Reg. CC (Expedited Funds Availability) - Iowa Bankers Association

Articles

FAQs

ACH Transfers

Coverage and Definitions

Disclosure Requirements

Change in Terms Notice

Next Day Items

ATM Deposit Funds Availability

Reason To Doubt Collectibility Exception Holds

New Account Exception Holds

Redeposited Check & Repeat Overdrafts Exception Hold

ACH Transfers

Question: We offer online account opening and new customers frequently want to fund the account with an ACH transfer from their current account at another institution. When the new customer requests an ACH transfer our bank will “pull” funds from their account. Typically, we make funds available from ACH transfers available the next business day.

We recently had a situation with a new account where the customer initiated an ACH transfer from “their existing account” at another bank. Per our procedures, we made funds available the next day and the customer immediately withdrew the funds. A day later the ACH deposit was reversed as unauthorized. The customer provided account information from an account they actually did not own. Short of not opening accounts online, how can the bank protect itself against this type of fraud if it must make ACH funds available the next day, before it can learn that the funds transfer was not authorized?

Answer: The key is understanding the scope of Regulation CC. ACH debits, used to fund the new account, are not subject to Reg. CC. Section 229.10 of Reg. CC requires next day availability for “electronic payments.” However, while “electronic payment” includes ACH credit transfers, it excludes ACH debit transfers. See Comment 2 to §229.2(p): “ACH debit transfers, even though they may be transmitted electronically, are not defined as electronic payments because the receiver of an ACH debit transfer has the right to return the transfer, which would reverse the credit given to the originator. Thus, ACH debit transfers are more like checks than wire transfers.”

A new account funded by “pulling” funds via ACH from an account at another institution, rather than “pushing” funds to an account, is an ACH debit not an ACH credit. This is true even if the deposit appears as a credit on the customer’s statement. As a result, the funds are not subject to immediate or next day availability. It is also worth noting, the Nacha rules place no funds availability requirements on ACH debits.

As a result, banks wishing to open accounts online and allowing the funding through ACH debits should consider the risk and timing of a funding ACH debit being returned due to lack of authorization, insufficient funds, and no account found when establishing its availability policy and customer account agreement.

Coverage and definitions

Coverage and definitions

Question: Is the bank allowed to place a hold on a transaction account when cashing a check drawn on another bank? Also, is the bank allowed to place a hold on another transaction account other than the account where the deposit is being made?

Answer: Yes, the bank may place a hold on a transaction account when cashing a check drawn on another bank as long as the bank’s Funds Availability Disclosure provided to the customer at account opening includes a disclosure of this practice similar to the model disclosure as Appendix C-6. Appendix C-6 states “If we cash a check for you that is drawn on another bank, we may withhold the availability of a corresponding amount of funds that are already in your account. Those funds will be available at the time funds from the check we cash would have been available if you had deposited it.”

The bank may also place a hold on another transaction account owned by the same depositor as long as the bank provides a similar disclosure as found in Appendix C-7 in its Funds Availability Disclosure. Appendix C-7 states, “If we accept for deposit a check that is drawn on another bank, we may make funds from the deposit available for withdrawal immediately but delay your availability to withdraw a corresponding amount of funds that you have a deposit in another account with us. The funds in the other account would then not be available for withdrawal until the time periods that are described elsewhere in this disclosure for the type of check that you deposited.”

Question: We are trying to plan ahead for the Juneteenth holiday. June 19 falls on a Sunday this year so the Juneteenth federal holiday will be observed on Monday, June 20. However, our bank will be open on June 20, so is June 20 a business day for us for Regulation Z and CC purposes?

Answer: The answer depends upon which “business day” definition you are referring to. Regulation Z has two definitions and Regulation CC has yet another.

Under Regulation Z, a business day is defined as “A day on which the creditor’s offices are open to the public for carrying on substantially all of its business functions,” which is referred to as the “general business day” definition. This definition applies to the timeframes to deliver certain disclosures such as the Loan Estimate, the Written List of Providers, changed circumstance redisclosure, the ten-day shopping period on the Loan Estimate, and the provision of the Settlement Information Booklet. So, if the bank is open to carry on substantially all its business functions, Monday, June 20 can be counted as a business day under the “general rule” definition. If the bank is not, Monday, June 20, 2022, will not be considered a business day.

