May 21, 2020

Is Your Financial Institution Prepared for the July 2020 Reg CC Changes? – WST

In 2010, the Dodd-Frank Act implemented changes to the Expedited Funds Availability Act, better known as Reg CC, including a) periodic adjustments to hold amounts to account for inflation, and b) customer notification requirements.  The 2019 final rule adjusted these two requirements in Reg CC effective July 1, 2020.  Is your financial institution prepared for these changes?

Reg CC Inflation Adjustment Requirements

Effective July 1, 2020, financial Institutions will now have to increase the amounts made available to consumers the next business day after the banking day deposits are made for certain negotiable instruments.  To summarize, the adjustments are going to change four main thresholds found in Reg CC:

  • $200 is changing to $225 (Note: the $200 amount is still referred to $100 in Reg CC). This is the amount used on case-by-case holds and will be the new requirement that will impact financial institutions the most.
  • $5,000 is changing to $5,525. This amount is used on certain special exception holds, such as large dollar holds, new account holds, and repeatedly overdrawn holds.  This change will also regularly impact financial institutions.
  • $400 is changing to $450. This relates to the rarely used rule that states that a financial institution may extend the availability schedule for non-next day items by one business day if it makes $400 of the items available for withdrawal no later than 5:00 pm on the day the items would otherwise be available.
  • Civil liability under Reg CC has been changed from $1,000 and $500,000 to $1,100 and $552,500 respectively.

Customer Notification Requirements

The second part of the finalized rule relates to customer notification.  Financial Institutions, under the new Reg CC requirements, will not only be required to send a change in terms notice 30 days before an adverse change to the customer account terms, but will now be required to notify the consumer within 30 days after a change is made that expedites funds for customer.  You are always welcome to notify your entire customer base before the changes take effect, but now, for the inflation adjustments, you must notify them within 30 days after the changes – so no later than July 31, 2020.  You may do this in the form of a letter to your customers, a post card, or as a statement header.  Below you will find the sample language that may be utilized for your customer notice.

Sample Language for your Change Notice to Customers

Effective 7/1/2020, we are increasing the amount we make available for withdrawal by checks not subject to next day availability to $225.  In addition, the amount available for withdrawal on exception holds for large deposits and new account holds is increasing to $5,525.

What You’ll Need to Do in Preparation for these Changes

  • Update any applicable policies and procedures ahead of the effective date (especially if your financial institution requires Board of Director approval).
  • Update your initial Reg CC disclosure – For all hold types disclosed, your financial institution should update your initial account disclosures to reflect the increases in the amounts required to be made available. Be sure to change any online Reg CC disclosures, if applicable.
  • Update your hold notices – Hold notice forms that include the amounts of available funds should be updated to reflect the increased amounts that will be available.
  • Provide customers with the change notice. Remember to do this no later than July 31, 2020.
  • Review the changes with your core provider or automated software (if applicable).
  • Staff Training – Training should be provided to new account staff, tellers and any other applicable staff to ensure they are knowledgeable about the changes in policy and are prepared to discuss the changes with your customers.

Below is a link to the full rule change as published in the Federal Register.  10-D Compliance also conducts deposit compliance reviews, so let us know how we can help you navigate these latest regulatory changes!

Agencies Issue Final Amendments to Regulation CC Regarding Funds Availability

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