This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

13801

Vol. 62, No. 56

Monday, March 24, 1997

1 ‘‘Bank’’ in Regulation CC and in this document

includes all depository institutions, such as

commercial banks, savings institutions, and credit

unions.

FEDERAL RESERVE SYSTEM

12 CFR Part 229

[Regulation CC; Docket No. R–0926]

Availability of Funds and Collection of

Checks

AGENCY: Board of Governors of the

Federal Reserve System.

ACTION: Final rule.

SUMMARY: The Board has adopted

amendments to its Regulation CC

relating to the availability of funds and

collection of checks. The amendments

do not represent any major policy

changes and are intended to clarify the

regulation and, in some cases, reduce

the compliance burden for depository

institutions.

EFFECTIVE DATE: April 28, 1997.

FOR FURTHER INFORMATION CONTACT:

Florence Young, Assistant Director

(202/452–3955), Division of Reserve

Bank Operations and Payment Systems;

Stephanie Martin, Senior Attorney (202/

452–3198), Heatherun Allison, Attorney

(202/452–3565), Legal Division; Manley

Williams, Attorney (202/452–3667),

Kyung Cho-Miller, Attorney (202/452–

2412), and Obrea Poindexter, Attorney

(202/452–2412), Division of Consumer

and Community Affairs. For the hearing

impaired only, contact Dorothea

Thompson, Telecommunications Device

for the Deaf (TDD) (202/452–3544),

Board of Governors of the Federal

Reserve System, 20th and C Streets,

N.W., Washington, D.C. 20551.

SUPPLEMENTARY INFORMATION:

I. Overview

The Board has adopted amendments

to its Regulation CC (12 CFR Part 229),

Availability of Funds and Collection of

Checks. The amendments are clarifying

and technical in nature and do not

represent any major policy changes. The

amendments to subpart B of the

regulation, governing availability

schedules and disclosures, address a

variety of issues, including the

treatment of deposits received at

‘‘contractual’’ branches (such as affiliate

banks 1). Many of the amendments are

designed to reduce the burden on banks

of complying with the regulation. For

example, the amendments would

provide more flexibility for hold notices

under emergency conditions, clarify the

various media by which banks may give

written notices, and delete certain

notice content requirements. The Board

has also updated the model forms in

Appendix C. Banks that use earlier

versions of the model forms are

protected from civil liability under

§ 229.21(e), but all banks are encouraged

to use the new versions when reordering

or reprinting supplies.

The amendments to subpart C,

governing collection of checks, clarify

the interaction between Regulation CC

and the Uniform Commercial Code

(U.C.C.); set forth rules for checks drawn

on banks in Guam, American Samoa,

and the Northern Mariana Islands; and

address other check collection matters.

A red-lined version of the

amendments to the regulation, model

forms, and commentary is available

from the Board’s Freedom of

Information Office or by calling 202–

452–3684.

The Board received 64 comments to

the proposed amendments from the

following types of institutions:

Banks/thrifts ........................................... 15

Bank holding companies ....................... 14

Credit unions ......................................... 10

Trade associations ................................. 9

Federal Reserve Banks .......................... 7

Clearinghouses ....................................... 3

Banking service companies ................... 3

Credit card companies .......................... 2

Federal Home Loan Banks .................... 1

II. Section-by-Section Analysis

Available for withdrawal (§ 229.2(d)).

The regulation defines ‘‘available for

withdrawal’’ to mean available for all

uses generally permitted to the customer

for actually and finally collected funds

under the bank’s account agreement or

policies. The commentary to this

definition clarifies that funds are

considered available for withdrawal

even if they are being held to satisfy,

among other things, the customer’s

liability arising from the certification,

guaranty, or acceptance of a check or the

sale of a cashier’s or teller’s check. The

Board proposed to revise the

commentary to clarify that funds held to

meet contingent obligations of the

customer related to the account are

considered to be available for

withdrawal. For example, a depositary

bank might receive a notification that

the customer has authorized a debit to

the account at a point-of-sale terminal.

Banks often ‘‘memo-post’’ these debits

to the customer’s account in advance of

the settlement date.

The Board received eighteen

comments on the proposal. Ten

commenters favored the proposal. Eight

commenters either opposed the

proposal or requested clarification.

Apparently, these commenters

interpreted the proposal to prohibit

‘‘memo-posting’’ and to require a bank

to allow a customer to withdraw funds

on which the bank had placed a hold to

satisfy a transaction to be debited from

the customer’s account. The Board

intended the opposite, however. A bank

may ‘‘memo-post’’ contingent account

liabilities such as debit card

transactions to a customer’s account

without violating its obligations under

this subpart. The Board has adopted

revised commentary language to clarify

this point.

Definition of ‘‘bank’’ (Section

229.2(e)). The regulation stated that, for

purposes of subpart C, the term ‘‘bank’’

includes any person engaged in the

business of banking, including a Federal

Reserve Bank, a Federal Home Loan

Bank, and a state or unit of general local

government to the extent that the state

or unit of general local government acts

as a paying bank. The Board proposed

to amend the regulation’s definition of

‘‘bank’’ to clarify that the Federal

Reserve Banks, the Federal Home Loan

Banks, and state or units of general local

government are not necessarily engaged

in the business of banking,

notwithstanding the fact that they are

included in this definition. The Board

received no comments on this change

and has adopted the amendment as

proposed.

Definition of ‘‘traveler’s check’’

(Section 229.2(hh)). The commentary

stated that ‘‘[t]raveler’s checks that are

not issued by banks may not have any
13802 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations

words on them identifying a bank as

drawee or paying agent * * * .’’ Some

people had interpreted this provision to

mean that traveler’s checks were

prohibited from having words on them

identifying a bank. The Board proposed

to revise the commentary to clarify that

only a description of a possible

situation, and not a prohibition, is

intended. The Board received two

comments in support of this change and

has adopted a slightly revised version of

the proposal.

Notice requirement to state amount of

deposit (Sections 229.13(g) and

229.16(c)). Regulation CC required a

notice of an exception hold

(§ 229.13(g)(1)(i)(B)) or a case-by-case

hold (§ 229.16(c)(2)(i)(B)) to include the

amount of the deposit from which funds

will be held. Some banks noted that

when they learn that a check is being

returned by the paying bank several

days after the day of deposit, it is often

difficult to trace the check back to a

particular deposit, especially in cases

where a corporate customer makes

several multi-check deposits on a single

day. The Expedited Funds Availability

Act (the Act) does not require the notice

to contain the amount of the deposit.

The Board proposed to eliminate the

‘‘amount of deposit’’ requirement for

both exception and case-by-case hold

notices. The Board received thirty-one

comments on this proposal, twentyseven of which expressed support. Two

commenters indicated that the

requirement to state the amount of

deposit was not burdensome, and two

commenters indicated that it would be

beneficial to retain the requirement ‘‘to

ensure the accuracy of the number of

days being held versus the policy or

regulation requirements’’ or to ‘‘aid the

consumer in identifying which deposit

the hold applies to.’’ The Board believes

that depositors can identify the holds

that the bank has applied based on other

information in the hold notice and has

eliminated the ‘‘amount of deposit’’

requirement as proposed.

The Board also requested comment on

the burdens to depositary banks and the

benefits to customers of the requirement

for hold notices to include the date of

deposit. The Board received twentyseven comments in response to this

request. Eighteen commenters

supported retention of the date

requirement, cited consumer benefits of

the requirement, or noted that the

requirement imposed little or no burden

for banks. In general, these commenters

indicated that the date requirement is an

important and necessary reference point

for depositors in identifying a

transaction and also helps banks track

particular checks. Seven commenters

favored eliminating the date

requirement or stated that the

requirement imposed burden on banks.

Two commenters supported elimination

of the date requirement as long as

consumers could obtain the necessary

information regarding a hold from the

other information in the notice. The

Board believes that the date requirement

continues to provide useful information

to depositors and imposes only a minor

burden on banks. The Board, therefore,

has retained the date requirement for

exception hold and case-by-case hold

notices.

Emergency exception notices and

length of holds (Sections 229.13 (g) and

(h)). The regulation allows a depositary

bank to place an exception hold on

funds deposited by check in the case of

an emergency, such as a computer or

communications interruption,

suspension of payments by another

bank, or war. The regulation required

the depositary bank to provide a notice

to the customer of the emergency hold

in the same manner in which it provides

notice under the other exception holds,

except that no notice was necessary if

the funds were made available before

the notice had to be sent. (That is, the

bank would have to mail or deliver the

notice to the customer no later than the

first business day following the day the

facts upon which a determination to

invoke the hold became known to the

depositary bank.) Some banks argued

that during a major disaster they would

be unable to meet the timing deadline

for emergency exception hold notices

due to the time required to move to a

backup processing site and the need for

the bank to focus on other customer

service priorities in the event of major

disasters.

Section 604(f)(2)(C) of the Act

requires depositary banks to send

emergency exception hold notices ‘‘in

accordance with regulations of the

Board.’’ Therefore, the Board proposed

to amend § 229.13(g) of Regulation CC to

require a depositary bank to give

reasonable notice of emergency

exception holds and to make

conforming revisions to the

commentary. Reasonable notice in some

situations might consist of individual

notices mailed to customers as soon as

practicable or, in other situations, may

consist of general notices, such as

postings at branches or ATMs, or

newspaper, television, or radio notices.

The Board also proposed clarifying

amendments to § 229.13(h) regarding

the length of exception holds and

corresponding revisions to the

commentary.

The Board received twenty-eight

comments on this proposal, all in

support. One commenter requested

further guidance on the factors to

consider when determining what form

the notice should take. The Board

believes that the factors as to what is

reasonable will vary with the situation

and that specifying factors may be

overly restrictive. Another commenter

recommended that a bank be permitted

to provide notices by posting or

publication in all situations warranting

an emergency hold. The Board,

however, believes that these methods

may not necessarily be reasonable in all

situations. The Board believes its

proposal provides significant flexibility

to banks under emergency conditions

and has amended § 229.13(g) and

revised the accompanying commentary

as proposed.

Written notices (Sections 229.13(g)

and 229.15(a)). Section 229.13(g)

requires a depositary bank to provide

written exception hold notices to

customers. Section 229.15(a) requires

banks to make availability policy and

other disclosures in writing and requires

that certain disclosures be in a form the

customer may keep. The Board

proposed to revise the commentary to

both these sections to clarify that

notices and disclosures delivered via fax

or electronic media that display text on

a monitor or screen, such as electronic

mail, screenphone, or interactive

television, are considered written

notices and disclosures if the customer

agrees to receive notices and disclosures

through such means. The proposal also

provided that a customer may request a

paper copy of an electronic notice or

disclosure. Twenty-one comments were

received on the proposal, all in favor of

the proposed revisions. One commenter

recommended that a customer be

allowed to request a paper copy of an

exception notice only within a

reasonable period of time after receiving

electronic notice.

The Board has re-examined the need

to allow the customer to request a paper

copy of an electronic notice or

disclosure, with an eye toward

providing banks with more flexibility in

servicing their customers, fostering

innovation, and reducing costs while

maintaining the level of customer

protection contemplated by Congress.

The Act specifies that certain notices

and disclosures must be written but

does not specify that they must be on

paper or in another form that must be

retained. Under the proposal, a bank

may send electronic notices and

disclosures only if the customer agrees.

If a customer was not satisfied with its

arrangement with its bank, it could

rescind the agreement and request that

the bank send all future notices and
Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations 13803

disclosures on paper, or close its

account. Customers interested in

retaining a paper copy presumably

would agree to receive notices and

disclosures electronically only if they

had the capability to print the electronic

information that they receive. The final

commentary language adopted by the

Board states that the Regulation CC

requirements would be satisfied by an

electronic notice or disclosure that

displays the text and is in a form that

the customer may keep (for example,

electronic information that can be

downloaded or printed). The Board has

dropped the proposed commentary

provision stating that a consumer may

request a paper copy of a notice

delivered. The Board is conducting a

comprehensive review of notice and

disclosure requirements under

consumer protection regulations and

may, in the future, request comment on

additional proposals regarding the use

of electronic communications to meet

the various regulatory requirements.

Future proposals may affect Regulation

CC as well as the other regulations.

Exception holds and the cash

withdrawal rule (Section 229.13(h)).

Section 229.12(d) permits a depositary

bank to extend holds on deposits of

local, nonlocal, and certain other checks

by one business day for purposes of

withdrawals by cash or similar means,

with the exception of $400, which must

be made available by 5:00 p.m. on the

original availability day (the ‘‘cash

withdrawal rule’’). The purpose of the

cash withdrawal rule is to allow

depositary banks an additional day to

learn if a check is being returned before

allowing irrevocable withdrawals from

the customer’s account. Some banks

asked how the cash withdrawal rule

works in conjunction with the exception

holds. For example, when a large

deposit exception hold is placed on a

$7,000 local check, $100 must be made

available for withdrawal on the next

business day. For check-writing

purposes, $4,900 must be available by

the second business day after deposit.

For withdrawal by cash or similar

means, $400 out of the $4,900 must be

available by 5:00 p.m. of the second day

and the remainder of the $4,900 must be

available by the third business day after

deposit. The banks asked whether the

five-day exception hold on the $2,000

excess over $5,000 is added to the

second business day for all purposes, or

whether the hold period may be added

to the second day for check-writing

withdrawals and to the third day for

cash and similar withdrawals. The

Board proposed to clarify that the

exception hold periods should be added

to the normal availability schedules (to

the second business day in the previous

example). The Board reasoned that it

would not be necessary to extend the

exception hold period for cash

withdrawal purposes, as in almost every

case the depositary bank should learn of

a returned local check before the

morning of the seventh business day

after deposit.

The Board received four comments on

this proposal. One commenter opposed

the proposal, stating that it would

require expensive and extensive

reprogramming. Two other commenters

stated that adopting the proposal would

make regulatory compliance more

difficult. One commenter stated that

additional clearing time is beneficial

and may help prevent losses. Upon

consideration of these comments, the

Board has decided that, to avoid costly

systems changes for banks and in an

effort to simplify the rule, the exception

hold periods may be added to the

availability period as applicable to

unlimited cash withdrawals. Therefore,

the Board has not adopted the proposed

revision.

Disclosure of branch-specific policies

(Section 229.16(a)). Section 229.16

requires banks to furnish notices of their

specific availability policies. Some

banks have established different

availability policies at different

branches (or for deposits accepted on

behalf of the bank by affiliates or

‘‘contractual branches’’). These banks

asked about the disclosure implications

of different policies and whether such a

bank must disclose to every customer

what routing numbers are local to each

location where deposits are accepted.

