.16(a) General
* * * * *
2. * * * A bank may establish different availability policies
for different groups of customers, such as customers in a particular
geographic area or customers of a particular branch. For purposes of
providing a specific availability policy, the bank may allocate
customers among groups through good faith use of a reasonable
method. A bank may also establish different availability policies
for deposits at different locations, such as deposits at a
contractual branch.
* * * * *
B. 229.16(b) Content of Specific Policy Disclosure
* * * * *
6. * * * If a bank does not have a cut-off time prior to its
closing time, the bank need not disclose a cut-off time.
* * * * *
C. 229.16(c) Longer Delays on a Case-by-Case Basis
* * * * *
2. * * *
a. * * * In addition, the notice must include the account
number, the date of the deposit, and the amount of the deposit being
delayed.
* * * * *
19. In appendix E, under section XII, a sentence is added to the
end of paragraph B.1. to read as follows:
XII. Section 229.18 Additional Disclosure Requirements
* * * * *
B. 229.18(b) Locations Where Employees Accept Consumer Deposits
1. * * * A bank that acts as a contractual branch at a
particular location must include the availability policy that
applies to its own customers but need not include the policy that
applies to the customers of the bank for which it is acting as a
contractual branch.
* * * * *
20. In appendix E, under section XIII, two new sentences are added
immediately following the first sentence of paragraph A.2., the last
four sentences of paragraph A.6.a. are revised, and a new sentence is
added to the end of paragraph E.3. to read as follows:
XIII. Section 229.19 Miscellaneous
A. 229.19(a) When Funds Are Considered Deposited
* * * * *
2. * * * Funds received at a contractual branch are considered
deposited when received by a teller at the contractual branch or
deposited into a proprietary ATM of the contractual branch. (See
also, Commentary to Sec. 229.10(c) on deposits made to an employee
of the depositary bank.) * * *
* * * * *
6. * * *
a. * * * For receipt of deposits at ATMs, contractual branches,
or other off-premise facilities, such as night depositories or lock
boxes, the depositary bank may establish a cut-off hour of 12:00
noon or later (either local time of the branch or other location of
the depositary bank at which the account is maintained or local time
of the ATM, contractual branch, or other off-premise facility). The
depositary bank must use the same timing method for establishing the
cut-off hour for all ATMs, contractual branches, and other off-
premise facilities used by its customers. The choice of cut-off hour
must be reflected in the bank's internal procedures, and the bank
must inform its customers of the cut-off hour upon request. This
earlier cut-off for ATM, contractual branch, or other off-premise
deposits is intended to provide greater flexibility in the servicing
of these facilities.
* * * * *
E. 229.19(e) Holds on Other Funds
* * * * *
3. * * * When a customer cashes a check over the counter and the
bank places a hold on an account of the customer, the bank must give
whatever notice would have been required under Secs. 229.13 or
229.16 had the check been deposited in the account.
* * * * *
21. In appendix E, under section XVI, a new sentence is added to
the end of paragraphs C.1.a. and C.1.b. to read as follows:
* * * * *
XVI. Section 229.30 Paying Bank's Responsibility for Return of
Checks
* * * * *
C. 229.30(c) Extension of Deadline
1. * * *
a. * * * This paragraph applies to the extension of all midnight
deadlines except Saturday midnight deadlines (see paragraph C.1.b.
of this appendix).
b. * * * This paragraph applies exclusively to the extension of
Saturday midnight deadlines.
* * * * *
22. In appendix E, under section XVII, the second sentence of
paragraph A.7.b. is revised to read as follows:
* * * * *
XVII. Section 229.31 Returning Bank's Responsibility for Return of
Checks
A. 229.31(a) Return of Checks
* * * * *
7. * * *
b. * * * If the returning bank makes an encoding error in
creating a qualified returned check, it may be liable under
Sec. 229.38 for losses caused by any negligence or under
Sec. 229.34(c)(3) for breach of an encoding warranty. * * *
* * * * *
23. In appendix E, under section XX, the first sentence of
paragraph A.1. and paragraph C.5. are revised, and a new paragraph F.
