Topic: Regulation CC
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We are considering establishing a new business product that would be a tiered interest-bearing checking account that only allows for internal transfers to and from a business’s operating account. There would be no limit on the number of internal transactions between accounts, but check-writing, ACH credits and debits, and online bill pay would be prohibited for these accounts. Customers would have the option of setting up an automatic sweep between the accounts or manually authorizing transfers through online banking. Will placing transaction limitations on this account subject it to Regulation D’s six-transaction limitation? If the customer sends external payments to these accounts, what return reason code should we use for ACH items, and what are the appropriate return actions for remotely created checks and paper checks?
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We do not believe the account described here would be subject to Regulation D and its six-transaction limit for savings deposits, since your proposed account terms authorize more than six internal transactions. To meet the definition of a “savings deposit” account under Regulation D, the account agreement must reserve the bank’s right to require at…
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Shortly after receiving his account statement, our customer notified us that some counterfeit checks had cleared his account. We sent the checks back through the Fed as fraudulent. We have received one of the checks back as a “late return” from the depository bank. Who is liable for these checks under the UCC, and does our bank have any recourse for these checks?
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We believe your bank likely is liable for these checks since they were returned after the midnight deadline. Whether your bank has any recourse for the checks depends on whether the depository bank breached a presentment warranty to your bank, or your customer’s negligence substantially contributed to the making of the fraudulent checks. Under…
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We received notice from ABC Bank that we owe it $1,000 on a $1,600 check that ABC Bank sent to our bank for payment over a year ago. We paid only $600 of the $1,600 check to ABC Bank, which now is requesting a cashier’s check for the remaining $1,000. We think that an encoding error on the MICR line caused the underpayment. Can ABC Bank seek payment on a check that is over one year old? Are we required to pay the balance of this check?
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We believe that your bank is liable to ABC Bank for the remaining $1,000 to be paid on the check, provided that your bank can withdraw that amount from your customer’s account. However, if your customer’s account does not contain sufficient funds to cover the remaining $1,000, your bank may be able to offset its…
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Are there any size requirements for the following lobby notices: CRA Notice, Annual Financial Disclosure Notice, Equal Housing Poster, HMDA Data Availability Notice, and Regulation CC Funds Availability Notice? Can these notices be displayed on an electronic board that switches between the notices? What does the term “prominently displayed” mean with respect to the Equal Housing Poster? Also, can you confirm that we are not required to disclose our rates on a rate board in our lobby?
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There are size requirements for some (but not all) of the notices listed in your questions. If there are no express size requirements, generally these notices should be sized and placed so that customers are able to see the notices and easily read their text. Each notice is addressed separately below. CRA Notice: The size…
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Can we charge a fee for closing a deposit account within a certain number after days opening the account, assuming that we disclose the fee at account opening? If so, can we place a hold on all newly opened accounts for the early closing fee amount until the expiration of the time period in which we can impose the fee?
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We are not aware of any limitations on charging an account closing fee, provided that the fee is disclosed as required by Regulation DD. The Illinois Banking Act permits banks to determine appropriate deposit account fees in accordance with their prudent business judgment and safe and sound operating standards. However, we recommend caution regarding the…
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We are considering reducing the staff at one of our branches from two employees to one on Saturday mornings. However, our procedures require dual control for opening our night deposit box. With only one employee present on Saturday mornings, we would not process deposits placed in the night deposit box on Friday night, Saturday, or Sunday until Monday morning. This would not affect the business day of posting but could affect the funds available to customers over the weekend. Are there any federal or state regulations we should be aware of related to this change? Would it be acceptable to place a sign on the night deposit box stating that transactions deposited Friday night through Sunday will not be processed until the following Monday?
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We are not aware of any federal or state regulations applicable to delaying the processing of deposits placed in a night depository. Posting notice on a night depository of the date when deposits will be processed also is not required by federal or state law. However, we do recommend posting such a notice as a…
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If a customer reports a fraudulent check after receiving their statement, is it true that we have only 24 hours to return the check after receiving it, regardless of the fraud?
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Yes, banks generally must return checks by midnight on the next banking day after receiving the check, as required by the Illinois Uniform Commercial Code (UCC). Although federal Regulation CC permits certain limited extensions of the UCC midnight deadline rule, they almost certainly are unavailable when the fraud is not discovered until after the customer…
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We have a business client who had a fraudulent check go through on their account. We are having a difficult time meeting the next day midnight deadline for returned checks. Can you confirm that we must comply with the midnight deadline? May we require business customers to notify us immediately of any fraud on their account once they receive their statement?
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Yes, banks generally must return checks by midnight on the next banking day after receiving the check, as required by the Illinois Uniform Commercial Code (UCC). However, federal Regulation CC permits an extension of the UCC midnight deadline under certain circumstances. A paying bank may send the returned check directly to the depository bank by…
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Can you verify that we can place a hold on deposits to a commercial account for five days? We were told that Regulation CC applies only to consumer accounts.
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Your bank may be able to impose a hold of five business days on a deposit to a commercial account, but such holds must comply with Regulation CC. Regulation CC’s funds availability requirements apply to any transaction accounts, whether held by a business or a consumer. Generally, the full amount of funds deposited by check…