The Board proposed to revise the

commentary to § 229.16(a) to clarify that

a bank may provide customers with a

branch-specific disclosure. The Board

proposed that banks, when determining

which disclosure to provide, be allowed

to allocate customers between branches

through good faith use of a reasonable

method, such as where the customer

opened the account.

The Board received sixteen comments

on this proposal. Some of the

commenters expressed concern about

identifying customers with specific

branches, given the trends towards

servicing accounts remotely or through

contractual branches. Accordingly, the

Board has revised the proposed

commentary language to state that a

bank may establish different availability

policies for different groups of

customers and may allocate customers

for disclosure purposes by any

reasonable method. The allocation need

not be branch-based. The final

commentary revision also states that a

bank may establish different availability

policies for deposits at different

locations, such as at contractual

branches. The Board also amended the

commentary to § 229.16(b) to clarify that

if a bank does not have a cut-off hour

prior to its closing time, the bank need

not disclose a cut-off hour.

Initial disclosures (Section 229.17).

The regulation requires a bank to

provide an availability policy disclosure

to a potential customer before opening

an account. The commentary states that,

if a bank receives a written request by

mail asking that an account be opened

and including an initial deposit, the

bank may open the account with the

deposit but must mail the required

disclosures not later than the business

day following the banking day on which

the bank receives the deposit. Although

the Board proposed no changes to this

section, one commenter asked that the

period for mailing a disclosure after

receiving an initial deposit through the

mail be extended to ten days. The

commenter stated that additional time is

necessary for the bank to perform ‘‘due

diligence’’ steps, such as conducting a

credit check and verifying the

information submitted by the customer.

The commenter stated that, because a

bank may ultimately decline an account

and send back the initial deposit,

sending a disclosure before final

acceptance of the account could be

confusing to the customer. As the Board

did not seek comment on any changes

to the initial disclosure rules in

§ 229.17, it is not adopting any changes

to this section at this time. The Board

will, however, consider seeking

comment on this matter in the future.

Deposits at contractual branches

(Sections 229.2(s), 229.10(c), 229.14(a),

229.19(a)). Due to easing of branching

restrictions, the practice of one bank

accepting deposits on behalf of another

bank (‘‘contractual branching’’) is

growing more prevalent. The Board

proposed to clarify the commentary

regarding treatment of deposits at

contractual branches. The proposed

revision to the commentary to the

definition of local paying bank

(§ 229.2(s)) stated that a branch of a

bank that is acting as an agent of the

depositary bank is considered a branch

of the depositary bank. Therefore, a

check would be deemed local or

nonlocal based on the location of the

contractual branch with respect to the

location of the paying bank.

The Board also proposed to revise the

commentary to §§ 229.10(c) and

229.19(a) to clarify that deposits at

contractual branches would be treated

similarly to deposits at proprietary

ATMs; deposits at contractual branches
13804 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations

would be considered deposited when

the funds are received by the

contractual branch teller. However,

deposits at contractual branches would

not be considered deposited at a teller

station staffed by an employee of the

depositary bank within the meaning of

§ 229.10(c) (ii)–(v) and therefore would

not be subject to next-day availability

under those provisions. The Board also

proposed to revise the commentary to

§ 229.19(a) to state that the depositary

bank could set a noon cut-off hour for

deposits at contractual branches, as

these deposits are treated as received at

‘‘off-premise’’ facilities. Finally, the

Board proposed to revise the

commentary to § 229.14(a) to clarify

that, in the case of a deposit at a

contractual branch, interest must accrue

when the account-holding bank receives

credit for the deposit, not when the

contractual branch receives credit.

The Board received twenty-two

comments on the proposal. Fourteen

commenters supported the proposal.

Two commenters stated that deposits

made at contractual branches should be

treated similarly to deposits made at

nonproprietary ATMs rather than at

proprietary ATMs, as proposed. The

Board believes that, on balance, deposits

made over the counter to a teller at a

branch, albeit a contractual branch, are

more akin to deposits at proprietary

ATMs than those at nonproprietary

ATMs. The Board has retained the

proposed treatment of contractual

branch deposits.

One commenter stated that ‘‘local

paying bank’’ under § 229.2(s) should

include paying banks that are members

of the same local clearinghouse as is the

depositary bank. The Board notes that a

bank is free under Regulation CC to treat

as local checks those checks that are

drawn on paying banks that are

members of the same local

clearinghouse and that can be collected

on a local basis regardless of the paying

bank’s Federal Reserve check processing

region. The Board has determined,

however, not to require banks to do so,

because such a requirement could make

it extremely complicated for banks to

assign availability for a given check

based on its routing number.

Another commenter asked that the

Board provide additional guidance on

how to determine whether a check is

local or nonlocal, particularly when the

paying bank has interstate branches.

The Board believes that the commentary

to the definition of ‘‘local check’’

(§ 229.2(r)) already provides sufficient

guidance on this issue. The commentary

states that, generally, a depositary bank

may rely on a check’s routing number to

determine whether the check is local or

nonlocal. (The only instance when a

bank may not be able to rely on the

routing number is when the check is

drawn on one bank and payable through

another bank, in which case the check

is local or nonlocal based on the

location of the drawee bank rather than

the location of the payable-through bank

whose routing number is on the check.)

Several commenters requested

clarifications of various kinds. One

commenter asked whether a hold notice

may be given by a contractual branch or

whether it must be given by the

account-holding bank. The Board

believes that the regulation clearly

places the responsibility for providing

notices with the account-holding bank,

but a contractual branch may agree to

provide notices on behalf of the

account-holding bank. Another

commenter asked whether the Board

would allow up to one year for banks to

comply with the new contractual

branching provisions. The Board does

not believe that a one-year lead time is

necessary, as the revisions represent a

clarification of the existing rule rather

than new requirements. One commenter

asked whether a bank’s lobby disclosure

obligations under § 229.18 require

disclosure of the availability of funds for

all deposits at that location or only for

accounts maintained at that location.

The Board added a clarification to the

commentary to § 229.18(b) to clarify that

lobby notices need only describe the

bank’s availability policy, not the

availability policy of the bank for which

it is acting as a contractual branch.

The Board adopted the other

commentary revisions to §§ 229.2(s),

229.10(c), 229.14(a), and 229.19(a)

substantially as proposed. In addition,

to provide a single reference point for

the definition of ‘‘contractual branch,’’

the Board has added a definition of this

term to § 229.2. The Board has also

added references to contractual

branches in §§ 229.2(s) and 229.19(a).

Holds on other funds—notices

(section 229.19(e)). Section 229.19(e)

provides that when a bank accepts a

deposit to an account that is subject to

the Regulation CC availability

requirements, the bank may not place a

hold on any other funds of the customer

(such as a savings account) that exceeds

those requirements. This section also

provides that when a bank cashes a

check over the counter (other than an

‘‘on-us’’ check), the bank may not place

a hold on that customer’s account that

exceeds the Regulation CC schedules

that would apply if the check were

deposited. Section 229.19(e) does not

explicitly address whether the

depositary bank must provide a hold

notice (case-by-case or safeguard

exception) in these cases. The Board

proposed to revise the commentary to

§ 229.19(e) to clarify that a hold notice

would be required if an exception or

case-by-case notice would have been

required under §§ 229.13 or 229.16 had

the hold been placed on funds

deposited in an account subject to the

regulation.

The Board received eight comments

on this proposal. Four commenters

expressed support for the proposal. One

commenter requested clarification on

whether notices are required when the

hold is not associated with a deposit to

an account. Two commenters opposed

the imposition of additional regulatory

burden with respect to accounts not

covered by Regulation CC. The Board

has adopted revised commentary

language to clarify that a notice under

this section is required only when the

funds being held are funds in an

account that is covered by Regulation

CC. Another commenter observed that,

if notice is required where, for example,

a bank cashes a check over the counter,

the wording of the notice should not

refer to ‘‘number of days following

deposit,’’ as no deposit is involved. The

Board has revised the commentary to

the model notices to clarify how to

amend the notices in these

circumstances. One commenter

expressed concern that notices of such

a policy must be incorporated into a

bank’s availability policy. The Board

notes that model clauses C–6 (Holds on

Other Funds (Check Cashing)) and C–7

(Holds on Other Funds (Other

Accounts)) provide models for inclusion

in a bank’s availability policy.

Midnight deadline extension (section

229.30(c)). The regulation

(§ 229.30(c)(1)) allows a bank to return

a check after the midnight deadline, as

long as it uses a means of delivery

designed to get the returned check to the

receiving bank by the end of that

receiving bank’s next banking day, or

later if ‘‘highly expeditious

transportation’’ is used. Section

229.30(c)(2) allows a paying bank to

extend a Saturday midnight deadline if

the checks get to a returning bank by the

cut-off hour for the returning bank’s

next processing cycle or to a depositary

bank by the end of the depositary bank’s

next banking day. The Board proposed

to amend the regulation to clarify that

§ 229.30(c)(1) pertains to all midnight

deadlines other than Saturday midnight

deadlines, and that § 229.30(c)(2)

pertains only to an extension of a

Saturday midnight deadline. The Board

received nine comments, all of which

supported the proposal. The Board has

adopted the amendment as proposed.
Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations 13805

2 12 U.S.C. 4401 et seq.

The Board also requested comment on

whether further modifications to the

regulation would be desirable in light of

problems posed by nonstandard banking

days other than Saturdays, such as midweek holidays. The Board received

thirteen comments in response to this

request. Of these, nine commenters

stated that further modifications to the

regulation were not necessary, and four

commenters stated that further

modifications or clarification would be

desirable. As none of the commenters

stated that nonstandard banking days

raise significant problems, the Board

decided not to make any further

modifications with respect to

nonstandard holidays at this time.

The Board also requested comment on

whether the regulation’s conditions for

extending a midnight deadline should

require a determination of motive or

whether the regulation should simply

set forth a ‘‘time-of-receipt’’ test.

Specifically, the Board asked whether

§ 229.30(c) should be available only ‘‘in

order to expedite delivery’’ (and not, for

example, to avoid a kite) or whether

extension of the midnight deadline

should be permitted for any reason so

long as the returned check is received

by the receiving bank by the end of that

bank’s next banking day (or later if

‘‘highly expeditious transportation’’ is

used). The Board received twelve

comments on this issue. All commenters

expressed support for clarifying that no

motive test is intended in this section.

The Board agrees that § 229.30(c) should

not require a determination of motive

for midnight deadline extensions. To

provide clarity on this point, the Board

has deleted the words ‘‘in an effort to

expedite delivery of a returned check to

a bank’’ from § 229.30(c)(1).

Extra day to create qualified returned

checks (section 229.31(a)). Section

229.31(a) allows a returning bank to

convert a returned check to a qualified

returned check (that is, to encode the

returned check with the routing number

of the depositary bank, the amount of

the check, and a return identifier so that

it can be handled in an automated

manner). If the returning bank creates a

qualified returned check, § 229.31(a)

provides a one-day extension in the

returning bank’s time frame for meeting

the ‘‘forward-collection’’ expeditiousreturn test in § 229.31(a)(2) (but not the

‘‘two-day/four-day’’ test) and the

deadlines for return under Regulation J

and the U.C.C. This extension does not

apply if the returning bank returns the

check directly to the depositary bank,

because in that case the preparation of

the qualified returned check will not

expedite handling by other banks. Given

the improvements in the check return

system since Regulation CC was first

implemented, the Board proposed to

eliminate the extension and to amend

§ 229.31(a) of the regulation and revise

the accompanying commentary

accordingly. The Board requested

comment on whether this extension is

still necessary and, if so, a description

of the operational problems that

elimination of the extension would

cause.

The Board received twenty-three

comments in response to this proposal.

Thirteen commenters supported

eliminating the extra day to create

qualified returned checks, and ten

commenters opposed eliminating the

extra day. One commenter stated that

the extra day should be retained if,

without it, the use of qualified returns

would be likely to decrease. Similarly,

another commenter stated that it did not

oppose the elimination of the extra day

so long as the extra day is no longer

necessary as an incentive to create

qualified returned checks. One Reserve

Bank commented that the extra day

should be retained, stating that it still

receives more raw returns than it can

process overnight. One commenter, a

clearinghouse, stated that if the extra

day were eliminated then paying banks

would be likely to shift returns to the

Federal Reserve Banks, benefitting the

public sector at the expense of the

private sector. As some returning banks

may still use the extra day, and to avoid

unintended shifts in volume from the

private sector to the public sector, the

Board has determined to retain the extra

day for creating qualified returned

checks.

Midnight deadline warranty and

U.C.C. defenses (Section 229.34(a)(1)).

Section 229.34(a)(1) requires a paying or

returning bank that returns a check to

warrant that the return is within its

deadlines under Regulation CC,

Regulation J, and the U.C.C. The

commentary to § 229.30(a) clarifies that

a paying bank is not responsible for

failure to make expeditious return under

that section to a party that has breached

a presentment warranty under U.C.C. 4–

208. This commentary is consistent with

U.C.C. 4–302(b), which subjects the

paying bank’s liability for missing its

midnight deadline to defenses based on

a breach of a presentment warranty or

fraud. The Board proposed to revise the

commentary to § 229.34(a)(1) to clarify

that a paying or returning bank’s

warranty of timely return within the

U.C.C. deadline is subject to U.C.C.

claims or defenses. The Board received

six comments on this proposal, all of

which supported the proposed

commentary revision. The Board has

adopted the revision as proposed.

Set-off rights (§ 229.34(c)(4)) and

returning bank liability (§ 229.31(a)).

Under § 229.34(c)(4), if a paying bank

overpays a presenting bank for checks

presented, the paying bank may set off

the excess amount paid against

subsequent settlements for checks

presented by that bank. The Board

proposed to amend that section (and

revise the accompanying commentary)

to give any bank in the collection or

return chain the right to offset excess

settlement made to a particular bank

against settlement for subsequent checks

or returned checks transferred by that

bank. The Board received six comments

in response to this proposal. Five

commenters expressed support for the

proposed revision, citing increased

efficiency and decreased administrative

costs. One commenter opposed the

proposal, pointing out the potential for

a confusing cycle of correcting debits

and credits if one bank automatically

sets off while the other bank

affirmatively makes an adjusting

settlement for the excess amount. In

addition to considering the comments,

the Board considered whether the

proposal was necessary to protect banks

in the collection and return chain. The

current regulation allows set-off by the

paying bank versus the presenting bank

because the paying bank is obligated to

accept and settle for (or return) checks

presented to it even in the absence of a

settlement agreement with the

presenting bank. A bank has a similar

obligation to accept returned checks for

which it is the depositary bank.

