IBA Compliance Connection

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Our Bank is considering changing the way checks deposited via mobile Remote Deposit Capture (RDC) are reviewed. Currently, if a check is deposited via mobile RDC, it is either accepted or declined, and all deposits are accepted until 6:00 p.m. The deposits are processed as electronic checks and are available for withdrawal the following day. Under the new process, checks will be reviewed by bank staff periodically throughout the day until 5:00 p.m. Any checks that are deposited after 5:00 p.m. will be put into a “suspended” status and will not be reviewed or deposited into the customer’s account until the following business day. Will this new process be compliant with Regulation CC?

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Regulation CC’s availability of fund provisions are not currently applicable to electronic checks. Therefore, we believe that your bank’s policies regarding availability of funds for mobile deposits processed as electronic checks will be governed by your account agreements, which should be updated to reflect the earlier deposit cutoff time of 5:00 p.m.

The Federal Reserve Board (FRB)’s recent Regulation CC amendments that became effective on July 1, 2018, defined electronic checks and subjected them to the check collection rules in Subpart C. However, the FRB did not amend Regulation CC’s funds availability requirements in Subpart B, which presently does not cover electronic checks. While Subpart B sets forth guidelines related to “checks” and “electronic payments,” the definitions of these terms do not include electronic checks.

It may seem nonsensical that the FRB’s recent Regulation CC amendments regarding electronic checks failed to amend Subpart B. This anomaly is explained by the fact that the Dodd-Frank Act requires the FRB to amend Subpart B jointly with the CFPB — the FRB cannot amend Subpart B on its own. At this time, the two agencies have not yet published a proposed or final rule to amend Subpart B.

For resources related to our guidance, please see:

  • Regulation CC Final Rule, 82 Fed. Reg. 27552 (Effective July 1, 2018), note 7 (“The Board is not amending subpart B of Regulation CC at this time. Section 1086 of the Dodd-Frank Wall Street Reform and Consumer Protection Act amended the EFA Act to make the Board’s authority for the EFA Act’s provisions implemented in subpart B joint with the Consumer Financial Protection Bureau.”)
  • Regulation CC, Subpart A, 12 CFR 229.2(ggg) (“Electronic check. . . . mean[s] an electronic image of, and electronic information derived from, a paper check. . . . that— (1) Is sent to a receiving bank pursuant to an agreement between the sender and the receiving bank; and (2) Conforms with ANS X9.100-187, unless the Board by rule or order determines that a different standard applies or the parties otherwise agree.”)
  • Regulation CC, Subpart C, 12 CFR 229.30(a) (“. . . . Electronic checks and electronic returned checks are subject to this subpart as if they were checks or returned checks, except where “paper check” or “paper returned check” is specified. For the purposes of this subpart, the term “check” or “returned check” as used in Subpart A includes “electronic check” or “electronic returned check,” except where “paper check” or “paper returned check” is specified.”)
  • Regulation CC, Subpart A, 12 CFR 229.2(p) (“Electronic payment means a wire transfer or an ACH credit transfer.”)