But wait, there is more to this analysis. The Official Staff Commentary then provides what is referred to as the “precise rule” definition of business day. (See comment 2 to 1026.2(a)(6).) This comment says, “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.” This comment then goes on to explain certain Federal legal holidays are identified in 5 U.S.C. 6103(a) by a specific date: New Year’s Day, Jan. 1; Independence Day, July 4; Veterans Day, Nov. 11; and Christmas Day, Dec. 25, and as of last year, Juneteenth, June 19. When one of these holidays falls on a Saturday or Sunday, Federal offices and other entities might observe the holiday on the preceding Friday or following Monday. In cases where the more precise rule applies, the observed holiday is a business day, only the identified date in 5 U.S.C 6103(a) is considered the federal legal holiday. As a result, for rescission purposes, the three-day waiting period from receipt of the Closing Disclosure until consummation and the three-day mailbox rule, Monday, June 20, 2022 is a business day whether or not the bank is open as the precise business day rule is not based on whether or not the bank is open for carrying on substantially all its business functions. The IBA has created a guide to assist banks in determining which business day definition applies the disclosure timing requirements found in Regulation Z, see the Business Day Definition Applicable to Integrated Disclosure Guide.

For deposit purposes, from a Regulation CC perspective related to funds availability and item processing, a business day is defined as any day excluding Saturdays, Sundays and legal holidays. The Official Staff Commentary to the definition of business day then provides additional explanation:

229.2(f) Banking Day and (g) Business Day
1. The EFA Act defines business day as any day excluding Saturdays, Sundays, and legal holidays. Legal holiday, however, is not defined, and the variety of local holidays, together with the practice of some banks to close midweek, makes the EFA Act’s definition difficult to apply. The Board believes that two kinds of business days are relevant. First, when determining the day when funds are deposited or when a bank must perform certain actions (such as returning a check), the focus should be on a day that the bank is actually open for business. Second, when counting days for purposes of determining when funds must be available under the regulation or when notice of nonpayment must be received by the depositary bank, there would be confusion and uncertainty in trying to follow the schedule of a particular bank, and there is less need to identify a day when a particular bank is open. Most banks that act as intermediaries (large correspondents and Federal Reserve Banks) follow the same holiday schedule. Accordingly, the regulation has two definitions: Business day generally follows the standard Federal Reserve Bank holiday schedule (which is followed by most large banks), and banking day is defined to mean that part of a business day on which a bank is open for substantially all of its banking activities.

The Federal Reserve announced if a holiday falls on Saturday, the Federal Reserve will be open the preceding Friday, making it a business day. However, if the holiday falls on Sunday, the Federal Reserve will be closed the following Monday. As a result, even if the bank is open, because the Federal Reserve is closed, June 20, 2022 should not be considered a “business day” for Regulation CC funds availability purposes.

Question: Can you explain the provision within Regulation CC that allows for holds on other accounts or deposits at the bank?

Answer: In general, Regulation CC defines an “account” as a “transaction account,” meaning primarily checking accounts. Regulation CC allows banks to place holds on other funds of the depositor if the bank cashes a check or accepts a check for deposit and allows immediate availability of the deposited item. Looking at Regulation CC section 229.19(e)(1), if a bank accepts a check for deposit and makes it immediately available, the bank can place a hold on “any funds of the customer at the bank” so long as that hold is no greater an amount than the amount of the deposited check, and the hold period doesn’t exceed normal case-by-case or exception hold time frames. Notice this particular section of Regulation CC uses the term “any funds of the customer at the bank” rather than use of the term “an account” – which allows the bank to hold funds in another checking account, or in a savings account or time deposit, when making deposited funds immediately available to the customer.

Regarding cashing a check and holding other funds at the bank, Regulation CC at section 229.19(e)(2) provides that a bank may place holds on “funds in an account of the customer at the bank” so long as that hold doesn’t exceed the amount of the check and the hold periods do not exceed the normal case-by-case or exception hold time frames. Given that this section uses the term “funds in an account” and Regulation CC defines “account” to mean “transaction accounts,” it appears when cashing a check and placing a hold on other funds at the bank, the hold would need to be placed against another checking account.

Of course, this entire discussion is moot unless your bank’s Regulation CC Funds Availability Policy and Disclosure Statement include the appropriate disclosure describing this practice, as found in model disclosures in Regulation CC, Appendices C-6 and C-7:

C-6—Holds on Other Funds (Check Cashing) If we cash a check for you that is drawn on another bank, we may withhold the availability of a corresponding amount of funds that are already in your account.
Those funds will be available at the time funds from the check we cashed would have been available if you had deposited it.

C-7—Holds on Other Funds (Other Account)
If we accept for deposit a check that is drawn on another bank, we may make funds from the deposit available for withdrawal immediately but delay your availability to withdraw a corresponding amount of funds that you have on deposit in another account with us. The funds in the other account would then not be available for withdrawal until the time periods that are described elsewhere in this disclosure for the type of check that you deposited.

Question: Are remotely deposited items (RDC) covered by Regulation CC funds availability rules?