Intermediary collecting and returning

banks, however, are free to agree with

each other about the terms for handling

checks, including provisions for offset.

These banks could structure their

agreements as netting contracts that are

enforceable even in the event of a

counterparty failure, under the terms of

Title IV of the Federal Deposit Insurance

Corporation Improvement Act of 1991.2

The Board, therefore, has expanded the

offset provisions of § 229.34(c)(4), but

only to the depositary bank-returning

bank relationship and not to the

relationships between intermediary

collecting and returning banks.

The Board also proposed to revise the

commentary to § 229.31(a), which

discusses the returning bank’s liability if

it makes an encoding error when

creating a qualified returned check. The

commentary pointed out that the

returning bank could be liable under

§ 229.38 for losses caused by negligence.

The Board proposed to add that the

returning bank could also be liable for

a breach of its encoding warranty under
13806 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations

§ 229.34(c)(3). The Board received five

comments on this proposal. Four

commenters supported the proposed

revision, while one commenter opposed

it, stating that the depositary bank

should be held liable for encoding errors

instead of a returning bank in order to

encourage depositary banks to provide

legible endorsements. The Board notes

that the regulation provides for a chain

of encoding warranties whereby an

intermediary bank could make a claim

back against the encoding bank on a

mis-encoded check. The Board has

adopted the revision as proposed.

Time limit for notice of warranty

breach (§ 229.34(f)). Sections 4–207(d)

and 4–208(e) of the U.C.C. provide that

a claimant on a breach of warranty must

give notice to the warrantor within 30

days after the claimant has reason to

know of the breach and the identity of

the warrantor, or else the warrantor is

discharged to the extent of any loss

caused by the delay in notice. The

Board proposed to add this time

limitation for notices of warranty claims

to Regulation CC to ensure that the same

time limitations apply for check-related

warranty claims, regardless of whether

the claim is under state or federal law.

The Board received four comments in

response to this proposal, all of them

supporting the proposed amendment.

The Board has adopted the amendment

as proposed.

Electronic presentment (§ 229.36(c)).

Section 229.36(c) allows a bank to

present a check electronically under an

agreement with the paying bank. That

section and the accompanying

commentary contained references to

check ‘‘truncation’’ (generally a term

used to describe a system in which the

physical check is held at some point in

the check collection process). An

electronic presentment arrangement

may, but does not necessarily, include

truncation of the physical check.

Therefore, the Board proposed to amend

§ 229.36(c) and revise the accompanying

commentary to apply it to ‘‘electronic

presentment’’ arrangements, not merely

‘‘truncation’’ arrangements. The Board

also proposed to revise the commentary

by adding an example of an electronic

presentment arrangement.

The Board received thirteen

comments on this proposal. Ten

commenters opposed the proposed

commentary example, most of them

stating that the example would appear

to include within the scope of

‘‘electronic presentment’’ arrangements

where the paying bank receives

presentment of the physical check after

having previously received information

electronically about the check. These

commenters stated that the proposal

should be limited to those check

collection arrangements under which

presentment occurs upon receipt by the

paying bank of the information about

the check rather than upon receipt of

the physical check itself. The Board did

not intend to cover check collection

arrangements where presentment occurs

upon receipt by the paying bank of the

physical check itself. The Board has,

therefore, adopted revised language to

the regulation and the accompanying

commentary.

Labelling requirements for payablethrough checks (§ 229.36(e)). A bank

that arranges for a check drawn on it to

be payable through another bank must

ensure that certain information is

printed on the face of the check.

Specifically, § 229.36(e) requires that

these checks show (1) the name,

location, and first four digits of the

routing number of the bank by which

the check is payable, and (2) the words

‘‘payable through’’ followed by the

name and location of the payablethrough bank. The Board adopted these

labelling requirements to enable banks

and their customers to identify payablethrough checks and to determine

whether they are local or nonlocal. The

provisions regarding the ‘‘payable

through’’ designation and the name and

location of the payable-through bank are

similar to provisions in U.C.C. 4–106.

As these particular labelling

requirements are covered by state law,

the Board proposed to eliminate them

from Regulation CC.

The Board received eight comments

on this proposal. Two commenters

supported the proposal. One commenter

suggested that the commentary make

reference to U.C.C. § 4–106 to avoid the

misperception that ‘‘payable through’’

language is not required at all. Six

commenters opposed the proposal. Two

of these commenters desired a uniform

standard in Regulation CC as opposed to

various state law requirements. Two

other commenters stated that U.C.C. § 4–

106 does not by its terms require the

location of a payable-through bank to be

shown on a check, and, therefore the

Board should continue to require

payable-through information. One

commenter suggested that the Board

require all checks to show on their face

the name and location of the bank

whose routing number is used on the

check.

The purpose of requiring conspicuous

‘‘payable through’’ labelling was to

ensure the ability of depositary banks to

identify payable-through checks

visually. Accordingly, the Board has

determined to continue to require the

words ‘‘payable through’’ and the name

of the bank on payable-through checks.

However, there appears to be no

continuing reason to require payablethrough checks to identify the location

of the payable-through bank.

Accordingly, the Board has deleted this

requirement. The Board notes, however,

that removing the location of the

payable-through bank from a payablethrough check would require the

payable-through bank to accept the

check at any branch or head office

under § 229.36(b)(3).

Measure of damages (§ 229.38(a)). The

commentary states that the measure of

damages provided in § 229.38(a)

‘‘derives from U.C.C. 4–103(e) and 4–

202(c).’’ The Board proposed to revise

the commentary to clarify the effect of

U.C.C. 4–202(c) upon the measure of

damages, as U.C.C. 4–202(c) does not

state a measure of damages but rather

limits liability by providing that a bank

that has exercised ordinary care is not

liable for the insolvency, neglect,

misconduct, mistake, or default of

others, or for the loss or destruction of

an item by others. The Board received

one comment on this change, in

support, and has adopted the revision as

proposed.

Correction to commentary (section

229.38(d)). In the 1995 technical

amendments to Regulation CC (60 FR

51669, October 3, 1995), some words

were inadvertently dropped from the

commentary to § 229.38(d). The Board

proposed to correct the commentary.

The Board received no comments on

this change and has adopted the

revisions as proposed.

Preference against depositary bank

(section 229.39(b)). Section 229.39(b)

gives a bank a preferred claim against a

closed paying or depositary bank that

‘‘finally pays’’ a check or returned check

without settling for it. A paying bank

‘‘finally pays’’ (becomes accountable

for) a check if it doesn’t settle for or

return the check by the applicable

deadline. A depositary bank is obligated

to ‘‘pay’’ for a returned check under

§ 229.32(b) but may not return the

returned check. The depositary bank

can meet its obligations under

§ 229.32(b) only by settling for the

returned check. Therefore, the

depositary bank cannot ‘‘finally pay’’ for

a returned check without settling for it.

The Board proposed to amend

§ 229.39(b) and revise the accompanying

commentary to clarify this distinction.

The Board did not receive any

comments to this proposal. Accordingly,

the Board has adopted the amendment

and revision as proposed.

Preference against presenting bank

(section 229.39(d)). Section 229.39(d)

gives a paying bank a preferred claim

against a closed presenting bank in the
Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations 13807

event that the presenting bank breaches

an amount or encoding warranty as

provided in § 229.34(c) (1) or (3) and

does not reimburse the paying bank for

adjustments for a settlement made by

the paying bank in excess of the value

of the checks presented. This preference

is intended to have the effect of a

perfected security interest and is

intended to put the paying bank in the

position of a secured creditor for

purposes of the receivership provisions

of the Federal Deposit Insurance Act

and similar provisions of state law.

The Board added § 229.39(d) in 1992,

as part of the ‘‘same-day settlement’’

amendments to Regulation CC (57 FR

46956, October 14, 1992). At that time,

some commenters suggested that the

preferred claim should extend to claims

other than adjustments, such as breach

of a U.C.C. presentment warranty (such

as warranties against forged or missing

indorsements and alterations). At that

time, the Board noted that a preferred

claim against a failed presenting bank

for forgeries, missing indorsements, and

alterations may reduce risk to the

paying bank. That risk, however, was

not directly related to the obligation to

make same-day settlement and was not

addressed in the original proposal;

therefore, the Board did not adopt the

commenters’ suggestion at that time.

The Board requested comment on

whether § 229.39(d) should be expanded

to cover the U.C.C. presentment

warranties.

The Board received six comments in

response to this proposal. Four of the

commenters expressed support for the

proposal. One commenter stated that the

proposal should not be limited to the

paying bank, but should be broadened

to consider whether such a preference

would be desirable for the benefit of

collecting banks, returning banks, and

depositary banks that receive U.C.C. and

Regulation CC warranties. One

commenter opposed the proposal,

stating that although preferred claims

against failed presenting banks may

reduce risk to paying banks, that risk is

not related to the obligation to make

same-day settlement. For this latter

reason, the Board determined that

§ 229.39(d) should be narrowly targeted

to warranties related to same-day

settlement situations (amount and

encoding). Accordingly, the Board

determined not to adopt the proposal.

Exclusions (section 229.42). The

regulation exempts certain checks from

the expeditious-return and notice-ofnonpayment requirements (such as a

check drawn upon the United States

Treasury, a U.S. Postal Service money

order, or a check drawn on a state or a

unit of general local government that is

not payable through or at a bank). The

Board proposed to amend the regulation

to reflect that such checks are also

exempt from the same-day settlement

requirements of § 229.36(f). The Board

received six comments on the proposal.

Three commenters supported the

proposal. Three commenters opposed

the proposal, stating that no justification

exists for the existing exclusion of these

checks from the expeditious-return and

notice-of-nonpayment requirements.

The exclusion provision has been in

effect since the regulation was adopted

in 1988. At that time, the Board noted

that handling of Treasury checks is

governed by Treasury rules and that the

Board’s authority over state and local

government checks is not clear. For

these reasons, the Board has adopted the

amendment as proposed.

Checks payable in Guam, American

Samoa, and the Northern Mariana

Islands (section 229.43). The Board has

received inquiries as to the applicability

of Regulation CC to checks drawn on

depository institutions located in Guam,

American Samoa, and the Northern

Mariana Islands (’’Pacific island

banks’’). For purposes of the Board’s

Regulation J, which governs collection

of checks through Federal Reserve

Banks, Pacific island banks are deemed

to be in the Twelfth Federal Reserve

District. Some checks drawn on these

institutions (’’Pacific island checks’’)

bear U.S. routing numbers and are

generally handled by banks in the U.S.

in the same manner as other checks.

Because the Act does not include

Guam, American Samoa, or the

Northern Mariana Islands in the

definition of ‘‘United States,’’ Pacific

island banks are not ‘‘banks’’ and Pacific

island checks are not ‘‘checks’’ as

defined in Regulation CC. Banks often

handle Pacific island checks in the same

manner as other checks, however. The

Board believes that applying some of the

provisions of subpart C to Pacific island

checks would provide an appropriate

legal framework for the handling of

these checks. The Board proposed to

add a new § 229.43 to the regulation and

accompanying commentary to set forth

the provisions of subpart C that apply to

checks drawn on Pacific island banks.

The Board received five comments on

this proposal, generally supporting the

proposal. The Board had proposed that

Pacific island checks not be subject to

expeditious-return requirements and

that depositary banks receiving notice of

nonpayment of Pacific island checks not

be subject to the requirements of

§ 229.33(d) for timely notice to

customers. The Board specifically

sought comment on these two issues.

Two commenters agreed that the

expeditious-return requirements should

not be applied to returning banks

returning Pacific Island checks. One

commenter believed that § 229.33(d)

should apply to Pacific island checks

because these checks frequently take

longer to be dishonored. The Board’s

purpose in adopting § 229.43, however,

is to empower banks to handle Pacific

island checks in the same manner as

other checks (for example, to make

direct returns of such checks) and not to

add new requirements or liability with

respect to these checks except insofar as

is necessary to ensure the proper

functioning of the check collection

system. The Board, therefore, has not

applied § 229.33(d) or the expeditiousreturn rules to Pacific island checks.

Another commenter expressed

support for the proposal, but stated that

the proposal should not be limited to

‘‘negotiable’’ checks since Subpart C of

Regulation CC also applies to

nonnegotiable checks pursuant to

§ 229.2(k). The Board adopted the

changes generally as proposed but has

modified the proposal to cover

nonnegotiable checks.

Model Forms (Appendix C). The

Board proposed to make technical and

stylistic changes to facilitate use of the

model forms and received several

suggestions for additional

improvements. One commenter

suggested that the model availability

policy disclosures would be clearer if

the first sentence indicated that the

policy applies to deposits of both cash

and checks. The commenter also

suggested that models C–4 and C–5

would be clearer if, in the section on

deposits not made in person, the

disclosure read ‘‘the day we receive

your deposit’’ instead of ‘‘the day of

your deposit.’’ Models C–1 through C–

5 have been modified accordingly. The

commenter further suggested that the

Board insert the word ‘‘generally’’

before any statement of when funds will

be available, if the statement is subject

to exceptions. The Board believes that

the heading ‘‘longer delays may apply’’

provides a sufficient warning and did

not adopt this suggestion.

Another commenter suggested that

the model disclosures indicate that a

bank has the discretion to implement a

new account exception hold under

section 229.13. As indicated in the

commentary to section 229.16(a), the

disclosure provided by a bank must

reflect the availability policy followed

in most cases, and if a bank has a policy

of imposing delays in availability on

any customers longer than those

specified in its disclosure, those

customers must receive disclosures that

reflect the longer applicable availability
13808 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations

periods. Thus, if a bank places new

account holds just on particular classes

of checks, such as checks over a certain

amount, that policy should be reflected

in the account disclosures. If a bank has

a policy of placing new account holds

on the accounts of certain customers,

the disclosure provided to those

customers should reflect that practice.

The Board does not believe that

additional model forms are necessary.

