Regulation CC and Changing Funds Availability for Large Deposits

Issue/Inquiry

The Bank imposes longer holds on check deposits totaling more than $5,000 to any account. For deposits to commercial accounts, the Bank wishes to increase the amount subject to the hold to $10,000. What does the Bank need to do regarding the customer disclosure? Does the section of Regulation CC pertaining to longer delays also apply to commercial accounts?

Response Summary

Under the large deposit exception of Regulation CC, a depository bank may extend hold schedules when deposits other than cash or electronic payments exceed $5,000 on any one day. An extended hold for a reasonable period may be applied to any amount in excess of $5,000. The regulation does not distinguish between consumer and commercial accounts, or between various amounts in excess of $5,000. A funds availability policy which imposed an extended hold on deposits of $10,000 or more to commercial deposits would be within the regulatory requirements.

Response Detail

Under the large deposit exception of Regulation CC, a depository bank may extend hold schedules when deposits other than cash or electronic payments exceed $5,000 on any one day. A hold may be applied to the amount in excess of $5,000. To apply the exception, the depository bank may aggregate deposits made to multiple accounts held by the same customer, even if the customer is not the sole owner of the account. 12 CFR §229.13(b).

If the depository bank invokes the large deposit exception, it can extend the time within which funds must be made available under the schedule for a reasonable period of time. A “reasonable period of time” is generally one business day for “on us” checks, five business days for local checks, and six business days for deposits in non-proprietary ATMs, in addition to the availability time period provided in the schedule. Under certain circumstances, however, an even longer period of time may be reasonable. In these cases, the burden is on the depositary bank to establish that the longer period is reasonable. Appendix E to Part 229 – Commentary, Section 229.13(h) – 1, 4.

Regulation CC does not distinguish between consumer and commercial transaction accounts, except as to the notice that must be provided when the depository bank extends the time that funds will be available for withdrawal on the basis of an exception.  12 CFR §229.13(g)(2).

In addition, the regulation does not distinguish between amounts in excess of $5,000. This means that if the Bank were to impose an extended hold on deposits of $10,000 or more, rather than $5,000 or more, it would be within the exception. Only if the Bank were proposing an extended hold on the basis of the large deposit exception for deposits less than $5,000 would it be in violation of the regulatory requirement.

The Bank’s funds availability policy presently requires an extended hold on deposits in excess of $5,000 to any account. A change from that requirement to an extended hold for deposits in excess of $5,000 to consumer accounts and $10,000 for deposits to commercial accounts would have the effect of expediting the availability of funds. In such case, the notice of a change in a depository bank’s funds availability policy can be disclosed to holders of consumer accounts no later than 30 days after implementation. 12 CFR §229.18(e).

There is no similar requirement pertaining to non-consumer accounts. As such, the Bank should refer to the agreement establishing these accounts, as to what is required in the way of notification.

This entry was posted on Monday, July 25th, 2016 at 3:00 pm.