Compliance Blog

Posted by Anthony Demangone

Yesterday, Das Fed released a proposal to amend Regulation CC.  Dodd-Frank seemingly mandated a proposal, because the law changed the $100 "immediate availability" to $200.  In addition, with the death of non-local checks, many parts of Regulation were out of date.  The only question was this: Would the Fed tweak other parts of the Regulation.

Dumb question.  Of course they did. Sigh.

To encourage electronic collection and return of checks between banks, the proposal provides that a depositary bank would be entitled to the expeditious return of a check only if it agrees to receive returned checks electronically. In addition, the proposal would permit the bank responsible for paying a check to require that checks presented to it for same-day settlement be presented electronically. More generally, the proposal would apply Regulation CC's collection and return provisions, including warranties, to electronic check images that meet certain requirements.

Additionally, due to the faster collection and return timeframes that result from electronic collection and return, the proposal would shorten the safe-harbor period for an exception hold to four business days, which should enable the depositary bank to learn of the return of virtually all unpaid checks before being required to make these deposits available for withdrawal. The proposal also eliminates the references in Regulation CC to "nonlocal" checks. The distinction between local and nonlocal checks is tied to Federal Reserve Bank check processing regions. As of February 2010, the Reserve Banks have ceased operations in all but one of their check processing offices, such that there is now only one check processing region, and all checks are local to each other. Local checks are generally subject to a two-business-day hold period.

As I read this proposal, regulatory burdens would increase, and your ability to hold funds would decrease. 

Comments are due June 3, 2011. The rule was released late on Thursday afternoon, so I haven't had a ton of time to digest it. That being said, here are my initial thoughts:

• I wish they had issued an ANPR, which allows them to canvass the crowd to see if folks had other ideas on how to improve Regulation CC.
• Even though they didn't ask for it, I'd think about looking at your check losses over the past few years.  Are credit unions getting pounded with fake cashier's checks, for example?  I'd look at that data, organize, and somehow weave it into your comments.  You may want to have someone at your credit union start pulling data related losses from bad checks. 

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NCUA has issued Letter to Credit Unions11-CU-02 and its attachment  regarding changes to the March 31, 2011 call report.  You know, I wish NCUA would put these two documents together, or at least link to the attachment from the letter. Well, as the saying goes, if you want a job done right, do it yourself.  I'd send their letter and its attachment, or my impressive "combined" document, to the person responsible for completing your call report.

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Have a great weekend everyone. Mandy is heading out of town to visit her college roommates, leaving me in charge of the dynamic duo.  Wish me luck, and wish Mandy a speedy return.  Actually, you should probably wish Kate and Briggs luck, and Mandy a very speedy return.