Catching Up – More Changes to Regulation CC

Finally, it seems like Regulation CC is catching up with the industry. Effective July 1, 2018, Subpart C and D were changed to include electronic items, address the concern of items being deposited remotely and amend the requirements for returns and notice of nonpayment. However, Subpart B was left untouched until now.

Rachelle Dekker
Rachelle Dekker – Senior Compliance Advisor

On June 24, 2019, the Consumer Financial Protection Bureau (CFPB) and the Federal Reserve Board issued an amendment to Regulation CC, which also resulted in an amendment to Regulation DD. Overall, three main changes fall under this final rule.

The first change is an amendment to Subpart B of Regulation CC, which comes from Dodd Frank. This is related to adjusting the dollar amounts related to six different sections within Subpart B of Regulation CC. The dollar amounts will be adjusted for inflation based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), every five years and rounded to the nearest $25. Specifically, §229.11(a) of the final rule states that the dollar amounts addressed in Regulation CC will be adjusted effective July 1, 2020, July 1, 2025 and July 1 of every fifth year after 2025.

The following six sections include a dollar amount, which will be adjusted:

  1. The minimum amount of deposited funds banks must make available for withdrawal by the opening of business on the next day for certain check deposits.
  2. The amount a bank must make available when using the EFA Act’s permissive adjustment to the funds-availability rules for withdrawals by cash or other means.
  3. The amount of funds deposited by certain checks in a new account that are subject to next-day availability.
  4. The threshold for using an exception to the funds-availability schedules if the aggregate amount of checks on any one banking day exceed the threshold amount.
  5. The threshold for determining whether an account has been repeatedly overdrawn.
  6. The civil liability amounts for failing to comply with the EFA Act’s requirements.

Keep in mind, since the impact of these changes will affect the institutions Funds Availability Policy, an update to the policy and a change in terms notice will need to be provided. For adverse changes to the institutions Funds Availability Policy, notification is required 30 days before the effective date of the increased amount. Alternatively, if the change is not considered adverse, notification is not required 30 days in advance, but is required within 30 days after the change in terms. The notification can be provided electronically if prior consent was obtained through compliance with E-Sign. In addition, you must consider how your institution’s core system will need to be updated to make available or hold the funds available for withdrawal to align with these adjusted amounts.

The second change comes from the Economic Growth Regulatory Relief Consumer Protection Act (EGRRCPA). The final rule updates the definition of “state” and “United States” to include certain territories. Institutions in American Samoa, the Commonwealth of the Northern Mariana Islands and Guam will need to follow the funds availability, payment of interest and disclosure requirements under Regulation CC. If you do not do business in those locations, then this section may not apply to your institution.

The third change with the final rule is related to Regulation DD. The regulation will be updated to add a new paragraph to section 1030.1(e). The addition of the paragraph to Regulation DD is to reference the board’s authority within Regulation CC. Additionally, there is an amendment with section 1030.7(c), which states that interest shall accrue not later than the business day specified for interest bearing accounts in Regulation CC. Lastly, the final rule includes a correction to errors in the Appendix of Regulation DD related to the formulas for calculating annual percentage yield (APY) and annual percentage yield earned (APYE). Certain terms of the formulas should have been presented as exponents but were not.

Overall, the change in amounts adjusted for inflation as it relates to your Funds Availability Policy may have the most impact on your institution. Be sure to adjust the amounts within the capabilities of your core system, conduct adequate training for employees and update your institution’s Funds Availability Policy. If your institution conducts business within the locations in the additional “states” included within Regulation CC, then update your procedures for placing holds in those locations. Lastly, take a look at your institution’s Regulation DD policy and procedures to determine if the clerical errors were also stated incorrectly on your institution’s internal documents. With all of the changes in the regulatory environment, Regulation CC is finally catching up!

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Rachelle Dekker
Rachelle Dekker – Senior Compliance Advisor