Compliance Blog

Posted by Anthony Demangone

Regulation CC applies to accounts.  Sure, most folks understand that.  But does it apply to all accounts?  No, it does not.  This comes from the Commentary to Regulation CC.

The EFA Act defines account to mean “a demand deposit account or similar transaction account at a depository institution.” The regulation defines account, for purposes other than subpart D, in terms of the definition of “transaction account” in the Board's Regulation D (12 CFR part 204). This definition of account, however, excludes certain deposits, such as nondocumentary obligations (see 12 CFR 204.2(a)(1)(vii)), that are covered under the definition of “transaction account” in Regulation D. The definition applies to accounts with general third party payment powers but does not cover time deposits or savings deposits, including money market deposit accounts, even though they may have limited third party payment powers.The Board believes that it is appropriate to exclude these accounts because of the reference to demand deposits in the EFA Act, which suggests that the EFA Act is intended to apply only to accounts that permit unlimited third party transfers. (Emphasis added.)

That's right - it doesn't apply to non-transaction accounts.  So, if a member makes a deposit to a savings account or money market account, Reg CC's protections generally do not apply. That being said, keep the following two points in mind.

• Some institutions treat nearly all their accounts as transaction accounts - even savings and money market accounts.  This is permissible.  It allows members to make transfers without Reg D limitations, but it does require the institution to reserve against those accounts per Reg D.  You'll want to determine if your credit union does this.
• Regulation CC has a mechanism through which the Fed can be asked to determine whether the Expedited Funds Availability Act preempts state laws that govern the availability of deposits.  The Fed's determinations are laid out in Appendix F.  You need to go through this to find your state, as some States, such as Massachusetts, apply Reg CC's protections to all accounts - not just transaction accounts.  And the Fed says that's OK.   Here's an example of how the rules in Massachusetts are different.

The Massachusetts statute governs the availability of funds deposited in “any demand deposit, negotiable order of withdrawal account, savings deposit, share account or other asset account.” Regulation CC applies only to accounts as defined in §229.2(a). Regulation CC does not affect the Massachusetts statute to the extent that the state law applies to deposits in savings and other accounts (including transaction accounts where the account holder is a bank, foreign bank, or the U.S. Treasury) that are not accounts under Regulation CC. (Note, however, that under §229.19(e) of Regulation CC, Holds on other funds, the federal availability schedules may apply to savings, time, and other accounts not defined as accounts under Regulation CC, in certain circumstances.) Emphasis added.

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NCUA has announced an audio conference to go over its new capital initiative for low-income credit unions.  The audio conference will be held on March 4. 

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 The FFIEC, which includes NCUA, has released an updated retail payments system booklet.

The Federal Financial Institutions Examination Council (FFIEC) today issued updated guidance for examiners, financial institutions, and technology service providers on the risks associated with retail payment systems. This Retail Payment Systems Booklet, which is part of the FFIEC Information Technology Examination Handbook series, is an update to the 2004 version that provided guidance on the risks and risk-management practices applicable to financial institutions' retail payment systems activities, including checks, electronic payments related to credit cards and debit cards, and the automated clearing house (ACH). Appendices to this booklet include examination procedures and references to applicable laws, regulations, and guidance.

The revised booklet addresses changes in technology and provides guidance on the Check Clearing for the 21st Century Act of 2004. This booklet also provides expanded guidance on merchant card processing and ACH activities. It provides a more in-depth discussion of the increased risks posed by these activities and some of the risk management tools that financial institutions can use to mitigate them. There is also a brief discussion on emerging technologies in retail payment systems. The booklet includes information on remotely created checks and electronically created payment orders, both of which are being used more frequently as payment devices. Lastly, the booklet addresses remote deposit capture and provides examination procedures for use in conjunction with the FFIEC guidance, Risk Management of Remote Deposit Capture (January 14, 2009).