Answer: No, an RDC will not be covered by the Funds Availability section of Regulation CC. Although, a RDC is now defined as an electronic check (because it starts its journey as a paper item) under the July 1, 2018 revisions to Regulation CC, a RDC will not be subject to Subpart B – Funds Availability. You will continue to address the availability of those RDC’s within the institution’s RDC agreement with your customer. The RDC items will, however, be subject to Subpart C – Collection of Checks.

Question: We have a customer who is questioning our ability to place a hold on a Canadian check he deposited. Can we place a hold on a Canadian item?

Answer: Yes and no. A check drawn on a bank located outside the United States in not subject to Regulation CC so the bank should not place a Regulation CC hold. The definition of a “check” for Regulation CC purposes (see §229.2(k)) includes:

A negotiable demand draft drawn on or payable through or at an office of a bank;
A negotiable demand draft drawn on a Federal Reserve Bank or a Federal Home Loan Bank
A negotiable demand draft drawn on the Treasure of the United States;
A demand draft drawn on a state government or unit of general local government that is not payable through or at a bank;
A United States Postal Service money order; or
A traveler’s check drawn on or payable through or at a bank.
The term check includes an original check and a substitute check.

The term “check” does not include a noncash item or an item payable in a medium other than
United States money. The commentary to this same section provides further clarification: Check is defined in section 602(7) of the EFA Act as a negotiable demand draft drawn on or payable through an office of a depository institution located in the United States, excluding noncash items. The regulation includes six categories of instruments within the definition of check.

What this means is the check drawn on the bank in Canada is not a “check” under Regulation CC and therefore, is NOT subject to the bank’s funds availability policy. So the bank can hold funds from a Canadian check until it has received final settlement on it.

Question: A customer frequently deposits checks into his checking account from a Canadian company that are drawn on a Canadian bank account. The funds are converted from Canadian to U. S. funds several days after the deposit. Due to the exchange rate, the account has more money in it right after the deposit than it will after the conversion. For example, $134 Canadian converts to approximately $100 in U.S. funds. It takes several days for the bank to receive the information about the conversion. We want to place a hold on these funds until the conversion information is received. Can we place a Regulation CC hold on these funds? What reason can we cite for the hold? None of the Regulation CC hold reasons seem to apply to these checks.

Answer: I agree that none of the Regulation CC hold reasons apply, so let’s look at one more item, the definition of a “check” under Regulation CC.

Section 229.2(k) of Regulation CC and its commentary states, “The term check does not include a noncash item or an item payable in a medium other than United States money.” The last part of this sentence explains that a “check” for purposes of Regulation CC, does not include funds other than U. S. money. The Official Staff Commentary to this section further explains a “check” is defined as “a negotiable demand draft drawn on or payable through an office of a depository institution located in the United States.” That means that only U.S. funds are covered by Regulation CC and also only checks drawn on or payable through a U.S. bank are covered. A deposit made in Canadian funds or drawn on a Canadian bank is not subject to Regulation CC hold timeframes and notification requirements.

The bank can place a hold on the Canadian funds and it does not have to cite a Regulation CC reason. Also, the bank does not have to follow the hold timeframes and notification requirements of Regulation CC. The funds can be held until the bank receives final settlement and the conversion information. From a customer service standpoint, the bank may want to inform the customer that a hold will be placed on the Canadian funds until final settlement and the conversion information is received and the account has the correct balance, all in U.S. funds. As an alternative, the bank can send the item for collection and credit the account only when the funds have been converted to U.S. currency.

Disclosure Requirements

Question: Our initial Reg. CC disclosure states the cut-off time for deposits received on a business day is “Close of Business.” Our main bank location closes at 4 p.m. Monday through Friday, and another branch closes at 3:30 p.m. Monday through Thursday, and 4 p.m. on Friday. Is our Reg. CC disclosure compliant if it indicates our cut-off is close of business instead of providing the specific times for each location?

Answer: If cut-off times vary by branch location, i.e., close of business, the initial Reg. CC disclosure must match the bank’s practice for cut-off times. Section 229.16(b) of Reg. CC includes the requirements for the content of specific availability policy disclosure:

(b)The specific availability policy disclosure shall contain the following, as applicable–

(1) A summary of the bank’s availability policy;

(2) A description of any categories of deposits or checks used by the bank when it delays availability (such as local or nonlocal checks); how to determine the category to which a particular deposit or check belongs; and when each category will be available for withdrawal (including a description of the bank’s business days and when a deposit is considered received).

The Official Staff Commentary to Section 229.16(b)(6) of Reg. CC then provides further explanation, “…the business day cut-off time used by the bank must be disclosed and if some locations have different cut-off times the bank must note this in the disclosure and state the earliest time that might apply. A bank need not list all of the different cut-off times that might apply. If a bank does not have a cut-off time prior to its closing time, the bank need not disclose a cut-off time.”