One commenter requested that the

Board amend model notices C–17 and

C–18 concerning notices at locations

where employees accept consumer

deposits. The commenter requested that

the Board add language indicating that

this notice applies only to deposits

made at that location and to accounts

maintained at that location. Although

the Board has revised the commentary

to section 229.18(b) to clarify that a

lobby notice need only describe the

bank’s availability policy for that

branch, the Board does not believe that

the lobby notice needs to contain such

a limitation. A bank may add such a

limitation, however, if it chooses.

The Board also requested comment on

whether any models in addition to those

currently in Appendix C would be

helpful. One commenter stated that

additional models are not necessary,

while another commenter stated that the

models should include a model clause

for inclusion in the availability policy

disclosures of banks in contractual

branch arrangements. If a bank’s

availability policy disclosure does not

apply to deposits at other locations

(deposits at contractual or other

branches in different check processing

regions, for example) the disclosure

should note that fact, or if a bank

follows a case-by-case hold policy, it

could use the case-by-case hold

provisions. The Board has adopted a

new model clause C–11A (Availability

of funds deposited at other locations),

for banks that base the availability of

funds on the location where the funds

are deposited. The Board has also

adopted commentary to that clause.

The Board proposed the following

additional changes to the models.

Model C–3 Next-day availability,

case-by-case holds to statutory limits,

and § 229.13 exceptions. The Board

proposed to revise Model C–3 to clarify

the availability of funds subject to a

hold. Generally, the first $100 is

available on the first business day after

the day of deposit. The first $100 is not

available, however, if the funds are

subject to an exception hold under

§ 229.13 other than a large deposit

exception. The Board received two

comments on this proposal. One

commenter supported the proposal. The

other commenter suggested that the

Board enumerate the circumstances in

which the $100 would not be available.

Because the availability of that $100

depends on the type of the hold, it is not

possible to provide concise additional

guidance, and the Board believes that a

lengthy explanation would not be

useful. Accordingly, the Board has

adopted the model substantively as

proposed.

Model C–5 Holds to statutory limits

on all deposits. The Board proposed to

revise Model C–5 to facilitate use of the

form by banks that elect to impose the

limitation on withdrawals by cash

under § 229.12(d). One commenter

suggested the Board include a crossreference to the section on local checks

the first time the phrase ‘‘local check’’

is used. Because the disclosure is

relatively short, the Board does not

believe that a cross reference is

necessary and has adopted the model

substantively as proposed.

Model C–10 Cash withdrawal

limitation. The Board proposed to revise

Model C–10 to facilitate the

incorporation of the clause into the

various model availability policy

disclosures. The Board received no

comments on this proposal and has

adopted the model as proposed.

Model C–12 Exception hold notice.

The Board proposed to revise Model C–

12 to clarify that the optional provision

concerning overdraft or returned check

fees applies only to the last category of

reasons, reasonable cause to doubt

collectibility. In addition, to reflect the

change to § 229.13(g)(1)(i)(B), the Board

proposed to delete the reference to the

amount of the deposit. One commenter

requested that the Board add natural

disasters to the examples of emergency

conditions. The Board believes that

additional examples are unnecessary

and has adopted the model as proposed.

Model C–13 Reasonable cause hold

notice. To reflect the change to

§ 229.13(g)(1)(i)(B), the Board proposed

to delete the reference to the amount of

the deposit. The Board received no

comments on the model notice, and has

adopted it as proposed.

Model C–16 Case-by-case hold

notice. The Board proposed to revise the

model notice to incorporate optional

language for banks that elect to impose

the cash withdrawal limitation. In

addition, to reflect the change to

§ 229.16(c)(2)(i)(B), the Board proposed

to delete the reference to the amount of

the deposit. The Board received no

comments on the model notice, and has

adopted it as proposed.

Commentary to model forms. The

Board proposed to make technical and

stylistic changes to the Commentary to

the model disclosures, clauses, and

notices. For example, the Board

proposed to clarify that the Act’s

protection from liability for banks that

use the models properly applies to the

model clauses and notices as well as to

the model disclosures. The Board also

proposed to revise the commentary to

Models C–2 through C–5 to clarify that

in disclosing that a longer delay may

apply, a bank may disclose when funds

will be generally available based on

when the funds would be available if

the deposit were of a nonlocal check.

Finally, the Board proposed to revise

the commentary to model notices C–12

through C–16 to clarify that a bank

should modify the notices if it places a

hold on other funds. One commenter

requested additional guidance on how

to modify the notices if it places a hold

on other funds. The commentary to

Model Notices C–12 through C–21 has

been revised to provide specific

wording a bank could use to modify the

notices.

Another commenter recommended

that the Board clarify that if a bank does

not have a cut-off hour prior to its

closing, it need not disclose a cut-off

hour. The introductory commentary to

the models has been modified

accordingly, as has the commentary to

§ 229.16(b), as discussed above.

Civil liability. Banks that use earlier

versions of the models are protected

from civil liability under § 229.21(e), but

are encouraged to use new versions

when reordering or reprinting supplies.

III. Final Regulatory Flexibility

Analysis

Two of the three requirements of a

final regulatory flexibility analysis (5

U.S.C. 604), (1) a succinct statement of

the need for and the objectives of the

rule and (2) a summary of the issues

raised by the public comments, the

agency’s assessment of the issues, and a

statement of the changes made in the

final rule in response to the comments,

are discussed above. The third

requirement of a final regulatory

flexibility analysis is a description of

significant alternatives to the rule that

would minimize the rule’s economic

impact on small entities and reasons

why the alternatives were rejected.

The final amendments will apply to

all depository institutions, regardless of

size, and represent relatively small

changes to the existing rule. The

amendments should not have a negative

economic impact on small institutions,

and, therefore, there were no significant

alternatives that would have minimized

the economic impact on those

institutions. The amendments will

clarify rights and duties of depository
Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations 13809

institutions and, in some cases, reduce

economic burden on all affected

entities.

IV. Paperwork Reduction Act

In accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C. 3506;

5 CFR 1320 Appendix A.1), the Board

reviewed the rule under the authority

delegated to the Board by the Office of

Management and Budget.

The collection of information

requirements amended in this rule are

found in 12 CFR 229.13, 229.16(c),

229.34(f), 229.36(e), and Appendix C.

This information is intended to alert

consumers about their financial

institutions’ checkhold policies and to

help prevent unintentional (and costly)

overdrafts. The respondents are forprofit financial institutions, including

small businesses. The Board’s

Regulation CC applies to all types of

depository institutions, not just state

member banks. However, under

Paperwork Reduction Act regulations,

the Federal Reserve accounts for the

burden of the paperwork associated

with the regulation only for state

member banks. Any estimates of

paperwork burden for institutions other

than state member banks that would be

affected by the amendments would be

provided by the federal agency or

agencies that supervise those lenders.

The Federal Reserve may not conduct

or sponsor, and an organization is not

required to respond to, this information

collection unless it displays a currently

valid OMB control number. The OMB

control number is 7100–0235.

The amendments are not expected to

change the ongoing annual burden. The

estimated burden per response ranges

from 3 minutes (for a notice of

exception, a case-by-case hold notice, or

a notice to a potential new customer or

to any person upon request) to 20 hours

for notices of changes in policy. There

are 1,042 state member banks and an

average frequency of 3,314 responses

per respondent each year. The total

amount of annual burden is estimated to

be 183,711 hours. Based on an hourly

cost of $20, the annual cost to the public

is estimated to be $3,674,220. There is

not estimated to be any annual cost

burden over the annual hour burden.

Additionally, the Federal Reserve

estimated that there would be associated

capital or start up cost in the amount of

$80 per bank for revising the notices to

conform with the new model

availability policy disclosures, clauses,

and notices when a bank exhausts its

current supply. The Board received one

comment from a commercial bank

which pointed out that ‘‘many financial

institutions deliver these disclosures to

their customers either in pre-printed

format, with other account rules or

information, or in computer format.

This commenter further stated that ‘‘in

terms of creation of documents, review

and final drafting, printing and forms

destruction, the costs of the revisions

. . . will exceed $10,000 for large

financial institutions.’’ The notice of

proposed rulemaking stated on page

27806 that ‘‘banks that use earlier

versions of the model forms would be

protected from civil liability under

§ 229.21(e), but would be encouraged to

use new versions when reordering or

reprinting new supplies.’’ This final rule

makes the same statement in the

‘‘Supplementary Information’’ section,

before the section-by-section analysis.

The regulation does not require

destruction or disposal of any notices

currently in use. The $80 cost estimate

is intended to represent only the costs

associated with complying with the

revisions to disclosure requirements in

the regulation, not the cost of complying

with the regulation on an on-going

basis. Since, as the commenter pointed

out, the Board’s revision of twelve

model disclosures will cause many

financial institutions to revise more

than twelve of its disclosures, forms,

and computer programs, the Board is

revising its estimate of the one-time cost

of complying with the revisions to $400

per state member bank, for a total of

$416,800.

Because the notices are not provided

to the Federal Reserve, no issue of

confidentiality under the Freedom of

Information Act arises. The disclosure

of information to consumers with regard

to the availability of funds is available

to the public. The account information

regarding the availability of funds in an

individual’s account is confidential

between the institution and the

consumer.

The Federal Reserve has a continuing

interest in the public’s opinions of our

collections of information. At any time,

comments regarding the burden

estimate, or any other aspect of this

collection of information, including

suggestions for reducing the burden,

may be sent to: Secretary, Board of

Governors of the Federal Reserve

System, 20th and C Streets, N.W.,

Washington, DC 20551; and to the

Office of Management and Budget,

Paperwork Reduction Project (7100–

0235), Washington, DC 20503.

List of Subjects in 12 CFR Part 229

Banks, banking, Federal Reserve

System, Reporting and recordkeeping

requirements.

For the reasons set forth in the

preamble, 12 CFR Part 229 is amended

as set forth below:

PART 229—AVAILABILITY OF FUNDS

AND COLLECTION OF CHECKS

(REGULATION CC)

1. The authority citation for part 229

continues to read as follows:

Authority: 12 U.S.C. 4001 et seq.

2. In § 229.2, the first sentence in

paragraph (e) concluding text is revised,

paragraph (s) is revised, paragraph (pp)

is redesignated as paragraph (qq), and a

new paragraph (pp) is added to read as

follows:

§ 229.2 Definitions.

* * * * *

(e) * * *

For purposes of subpart C of this part

and, in connection therewith, this

subpart A, the term bank also includes

any person engaged in the business of

banking, as well as a Federal Reserve

Bank, a Federal Home Loan Bank, and

a state or unit of general local

government to the extent that the state

or unit of general local government acts

as a paying bank. * * *

* * * * *

(s) Local paying bank means a paying

bank that is located in the same checkprocessing region as the physical

location of the branch, contractual

branch, or proprietary ATM of the

depositary bank in which that check

was deposited.

* * * * *

(pp) Contractual branch, with respect

to a bank, means a branch of another

bank that accepts a deposit on behalf of

the first bank.

* * * * *

3. Section 229.13 is amended as

follows:

a. In paragraphs (g)(1) introductory

text and (g)(1)(ii)(A), the phrase

‘‘paragraphs (b) through (f)’’ is revised to

read ‘‘paragraphs (b) through (e)’’;

b. Paragraphs (g)(1)(i)(B) and

(g)(1)(i)(E) are revised;

c. Paragraph (g)(1)(ii)(B) is removed

and the paragraph designation

(g)(1)(ii)(A) is removed;

d. Paragraph (g)(4) is redesignated as

paragraph (g)(5) and new paragraph

(g)(4) is added; and

e. Paragraph (h)(4) is revised.

The addition and revisions read as

follows:

§ 229.13 Exceptions.

* * * * *

(g) Notice of exception—(1) * * *

(i) * * *

(B) The date of the deposit;

* * * * *
13810 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations

(E) The time period within which the

funds will be available for withdrawal.

* * * * *

(4) Emergency conditions exception

notice. When a depositary bank extends

the time when funds will be available

for withdrawal based on the application

of the emergency conditions exception

contained in paragraph (f) of this

section, it must provide the depositor

with notice in a reasonable form and

within a reasonable time given the

circumstances. The notice shall include

the reason the exception was invoked

and the time period within which funds

shall be made available for withdrawal,

unless the depositary bank, in good

faith, does not know at the time the

notice is given the duration of the

emergency and, consequently, when the

funds must be made available. The

depositary bank is not required to

provide a notice if the funds subject to

the exception become available before

the notice must be sent.

* * * * *

(h) Availability of deposits subject to

exceptions. * * *

(4) For the purposes of this section, a

‘‘reasonable period’’ is an extension of

up to one business day for checks

described in § 229.10(c)(1)(vi), five

business days for checks described in

§ 229.12(b) (1) through (4), and six

business days for checks described in

§ 229.12(c) (1) and (2) or § 229.12(f). A

longer extension may be reasonable, but

the bank has the burden of so

establishing.

4. Section § 229.16(c)(2)(i)(B) is

revised to read as follows:

§ 229.16 Specific availability policy

disclosure.

* * * * *

(c) Longer delays on a case-by-case

basis. * * *

(2) * * * (i) * * *

(B) The date of the deposit;

* * * * *

5. In § 229.19, paragraph (a)(1) and the

first sentence of paragraph (a)(5)(ii) are

revised to read as follows:

§ 229.19 Miscellaneous.

(a) * * *

(1) Funds deposited at a staffed

facility, ATM, or contractual branch are

considered deposited when they are

received at the staffed facility, ATM, or

contractual branch;

* * * * *

(5) * * *

(ii) After a cut-off hour set by the

depositary bank for the receipt of

deposits of 2:00 p.m. or later, or, for the

receipt of deposits at ATMs, contractual

branches, or off-premise facilities, of

12:00 noon or later. * * *

* * * * *

6. In § 229.30, paragraph (c) is revised

to read as follows:

§ 229.30 Paying bank’s responsibility for

return of checks.

* * * * *

(c) Extension of deadline. The

deadline for return or notice of

nonpayment under the U.C.C. or

Regulation J (12 CFR part 210), or

§ 229.36(f)(2) is extended to the time of

dispatch of such return or notice of

nonpayment where a paying bank uses

a means of delivery that would

ordinarily result in receipt by the bank

to which it is sent—

(1) On or before the receiving bank’s

next banking day following the

otherwise applicable deadline, for all

deadlines other than those described in

paragraph (c)(2) of this section; this

deadline is extended further if a paying

bank uses a highly expeditious means of

transportation, even if this means of

transportation would ordinarily result

in delivery after the receiving bank’s

next banking day; or

(2) Prior to the cut-off hour for the

next processing cycle (if sent to a

returning bank), or on the next banking

day (if sent to the depositary bank), for

a deadline falling on a Saturday that is

a banking day (as defined in the

applicable U.C.C.) for the paying bank.