is added as follows:
* * * * *
XX. Section 229.34 Warranties
A. 229.34(a) Warranty of Returned Check
1. This paragraph includes warranties that a returned check,
including a notice in lieu of return, was returned by the paying
bank, or in the case of a check payable by a bank and payable
through another bank, the bank by which the check is payable, within
the deadline under the U.C.C. (subject to any claims or defenses
under the U.C.C., such as breach of a presentment warranty),
Regulation J (12 CFR part 210), or Sec. 229.30(c); that the paying
or returning bank is authorized to return the check; that the
returned check has not been materially altered; and that, in the
case of a notice in lieu of return, the original check has not been
and will not be returned for payment. * * *
* * * * *
C. 229.34(c) Warranty of Settlement Amount, Encoding, and Offset
* * * * *
5. Paragraph (c)(4) provides that a paying bank or a depositary
bank may set off excess settlement paid to another bank against
settlement owed to that bank for checks presented or returned checks
received (for which it is the depositary bank) subsequent to the
excess settlement.
* * * * *
[[Page 13818]]
F. 229.34(f) Notice of Claim
1. This paragraph adopts the notice provisions of U.C.C.
sections 4-207(d) and 4-208(e). The time limit set forth in this
paragraph applies to notices of claims for warranty breaches only.
As provided in Sec. 229.38(g), all actions under this section must
be brought within one year after the date of the occurrence of the
violation involved.
* * * * *
24. In appendix E, section XXII is amended as follows:
a. Paragraph C. is revised; and
b. In paragraph E., the first sentence of paragraph E.1. is revised
to read as follows:
* * * * *
XXII. Section 229.36 Presentment and Issuance of Checks
* * * * *
C. 229.36(c) Electronic Presentment
1. Under an electronic presentment agreement, presentment takes
place when the paying bank receives an electronic transmission of
information describing the check rather than upon delivery of the
physical check. Electronic presentment agreements may include a
variety of procedures in which the physical check is held
(truncated) or delayed by the depositary or collecting bank. U.C.C.
4-110 and 4-406(b) make express provision for truncation and
electronic presentment.
2. This paragraph allows electronic presentment by agreement
with the paying bank; however, such agreement may not prejudice the
interests of other parties to the check. For example, an electronic
presentment agreement may not extend the paying bank's time for
return. Such an extension could damage the depositary bank, which
must make funds available to its customers under mandatory
availability schedules.
* * * * *
E. 229.36(e) Issuance of Payable Through Checks
1. If a bank arranges for checks payable by it to be payable
through another bank, it must require its customers to use checks
that contain conspicuously on their face the name, location, and
first four digits of the nine-digit routing number of the bank by
which the check is payable and the legend ``payable through''
followed by the name of the payable-through bank. * * *
* * * * *
25. In appendix E, section XXIV is amended as follows:
a. In paragraph A.2., the third sentence is revised; and
b. In paragraph D.2.b., the second sentence is removed and two new
sentences are added immediately following the first sentence to read as
follows:
* * * * *
XXIV. Section 229.38 Liability
A. 229.38(a) Standard of Care; Liability; Measure of Damages
* * * * *
2. * * * The measure of damages provided in this section (loss
incurred up to amount of check, less amount of loss party would have
incurred even if bank had exercised ordinary care) is based on
U.C.C. 4-103(e) (amount of the item reduced by an amount that could
not have been realized by the exercise of ordinary care), as limited
by 4-202(c) (bank is liable only for its own negligence and not for
actions of subsequent banks in chain of collection). * * *
* * * * *
D. 229.38(d) Responsibility for Certain Aspects of Checks
* * * * *
2. * * *
b. * * * Under Sec. 229.33(a), a paying bank that returns a
check in the amount of $2,500 or more must provide notice of
nonpayment to the depositary bank by 4:00 p.m. on the second
business day following the banking day on which the check is
presented to the paying bank. Even if a payable-through check in the
amount of $2,500 or more is not returned through the payable-through
bank as quickly as would have been required had the check been
received by the bank by which it is payable, the depositary bank
should not suffer damages unless it has not received timely notice
of nonpayment. * * *
* * * * *
26. In appendix E, under section XXV, the first sentence in
paragraph C.1. is revised to read as follows:
XXV. Section 229.39 Insolvency of Bank