As shown in the Official Staff Commentary above, because “Close of Business” is disclosed in your initial Reg. CC disclosure as the cut-off time for deposits to be considered received, you do not need to disclose any other cut-off time, and your initial disclosure is compliant. However, if your branches had different cut-off times, some or all of which were prior to closing time, the bank must include in the disclosure that locations may have different cut-off times, including the earliest time that may apply.

Change in Terms Notice

Question: I’m a new compliance officer and haven’t worked through a Reg. CC inflation adjustment to the amount of funds required to be made available for withdrawal. What should I be thinking about/doing?

Answer: Having an effective change management process is very important so you have an outline of things to consider. One regulatory change can affect many aspects of a bank’s systems, procedures, controls, etc. If your bank has a change management process, utilize that process. Here are some ideas of items to consider as you navigate the Reg. CC inflation adjustments.

Change in policy notice. Reg. CC requires a bank to send a notice to consumer accountholders when its funds availability policy changes, including when dollar amounts change due to inflation adjustments. Because these increased amounts expedite the availability of funds for consumers, the bank must send this change of policy notice no later than 30 days after the change is implemented. This can be done with a clear and conspicuous message on periodic statements or a separate mailing. If utilizing a statement message, consider your statement cycles. The last statement containing the notice must go out no later than the end of the 30-day period after the change effective date.
Funds availability account opening disclosure. The bank must update its funds availability disclosure provided at account opening to reflect the adjusted amounts.
Hold notice forms. In most cases, banks are required to provide written notice to consumers when delaying the availability of a deposit. If your hold notice form references specific dollar amounts, those will need to be updated as well to reflect the adjusted thresholds.
Core systems. Some core systems have automation features for initially placing a hold on a deposit and/or for producing a hold notice form. If the core system that your frontline staff uses has any form of automation when creating a hold on deposited funds, those systems must be updated to reflect the new amounts that must be made available. For example, a teller processing a deposit may be able to select an option to place a certain type of hold on the funds within the system, and based on that selection, the system will divide out which amounts should be held and for how long. In that case, the system must be updated to reflect the increased amounts, so when a selection is made and a hold is placed, the system knows the right amounts to hold and make available.
Training staff. This may be the most important of all steps to consider. Your staff will need to be trained on the new dollar amounts. The same process they’ve used for several years is about to change. Training staff helps ensure that holds will be placed correctly and only when appropriate. Training mitigates the risk of funds being held for too long, or before they’re required to be made available, possibly risking a financial loss to the bank.
Timing. Implementing these changes may take longer than you might think, especially when a third-party vendor is involved. Depending on the vendor, some may need several months to prepare the changes. The sooner you can begin that dialogue, the better, so you can complete it within the required timeframe.

Question: The mandatory effective date for the 2025 Reg. CC threshold changes is July 1, 2025. Since the thresholds are increasing and it is a benefit to the customer, Reg. CC does not require advance customer notice but instead requires affected customers are notified within 30 days after implementing the change. Our plan is to implement the change on July 1, 2025 and provide notice by Aug. 1, 2025. Our deposit software vendor is telling us we need to finalize preparation now to guarantee the change in terms notice is provided in compliance with the timing rules. Why are they insisting on doing this so early? Am I misunderstanding the compliance date or timing requirements?

Answer: You are correct in your understanding of the mandatory date and notice timelines. The mandatory effective date to implement the threshold changes is July 1, 2025. Banks are permitted to apply the new thresholds sooner than is required, but the changes must be made no later than July 1.

Once your bank decides when it wants to implement the new thresholds, the change in terms notice must be provided to all affected customers either before or no later than 30 days following the execution of the change. This means if you start using the new thresholds sooner, your notice requirements will be sooner as well.

If you are working with a vendor solution to provide your change in terms notice, they may need certain information from you early on, so they have ample time to work on the changes. They may have earlier deadlines to ensure the final product is completed by the mandatory compliance date. If you prefer not to work with a vendor to send a full change in terms notice, you can opt for a statement message to communicate the change to impacted customers. This may or may not result in less urgent timelines.

Question: The Reg. CC funds availability thresholds will change (increase) effective July 1, 2025. We will update our funds availability notice and provide the updated Reg. CC disclosure to our new customers who open accounts after July 1, 2025. Are we required to send notice to our existing customers explaining the new thresholds?

Answer: Yes. Reg. CC section 229.18(e), “Changes in Policy”, states that banks must send notice to owners of consumer accounts under two different timeframes depending on the change. When the change expedites the availability of funds to the consumer, notice must be provided no later than 30 calendar days after implementing the change. In other words, if more funds are made available or funds are available more quickly, notice can be provided after the change takes effect. All other changes require a notice be provided at least 30 calendar days prior to implementing the change.