* * * * *

7. In § 229.34, the section heading and

paragraph (c)(4) are revised and a new

paragraph (f) is added to read as follows:

§ 229.34 Warranties.

* * * * *

(c) Warranty of settlement amount,

encoding, and offset. * * *

* * * * *

(4) If a bank settles with another bank

for checks presented, or for returned

checks for which it is the depositary

bank, in amount exceeding the total

amount of the checks, the settling bank

may set off the excess settlement

amount against subsequent settlements

for checks presented, or for returned

checks for which it is the depositary

bank, that it receives from the other

bank.

* * * * *

(f) Notice of claim. Unless a claimant

gives notice of a claim for breach of

warranty under this section to the bank

that made the warranty within 30 days

after the claimant has reason to know of

the breach and the identity of the

warranting bank, the warranting bank is

discharged to the extent of any loss

caused by the delay in giving notice of

the claim.

8. In § 229.36, the heading and the last

sentence of paragraph (c) and paragraph

(e)(1)(ii) are revised to read as follows:

§ 229.36 Presentment and issuance of

checks.

* * * * *

(c) Electronic presentment. * * * An

electronic presentment agreement may

not extend return times or otherwise

vary the requirements of this part with

respect to parties interested in the check

that are not party to the agreement.

* * * * *

(e) Issuance of payable-through

checks.

(1) * * *

(ii) The words ‘‘payable through’’

followed by the name of the payablethrough bank.

* * * * *

9. In § 229.39, paragraph (b) is revised

to read as follows:

§ 229.39 Insolvency of bank.

* * * * *

(b) Preference against paying or

depositary bank. If a paying bank finally

pays a check, or if a depositary bank

becomes obligated to pay a returned

check, and suspends payment without

making a settlement for the check or

returned check with the prior bank that

is or becomes final, the prior bank has

a preferred claim against the paying

bank or the depositary bank.

* * * * *

10. Section 229.42 is revised to read

as follows:

§ 229.42 Exclusions.

The expeditious-return (§§ 229.30(a)

and 229.31(a)), notice-of-nonpayment

(§ 229.33), and same-day settlement

(§ 229.36(f)) requirements of this subpart

do not apply to a check drawn upon the

United States Treasury, to a U.S. Postal

Service money order, or to a check

drawn on a state or a unit of general

local government that is not payable

through or at a bank.

11. A new § 229.43 is added to read

as follows:

§ 229.43 Checks payable in Guam,

American Samoa, and the Northern Mariana

Islands.

(a) Definitions. The definitions in

§ 229.2 apply to this section, unless

otherwise noted. In addition, for the

purposes of this section—

(1) Pacific island bank means an

office of an institution that would be a

bank as defined in § 229.2(e) but for the

fact that the office is located in Guam,

American Samoa, or the Northern

Mariana Islands;

(2) Pacific island check means a

demand draft drawn on or payable
Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations 13811

through or at a Pacific island bank,

which is not a check as defined in

§ 229.2(k).

(b) Rules applicable to Pacific island

checks. To the extent a bank handles a

Pacific island check as if it were a check

defined in § 229.2(k), the bank is subject

to the following sections of this part

(and the word ‘‘check’’ in each such

section is construed to include a Pacific

island check)—

(1) § 229.31, except that the returning

bank is not subject to the requirement to

return a Pacific island check in an

expeditious manner;

(2) § 229.32;

(3) § 229.34(c)(2), (c)(3), (d), and (e);

(4) § 229.35; for purposes of

§ 229.35(c), the Pacific island bank is

deemed to be a bank;

(5) § 229.36(d);

(6) § 229.37;

(7) § 229.38(a) and (c) through (h);

(8) § 229.39(a), (b), (c) and (e); and

(9) §§ 229.40 through 229.42.

12. Appendix C to Part 229 is

amended as follows:

a. The appendix heading is revised;

b. The introductory text is revised;

c. The heading above the contents

listing for models C–1 through C–5 is

revised;

d. A new item is added to the end of

the contents listing for Model Clauses;

e. The heading immediately above

model policy disclosure ‘‘C–1—Nextday availability’’ is revised; and

f. Model Availability Policy

Disclosures C–1 through C–5, Model

Clauses C–9 and C–10, and Model

Notices C–12 through C–16 are revised,

and a new Model Clause C–11A is

added.

The revisions and additions read as

follows:

Appendix C to Part 229—Model

Availability Policy Disclosures,

Clauses, and Notices

This Appendix contains model availability

policy disclosures, clauses, and notices to

facilitate compliance with the disclosure

requirements of Regulation CC (12 CFR Part

229). Although use of these models is not

required, banks using them properly to make

disclosures required by the Regulation CC are

deemed to be in compliance.

Model Availability Policy Disclosures

* * * * *

Model Clauses

* * * * *

C–11A Availability of Funds Deposited at

Other Locations

* * * * *

Model Availability Policy Disclosures

C–1—Next-Day Availability

Your Ability to Withdraw Funds

Our policy is to make funds from your cash

and check deposits available to you on the

first business day after the day we receive

your deposit. Electronic direct deposits will

be available on the day we receive the

deposit. Once the funds are available, you

can withdraw them in cash and we will use

them to pay checks that you have written.

For determining the availability of your

deposits, every day is a business day, except

Saturdays, Sundays, and federal holidays. If

you make a deposit before (time of day) on

a business day that we are open, we will

consider that day to be the day of your

deposit. However, if you make a deposit after

(time of day) or on a day we are not open,

we will consider that the deposit was made

on the next business day we are open.

C–2—Next-day availability and § 229.13

exceptions

Your Ability to Withdraw Funds

Our policy is to make funds from your cash

and check deposits available to you on the

first business day after the day we receive

your deposit. Electronic direct deposits will

be available on the day we receive the

deposit. Once they are available, you can

withdraw the funds in cash and we will use

the funds to pay checks that you have

written.

For determining the availability of your

deposits, every day is a business day, except

Saturdays, Sundays, and federal holidays. If

you make a deposit before (time of day) on

a business day that we are open, we will

consider that day to be the day of your

deposit. However, if you make a deposit after

(time of day) or on a day we are not open,

we will consider that the deposit was made

on the next business day we are open.

Longer Delays May Apply

Funds you deposit by check may be

delayed for a longer period under the

following circumstances:

• We believe a check you deposit will not

be paid.

• You deposit checks totaling more than

$5,000 on any one day.

• You redeposit a check that has been

returned unpaid.

• You have overdrawn your account

repeatedly in the last six months.

• There is an emergency, such as failure of

computer or communications equipment.

We will notify you if we delay your ability

to withdraw funds for any of these reasons,

and we will tell you when the funds will be

available. They will generally be available no

later than the (number) business day after the

day of your deposit.

Special Rules for New Accounts

If you are a new customer, the following

special rules will apply during the first 30

days your account is open.

Funds from electronic direct deposits to

your account will be available on the day we

receive the deposit. Funds from deposits of

cash, wire transfers, and the first $5,000 of

a day’s total deposits of cashier’s, certified,

teller’s, traveler’s, and federal, state and local

government checks will be available on the

first business day after the day of your

deposit if the deposit meets certain

conditions. For example, the checks must be

payable to you (and you may have to use a

special deposit slip). The excess over $5,000

will be available on the ninth business day

after the day of your deposit. If your deposit

of these checks (other than a U.S. Treasury

check) is not made in person to one of our

employees, the first $5,000 will not be

available until the second business day after

the day of your deposit.

Funds from all other check deposits will be

available on the (number) business day after

the day of your deposit.

C–3—Next-Day Availability, Case-by-Case

Holds to Statutory Limits, and § 229.13

Exceptions

Your Ability To Withdraw Funds

Our policy is to make funds from your cash

and check deposits available to you on the

first business day after the day we receive

your deposit. Electronic direct deposits will

be available on the day we receive the

deposit. Once they are available, you can

withdraw the funds in cash and we will use

the funds to pay checks that you have

written.

For determining the availability of your

deposits, every day is a business day, except

Saturdays, Sundays, and federal holidays. If

you make a deposit before (time of day) on

a business day that we are open, we will

consider that day to be the day of your

deposit. However, if you make a deposit after

(time of day) or on a day we are not open,

we will consider that the deposit was made

on the next business day we are open.

Longer Delays May Apply

In some cases, we will not make all of the

funds that you deposit by check available to

you on the first business day after the day of

your deposit. Depending on the type of check

that you deposit, funds may not be available

until the fifth business day after the day of

your deposit. The first $100 of your deposits,

however, may be available on the first

business day.

If we are not going to make all of the funds

from your deposit available on the first

business day, we will notify you at the time

you make your deposit. We will also tell you

when the funds will be available. If your

deposit is not made directly to one of our

employees, or if we decide to take this action

after you have left the premises, we will mail

you the notice by the day after we receive

your deposit.

If you will need the funds from a deposit

right away, you should ask us when the

funds will be available.

In addition, funds you deposit by check

may be delayed for a longer period under the

following circumstances:

• We believe a check you deposit will not

be paid.

• You deposit checks totaling more than

$5,000 on any one day.

• You redeposit a check that has been

returned unpaid.

• You have overdrawn your account

repeatedly in the last six months.
13812 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations

• There is an emergency, such as failure of

computer or communications equipment.

We will notify you if we delay your ability

to withdraw funds for any of these reasons,

and we will tell you when the funds will be

available. They will generally be available no

later than the (number) business day after the

day of your deposit.

Special Rules for New Accounts

If you are a new customer, the following

special rules will apply during the first 30

days your account is open.

Funds from electronic direct deposits to

your account will be available on the day we

receive the deposit. Funds from deposits of

cash, wire transfers, and the first $5,000 of

a day’s total deposits of cashier’s, certified,

teller’s, traveler’s, and federal, state and local

government checks will be available on the

first business day after the day of your

deposit if the deposit meets certain

conditions. For example, the checks must be

payable to you (and you may have to use a

special deposit slip). The excess over $5,000

will be available on the ninth business day

after the day of your deposit. If your deposit

of these checks (other than a U.S. Treasury

check) is not made in person to one of our

employees, the first $5,000 will not be

available until the second business day after

the day of your deposit.

Funds from all other check deposits will be

available on the (number) business day after

the day of your deposit.

C–4—Holds to Statutory Limits On All

Deposits (Includes Chart)

Your Ability To Withdraw Funds

Our policy is to delay the availability of

funds from your cash and check deposits.

During the delay, you may not withdraw the

funds in cash and we will not use the funds

to pay checks that you have written.

Determining the Availability of a Deposit

The length of the delay is counted in

business days from the day of your deposit.

Every day is a business day except Saturdays,

Sundays, and federal holidays. If you make

a deposit before (time of day) on a business

day that we are open, we will consider that

day to be the day of your deposit. However,

if you make a deposit after (time of day) or

on a day we are not open, we will consider

that the deposit was made on the next

business day we are open.

The length of the delay varies depending

on the type of deposit and is explained

below.

Same-Day Availability

Funds from electronic direct deposits to

your account will be available on the day we

receive the deposit.

Next-Day Availability

Funds from the following deposits are

available on the first business day after the

day of your deposit:

• U.S. Treasury checks that are payable to

you.

• Wire transfers.

• Checks drawn on (bank name) [unless

(any limitations related to branches in

different states or check processing regions)].

If you make the deposit in person to one

of our employees, funds from the following

deposits are also available on the first

business day after the day of your deposit:

• Cash.

• State and local government checks that

are payable to you [if you use a special

deposit slip available from (where deposit

slip may be obtained)].

• Cashier’s, certified, and teller’s checks

that are payable to you [if you use a special

deposit slip available from (where deposit

slip may be obtained)].

• Federal Reserve Bank checks, Federal

Home Loan Bank checks, and postal money

orders, if these items are payable to you.

If you do not make your deposit in person

to one of our employees (for example, if you

mail the deposit), funds from these deposits

will be available on the second business day

after the day we receive your deposit.

Other Check Deposits

To find out when funds from other check

deposits will be available, look at the first

four digits of the routing number on the

check:

BILLING CODE 6210–01–P
Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations 13813

BILLING CODE 6210–01–C

Some checks are marked ‘‘payable

through’’ and have a four-or nine-digit

number nearby. For these checks, use this

four-digit number (or the first four digits of

the nine-digit number), not the routing

number on the bottom of the check, to

determine if these checks are local or

nonlocal. Once you have determined the first

four digits of the routing number (1234 in the

examples above), the following chart will

show you when funds from the check will be

available:

First four digits from routing

number When funds are available When funds are available if a deposit is made on a Monday

[local numbers] ................................ $100 on the first business day after the day of your deposit .................. Tuesday.

Remaining funds on the second business day after the day of your deposit.Wednesday.

All other numbers ............................ $100 on the first business day after the day of your deposit .................. Tuesday.

Remaining funds on the fifth business day after the day of your deposit Monday of the following week.

If you deposit both categories of checks,

$100 from the checks will be available on the

first business day after the day of your

deposit, not $100 from each category of

check.

Longer Delays May Apply

Funds you deposit by check may be

delayed for a longer period under the

following circumstances:

• We believe a check you deposit will not

be paid.

• You deposit checks totaling more than

$5,000 on any one day.

• You redeposit a check that has been

returned unpaid.

• You have overdrawn your account

repeatedly in the last six months.

• There is an emergency, such as failure of

computer or communications equipment.

We will notify you if we delay your ability

to withdraw funds for any of these reasons,

and we will tell you when the funds will be

available. They will generally be available no

later than the (number) business day after the

day of your deposit.

Special Rules for New Accounts

If you are a new customer, the following

special rules will apply during the first 30

days your account is open.

Funds from electronic direct deposits to

your account will be available on the day we

receive the deposit. Funds from deposits of

cash, wire transfers, and the first $5,000 of

a day’s total deposits of cashier’s, certified,

teller’s, traveler’s, and federal, state and local

government checks will be available on the

first business day after the day of your

deposit if the deposit meets certain

conditions. For example, the checks must be

payable to you (and you may have to use a

special deposit slip). The excess over $5,000

will be available on the ninth business day

after the day of your deposit. If your deposit

of these checks (other than a U.S. Treasury

check) is not made in person to one of our

employees, the first $5,000 will not be
13814 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations

available until the second business day after

the day of your deposit.