* * * * *
C. 229.39(b) Preference Against Paying or Depositary Bank
1. This paragraph gives a bank a preferred claim against a
closed paying bank that finally pays a check without settling for it
or a closed depositary bank that becomes obligated to pay a returned
check without settling for it. * * *
* * * * *
27. In appendix E, under section XXVIII, the first sentence of
paragraph A. is revised to read as follows:
XXVIII. Section 229.42 Exclusions
A. Checks drawn on the United States Treasury, U.S. Postal
Service money orders, and checks drawn on states and units of
general local government that are presented directly to the state or
unit of general local government and that are not payable through or
at a bank are excluded from the coverage of the expeditious-return,
notice-of-nonpayment, and same-day settlement requirements of
subpart C of this part. * * *
* * * * *
28. In appendix E, section XXIX is redesignated as section XXX, a
new section XXIX is added, and newly designated section XXX is revised
to read as follows:
* * * * *
XXIX. Section 229.43 Checks Payable in Guam, American Samoa, and
the Northern Mariana Islands
A. 229.43(a) Definitions
1. Bank offices in Guam, American Samoa, and the Northern
Mariana Islands (which Regulation CC defines as Pacific island
banks) do not meet the definition of bank in Sec. 229.2(e) because
they are not located in the United States. Some checks drawn on
Pacific island banks (defined as Pacific island checks) bear U.S.
routing numbers and are collected and returned by banks in the same
manner as checks payable in the U.S.
B. 229.43(b) Rules Applicable to Pacific Island Checks
1. When a bank handles a Pacific island check as if it were a
check as defined in Sec. 229.2(k), the bank is subject to certain
provisions of Regulation CC, as provided in this section. Because
the Pacific island bank is not a bank as defined in Sec. 229.2(e),
it is not a paying bank as defined in Sec. 229.2(z) (unless
otherwise noted in this section). Pacific island banks are not
subject to the provisions of Regulation CC.
2. A bank may agree to handle a Pacific island check as a
returned check under Sec. 229.31 and may convert the returned
Pacific island check to a qualified returned check. The returning
bank is not, however, subject to the expeditious-return requirements
of Sec. 229.31. The returning bank may receive the Pacific island
check directly from a Pacific island bank or from another returning
bank. As a Pacific island bank is not a paying bank under Regulation
CC, Sec. 229.31(c) does not apply to a returning bank settling with
the Pacific island bank.
3. A depositary bank that handles a Pacific island check is not
subject to the provisions of subpart B of Regulation CC, including
the availability, notice, and interest accrual requirements, with
respect to that check. If, however, a bank accepts a Pacific island
check for deposit (or otherwise accepts the check as transferee) and
collects the Pacific island check in the same manner as other
checks, the bank is subject to the provisions of Sec. 229.32,
including the provisions regarding time and manner of settlement for
returned checks in Sec. 229.32(b), in the event the Pacific island
check is returned by a returning bank. If the depositary bank
receives the returned Pacific island check directly from the Pacific
island bank, however, the provisions of Sec. 229.32(b) do not apply,
because the Pacific island bank is not a paying bank under
Regulation CC. The depositary bank is not subject to the notice of
nonpayment provisions in Sec. 229.33 for Pacific island checks.
4. Banks that handle Pacific island checks in the same manner as
other checks are subject to the indorsement provisions of
Sec. 229.35. Section 229.35(c) eliminates the need for the
restrictive indorsement ``pay any bank.'' For purposes of
Sec. 229.35(c), the Pacific island bank is deemed to be a bank.
5. Pacific island checks will often be intermingled with other
checks in a single cash letter. Therefore, a bank that handles
Pacific island checks in the same manner as other checks is subject
to the transfer warranty provision in Sec. 229.34(c)(2)
[[Page 13819]]
regarding accurate cash letter totals and the encoding warranty in
Sec. 229.34(c)(3). A bank that acts as a returning bank for a
Pacific island check is not subject to the warranties in
Sec. 229.34(a). Similarly, because the Pacific island bank is not a
``bank'' or a ``paying bank'' under Regulation CC, Sec. 229.34(b),
(c)(1), and (c)(4) do not apply. For the same reason, the provisions
of Sec. 229.36 governing paying bank responsibilities such as place
of receipt and same-day settlement do not apply to checks presented
to a Pacific island bank, and the liability provisions applicable to
paying banks in Sec. 229.38 do not apply to Pacific island banks.