In this case, the availability thresholds are increasing, therefore, notice must be provided not later than 30 calendar days after implementation of the change. The commentary to this section states that notice may be provided in any form, and it must be clear and conspicuous. If the bank provides a completely new availability disclosure, the disclosure must inform the customer of the changed terms by use of a letter, insert, or by highlighting the changed terms in the disclosure.

Question: In light of the recently released final Treasury rule governing the payment of Treasury checks, we are considering changing our Reg. CC funds availability policy related to these items. If we were to adjust our availability of Treasury check funds that are deposited to next day availability instead of our current same day availability, once we provide notice to our customers of the change and wait the appropriate advance change in-terms notice period, can we delay availability to our customers without providing a case-by-case hold each time a Treasury check is deposited?

Answer: Regardless of the check type deposited, Reg. CC (§229.18(e)) requires the bank to send notice to their customers if it changes its fund availability policy with regard to consumer accounts. Generally, notice must be sent at least 30 calendar days before implementing any change in its availability policy. If the change results in faster availability of deposits, the bank need not send advance notice. The bank must, however, send notice of the change no later than 30 calendar days after the change is implemented.

If your current funds availability disclosure (and system) provides same day availability for Treasury checks, and you want to delay availability until the banking day after deposit, you would first need to verify your system can identify Treasury checks in order to provide next day availability. If it can, then you would need to update your Funds Availability Disclosure and send the change in terms notice to all affected customers, waiting the 30-day timeframe. Once that timeframe has expired, you can update your system to reflect next-day availability for these items and will not be required to provide a case-by-case hold notice.

It is important to note however, the bank would still be required to provide the appropriate hold notice if it wanted to place an exception hold, such as a large item hold, on a Treasury check.

NEXT DAY ITEMS

Question: Can the bank place a funds availability hold on a US Treasury check and if so, for how long?

Answer: Yes, in some cases. If the Treasury check is deposited into a “new account” (the customer had not had a transaction account with your bank within 30 days of the first deposit to the account), and your Funds Availability Notice provided at account opening details the new account hold provisions, you can hold the excess amount over $5,525 ($6,725)* for up to nine business days from the banking day of deposit. The first $5,525 ($6,725)* of the Treasury check deposited must be made available by the first business day after the banking day of deposit.

If the account is not a “new account”, and the Treasury check is deposited, it is subject to next-day availability. The first $5,525 ($6,725)* of next-day checks deposited on a banking day must be made available by the next business day after the banking day of deposit; the balance of the checks deposited must be available by the second day after the banking day of deposit unless the bank places an exception hold. Exception holds may also be placed on Treasury checks if a specific exception hold reason is triggered.

Exception hold reasons that may be used on Treasury checks include a large deposit hold (affects the excess over $5,525 ($6,725)* in checks deposited), a chronic over-drafter hold (which affects the full amount of deposited checks) or a reasonable doubt hold (in which the bank has a reasonable cause to believe the check will not be paid). Checks subject to an exception hold may be held seven business days.

Finally, keep in mind a bank is NOT required to accept any check for deposit if it has reason to believe the check may not be paid nor is the bank required to cash Treasury checks.

*Effective July 1, 2025

Question: Cashier’s checks are sometimes fraudulent but are considered official checks so must be made available the next day, correct? Are there any exceptions?

Answer: To clarify, in general under your standard funds availability schedule, official checks must be available the next business day if deposited in person and deposited by and payable to the account owner. There are some instances in which a bank can place a hold on a cashier’s check:

If the checks deposited in a day exceed $5,525 ($6,725)*, the “Large Deposit” Exception Hold may be used on the amount EXCEEDING $5,525 ($6,725)* and the first $5,525 ($6,725)* must be available to the customer either next day or second day depending on if bank is next day or maximum hold bank.
If you have reason to believe a cashier’s check is fraudulent, you can hold 100% of the funds for 7 business days using the “reason to doubt collectability” hold reason. Don’t forget to document the reason you believe the check is fraudulent. You can also refuse to accept the check for deposit.

*Effective July 1, 2025

Question: If a deposit consists of three checks and we are providing next day availability on two items, does the $225 ($275)* next day availability rule apply on the third check being placed on hold?

Answer: The next-day items (Treasury checks, cashier’s, teller’s and certified checks, etc.) get next-day availability unless you place an exception hold on all or part of them. The $225 ($275)* next day availability rule applies only to checks other than next-day items and is in addition to any availability that you provide for those next-day items.

For example, if the first two checks in your example are next-day items, you make the total of those checks available on the next business day following the banking day of deposit (deposit on Monday, availability at opening of business on Tuesday). If the third check is not a next-day item, you must make the first $225 ($275)* of that check available on the next business day, also.