Funds from all other check deposits will be

available on the (number) business day after

the day of your deposit.

C–5—Holds to Statutory Limits on All

Deposits

Your Ability To Withdraw Funds

Our policy is to delay the availability of

funds from your cash and check deposits.

During the delay, you may not withdraw the

funds in cash and we will not use the funds

to pay checks that you have written.

Determining the Availability of a Deposit

The length of the delay is counted in

business days from the day of your deposit.

Every day is a business day except Saturdays,

Sundays, and federal holidays. If you make

a deposit before (time of day) on a business

day that we are open, we will consider that

day to be the day of your deposit. However,

if you make a deposit after (time of day) or

on a day we are not open, we will consider

that the deposit was made on the next

business day we are open.

The length of the delay varies depending

on the type of deposit and is explained

below.

Same-Day Availability

Funds from electronic direct deposits to

your account will be available on the day we

receive the deposit.

Next-Day Availability

Funds from the following deposits are

available on the first business day after the

day of your deposit:

• U.S. Treasury checks that are payable to

you.

• Wire transfers.

• Checks drawn on (bank name) [unless

(any limitations related to branches in

different states or check processing regions)].

If you make the deposit in person to one

of our employees, funds from the following

deposits are also available on the first

business day after the day of your deposit:

• Cash.

• State and local government checks that

are payable to you [if you use a special

deposit slip available from (where deposit

slip may be obtained)].

• Cashier’s, certified, and teller’s checks

that are payable to you [if you use a special

deposit slip available from (where deposit

slip may be obtained)].

• Federal Reserve Bank checks, Federal

Home Loan Bank checks, and postal money

orders, if these items are payable to you.

If you do not make your deposit in person

to one of our employees (for example, if you

mail the deposit), funds from these deposits

will be available on the second business day

after the day we receive your deposit.

Other Check Deposits

The delay for other check deposits depends

on whether the check is a local or a nonlocal

check. To see whether a check is a local or

a nonlocal check, look at the routing number

on the check:

BILLING CODE 6210–01–P

BILLING CODE 6210–01–C

If the first four digits of the routing number

(1234 in the examples above) are (list of local

numbers), then the check is a local check.

Otherwise, the check is a nonlocal check.

Some checks are marked ‘‘payable through’’

and have a four-or nine-digit number nearby.

For these checks, use the four-digit number

(or the first four digits of the nine-digit

number), not the routing number on the

bottom of the check, to determine if these

checks are local or nonlocal. Our policy is to

make funds from local and nonlocal checks

available as follows.

1. Local checks. The first $100 from a

deposit of local checks will be available on

the first business day after the day of your

deposit. The remaining funds will be

available on the second business day after the

day of your deposit.

For example, if you deposit a local check

of $700 on a Monday, $100 of the deposit is

available on Tuesday. The remaining $600 is

available on Wednesday.
Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations 13815

2. Nonlocal checks. The first $100 from a

deposit of nonlocal checks will be available

on the first business day after the day of your

deposit. The remaining funds will be

available on the fifth business day after the

day of your deposit.

For example, if you deposit a $700

nonlocal check on a Monday, $100 of the

deposit is available on Tuesday. The

remaining $600 is available on Monday of the

following week.

Longer Delays May Apply

Funds you deposit by check may be

delayed for a longer period under the

following circumstances:

• We believe a check you deposit will not

be paid.

• You deposit checks totaling more than

$5,000 on any one day.

• You redeposit a check that has been

returned unpaid.

• You have overdrawn your account

repeatedly in the last six months.

• There is an emergency, such as failure of

computer or communications equipment.

We will notify you if we delay your ability

to withdraw funds for any of these reasons,

and we will tell you when the funds will be

available. They will generally be available no

later than the (number) business day after the

day of your deposit. If you deposit both

categories of checks, $100 from the checks

will be available on the first business day

after the day of your deposit, not $100 from

each category of check.

Special Rules for New Accounts

If you are a new customer, the following

special rules will apply during the first 30

days your account is open.

Funds from electronic direct deposits to

your account will be available on the day we

receive the deposit. Funds from deposits of

cash, wire transfers, and the first $5,000 of

a day’s total deposits of cashier’s, certified,

teller’s, traveler’s, and federal, state and local

government checks will be available on the

first business day after the day of your

deposit if the deposit meets certain

conditions. For example, the checks must be

payable to you (and you may have to use a

special deposit slip). The excess over $5,000

will be available on the ninth business day

after the day of your deposit. If your deposit

of these checks (other than a U.S. Treasury

check) is not made in person to one of our

employees, the first $5,000 will not be

available until the second business day after

the day of your deposit.

Funds from all other check deposits will be

available on the (number) business day after

the day of your deposit.

Model Clauses

* * * * *

C–9—Automated Teller Machine Deposits

(Extended Hold)

Deposits at Automated Teller Machines

Funds from any deposits (cash or checks)

made at automated teller machines (ATMs)

we do not own or operate will not be

available until the fifth business day after the

day of your deposit. This rule does not apply

at ATMs that we own or operate.

(A list of our ATMs is enclosed. or A list

of ATMs where you can make deposits but

that are not owned or operated by us is

enclosed. or All ATMs that we own or

operate are identified as our machines.)

C–10—Cash Withdrawal Limitation

Cash Withdrawal Limitation

We place certain limitations on

withdrawals in cash. In general, $100 of a

deposit is available for withdrawal in cash on

the first business day after the day of deposit.

In addition, a total of $400 of other funds

becoming available on a given day is

available for withdrawal in cash at or after

(time no later than 5:00 p.m.) on that day.

Any remaining funds will be available for

withdrawal in cash on the following business

day.

* * * * *

C–11A—Availability of Funds Deposited at

Other Locations

Deposits at Other Locations

This availability policy only applies to

funds deposited at (location). Please inquire

for information about the availability of

funds deposited at other locations.

Model Notices

C–12—Exception Hold Notice

Notice of Hold

Account number: (number)

Date of deposit: (date)

We are delaying the availability of

$(amount being held) from this deposit.

These funds will be available on the

(number) business day after the day of your

deposit.

We are taking this action because:

—A check you deposited was previously

returned unpaid.

—You have overdrawn your account

repeatedly in the last six months.

—The checks you deposited on this day

exceed $5,000.

—An emergency, such as failure of computer

or communications equipment, has

occurred.

—We believe a check you deposited will not

be paid for the following reasons [*]:

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

[*If you did not receive this notice at the time

you made the deposit and the check you

deposited is paid, we will refund to you any

fees for overdrafts or returned checks that

result solely from the additional delay that

we are imposing. To obtain a refund of such

fees, (description of procedure for obtaining

refund).]

C–13—Reasonable Cause Hold Notice

Notice of Hold

Account number: (number)

Date of deposit: (date)

We are delaying the availability of the

funds you deposited by the following check:

(description of check, such as amount and

drawer.)

These funds will be available on the

(number) business day after the day of your

deposit. The reason for the delay is explained

below:

—We received notice that the check is being

returned unpaid.

—We have confidential information that

indicates that the check may not be paid.

—The check is drawn on an account with

repeated overdrafts.

—We are unable to verify the endorsement of

a joint payee.

—Some information on the check is not

consistent with other information on the

check.

—There are erasures or other apparent

alterations on the check.

—The routing number of the paying bank is

not a current routing number.

—The check is postdated or has a stale date.

—Information from the paying bank indicates

that the check may not be paid.

—We have been notified that the check has

been lost or damaged in collection.

—Other:

lllllllllllllllllllll

[If you did not receive this notice at the

time you made the deposit and the check you

deposited is paid, we will refund to you any

fees for overdrafts or returned checks that

result solely from the additional delay that

we are imposing. To obtain a refund of such

fees, (description of procedure for obtaining

refund).]

C–14—One-Time Notice for Large Deposit

and Redeposited Check Exception Holds

Notice of Hold

If you deposit into your account:

• Checks totaling more than $5,000 on any

one day, the first $5,000 deposited on any

one banking day will be available to you

according to our general policy. The amount

in excess of $5,000 will generally be available

on the (number) business day after the day

of deposit for checks drawn on (bank name),

the (number) business day after the day of

deposit for local checks and (number)

business day after the day of deposit for

nonlocal checks. If checks (not drawn on us)

that otherwise would receive next-day

availability exceed $5,000, the excess will be

treated as either local or nonlocal checks

depending on the location of the paying

bank. If your check deposit, exceeding $5,000

on any one day, is a mix of local checks,

nonlocal checks, checks drawn on (bank

name), or checks that generally receive nextday availability, the excess will be calculated

by first adding together the (type of check),

then the (type of check), then the (type of

check), then the (type of check).

• A check that has been returned unpaid,

the funds will generally be available on the

(number) business day after the day of

deposit for checks drawn on (bank name),

the (number) business day after the day of

deposit for local checks and the (number)

business day after the day of deposit for

nonlocal checks. Checks (not drawn on us)

that otherwise would receive next-day

availability will be treated as either local or

nonlocal checks depending on the location of

the paying bank.
13816 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations

C–15—One-Time Notice for Repeated

Overdraft Exception Hold

Notice of Hold

Account Number: (number) Date of Notice:

(date)

We are delaying the availability of checks

deposited into your account due to repeated

overdrafts of your account. For the next six

months, deposits will generally be available

on the (number) business day after the day

of your deposit for checks drawn on (bank

name), the (number) business day after the

day of your deposit for local checks, and the

(number) business day after the day of

deposit for nonlocal checks. Checks (not

drawn on us) that otherwise would have

received next-day availability will be treated

as either local or nonlocal checks depending

on the location of the paying bank.

C–16—Case-by-Case Hold Notice

Notice of Hold

Account number: (number)

Date of deposit: (date)

We are delaying the availability of

$(amount being held) from this deposit.

These funds will be available on the

(number) business day after the day of your

deposit [(subject to our cash withdrawal

limitation policy)].

[If you did not receive this notice at the

time you made the deposit and the check you

deposited is paid, we will refund to you any

fees for overdrafts or returned checks that

result solely from the additional delay that

we are imposing. To obtain a refund of such

fees, (description of procedure for obtaining

refund).]

* * * * *

13. In appendix E to Part 229, under

section II,

a. In paragraph E.2., the last sentence

is revised;

b. Paragraph S.1. is revised;

c. In paragraph HH.2., the last

sentence is revised; and

d. A new paragraph PP. is added.

The revisions and additions read as

follows:

Appendix E to Part 229—Commentary

* * * * *

II. Section 229.2 Definitions

* * * * *

E. 229.2(d) Available for Withdrawal

* * * * *

2. * * * For example, a bank does not

violate its obligations under this subpart

by holding funds to satisfy a

garnishment, tax levy, or court order

restricting disbursements from the

account; or to satisfy the customer’s

liability arising from the certification of

a check, sale of a cashier’s or teller’s

check, guaranty or acceptance of a

check, or similar transaction to be

debited from the customer’s account.

* * * * *

S. 229.2(s) Local Paying Bank

1. ‘‘Local paying bank’’ is defined as a

paying bank located in the same checkprocessing region as the branch, contractual

branch, or proprietary ATM of the depositary

bank. For example, a check deposited at a

contractual branch would be deemed local or

nonlocal based on the location of the

contractual branch with respect to the

location of the paying bank.

* * * * *

HH. 229.2(hh) Traveler’s Check

* * * * *

2. * * * Sometimes traveler’s checks

that are not issued by banks do not have

any words on them identifying a bank

as drawee or paying agent, but instead

bear unique routing numbers with an

8000 prefix that identifies a bank as

paying agent.

* * * * *

PP. 229.2(pp) Contractual Branch

1. When one bank arranges for another

bank to accept deposits on its behalf, the

second bank is a contractual branch of the

first bank. For further discussion of

contractual branch deposits and related

disclosures, see §§ 229.2(s) and 229.19(a) of

the regulation and the commentary to

§§ 229.2(s), 229.10(c), 229.14(a), 229.16(a),

229.18(b), and 229.19(a).

* * * * *

14. In appendix E, under section IV,

in paragraph D.3.a., two new sentences

are added to the end of the paragraph to

read as follows:

* * * * *

IV. Section 229.10 Next-Day Availability

* * * * *

D. 229.10(c) Certain Check Deposits

* * * * *

3. * * *

a. * * * 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).)

* * * * *

15. In appendix E, under section VII:

a. In paragraph H.1.a, the first

sentence is revised and two new

sentences are added to the end of the

paragraph;

b. Paragraph H.1.e. is removed and

paragraph H.1.f. is redesignated as

paragraph H.1.e.;

c. Paragraph H.4. is redesignated as

paragraph H.5. and new paragraph H.4.

is added;

d. The second sentence in paragraph

I.1. is revised; and e. The first sentence

in paragraph I.4. is revised.

The additions and revisions read as

follows:

* * * * *

VII. Section 229.13 Exceptions

* * * * *

H. 229.13(g) Notice of Exception

1. * * *

a. If a depositary bank invokes any of the

safeguard exceptions to the schedules listed

above, other than the new account or

emergency conditions exception, and extends

the hold on a deposit beyond the time

periods permitted in §§ 229.10(c) and 229.12,

it must provide a notice to its customer.

* * * A depositary bank satisfies the written

notice requirement by sending an electronic

notice that displays the text and is in a form

that the customer may keep, if the customer

agrees to such means of notice. Information

is in a form that the customer may keep if,

for example, it can be downloaded or

printed.

* * * * *

4. Emergency conditions exception notice.

a. If an account is subject to the emergency

conditions exception under § 229.13(f), the

depositary bank must provide notice in a

reasonable form within a reasonable time,

depending on the circumstances. For

example, a depositary bank may learn of a

weather emergency or a power outage that

affects the paying bank’s operations. Under

these circumstances, it likely would be

reasonable for the depositary bank to provide

an emergency conditions exception notice in

the same manner and within the same time

as required for other exception notices. On

the other hand, if a depositary bank

experiences a weather or power outage

emergency that affects its own operations, it

may be reasonable for the depositary bank to

provide a general notice to all depositors via

postings at branches and ATMs, or through

newspaper, television, or radio notices.

b. If the depositary bank extends the hold

placed on a deposit due to an emergency

condition, the bank need not provide a notice

if the funds would be available for

withdrawal before the notice must be sent.