Section 229.36(d), regarding finality of settlement between banks
during forward collection, applies to banks that handle Pacific
island checks in the same manner as other checks, as do the
liability provisions of Sec. 229.38, to the extent the banks are
subject to the requirements of Regulation CC as provided in this
section, and Secs. 229.37 and 229.39 through 229.42.
XXX. Appendix C--Model Availability Policy Disclosures, Clauses,
and Notices
A. Introduction
1. Appendix C contains model disclosures, clauses, and notices
that may be used by banks to meet their disclosure responsibilities
under the regulation. Banks using the models properly will be in
compliance with the regulation's disclosure requirements.
2. Information that must be inserted by a bank using the models
is italicized within parentheses in the text of the models. Optional
information is enclosed in brackets.
3. Banks may make certain changes to the format or content of
the models, including deleting material that is inapplicable,
without losing the Act's protection from liability for banks that
use the models properly. For example, if a bank does not have a cut-
off hour prior to it's closing time, or if a bank does not take
advantage of the Sec. 229.13 exceptions, it may delete the
references to those provisions. Changes to the models may not be so
extensive as to affect the substance, clarity, or meaningful
sequence of the models. Acceptable changes include, for example:
a. Using ``customer'' and ``bank'' instead of pronouns.
b. Changing the typeface or size.
c. Incorporating certain state law ``plain English''
requirements.
4. Shorter time periods for availability may always be
substituted for time periods used in the models.
5. Banks may also add related information. For example, a bank
may indicate that although funds have been made available to a
customer and the customer has withdrawn them, the customer is still
responsible for problems with the deposit, such as checks that were
deposited being returned unpaid. Or a bank could include a telephone
number to be used if a customer has an inquiry regarding a deposit.
6. Banks are cautioned against using the models without
reviewing their own policies and practices, as well as state and
federal laws regarding the time periods for availability of specific
types of checks. A bank using the models will be in compliance with
the Act and the regulation only if the bank's disclosures correspond
to its availability policy.
7. Banks that have used earlier versions of the models (such as
those models that gave Social Security benefits and payroll payments
as examples of preauthorized credits available the day after
deposit, or that did not address the cash withdrawal limitation) are
protected from civil liability under Sec. 229.21(e). Banks are
encouraged, however, to use current versions of the models when
reordering or reprinting supplies.
B. Model Availability Policy Disclosures, Models C-1 Through C-5
1. Models C-1 through C-5 generally.
a. Models C-1 through C-5 are models for the availability policy
disclosures described in Sec. 229.16. The models accommodate a
variety of availability policies, ranging from next-day availability
to holds to statutory limits on all deposits. Model C-3 reflects the
additional disclosures discussed in Secs. 229.16 (b) and (c) for
banks that have a policy of extending availability times on a case-
by-case basis.
b. As already noted, there are several places in the models
where information must be inserted. This information includes the
bank's cut-off times, limitations relating to next-day availability,
and the first four digits of routing numbers for local banks. In
disclosing when funds will be available for withdrawal, the bank
must insert the ordinal number (such as first, second, etc.) of the
business day after deposit that the funds will become available.
c. Models C-1 through C-5 generally do not reflect any optional
provisions of the regulation, or those that apply only to certain
banks. Instead, disclosures for these provisions are included in
Models C-6 through C-11A. A bank using one of the model availability
policy disclosures should also consider whether it must incorporate
one or more of Models C-6 through C-11A.
d. While Sec. 229.10(b) requires next-day availability for
electronic payments, Treasury regulations (31 CFR part 210) and ACH
association rules require that preauthorized credits (''direct
deposits'') be made available on the day the bank receives the
funds. Models C-1 through C-5 reflect these rules. Wire transfers,
however, are not governed by Treasury or ACH rules, but banks
generally make funds from wire transfers available on the day
received or on the business day following receipt. Banks should
ensure that their disclosures reflect the availability given in most
cases for wire transfers.
2. Model C-1 Next-day availability. A bank may use this model
when its policy is to make funds from all deposits available on the
first business day after a deposit is made. This model may also be
used by banks that provide immediate availability by substituting
the word ``immediately'' in place of ``on the first business day
after the day we receive your deposit.''