Whereas, if the deposit consists only of checks that are not next-day items, you must make the first $225 ($275)* available on the next business day unless you are placing an exception hold on the item, in which case the $225 ($275)* next-day rule does not apply. Therefore, if you’ve made the first two deposited checks available next day and they total $225 ($275)* or more, you need not make an additional $225 ($275)* from the third check available next day.

*Effective July 1, 2025

ATM Deposit Funds Availability

Question: When must we make a deposit made at an ATM owned by our bank available?

Answer: It depends on what your bank’s funds availability policy currently states. Typically, for next-day available banks, if your bank accepts deposits at ATMs owned by your bank, those deposits need only be available by the second business day after the banking day of deposit, because they are not considered “made in person” and therefore not requiring next day availability. See Regulation CC, Official Staff Commentary to section 229.10(c)-3:

229.10(c) Certain Check Deposits

3.Deposits Made to an Employee of the Depositary Bank.

In most cases, next-day availability of the proceeds of checks subject to this section is conditioned on the deposit of these checks in person to an employee of the depositary bank. If the deposit is not made to an employee of the depositary bank on the premises of such bank, the proceeds of the deposit must be made available for withdrawal by the start of business on the second business day after deposit, under paragraph (c)(2) of this section. For example, second-day availability rather than next-day availability would be allowed for deposits of checks subject to this section made at a proprietary ATM, night depository, through the mail or a lock box, or at a teller station staffed by a person who is not an employee of the depositary bank. Second-day availability also may be allowed for deposits picked up by an employee of the depositary bank at the customer’s premises; such deposits would be considered made upon receipt at the branch or other location of the depositary bank. Employees of a contractual branch would not be considered employees of the depositary bank for the purposes of this regulation, and deposits at contractual branches would be treated the same as deposits to a proprietary ATM for the purposes of this regulation. (See also, Commentary to §229.19(a).)

However, the bank must still make the first $225 ($275)* available next day even if the deposit was made at an ATM. See Regulation CC official staff commentary to section 229.10(c)-5:

First $225 [$275]
The EFA Act and regulation also require that up to $225 ($275)* of the aggregate deposit by check or checks not subject to next-day availability on any one banking day be made available on the next business day. For example, if $70 were deposited in an account by check(s) on a Monday, the entire $70 must be available for withdrawal at the start of business on Tuesday. If $400 were deposited by check(s) on a Monday, this section requires that $225 ($275)* of the funds be available for withdrawal at the start of business on Tuesday. The portion of the customer’s deposit to which the $225 ($275)* must be applied is at the discretion of the depositary bank, as long as it is not applied to any checks subject to next-day availability. The $225 ($275)* next-day availability rule does not apply to deposits at nonproprietary ATMs.

If your customers make deposits at ATMs owned by other operators (“non-proprietary” ATMs), under current Regulation CC, your bank may automatically hold the full amount of the deposit for up to five business days without making the first $225 ($275)* available next day.

*Effective July 1, 2025

Question: Recently we have incurred multiple losses as a result of counterfeit checks that have been deposited at nonproprietary ATMs. How can a bank reduce its risk of counterfeit checks being deposited via ATMs?

Answer: You have options to reduce the risk of accepting counterfeit checks for deposit. First, the bank can revoke a customer’s right to make deposits via an ATM. Your customers may not appreciate this.

The second option is to utilize the protections afforded you under Regulation CC. Regulation CC does allow a bank to treat all deposits made at nonproprietary ATMs as “nonlocal” deposits and hold those funds for a period of no longer than five days. See 229.12(f): “Deposits at nonproprietary ATMs. A depositary bank shall make funds deposited in an account at a nonproprietary ATM by cash or check available for withdrawal not later than the fifth business day following the banking day on which the funds are deposited.” If a bank intends to hold all deposits made at nonproprietary ATMs for a period of five days, it must provide notice to its customers in the initial Regulation CC disclosure provided at account opening. If the initial disclosure is provided, notice does not have to provide following each individual deposit made at a nonproprietary ATM.

REASON TO DOUBT COLLECTIBILITY EXCEPTION HOLDS

Question: I attended a webinar about addressing check fraud. During the webinar one of the presenters stated you could use a Regulation CC reason to doubt collectibility exception hold on a check you suspected was fraudulent. My understanding was if we used this exception hold, we had to have a well-founded belief the check was not collectible, not just a suspicion. Do you agree?

