The CFPB and the Fed Adjust Regulation CC for Inflation

By John ReVeal and Daniel S. Cohen

On June 24, 2019, the Consumer Financial Protection Bureau (“CFPB”) and the Federal Reserve Board (“Fed”) (collectively, the “Agencies”) amended Regulation CC, which implements the Expedited Funds Availability Act (the “EFAA”), to adjust for inflation the amount of funds depository institutions must make available to their customers after funds have been deposited and the civil liabilities for failing to meet these obligations (the “Amendment”).  However, depository institutions will not need to adjust their compliance procedures right away.  To “help ensure that institutions have sufficient time to implement the adjustments,” the Agencies set July 1, 2020 as the compliance deadline. Below is a summary of the key funds availability rules and how they are changed (or not) by the Amendment. 

Deposits Subject to Next Business Day Availability

  • Cash deposited in person to a bank employee, wire transfers and Automated Clearing House credit transfers (i.e, “electronic payments”), checks drawn on the U.S. Treasury and deposited into the payee’s account, and certain checks (such as cashier’s checks) deposited in person to a bank employee into an account of the payee. 
  • The lesser of $200 or the aggregate amount deposited on any one banking day to all accounts of the customer by checks that are not otherwise subject to next day availability, such as cashier’s checks that are not deposited in person to a bank employee. 

The Amendment changes $200 to $225. [1]

Deposits Subject to Second Business Day Availability

  • Cash deposits not made in person to a bank employee, and certain checks that otherwise would be subject to next business day availability but that are not deposited in person to a bank employee.  “Local checks” and certain other checks that are not otherwise subject to next day availability. 

These rules are not changed by the Amendment.

Deposits Subject to Fifth Business Day Availability

  • “Nonlocal checks” and certain other checks that are not otherwise subject to next day availability, and deposits of cash or checks at a nonproprietary ATM.

These rules are not changed by the Amendment.

Exception for Certain Checks and ATM Deposits

  • The availability of funds from local checks, nonlocal checks, and deposits at nonproprietary ATMs may be extended by one business day for withdrawal by cash or similar means, except that this extension does not apply to $400 of these funds.

The $400 amount is increased to $450 by the Amendment.

Exceptions Subject to a $5,000 Rule

  • Certain deposits into “new accounts” are subject to the standard availability schedule only with respect to the first $5,000 of funds deposited on any one banking day, but the amount in excess of $5,000 must be available for withdrawal by the ninth business day.  The standard availability rules do not apply to the aggregate amount of deposits by a check or checks that exceeds $5,000 on any one banking day.
  • If the customer’s account or accounts have been repeatedly overdrawn, then the standard availability rules for checks and certain other deposits do not apply for a period of six months after the last such overdraft.  A bank can treat the account(s) as repeatedly overdrawn for this purpose if, on two or more banking days in the preceding six months, the balance of the account(s) is negative or would have become negative by $5,000 or more.

In all cases outlined above, the Amendment increase the $5,000 amount to $5,525.

Depository institutions will have one year to revise their availability schedules and funds availability policies, and they will need to notify their consumer account holders via a written “change-in-terms” statement.  Depository institutions must send these written notices to the account holder at least 30 days before the changes go into effect; electronic disclosure is acceptable, provided the institution complies with the E-Sign Act.  

Affected entities also should consider the potential costs of failure to comply with the new rules.  Depository institutions are currently liable for actual damages as well as additional damages between $100 and $1,000 for individual actions, and the lesser of $500,000 or 1 percent of net worth for class actions.  As of July 1, 2020, the maximum additional damages for individuals will be between $100 and $1,100 and class actions will receive the lesser of $552,500 or one percent of net worth.

The scope of Regulation CC has never been contingent upon a depository institution’s total assets and the Amendment does not exempt any depository institutions on this basis.  Notably, the Agencies expressly reaffirmed Regulation CC’s scope by stating that depository institutions with $10 billion or less in total assets are still subject to Regulation CC. 


Note

[1]  The EFAA states that the current threshold is $200 (see 12 U.S.C § 4002(a)(2)(D)), but Regulation CC as printed by the Government Printing Office was not updated to reflect this higher amount and still states $100.  The Amendment cites to this provision of the EFAA where it states that the threshold amount, as of July 21, 2011 through June 30, 2020 is $200.  See 84 Fed. Reg. 31687, 31696 (July 3, 2019).  We conform our figures to the EFAA and the Amendment.

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