By Rhonda Coggins, CRCM, National Compliance Services Director
Regulation CC has been around for quite some time. It was promulgated by the Federal Reserve Board to implement the Expedited Funds Availability Act (EFAA) and became effective in 1988. At its core, the regulation establishes requirements that institutions must make funds deposited into transaction accounts available according to certain time schedules and that an institution discloses in their funds availability policies.
Fast forward to today, where big changes are just around the corner. Earlier this year, the Federal Reserve and the Bureau of Consumer Financial Protection issued a final rule amending Regulation CC. A major focal point of this new rule is to implement a statutory requirement to adjust for inflation, the amount of funds institutions must make available to their customers. Also, the rule incorporates changes as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act.
As required by the Dodd-Frank Act, the EFAA dollar amounts are required to be adjusted for inflation every 5 years. To support this, the new rule amends the Regulation for its first set of adjustments that will become effective July 1, 2020. For example, the Regulation currently requires certain availability where the first $200 of a deposit must be made available. However, effective on July 1, 2020, the $200 provision will change to $225.
So, how would an institution prepare for these new changes?
- Institutions should review the final rule and compare it to their board-approved policy. The policy should be revised to accommodate the new rule.
- Institutions should review their funds availability disclosure and ensure it reflects the board-approved policy while maintaining compliance with the regulation.
- Institutions should then review any posted funds availability notices and review them for any necessary revisions.
- Consideration should also be given to providing any change-in-terms notices. While the preamble to the final rule considered comments suggesting that no change-in-terms notices be required for inflationary adjustments, the Agencies declined to make any exception for such adjustments. In connection with such notices, the Agencies discussed cost-effective ways to deliver them, such as electronically subject to E-SIGN or sending a notice on or with an account statement.
Another change being implemented with this new final rule is that the definition of “state” and the definition of “United States” are being expanded to include American Samoa, the Commonwealth of the Northern Mariana Islands, and Guam.
In working towards compliance, it is very important that your funds availability procedures are updated and distributed to impacted staff; followed by training staff on the new procedures. Also, institutions should ensure that any platform or systemic support be adjusted as needed to support compliance with the new requirements.
It’s important to take action now, both internally and with your platform provider, to ensure you are prepared for the 2020 effective date that will be here before you know it. Stakeholders can find the Agencies’ new final rule here and their correction here.