Topic: Regulation CC
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If we have no transfer limits set for our savings and money market accounts, would they now be considered transaction accounts under the new Regulation D changes? Would that raise the reserve requirements on these accounts in the event that reserve requirements are ever reinstated under Regulation D? Are there any other ramifications that could result from this change in categorization?
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We do not believe that your savings and money market accounts would automatically be considered transaction accounts if you suspend enforcement of the six-per-month transaction limitation. Although a recent interim final rule removed the transaction limitation from the definition of “savings deposit” under Regulation D, the interim final rule maintains separate definitions for savings deposits…
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We sent an affidavit of altered check to a bank that cashed a check issued by our customer. The depository bank is now claiming under Regulation CC (12 CFR 229.38(i)(2)) that the presumption of alteration has been overcome because the check had an unauthorized signature of the drawer, making it a forgery and not an alteration. The signature on the check does not match the signature the drawer provided on the fraud affidavit, and the drawer cannot verify that the signature on the check is theirs. We believe this is because the customer’s signature was traced back onto the check after it was stolen from a U.S. postal box and washed, so it is not an exact match. Do we have grounds to sue the depository bank for violating the presentment warranties? Additionally, are there any time frames we should be aware of? We supplied an affidavit of alteration in August 2020 and did not get a response from the depository bank until April 2021.
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We cannot comment on whether you have grounds to sue the depository bank. If a court were to conclude that the disputed check was altered rather than forged, we believe that the depository bank could be held liable for violating its presentment warranties — but that outcome depends on whether you can prove that the…
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We are a small bank, and several of our employees have been diagnosed with COVID-19. We have two employees on site who are maintaining daily operations and addressing customer needs, but they may have been exposed to the disease. We have been in contact with the FDIC and IDFPR regarding the circumstances, and the IDFPR has advised us of the necessary steps to make an emergency proclamation request and temporarily close our bank. We would like to know if there are any other requirements or regulations we should be aware of in the event of a closure, such as any Uniform Commercial Code (UCC) considerations. Also, we note that our ability to handle the daily cash letter would not be impeded as our correspondent bank handles those operational duties.
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If your bank must close due to a large portion of your employees being diagnosed with COVID-19, we believe you generally would be excused from meeting the time limits imposed by the UCC, provided your bank exercises diligence in taking the necessary action as soon as it is able. Delays by collecting banks and paying…
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Do you have a Regulation CC Matrix for the changes that became effective on July 1, 2020?
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The IBA currently does not offer a Regulation CC Matrix. However, the Regulation CC inflation adjustments that went into effect on July 1, 2020, can be summarized as follows: (1) A bank must make $225 (instead of $200) available for withdrawal the next business day after the deposit of checks that are not subject to…
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Are depository banks required to mail an image replacement document (IRD) with a chargeback notice? When we, as a payor bank, have returned checks to depository banks, we have received calls from their customers requesting a copy of the item, since their bank (the depository bank) does not provide it.
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No, a depository bank is not required to send an image replacement document (also known as a substitute check) to its customers as part of the chargeback notice. Regulation CC provides that if a depository bank receives a returned check, “it shall send or give notice to its customer of the facts,” but it does…
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The new Regulation CC changes to the amounts that must be made available during holds will require notification to our customers within thirty days of the change. However, our initial disclosures do not reference the dollar amounts of available funds during various holds. Do we need to begin disclosing these hold amounts to our customers, or may we simply notify them that the hold amounts have changed and are available if they wish to view them? Currently, we use the basic funds availability policy (Model C-1) in Appendix C to Regulation CC.
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We do not believe you need to include the dollar amounts of available funds during holds in your initial Regulation CC disclosures, provided that the model availability policy you are using (Model C-1) accurately reflects the specific availability policy followed by your bank in most cases. Under Regulation CC, banks must provide potential customers (and…
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We paid five checks for a customer in late December 2019 that turned out to be forgeries. Our account agreement provides customers with a 60-day period after receiving their account statements to report any unauthorized payments. This customer notified us that the checks were fraudulent on January 9, and we returned them on the same day — even though the midnight deadline for their returns had long passed. The bank of first deposit filed a claim of late return through the Fed’s adjustment process, and we filed a response. On January 31, the Fed reimbursed us for all five checks, and we credited our customer’s account. On May 18, we received letters from the bank of first deposit requesting that we credit them for three of the checks. Are we liable to the bank of first deposit for these checks? How long does the bank of first deposit have to request credit for the two remaining checks?
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Your bank likely is liable to the depository bank for all five forged checks, since your bank did not return them until after the midnight deadline had passed. Regarding the two remaining checks, the depository bank has up to three years to request credit and bring an action against your bank for failing to pay…
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Our customer notified us of four forged checks posted to its account. The checks were purchased from a check printing company and were printed with the name and address of an out-of-state business, as well as our customer’s account number and our routing number. The checks were processed on December 31, and we returned them as “altered/fictitious” on January 13. We obtained an affidavit of forgery from our customer but did not attach it to the return. On February 28, the depository bank sent a claim of late return, and our account was debited for the checks. We have twenty days to contest the depository bank’s claim of late return, and we thought the depository bank only had twenty days to make their claim. Can we contest the depository bank’s claim of late return on the basis that it was untimely? If not, we believe we would be liable for the checks, since our customer reported the fraud within two weeks after the checks were processed. What are our options for recovering these funds?
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The depository bank had two months to file a claim of late return — not twenty days. Additionally, a paying bank may only dispute a claim of late return with evidence that the return was not late. Consequently, it does not appear that your bank has a valid basis to contest the claim of late…
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Our business customer mailed a rent check that was stolen in transit, altered to change the payee, and deposited or cashed at another bank. Our customer notified us approximately two weeks after this occurred, when they discovered the check payee line had been altered. We returned the check as an “altered/fictitious item.” Approximately one month later, the depository bank filed a claim of late return and put an adjustment through the Federal Reserve Bank to debit us for the item. Can the depository bank file a claim of late return in relation to a fraudulent or altered check? We have twenty days to respond.
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Yes, the depository bank can file a claim of late return in relation to a fraudulent or altered check that was not returned before the midnight deadline. However, your bank may be able to seek relief from the depository bank for breach of a presentment warranty due to the altered check. Under the Federal Reserve…
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When a customer opens an individual retirement account (IRA), should they receive disclosures regarding funds availability and substitute checks under Regulation CC and electronic fund transfers under Regulation E?
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No, we do not believe these disclosures are required for IRAs. Regulation CC governs the availability of funds for transaction accounts and the holds banks can place on checks. Its disclosure requirements related to funds availability and substitute checks do not apply to IRAs, which are excluded from Regulation CC’s definition of a “transaction account.”…