Business Days and Holidays – Unwinding Regulation Z
Written by Brandy Bruyere, Director of Regulatory Compliance
We hope everyone had a nice weekend and any celebrations were successful and pleasant time with family and loved ones. With a couple of federal holidays falling on the weekend recently, we have had a few credit unions ask about how this impacts the Regulation Z definition of business day. Because Reg Z is so fun, there are two definitions of business day that apply to different situations:
(6) Business day means a day on which the creditor's offices are open to the public for carrying on substantially all of its business functions. However, for purposes of rescission under §1026.15 and 1026.23, and for purposes of §1026.19(a)(1)(ii) [limit on imposing fees for a reverse mortgage application before disclosures are provided], 1026.19(a)(2) [waiting period for good faith estimates], 1026.19(e)(1)(iii)(B) [providing Loan Estimate at least 7 business days before consummation], 1026.19(e)(1)(iv) [timing of the receipt of the Loan Estimate], 1026.19(e)(2)(i)(A) [restriction on fees before Loan Estimate is provided], 1026.19(e)(4)(ii) [limits on providing revised Loan Estimates], 1026.19(f)(1)(ii) [timing requirements for providing a Closing Disclosure], 1026.19(f)(1)(iii) [timing of receipt of the Closing Disclosure], 1026.20(e)(5) [timing of delivery of escrow cancellation notices], 1026.31 [includes timing requirements for high-cost and reverse mortgage disclosures], and 1026.46(d)(4) [private education loans], the term means all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a), such as New Year's Day, the Birthday of Martin Luther King, Jr., Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day.
(Emphasis and clarifications added.)
Notice that the specific definition of business day that includes all calendar days except Sundays and legal public holidays applies to many of timing requirements of the TILA/RESPA integrated disclosures (TRID) rule. How does this this work if a holiday is on a weekend?
To start, this only impacts a handful of holidays. Some of these federal holidays are always on a Monday, like Labor Day or Memorial Day, and Thanksgiving is always on a Thursday. But for federal holidays with set dates, specifically Christmas Day, New Year's Day, Independence Day and Veteran's Day, some years the holiday will fall on a weekend and be officially observed on either the previous Friday, or the following Monday.
The federal government seems to recognize Sunday holidays on the following Monday and Saturday holidays on the previous Friday. 2017 provides two examples New Year's Day is recognized on Monday, January 2 and Veteran's Day, which falls on a Saturday, is recognized on Friday, November 10.
Let's go back to the Reg Z definition of business day. Other than for specific provisions, like the right of rescission or certain disclosure timing requirements, a business day is based on a function test and includes days where the credit union's offices are open to the public for carrying out substantially all of its business functions, as further clarified in the commentary:
- Business function test. Activities that indicate that the creditor is open for substantially all of its business functions include the availability of personnel to make loan disbursements, to open new accounts, and to handle credit transaction inquiries. Activities that indicate that the creditor is not open for substantially all of its business functions include a retailer's merely accepting credit cards for purchases or a bank's having its customer-service windows open only for limited purposes such as deposits and withdrawals, bill paying, and related services.
But what about the rules subject to the other definition of business day like the right of rescission, or delivery of various disclosures under TRID? The commentary indicates that if the federal holiday is observed on another day, such as the Friday before the holiday, that Friday is still a business day for the purposes of the applicable rules:
- Rule for rescission, disclosures for certain mortgage transactions, and private education loans.A more precise rule for what is a business day (all calendar days except Sundays and the Federal legal holidays specified in 5 U.S.C. 6103(a)) applies when the right of rescission, the receipt of disclosures for certain dwelling- or real estate-secured mortgage transactions under, or the receipt of disclosures for private education loans under §1026.46(d)(4) is involved. Four Federal legal holidays are identified in 5 U.S.C. 6103(a) by a specific date: New Year's Day, January 1; Independence Day, July 4; Veterans Day, November 11; and Christmas Day, December 25. When one of these holidays (July 4, for example) falls on a Saturday, Federal offices and other entities might observe the holiday on the preceding Friday (July 3). In cases where the more precise rule applies, the observed holiday (in the example, July 3) is a business day.
(Emphasis added.)
Do other rules take a similar approach? No, in fact, under Regulation CC, the Monday following a weekend holiday not a business day, by definition:
(f) Banking day means that part of any business day on which an office of a bank is open to the public for carrying on substantially all of its banking functions.
(g)Business day means a calendar day other than a Saturday or a Sunday, January 1, the third Monday in January, the third Monday in February, the last Monday in May, July 4, the first Monday in September, the second Monday in October, November 11, the fourth Thursday in November, or December 25. If January 1, July 4, November 11, or December 25 fall on a Sunday, the next Monday is not a business day.
(Emphasis added.)
Meanwhile, Regulation E follows one rule that tracks the first Regulation Z business function type test, here's the definition and some of the commentary:
(d) Business day means any day on which the offices of the consumer's financial institution are open to the public for carrying on substantially all business functions.
- Substantially all business functions.Substantially all business functions include both the public and the back-office operations of the institution. For example, if the offices of an institution are open on Saturdays for handling some consumer transactions (such as deposits, withdrawals, and other teller transactions), but not for performing internal functions (such as investigating account errors), then Saturday is not a business day for that institution. In this case, Saturday does not count toward the business-day standard set by the regulation for reporting lost or stolen access devices, resolving errors, etc.
Overall, different regulations have different timing requirements, and to keep things fun, do not take a uniform approach to how to tally when these timing requirements have been met. Is it by calendar days, or business days? If business days, what's a business day? These are some of the fun things compliance officers get to tackle on a regular basis.
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Upcoming NAFCU Webcast:
Live Webcast Tuesday, January 10, 2017 | 2:00-3:30 p.m. ET
Join this crucial webcast for an in-depth understanding of the new standard and how it can impact your credit union. You'll explore ALLL methodology, interagency guidance and learn how to plan for CECL adaptation.
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Programming Note. In observance of New Year's Day, NAFCU will be closed on Friday, December 30 and Monday, January 2. We'll be back to blogging on Wednesday, January 4. Have a safe and happy New Year! In the meantime, we tried taking photos at home for our holiday card, and found that this task was much easier last year when Nolan was not terribly mobile yet. Lemmy cooperates though, for treats.