For example, if on the last day of a hold

period the depositary bank experiences a

computer failure and customer accounts

cannot be updated in a timely fashion to

reflect the funds as available balances,

notices are not required if the funds are made

available before the notices must be sent.

* * * * *

I. 229.13(h) Availability of Deposits Subject

to Exceptions

1. * * * This provision establishes that an

extension of up to one business day for ‘‘on

us’’ checks, five business days for local

checks, and six business days for nonlocal

checks and checks deposited in a

nonproprietary ATM is reasonable. * * *

* * * * *

4. One business day for ‘‘on us’’ checks,

five business days for local checks, and six

business days for nonlocal checks or checks

deposited in a nonproprietary ATM, in

addition to the time period provided in the

schedule, should provide adequate time for

the depositary bank to learn of the

nonpayment of virtually all checks that are

returned. * * *

* * * * *
Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations 13817

16. In appendix E, under section VIII,

a new sentence is added to the end of

paragraph A.1. to read as follows:

* * * * *

VIII. Section 229.14 Payment of Interest

A. 229.14(a) In General

1. * * * In the case of a deposit at a

contractual branch, credit is received on the

day the depositary bank receives credit for

the amount of the deposit, which may be

different from the day the contractual branch

receives credit for the deposit.

* * * * *

17. In appendix E, under section IX,

two new sentences are added

immediately following the second

sentence of paragraph A.1. to read as

follows:

* * * * *

IX. Section 229.15 General Disclosure

Requirements

A. 229.15(a) Form of Disclosures

1. * * * A depositary bank satisfies the

written disclosure requirement by sending an

electronic disclosure that displays the text

and is in a form that the customer may keep,

if the customer agrees to such means of

disclosure. Information is in a form that the

customer may keep if, for example, it can be

downloaded or printed. * * *

* * * * *

18. In appendix E, under section X,

three new sentences are added to the

end of paragraph A.2., one new sentence

is added to the end of paragraph B.6.,

and the last sentence of paragraph C.2.a.

is revised to read as follows:

* * * * *

X. Section 229.16 Specific Availability

Policy Disclosure

A. 229.16(a) General

* * * * *

2. * * * A bank may establish different

availability policies for different groups of

customers, such as customers in a particular

geographic area or customers of a particular

branch. For purposes of providing a specific

availability policy, the bank may allocate

customers among groups through good faith

use of a reasonable method. A bank may also

establish different availability policies for

deposits at different locations, such as

deposits at a contractual branch.

* * * * *

B. 229.16(b) Content of Specific Policy

Disclosure

* * * * *

6. * * * If a bank does not have a cut-off

time prior to its closing time, the bank need

not disclose a cut-off time.

* * * * *

C. 229.16(c) Longer Delays on a Case-byCase Basis

* * * * *

2. * * *

a. * * * In addition, the notice must

include the account number, the date of the

deposit, and the amount of the deposit being

delayed.

* * * * *

19. In appendix E, under section XII,

a sentence is added to the end of

paragraph B.1. to read as follows:

XII. Section 229.18 Additional Disclosure

Requirements

* * * * *

B. 229.18(b) Locations Where Employees

Accept Consumer Deposits

1. * * * A bank that acts as a contractual

branch at a particular location must include

the availability policy that applies to its own

customers but need not include the policy

that applies to the customers of the bank for

which it is acting as a contractual branch.

* * * * *

20. In appendix E, under section XIII,

two new sentences are added

immediately following the first sentence

of paragraph A.2., the last four

sentences of paragraph A.6.a. are

revised, and a new sentence is added to

the end of paragraph E.3. to read as

follows:

XIII. Section 229.19 Miscellaneous

A. 229.19(a) When Funds Are Considered

Deposited

* * * * *

2. * * * Funds received at a contractual

branch are considered deposited when

received by a teller at the contractual branch

or deposited into a proprietary ATM of the

contractual branch. (See also, Commentary to

§ 229.10(c) on deposits made to an employee

of the depositary bank.) * * *

* * * * *

6. * * *

a. * * * For receipt of deposits at ATMs,

contractual branches, or other off-premise

facilities, such as night depositories or lock

boxes, the depositary bank may establish a

cut-off hour of 12:00 noon or later (either

local time of the branch or other location of

the depositary bank at which the account is

maintained or local time of the ATM,

contractual branch, or other off-premise

facility). The depositary bank must use the

same timing method for establishing the cutoff hour for all ATMs, contractual branches,

and other off-premise facilities used by its

customers. The choice of cut-off hour must

be reflected in the bank’s internal

procedures, and the bank must inform its

customers of the cut-off hour upon request.

This earlier cut-off for ATM, contractual

branch, or other off-premise deposits is

intended to provide greater flexibility in the

servicing of these facilities.

* * * * *

E. 229.19(e) Holds on Other Funds

* * * * *

3. * * * When a customer cashes a check

over the counter and the bank places a hold

on an account of the customer, the bank must

give whatever notice would have been

required under §§ 229.13 or 229.16 had the

check been deposited in the account.

* * * * *

21. In appendix E, under section XVI,

a new sentence is added to the end of

paragraphs C.1.a. and C.1.b. to read as

follows:

* * * * *

XVI. Section 229.30 Paying Bank’s

Responsibility for Return of Checks

* * * * *

C. 229.30(c) Extension of Deadline

1. * * *

a. * * * This paragraph applies to the

extension of all midnight deadlines except

Saturday midnight deadlines (see paragraph

C.1.b. of this appendix).

b. * * * This paragraph applies

exclusively to the extension of Saturday

midnight deadlines.

* * * * *

22. In appendix E, under section XVII,

the second sentence of paragraph A.7.b.

is revised to read as follows:

* * * * *

XVII. Section 229.31 Returning Bank’s

Responsibility for Return of Checks

A. 229.31(a) Return of Checks

* * * * *

7. * * *

b. * * * If the returning bank makes an

encoding error in creating a qualified

returned check, it may be liable under

§ 229.38 for losses caused by any negligence

or under § 229.34(c)(3) for breach of an

encoding warranty. * * *

* * * * *

23. In appendix E, under section XX,

the first sentence of paragraph A.1. and

paragraph C.5. are revised, and a new

paragraph F. is added as follows:

* * * * *

XX. Section 229.34 Warranties

A. 229.34(a) Warranty of Returned Check

1. This paragraph includes warranties that

a returned check, including a notice in lieu

of return, was returned by the paying bank,

or in the case of a check payable by a bank

and payable through another bank, the bank

by which the check is payable, within the

deadline under the U.C.C. (subject to any

claims or defenses under the U.C.C., such as

breach of a presentment warranty),

Regulation J (12 CFR part 210), or § 229.30(c);

that the paying or returning bank is

authorized to return the check; that the

returned check has not been materially

altered; and that, in the case of a notice in

lieu of return, the original check has not been

and will not be returned for payment. * * *

* * * * *

C. 229.34(c) Warranty of Settlement

Amount, Encoding, and Offset

* * * * *

5. Paragraph (c)(4) provides that a paying

bank or a depositary bank may set off excess

settlement paid to another bank against

settlement owed to that bank for checks

presented or returned checks received (for

which it is the depositary bank) subsequent

to the excess settlement.

* * * * *
13818 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations

F. 229.34(f) Notice of Claim

1. This paragraph adopts the notice

provisions of U.C.C. sections 4–207(d) and 4–

208(e). The time limit set forth in this

paragraph applies to notices of claims for

warranty breaches only. As provided in

§ 229.38(g), all actions under this section

must be brought within one year after the

date of the occurrence of the violation

involved.

* * * * *

24. In appendix E, section XXII is

amended as follows:

a. Paragraph C. is revised; and

b. In paragraph E., the first sentence

of paragraph E.1. is revised to read as

follows:

* * * * *

XXII. Section 229.36 Presentment and

Issuance of Checks

* * * * *

C. 229.36(c) Electronic Presentment

1. Under an electronic presentment

agreement, presentment takes place when the

paying bank receives an electronic

transmission of information describing the

check rather than upon delivery of the

physical check. Electronic presentment

agreements may include a variety of

procedures in which the physical check is

held (truncated) or delayed by the depositary

or collecting bank. U.C.C. 4–110 and 4–

406(b) make express provision for truncation

and electronic presentment.

2. This paragraph allows electronic

presentment by agreement with the paying

bank; however, such agreement may not

prejudice the interests of other parties to the

check. For example, an electronic

presentment agreement may not extend the

paying bank’s time for return. Such an

extension could damage the depositary bank,

which must make funds available to its

customers under mandatory availability

schedules.

* * * * *

E. 229.36(e) Issuance of Payable Through

Checks

1. If a bank arranges for checks payable by

it to be payable through another bank, it must

require its customers to use checks that

contain conspicuously on their face the

name, location, and first four digits of the

nine-digit routing number of the bank by

which the check is payable and the legend

‘‘payable through’’ followed by the name of

the payable-through bank. * * *

* * * * *

25. In appendix E, section XXIV is

amended as follows:

a. In paragraph A.2., the third

sentence is revised; and

b. In paragraph D.2.b., the second

sentence is removed and two new

sentences are added immediately

following the first sentence to read as

follows:

* * * * *

XXIV. Section 229.38 Liability

A. 229.38(a) Standard of Care; Liability;

Measure of Damages

* * * * *

2. * * * The measure of damages provided

in this section (loss incurred up to amount

of check, less amount of loss party would

have incurred even if bank had exercised

ordinary care) is based on U.C.C. 4–103(e)

(amount of the item reduced by an amount

that could not have been realized by the

exercise of ordinary care), as limited by 4–

202(c) (bank is liable only for its own

negligence and not for actions of subsequent

banks in chain of collection). * * *

* * * * *

D. 229.38(d) Responsibility for Certain

Aspects of Checks

* * * * *

2. * * *

b. * * * Under § 229.33(a), a paying bank

that returns a check in the amount of $2,500

or more must provide notice of nonpayment

to the depositary bank by 4:00 p.m. on the

second business day following the banking

day on which the check is presented to the

paying bank. Even if a payable-through check

in the amount of $2,500 or more is not

returned through the payable-through bank

as quickly as would have been required had

the check been received by the bank by

which it is payable, the depositary bank

should not suffer damages unless it has not

received timely notice of nonpayment. * * *

* * * * *

26. In appendix E, under section XXV,

the first sentence in paragraph C.1. is

revised to read as follows:

XXV. Section 229.39 Insolvency of Bank

* * * * *

C. 229.39(b) Preference Against Paying or

Depositary Bank

1. This paragraph gives a bank a preferred

claim against a closed paying bank that

finally pays a check without settling for it or

a closed depositary bank that becomes

obligated to pay a returned check without

settling for it. * * *

* * * * *

27. In appendix E, under section

XXVIII, the first sentence of paragraph

A. is revised to read as follows:

XXVIII. Section 229.42 Exclusions

A. Checks drawn on the United States

Treasury, U.S. Postal Service money orders,

and checks drawn on states and units of

general local government that are presented

directly to the state or unit of general local

government and that are not payable through

or at a bank are excluded from the coverage

of the expeditious-return, notice-ofnonpayment, and same-day settlement

requirements of subpart C of this part. * * *

* * * * *

28. In appendix E, section XXIX is

redesignated as section XXX, a new

section XXIX is added, and newly

designated section XXX is revised to

read as follows:

* * * * *

XXIX. Section 229.43 Checks Payable in

Guam, American Samoa, and the Northern

Mariana Islands

A. 229.43(a) Definitions

1. Bank offices in Guam, American Samoa,

and the Northern Mariana Islands (which

Regulation CC defines as Pacific island

banks) do not meet the definition of bank in

§ 229.2(e) because they are not located in the

United States. Some checks drawn on Pacific

island banks (defined as Pacific island

checks) bear U.S. routing numbers and are

collected and returned by banks in the same

manner as checks payable in the U.S.

B. 229.43(b) Rules Applicable to Pacific

Island Checks

1. When a bank handles a Pacific island

check as if it were a check as defined in

§ 229.2(k), the bank is subject to certain

provisions of Regulation CC, as provided in

this section. Because the Pacific island bank

is not a bank as defined in § 229.2(e), it is not

a paying bank as defined in § 229.2(z) (unless

otherwise noted in this section). Pacific

island banks are not subject to the provisions

of Regulation CC.

2. A bank may agree to handle a Pacific

island check as a returned check under

§ 229.31 and may convert the returned

Pacific island check to a qualified returned

check. The returning bank is not, however,

subject to the expeditious-return

requirements of § 229.31. The returning bank

may receive the Pacific island check directly

from a Pacific island bank or from another

returning bank. As a Pacific island bank is

not a paying bank under Regulation CC,

§ 229.31(c) does not apply to a returning bank

settling with the Pacific island bank.

3. A depositary bank that handles a Pacific

island check is not subject to the provisions

of subpart B of Regulation CC, including the

availability, notice, and interest accrual

requirements, with respect to that check. If,

however, a bank accepts a Pacific island

check for deposit (or otherwise accepts the

check as transferee) and collects the Pacific

island check in the same manner as other

checks, the bank is subject to the provisions

of § 229.32, including the provisions

regarding time and manner of settlement for

returned checks in § 229.32(b), in the event

the Pacific island check is returned by a

returning bank. If the depositary bank

receives the returned Pacific island check

directly from the Pacific island bank,

however, the provisions of § 229.32(b) do not

apply, because the Pacific island bank is not

a paying bank under Regulation CC. The

depositary bank is not subject to the notice

of nonpayment provisions in § 229.33 for

Pacific island checks.

4. Banks that handle Pacific island checks

in the same manner as other checks are

subject to the indorsement provisions of

§ 229.35. Section 229.35(c) eliminates the

need for the restrictive indorsement ‘‘pay any

bank.’’ For purposes of § 229.35(c), the

Pacific island bank is deemed to be a bank.

5. Pacific island checks will often be

intermingled with other checks in a single

cash letter. Therefore, a bank that handles

Pacific island checks in the same manner as

other checks is subject to the transfer

warranty provision in § 229.34(c)(2)
Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations 13819

regarding accurate cash letter totals and the

encoding warranty in § 229.34(c)(3). A bank

that acts as a returning bank for a Pacific

island check is not subject to the warranties

in § 229.34(a). Similarly, because the Pacific

island bank is not a ‘‘bank’’ or a ‘‘paying

bank’’ under Regulation CC, § 229.34(b),

(c)(1), and (c)(4) do not apply. For the same

reason, the provisions of § 229.36 governing

paying bank responsibilities such as place of

receipt and same-day settlement do not apply

to checks presented to a Pacific island bank,

and the liability provisions applicable to

paying banks in § 229.38 do not apply to

Pacific island banks. Section 229.36(d),

regarding finality of settlement between

banks during forward collection, applies to

banks that handle Pacific island checks in the

same manner as other checks, as do the

liability provisions of § 229.38, to the extent

the banks are subject to the requirements of

Regulation CC as provided in this section,

and §§ 229.37 and 229.39 through 229.42.