3. Model C-2 Next-day availability and Sec. 229.13 exceptions.
A bank may use this model when its policy is to make funds from all
deposits available to its customers on the first business day after
the deposit is made, and to reserve the right to invoke the new
account and other exceptions in Sec. 229.13. In disclosing that a
longer delay may apply, a bank may disclose when funds will
generally be available based on when the funds would be available if
the deposit were of a nonlocal check.
4. Model C-3 Next-day availability, case-by-case holds to
statutory limits, and Sec. 229.13 exceptions. A bank may use this
model when its policy, in most cases, is to make funds from all
types of deposits available the day after the deposit is made, but
to delay availability on some deposits on a case-by-case basis up to
the maximum time periods allowed under the regulation. A bank using
this model also reserves the right to invoke the exceptions listed
in Sec. 229.13. In disclosing that a longer delay may apply, a bank
may disclose when funds will generally be available based on when
the funds would be available if the deposit were of a nonlocal
check.
5. Model C-4 Holds to statutory limits on all deposits. A bank
may use this model when its policy is to impose delays to the full
extent allowed under Sec. 229.12 and to reserve the right to invoke
the Sec. 229.13 exceptions. In disclosing that a longer delay may
apply, a bank may disclose when funds will generally be available
based on when the funds would be available if the deposit were of a
nonlocal check. Model C-4 uses a chart to show the bank's
availability policy for local and nonlocal checks and Model C-5 uses
a narrative description.
6. Model C-5 Holds to statutory limits on all deposits. A bank
may use this model when its policy is to impose delays to the full
extent allowed under Sec. 229.12 and to reserve the right to invoke
the Sec. 229.13 exceptions. In disclosing that a longer delay may
apply, a bank may disclose when funds will generally be available
based on when the funds would be available if the deposit were of a
nonlocal check.
C. Model Clauses, Models C-6 Through C-11A
1. Models C-6 through C-11A generally. Certain clauses like
those in the models must be incorporated into a bank's availability
policy disclosure under certain circumstances. The commentary to
each clause indicates when a clause similar to the model clause is
required.
2. Model C-6 Holds on other funds (check cashing). A bank that
reserves the right to place a hold on funds already on deposit when
it cashes a check for a customer, as addressed in Sec. 229.19(e),
must incorporate this type of clause in its availability policy
disclosure.
3. Model C-7 Holds on other funds (other account). A bank that
reserves the right to place a hold on funds in an account of the
customer other than the account into which the deposit is made, as
addressed in Sec. 229.19(e), must incorporate this type of clause in
its availability policy disclosure.
4. Model C-8 Appendix B availability (nonlocal checks). A bank
in a check processing region where the availability schedules for
certain nonlocal checks have been reduced, as described in Appendix
B of Regulation CC, must incorporate this type of clause in its
availability policy disclosure. Banks using Model C-5 may insert
this
[[Page 13820]]
clause at the conclusion of the discussion titled ``Nonlocal
checks.''
5. Model C-9 Automated teller machine deposits (extended
holds). A bank that reserves the right to delay availability of
deposits at nonproprietary ATMs until the fifth business day
following the date of deposit, as permitted by Sec. 229.12(f), must
incorporate this type of clause in its availability policy
disclosure. A bank must choose among the alternative language based
on how it chooses to differentiate between proprietary and
nonproprietary ATMs, as required under Sec. 229.16(b)(5).
6. Model C-10 Cash withdrawal limitation. A bank that imposes
cash withdrawal limitations under Sec. 229.12 must incorporate this
type of clause in its availability policy disclosure. Banks
reserving the right to impose the cash withdrawal limitation and
using Model C-3 should disclose that funds may not be available
until the sixth (rather than fifth) business day in the first
paragraph under the heading ``Longer Delays May Apply.''
7. Model C-11 Credit union interest payment policy. A credit
union subject to the notice requirement of Sec. 229.14(b)(2) must
incorporate this type of clause in its availability policy
disclosure. This model clause is only an example of a hypothetical
policy. Credit unions may follow any policy for accrual provided the
method of accruing interest is the same for cash and check deposits.