Answer: You are correct. Regulation CC does require more than just a “suspicion” a check may be fraudulent in order to use a “collectability” exception hold:

229.13(e) Reasonable cause to doubt collectibility —

(1) In general. Sections 229.10(c) and 229.12 do not apply to a check deposited in an account at a depositary bank if the depositary bank has reasonable cause to believe that the check is uncollectible from the paying bank. Reasonable cause to believe a check is uncollectible requires the existence of facts that would cause a well-grounded belief in the mind of a reasonable person. Such belief shall not be based on the fact that the check is of a particular class or is deposited by a particular class of persons. The reason for the bank’s belief that the check is uncollectible shall be included in the notice required under paragraph (g) of this section.

The Official Staff Commentary provides several examples what constitutes “reasonable cause,” including:

Receiving a notice from the paying bank that a check was not paid and is being returned.
Receiving information from the paying bank that indicates the payment on the check has been stopped, or that the drawer’s account does not currently have sufficient funds to honor the check.
The fact that a check is stale (over 6 months from issuance) or postdated.
Knowledge the depositor is engaging in kiting activity.
Knowledge of the insolvency or pending insolvency of the drawer of the check.

Keep in mind the bank is not obligated to accept any item for deposit. So rather than placing a hold on a deposited item, you can simply refuse to accept the item for deposit if you have reason to believe the item maybe fraudulent. If the bank refuses the item for deposit, it could offer to the send the check for collection to the paying bank. When a bank sends an item for collection, the item is not deposited into a bank account or run through the Fed check clearing system. Instead, the check is sent directly to the bank on which it is drawn via US mail or similar means with a request that the paying bank return certified funds to the payee or wire funds to the payee’s account.

Question: If the paying bank provides an appropriate reason to doubt collectability, how should we document that call/information?

Answer: While the regulation does not specifically identify this process, typically the bank will make a record of this information such as by writing down the employee who made the call, date they called, who they talked to, and what was said on the copy of the hold form that was retained, on the copy of the item(s) being deposited or on some other form attached to these copies. For example, “Sue P. called First State Bank on 2/20/17 and was told the check will not pay due to insufficient funds”.

NEW ACCOUNT EXCEPTION HOLDS

Question: If I am using a new account hold and I have told the customer at the time of deposit that I am placing a hold for 9 business days, do I have to give them any type of written notice?

Answer: No, written notice does not have to be given when using the new account hold. Written notice is required for large deposit, redeposited checks, repeat overdrafts, reasonable cause to doubt collectability, and emergency conditions per section 229.13(g)(1) of Regulation CC. For new account holds, notification should already be addressed in the account opening disclosures. However, the bank at its option may want to provide a hold notice from a customer service perspective.

Question: If a customer makes a deposit within 30 days of when the account is opened, I understand I can only use the new account hold reason if this is their first demand deposit account (checking) with our bank. But what if this is a joint account and one person already has a checking account at the bank but the other owner does not? Can I still use the new account hold reason or is that not allowed because this account is not the first new checking account for both owners?

Answer: Yes, you can use this reason for the hold. Section 229.13(a) of Regulation CC states that the new account exception hold reason may not be used (account is not considered a new account) if EACH customer on the account has had, within 30 calendar days before the account was established, another demand deposit account at the depository bank for at least 30 calendar days. The commentary goes on to say “If two customers that each have an established individual account with the bank open a joint account, the joint account is not subject to the new account exception. If one of the customers on the account has no current or recent established account relationship with the bank, however, the joint account is subject to the new account exception, even if the other individual on the account has an established account relationship with the bank.”

Question: I would like to place a Regulation CC new account hold on a deposit being made today into an account opened today. Our Regulation CC notice does provide for new account holds. The only problem is the person opening this account previously had an account with us but closed the account about a month ago. Since this person once had an account with us, is this account still considered “new”?

Answer: It depends. To use the new account hold, you must first disclose the fact the bank may delay availability of deposits for new accounts in your funds availability disclosure provided at the time of account opening and the account being opened must be “new.” Regulation CC defines a new account as one opened by a person who has not had an established account relationship with the bank during the 30 days prior to the current account opening. See 229.13(a)(2):

An account is considered a new account during the first 30 calendar days after the account is established. An account is not considered a new account if each customer on the account has had, within 30 calendar days before the account is established, another account at the depositary bank for at least 30 calendar days.

In your scenario, as long as you have disclosed the possibility of placing a new account hold in your disclosures and the account was closed more than 30 days prior to the new account being opened, you may place a “new account” hold on these deposits for the first 30 days after the account was established.

REDEPOSITED CHECK & REPEAT OVERDRAFTS EXCEPTION HOLD

Question: Our customer has two checking accounts and has had overdrafts on both accounts. For the repeat overdraft exception hold in Reg. CC, does the bank apply the exception hold criteria to the accounts individually or can the overdrafts from both accounts be considered? For example, account A was overdrawn two banking days and account B five banking days in the last six months. Individually, they do not meet the criteria to use the overdraft hold, but together, they do.