XXX. Appendix C—Model Availability Policy

Disclosures, Clauses, and Notices

A. Introduction

1. Appendix C contains model disclosures,

clauses, and notices that may be used by

banks to meet their disclosure

responsibilities under the regulation. Banks

using the models properly will be in

compliance with the regulation’s disclosure

requirements.

2. Information that must be inserted by a

bank using the models is italicized within

parentheses in the text of the models.

Optional information is enclosed in brackets.

3. Banks may make certain changes to the

format or content of the models, including

deleting material that is inapplicable,

without losing the Act’s protection from

liability for banks that use the models

properly. For example, if a bank does not

have a cut-off hour prior to it’s closing time,

or if a bank does not take advantage of the

§ 229.13 exceptions, it may delete the

references to those provisions. Changes to the

models may not be so extensive as to affect

the substance, clarity, or meaningful

sequence of the models. Acceptable changes

include, for example:

a. Using ‘‘customer’’ and ‘‘bank’’ instead of

pronouns.

b. Changing the typeface or size.

c. Incorporating certain state law ‘‘plain

English’’ requirements.

4. Shorter time periods for availability may

always be substituted for time periods used

in the models.

5. Banks may also add related information.

For example, a bank may indicate that

although funds have been made available to

a customer and the customer has withdrawn

them, the customer is still responsible for

problems with the deposit, such as checks

that were deposited being returned unpaid.

Or a bank could include a telephone number

to be used if a customer has an inquiry

regarding a deposit.

6. Banks are cautioned against using the

models without reviewing their own policies

and practices, as well as state and federal

laws regarding the time periods for

availability of specific types of checks. A

bank using the models will be in compliance

with the Act and the regulation only if the

bank’s disclosures correspond to its

availability policy.

7. Banks that have used earlier versions of

the models (such as those models that gave

Social Security benefits and payroll

payments as examples of preauthorized

credits available the day after deposit, or that

did not address the cash withdrawal

limitation) are protected from civil liability

under § 229.21(e). Banks are encouraged,

however, to use current versions of the

models when reordering or reprinting

supplies.

B. Model Availability Policy Disclosures,

Models C–1 Through C–5

1. Models C–1 through C–5 generally.

a. Models C–1 through C–5 are models for

the availability policy disclosures described

in § 229.16. The models accommodate a

variety of availability policies, ranging from

next-day availability to holds to statutory

limits on all deposits. Model C–3 reflects the

additional disclosures discussed in §§ 229.16

(b) and (c) for banks that have a policy of

extending availability times on a case-by-case

basis.

b. As already noted, there are several

places in the models where information must

be inserted. This information includes the

bank’s cut-off times, limitations relating to

next-day availability, and the first four digits

of routing numbers for local banks. In

disclosing when funds will be available for

withdrawal, the bank must insert the ordinal

number (such as first, second, etc.) of the

business day after deposit that the funds will

become available.

c. Models C–1 through C–5 generally do

not reflect any optional provisions of the

regulation, or those that apply only to certain

banks. Instead, disclosures for these

provisions are included in Models C–6

through C–11A. A bank using one of the

model availability policy disclosures should

also consider whether it must incorporate

one or more of Models C–6 through C–11A.

d. While § 229.10(b) requires next-day

availability for electronic payments, Treasury

regulations (31 CFR part 210) and ACH

association rules require that preauthorized

credits (’’direct deposits’’) be made available

on the day the bank receives the funds.

Models C–1 through C–5 reflect these rules.

Wire transfers, however, are not governed by

Treasury or ACH rules, but banks generally

make funds from wire transfers available on

the day received or on the business day

following receipt. Banks should ensure that

their disclosures reflect the availability given

in most cases for wire transfers.

2. Model C–1 Next-day availability. A

bank may use this model when its policy is

to make funds from all deposits available on

the first business day after a deposit is made.

This model may also be used by banks that

provide immediate availability by

substituting the word ‘‘immediately’’ in place

of ‘‘on the first business day after the day we

receive your deposit.’’

3. Model C–2 Next-day availability and

§ 229.13 exceptions. A bank may use this

model when its policy is to make funds from

all deposits available to its customers on the

first business day after the deposit is made,

and to reserve the right to invoke the new

account and other exceptions in § 229.13. In

disclosing that a longer delay may apply, a

bank may disclose when funds will generally

be available based on when the funds would

be available if the deposit were of a nonlocal

check.

4. Model C–3 Next-day availability, caseby-case holds to statutory limits, and § 229.13

exceptions. A bank may use this model when

its policy, in most cases, is to make funds

from all types of deposits available the day

after the deposit is made, but to delay

availability on some deposits on a case-bycase basis up to the maximum time periods

allowed under the regulation. A bank using

this model also reserves the right to invoke

the exceptions listed in § 229.13. In

disclosing that a longer delay may apply, a

bank may disclose when funds will generally

be available based on when the funds would

be available if the deposit were of a nonlocal

check.

5. Model C–4 Holds to statutory limits on

all deposits. A bank may use this model

when its policy is to impose delays to the full

extent allowed under § 229.12 and to reserve

the right to invoke the § 229.13 exceptions.

In disclosing that a longer delay may apply,

a bank may disclose when funds will

generally be available based on when the

funds would be available if the deposit were

of a nonlocal check. Model C–4 uses a chart

to show the bank’s availability policy for

local and nonlocal checks and Model C–5

uses a narrative description.

6. Model C–5 Holds to statutory limits on

all deposits. A bank may use this model

when its policy is to impose delays to the full

extent allowed under § 229.12 and to reserve

the right to invoke the § 229.13 exceptions.

In disclosing that a longer delay may apply,

a bank may disclose when funds will

generally be available based on when the

funds would be available if the deposit were

of a nonlocal check.

C. Model Clauses, Models C–6 Through C–

11A

1. Models C–6 through C–11A generally.

Certain clauses like those in the models must

be incorporated into a bank’s availability

policy disclosure under certain

circumstances. The commentary to each

clause indicates when a clause similar to the

model clause is required.

2. Model C–6 Holds on other funds (check

cashing). A bank that reserves the right to

place a hold on funds already on deposit

when it cashes a check for a customer, as

addressed in § 229.19(e), must incorporate

this type of clause in its availability policy

disclosure.

3. Model C–7 Holds on other funds (other

account). A bank that reserves the right to

place a hold on funds in an account of the

customer other than the account into which

the deposit is made, as addressed in

§ 229.19(e), must incorporate this type of

clause in its availability policy disclosure.

4. Model C–8 Appendix B availability

(nonlocal checks). A bank in a check

processing region where the availability

schedules for certain nonlocal checks have

been reduced, as described in Appendix B of

Regulation CC, must incorporate this type of

clause in its availability policy disclosure.

Banks using Model C–5 may insert this
13820 Federal Register / Vol. 62, No. 56 / Monday, March 24, 1997 / Rules and Regulations

clause at the conclusion of the discussion

titled ‘‘Nonlocal checks.’’

5. Model C–9 Automated teller machine

deposits (extended holds). A bank that

reserves the right to delay availability of

deposits at nonproprietary ATMs until the

fifth business day following the date of

deposit, as permitted by § 229.12(f), must

incorporate this type of clause in its

availability policy disclosure. A bank must

choose among the alternative language based

on how it chooses to differentiate between

proprietary and nonproprietary ATMs, as

required under § 229.16(b)(5).

6. Model C–10 Cash withdrawal

limitation. A bank that imposes cash

withdrawal limitations under § 229.12 must

incorporate this type of clause in its

availability policy disclosure. Banks

reserving the right to impose the cash

withdrawal limitation and using Model C–3

should disclose that funds may not be

available until the sixth (rather than fifth)

business day in the first paragraph under the

heading ‘‘Longer Delays May Apply.’’

7. Model C–11 Credit union interest

payment policy. A credit union subject to the

notice requirement of § 229.14(b)(2) must

incorporate this type of clause in its

availability policy disclosure. This model

clause is only an example of a hypothetical

policy. Credit unions may follow any policy

for accrual provided the method of accruing

interest is the same for cash and check

deposits.

8. Model C–11A Availability of funds

deposited at other locations. A clause similar

to Model C–11A should be used if a bank

bases the availability of funds on the location

where the funds are deposited (for example,

at a contractual or other branch located in a

different check processing region). Similarly,

a clause similar to Model C–11A should be

used if a bank distinguishes between local

and non-local checks (for example, a bank

using model availability policy disclosure C–

4 or C–5), and accepts deposits in more than

one check processing region.

D. Model Notices, Models C–12 Through C–

21

1. Model Notices C–12 through C–21

generally. Models C–12 through C–21

provide models for the various notices

required by the regulation. A bank that

cashes a check and places a hold on funds

in an account of the customer (see

§ 229.19(e)) should modify the model hold

notice accordingly. For example, the bank

could replace the word ‘‘deposit’’ with the

word ‘‘transaction’’ and could add the phrase

‘‘or cashed’’ after the word ‘‘deposited.’’

2. Model C–12 Exception hold notice.

This model satisfies the written notice

required under § 229.13(g) when a bank

places a hold based on a § 229.13 exception.

If a hold is being placed on more than one

check in a deposit, each check need not be

described, but if different reasons apply, each

reason must be indicated. A bank may use

the actual date when funds will be available

for withdrawal rather than the number of the

business day following the day of deposit. A

bank must incorporate in the notice the

material set out in brackets if it imposes

overdraft or returned check fees after

invoking the reasonable cause exception

under § 229.13(e).

3. Model C–13 Reasonable cause hold

notice. This notice satisfies the written notice

required under § 229.13(g) when a bank

invokes the reasonable cause exception

under § 229.13(e). The notice provides the

bank with a list of specific reasons that may

be given for invoking the exception. If a hold

is being placed on more than one check in

a deposit, each check must be described

separately, and if different reasons apply,

each reason must be indicated. A bank may

disclose its reason for doubting collectibility

by checking the appropriate reason on the

model. If the ‘‘Other’’ category is checked,

the reason must be given. A bank may use

the actual date when funds will be available

for withdrawal rather than the number of the

business day following the day of deposit. A

bank must incorporate in the notice the

material set out in brackets if it imposes

overdraft or returned check fees after

invoking the reasonable cause exception

under § 229.13(e).

4. Model C–14 One-time notice for large

deposit and redeposited check exception

holds. This model satisfies the notice

requirements of § 229.13(g)(2) concerning

nonconsumer accounts.

5. Model C–15 One-time notice for

repeated overdraft exception hold. This

model satisfies the notice requirements of

§ 229.13(g)(3).

6. Model C–16 Case-by-case hold notice.

This model satisfies the notice required

under § 229.16(c)(2) when a bank with a caseby-case hold policy imposes a hold on a

deposit. This notice does not require a

statement of the specific reason for the hold,

as is the case when a § 229.13 exception hold

is placed. A bank may specify the actual date

when funds will be available for withdrawal

rather than the number of the business day

following the day of deposit when funds will

be available. A bank must incorporate in the

notice the material set out in brackets if it

imposes overdraft fees after invoking a caseby-case hold.

7. Model C–17 Notice at locations where

employees accept consumer deposits and

Model C–18 Notice at locations where

employees accept consumer deposits (caseby-case holds). These models satisfy the

notice requirement of § 229.18(b). Model C–

17 reflects an availability policy of holds to

statutory limits on all deposits, and Model C–

18 reflects a case-by-case availability policy.

8. Model C–19 Notice at automated teller

machines. This model satisfies the ATM

notice requirement of § 229.18(c)(1).

9. Model C–20 Notice at automated teller

machines (delayed receipt). This model

satisfies the ATM notice requirement of

§ 229.18(c)(2) when receipt of deposits at offpremises ATMs is delayed under

§ 229.19(a)(4). It is based on collection of

deposits once a week. If collections occur

more or less frequently, the description of

when deposits are received must be adjusted

accordingly.

10. Model C–21 Deposit slip notice. This

model satisfies the notice requirements of

§ 229.18(a) for deposit slips.

By order of the Board of Governors of the

Federal Reserve System, March 17, 1997.

William W. Wiles,

Secretary of the Board.

[FR Doc. 97–7156 Filed 3–21–97; 8:45 am]

BILLING CODE 6210–01–P

SECURITIES AND EXCHANGE

COMMISSION

17 CFR Part 232

[Release Nos. 33–7405; 34–38419; 35–

26688; 39–2348; IC–22571]

RIN 3235–AG96

Adoption of Updated EDGAR Filer

Manual; Correction and Delay of

Implementation

AGENCY: Securities and Exchange

Commission.

ACTION: Final rule; correction and delay

of implementation.

SUMMARY: The Commission is correcting

an amendment to Regulation S–T to

conform to the Office of Federal

Register’s requirements for

incorporation by reference and

postponing the implementation of an

updated edition of the EDGAR Filer

Manual which was published in the

Federal Register on February 27, 1997

[62 FR 8877] in order to resolve

technical issues that delayed system

implementation from March 10, 197 to

March 24, 1997. The incorporation by

reference into the Code of Federal

Regulations remains March 10, 1997.

DATES: The correction to § 232.301 is

effective March 10, 1997. The

implementation of the new edition of

the EDGAR Filer Manual is delayed

until March 24, 1997. The incorporation

by reference of the EDGAR Filer Manual

approved by the Director of the Federal

Register as of March 10, 1997 remains

unchanged.

FOR FURTHER INFORMATION CONTACT:

In the Office of Information Technology,

David T. Copenhafer at (202) 942–8800;

for questions concerning investment

company filings, Ruth Armfield

Sanders, Senior Counsel, Division of

Investment Management, at (202) 942–

0591; and for questions with respect to

documents subject to review by the

Division of Corporation Finance,

Margaret R. Black at (202) 942–2940.

SUPPLEMENTARY INFORMATION: On

February 27, 1997, the Commission

announced the adoption of an updated

EDGAR Filer Manual (‘‘Filer Manual’’),

which sets forth the technical formatting

requirements governing the preparation

and submission of electronic filings