As most of you probably know, we have been expecting a revised Regulation CC for years now. Sure, there were a few updates to Subparts A, C & D, such as new requirements for mobile deposit endorsements that went into effect on July 1, 2018, but what we are really waiting on are the revisions to Subpart B. Subpart B to Regulation CC - which is the section of the rule that relates to funds availability and check holds - is terribly written, terribly out-of-date, and has been on the list to be redone by the CFPB for years now. In fact, Regulation CC has been on the CFPB agenda as a Reg that will be released later in the year, for years.
We shall see.
In the meantime, banks are still required to comply with the rules of Subpart B of Regulation CC, including hold time frames for deposits, account disclosures, and additional disclosure requirements.
While these rules have been around for years, we still continue to see questions and misunderstandings about some of these rules. In particular, I received a question this week regarding the lobby disclosure requirements under regulation CC.
Funds Availability Lobby Notice Requirements
Section 229.18 of Regulation CC provides a very short paragraph in regards to the what disclosures must be posted in a lobby for Regulation CC:
(b) Locations where employees accept consumer deposits. A bank shall post in a conspicuous place in each location where its employees receive deposits to consumer accounts a notice that sets forth the time periods applicable to the availability of funds deposited in a consumer account.
As you can see, this requirement is fairly general and doesn’t give any specifics. Therefore, we can look to the commentary for additional guidance on this topic.
B. 229.18(b) Locations Where Employees Accept Consumer Deposits
"1. This paragraph describes the statutory requirement that a bank post in each location where its employees accept consumer deposits a notice of its availability policy pertaining to consumer accounts. The notice that is required must specifically state the availability periods for the various deposits that may be made to consumer accounts. The notice need not be posted at each teller window, but the notice must be posted in a place where consumers seeking to make deposits are likely to see it before making their deposits. For example, the notice might be posted at the point where the line forms for teller service in the lobby. The notice is not required at any drive-through teller windows nor is it required at night depository locations, or at locations where consumer deposits are not accepted. 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."
As you can see, there is actually quite a bit to this, so let’s break it down.
Location of Funds Availability Lobby Disclosures
First, the rule states that a financial institution must place a disclosure “in each location where its employees receive deposits to consumer accounts.” While this would initially seem to imply that “each” teller station would need a Regulation CC disclosure, that isn’t the case.
The commentary to part 229.18(b) clarifies a few things for us. First, it explains that the notice does not need to be posted at every teller window as a single notice that can be seen from anyone making a deposit could be considered acceptable. The commentary actually gives the example of placing the notice at the start of the teller line where anyone seeking to make a deposit would see the notice.
From my experience, many financial institutions will place the notice on just one or two signs (or plaques) in the middle of the teller line. They key to avoid examiner criticism is to make sure the sign can be clearly seen by anyone making a deposit. For example, I have criticized banks with very long teller lines who place their Regulation CC notice at one far end. In addition, I have seen where the disclosure gets hidden by a holiday decoration, or is removed all together. The bottom line is to make sure the disclosure can be seen.
Funds Availability Disclosures in Drive Through Lanes and Night Drops
As Regulation CC states that a disclosure must be placed in “each location where its employees receive deposits to consumer accounts,” one would assume that this would include drive-up lanes and even night depositories (because we all know consumers do occasionally make deposits there). The commentary, however, clarifies that a Regulation CC disclosure is not required in drive through lanes or night depositories.
Specifically, the commentary states the following:
“The notice is not required at any drive-through teller windows nor is it required at night depository locations, or at locations where consumer deposits are not accepted.”
The bottom line is that, while having a disclosure at drive through lanes and night depositories may be nice, it is not a requirement of Regulation CC.
Content of Regulation CC Lobby Disclosures
In discussing the requirements of lobby disclosures, it is important to discuss what information must be included on the disclosure. To know what information should be included on the lobby disclosure, we can turn to Appendix D of Regulation CC which provides sample disclosures that can be used to comply with the rules.
Specifically, Appendix D provides two options for the model language: C-17 and C-18. C-17 reflects an availability of holds to the maximum (statutory) limits for all deposits while C-18 reflects the availability for a case-by-case bank. As most banks utilize case-by-case availability, the vast majority of banks utilize C-18 as follows:
“Our general policy is to allow you to withdraw funds deposited in your account on the (number) business day after the day we receive your deposit. Funds from electronic direct deposits will be available on the day we receive the deposit. In some cases, we may delay your ability to withdraw funds beyond the (number) business day. Then, the funds will generally be available by the fifth business day after the day of deposit.”
It is important to note two things regarding this disclosure. First, the very last sentence references “the fifth business day.” This timeframe was correct when there were multiple check processing regions, but as those regions have been consolidated to one region, the statement should be changed to “available by the second business day after the day of deposit.”
Secondly, you may have noticed that this disclosure only references case-by-case holds and you might be asking whether or not the lobby disclosure must include langue as to the bank’s policy for exception holds. In fact, I have even seen auditors try to cite the lack of language for special exception holds as a violation.
The fact is that model form C-18 does not contain any language regarding special exception holds, and that is okay. No one really knows why this is considered okay, but the beginning of Appendix C to Regulation CC makes it clear that the use of the model form provides a safe harbor for compliance. In other words, if C-18 is used as the lobby disclosure for a case-by-case bank, there is no need for language about the bank’s exception hold policy.
From the commentary:
“ Although use of these models is not required, banks using them properly (with the exception of models C-22 through C-25) to make disclosures required by Regulation CC are deemed to be in compliance.”