Answer: Reg. CC, 229.13(d) states that if any account, or combination of accounts, have been repeatedly overdrawn, the bank can use the repeat overdraft exception hold for that customer. See Reg. CC, 229.13:

(d) Repeated overdrafts. If any account or combination of accounts of a depositary bank’s customer has been repeatedly overdrawn, then for a period of six months after the last such overdraft, Secs. 229.10(c) and 229.12 do not apply to any of the accounts. A depositary bank may consider a customer’s account to be repeatedly overdrawn if:

(1) On six or more banking days within the preceding six months, the account balance is negative, or the account balance would have become negative if checks or other charges to the account had been paid; or

(2) On two or more banking days within the preceding six months, the account balance is negative, or the account balance would have become negative, in the amount of $5,525 ($6,725)* or more, if checks or other charges to the account had been paid.

The FFIEC Exam Manual states this another way:

Repeated Overdraft Exception Section 229.13(d), provides that if a customer’s account, or accounts, have been repeatedly overdrawn during the preceding six months, the bank may delay the availability of funds from checks. A customer’s account may be considered “repeatedly overdrawn” in two ways. First, the exception may be applied if the account (or accounts) have been overdrawn, or would have been overdrawn had checks or other charges been paid, for six or more banking days during the preceding six months.

*Effective July 1, 2025

Question: Can the bank list multiple reasons on the Regulation CC hold notice for placing a hold on a deposit? For example, we recently had a customer who meets the criteria for a “repeat overdrafter” deposit a check that would qualify for a large deposit exception hold. Can we indicate both hold reasons on the notice or are we required to select one or the other?

Answer: Regulation CC does not prohibit indicating more than one hold reason on the notice but doing so does not allow the bank to hold the deposit longer. Meaning, just because two exception hold reasons apply, you cannot hold the item longer than the normal seven business days.

Question: Can we use the “safeguard exception” reason hold (a check you deposited was previously returned unpaid) because the customer has had checks returned unpaid in the past?

Answer: No. The exception hold applicable to returned checks applies only to a specific check that has been returned unpaid for a reason other than an endorsement issue or post-dating and is being redeposited a second time. See Regulation CC at 229.13(c).

Only the recurring overdraft exception is available for “past bad acts” of your depositor. This exception hold reason is found in 229.13(d):

(d) Repeated overdrafts. It states if any account or combination of accounts of a depository bank’s customer has been repeatedly overdrawn, then for a period of six months after the last such overdraft, 229.10(c) and 229.12 do not apply to any of the accounts. A depository bank may consider a customer’s account to be repeatedly overdrawn if—

On six or more banking days within the preceding six months, the account balance is negative, or the account balance would have become negative if checks or other charges to the account had been paid; or
On two or more banking days within the preceding six months, the account balance is negative, or the account balance would have become negative, in the amount of $5,525 ($6,725)* or more, if checks or other charges to the account had been paid.

*Effective July 1, 2025

Question: I just placed a large item exception hold on a US Treasury Check. We generally have next day availability but were skeptical to release all the funds without first verifying the check. Can you tell me where or how I can do that if possible? Also, what is the maximum amount of time I can hold the funds?

Answer: The maximum hold time frames vary depending on what type of hold you placed on the check:

Nine (9) business days per Regulation CC if the funds were deposited to a new account;
Seven (7) business days if you have a reasonable cause to doubt collectability, large item deposits (for the amount in excess of $5,525($6,725)*), redeposited checks, and repeat overdrafts.

As for verifying Treasury checks, banks can verify US Treasury checks by utilizing the online Treasury Check Verification Application located at https://tcvs.fiscal.treasury.gov/. Banks must enter their routing number and the check’s number and amount.

For U.S postal money orders, the U.S. Postal Services offers an automated voice verification service for its money orders. The phone number is (866) 459-7822. The caller is prompted to provide certain information about the money order. The automated system will verify the issue date and amount of the money order. The maximum amount for a domestic U.S. Postal Money order is $1,000 and $700 for international U.S. Postal Money Orders.

Therefore, if you have called and they have confirmed fraud, you can either refuse to accept the item for deposit or if you learn this after the deposit was made, you could place a seven-business day hold on the item due to reasonable cause to doubt collectability.

*Effective July 1, 2025

Tools

Check 21 Consumer Notice

Check 21 Expedited Claim Notices

Check 21 Expedited Recrediting

Reg. CC Reference Guide

Reg. CC Reference Guide – 2025 Thresholds

Reg. CC Flow Chart

Reg. CC Flow Chart – 2025 Thresholds

Reg. CC Flow Chart word version