Updates to Regulation CC

The Consumer Financial Protection Bureau and Federal Reserve Board issued a final rule on inflation-based adjustments to the dollar amounts required by the Expedited Funds Availability Act (EFA Act), which is implemented by Regulation CC.

They also amended Regulation CC to incorporate the Economic Growth, Regulatory Relief and Consumer Protection Act amendments to the Expedited Funds Availability Act, which include extending coverage to American Samoa, the Commonwealth of the Northern Mariana Islands and Guam as well as other technical amendments.

There have been many questions on the timing of the amendments. To clarify, all of the amendments went into effect Sept. 3, except for the newly adjusted dollar amounts, which are effective July 1, 2020.

The amendments related to the extension of the EFA Act to American Samoa, the Commonwealth of the Northern Mariana Islands and Guam found in 229.12(e) and 229.43, the definitions of Automatic Teller Machine, States and United States and the technical amendments to Regulation DD all went into effect Sept. 3. The major part of the rule regarding the newly adjusted dollar amounts goes into effect July 1, 2020.

The amendments institute a Dodd-Frank Act statutory requirement to adjust for inflation the amount of funds depository institutions must make available to their customers. The Dodd-Frank Act amendments require the EFA Act dollar amounts to be adjusted every five years based on the annual percentage increase of Consumer Price Index for Urban Wage Earners or CPI-W, rounded to the nearest multiple of $25. As implemented through this final rule, the first adjustments will change the:

• $100 amount (amended to $200 in the EFA Act by the Dodd Frank Act in 2011) in § 229.10, 229.12, 229.13 to $225;
• $400 amount in § 229.12(d) to $450;
• $5,000 amount in § 229.13(a), (b) and (d) to $5,525; and
• $1,000 and $500,000 amounts in § 229.21(a) to $1,100 and $552,500.

The newly adjusted amounts are effective July 1, 2020. The second set of adjustments will be effective July 1, 2025 and will be based on underlying inflation from July 2018 through July 2023. The third and final set of adjustments will be effective July 1, 2030 and will be based on inflation from July 2023 through July 2028.

The amendments that went into effect Sept. 3 were technical. It’s the July 1, 2020 changes that you need to think about. With systems to update, disclosures to change and staff to train, this deadline will be here before you know it. First, you will have to work with vendors to update software that determines availability. Also, banks should consider necessary changes to their Funds Availability Policy disclosures prior to implementation.

Also note that changes to a bank’s funds availability policy to reflect the inflation adjustments will trigger the Regulation CC change-in-terms notice requirements. Regulation CC § 229.18(e) requires a depository institution to send customers a notice regarding a change to the bank’s funds-availability policy at least 30 days before implementing a change and not later than 30 days after implementation for any change that expedites the availability of funds.

The final rule makes it clear that “…[t]he changes to the availability policies to reflect the statutorily required inflation adjustments, as implemented by this final rule, would trigger the requirement to send a change-in-terms notice.”

A change-in-terms notice may be provided electronically in compliance with the Electronic Signatures in Global and National Commerce Act (E-Sign Act) and may be sent on or with a monthly account statement. Furthermore, staff will need to be trained.

Following are questions we have received on the hotline:

Question: Regarding the inflation adjustment amendments issued to Reg CC: We understand that these changes will not be effective until July 1, 2020, but are wondering if we can make these changes early? We are in the process of changing our fee schedule and plan on doing a special mailing to notify our customers of the changes. Could we also include the new funds availability schedule as well to save on postage rather than doing a second special mailing next year?

Answer: Although early compliance is not addressed in the final rule, the bank is always welcome to make more funds available than what is required by Reg CC. The bank would want to be sure to give notice within 30 days of changing its policy.

Question: Are case-by-case holds included in the July 1, 2020, Reg CC changes?

Answer: If your bank has adopted an availability policy more favorable than that required under Regulation CC, it may delay availability but only up to the maximum timeframe allowed by Regulation CC. This means that if your bank offers next-day availability, but decides to delay it, it must still make $200 available on the next business day. On July 1, 2020, the $200 amount will increase to $225. So, your policy regarding longer delays will need to be updated to reflect this new $225 amount. This also means that your funds availability policy disclosure will need to be updated and a change in terms notice will need to be provided.

Question: Can our Funds Availability Policy Disclosure include the phrase “minimum amount required by regulation” rather than setting forth an actual dollar figure?

Answer: Banks should not provide funds availability policy disclosures that include such a phrase. The agencies believe that it would result in customer confusion. Specifically, the agencies believe that one of the purposes of the statute is that consumers be informed of the specific amount of deposits available to them under an institution’s funds-availability policy.