8. Model C-11A Availability of funds deposited at other
locations. A clause similar to Model C-11A should be used if a bank
bases the availability of funds on the location where the funds are
deposited (for example, at a contractual or other branch located in
a different check processing region). Similarly, a clause similar to
Model C-11A should be used if a bank distinguishes between local and
non-local checks (for example, a bank using model availability
policy disclosure C-4 or C-5), and accepts deposits in more than one
check processing region.
D. Model Notices, Models C-12 Through C-21
1. Model Notices C-12 through C-21 generally. Models C-12
through C-21 provide models for the various notices required by the
regulation. A bank that cashes a check and places a hold on funds in
an account of the customer (see Sec. 229.19(e)) should modify the
model hold notice accordingly. For example, the bank could replace
the word ``deposit'' with the word ``transaction'' and could add the
phrase ``or cashed'' after the word ``deposited.''
2. Model C-12 Exception hold notice. This model satisfies the
written notice required under Sec. 229.13(g) when a bank places a
hold based on a Sec. 229.13 exception. If a hold is being placed on
more than one check in a deposit, each check need not be described,
but if different reasons apply, each reason must be indicated. A
bank may use the actual date when funds will be available for
withdrawal rather than the number of the business day following the
day of deposit. A bank must incorporate in the notice the material
set out in brackets if it imposes overdraft or returned check fees
after invoking the reasonable cause exception under Sec. 229.13(e).
3. Model C-13 Reasonable cause hold notice. This notice
satisfies the written notice required under Sec. 229.13(g) when a
bank invokes the reasonable cause exception under Sec. 229.13(e).
The notice provides the bank with a list of specific reasons that
may be given for invoking the exception. If a hold is being placed
on more than one check in a deposit, each check must be described
separately, and if different reasons apply, each reason must be
indicated. A bank may disclose its reason for doubting
collectibility by checking the appropriate reason on the model. If
the ``Other'' category is checked, the reason must be given. A bank
may use the actual date when funds will be available for withdrawal
rather than the number of the business day following the day of
deposit. A bank must incorporate in the notice the material set out
in brackets if it imposes overdraft or returned check fees after
invoking the reasonable cause exception under Sec. 229.13(e).
4. Model C-14 One-time notice for large deposit and redeposited
check exception holds. This model satisfies the notice requirements
of Sec. 229.13(g)(2) concerning nonconsumer accounts.
5. Model C-15 One-time notice for repeated overdraft exception
hold. This model satisfies the notice requirements of
Sec. 229.13(g)(3).
6. Model C-16 Case-by-case hold notice. This model satisfies
the notice required under Sec. 229.16(c)(2) when a bank with a case-
by-case hold policy imposes a hold on a deposit. This notice does
not require a statement of the specific reason for the hold, as is
the case when a Sec. 229.13 exception hold is placed. A bank may
specify the actual date when funds will be available for withdrawal
rather than the number of the business day following the day of
deposit when funds will be available. A bank must incorporate in the
notice the material set out in brackets if it imposes overdraft fees
after invoking a case-by-case hold.
7. Model C-17 Notice at locations where employees accept
consumer deposits and Model C-18 Notice at locations where
employees accept consumer deposits (case-by-case holds). These
models satisfy the notice requirement of Sec. 229.18(b). Model C-17
reflects an availability policy of holds to statutory limits on all
deposits, and Model C-18 reflects a case-by-case availability
policy.
8. Model C-19 Notice at automated teller machines. This model
satisfies the ATM notice requirement of Sec. 229.18(c)(1).
9. Model C-20 Notice at automated teller machines (delayed
receipt). This model satisfies the ATM notice requirement of
Sec. 229.18(c)(2) when receipt of deposits at off-premises ATMs is
delayed under Sec. 229.19(a)(4). It is based on collection of
deposits once a week. If collections occur more or less frequently,
the description of when deposits are received must be adjusted
accordingly.
10. Model C-21 Deposit slip notice. This model satisfies the
notice requirements of Sec. 229.18(a) for deposit slips.
By order of the Board of Governors of the Federal Reserve
System, March 17, 1997.
William W. Wiles,
Secretary of the Board.
[FR Doc. 97-7156 Filed 3-21-97; 8:45 am]
BILLING CODE 6210-01-P
