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6500 - Consumer Protection
XXIII. Section 229.37
Variations by Agreement
A. This section is similar to U.C.C. 4--103, and permits consistent
treatment of agreements varying article 4 or subpart C, given the
substantial interrelationship of the two documents. To achieve
consistency, the official comment to U.C.C. 4--103(a) (which in turn
follows U.C.C. 1--201(3)) should be followed in construing this
section. For example, as stated in Official Comment 2 to section
4--103, owners of items and other interested parties are not affected
by agreements under this section unless they are parties to the
agreement or are bound by adoption, ratification, estoppel, or the
like. In particular, agreements varying this subpart that delay the
return of a check beyond the times required by this subpart may result
in liability under § 229.38 to entities not party to the agreement.
B. The Board has not followed U.C.C. 4--103(b), which permits
Federal Reserve regulations and operating letters, clearinghouse rules,
and the like to apply to parties that have not specifically assented.
Nevertheless, this section does not affect the status of such
agreements under the U.C.C.
C. The following are examples of situations where variation by
agreement is permissible, subject to the limitations of this section:
1. A depositary bank may authorize another bank to apply the other
bank's indorsement to a check as the depositary bank. (See
§ 229.35(d).)
2. A depositary bank may authorize returning banks to commingle
qualified returned checks with forward collection checks. (See
§ 229.32(a).)
3. A depositary bank may limit its liability to its customers in
connection with the late return of a deposited check where the lateness
is caused by markings on the check by the depositary bank's customer or
prior indorser in the area of the depositary bank indorsement. (See
§ 229.38(d).)
4. A paying bank may require its customer to assume the paying
bank's liability for delayed or missent checks where the delay or
missending is caused by markings placed on the check by the paying
bank's customer that obscured a properly placed indorsement of the
depositary bank. (See
§ 229.38(d).)
5. A collecting or paying bank may agree to accept forward
collection checks without the indorsement of a prior collecting bank.
(See § 229.35(a).)
6. A bank may agree to accept returned checks without the
indorsement of a prior bank. (See
§ 229.35(a).)
7. A presenting bank may agree with a paying bank to present checks
for same-day settlement at a location that is not in the check
processing region consistent with the routing number on the checks.
(See § 229.36(f)(1)(i).)
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8. A presenting bank may agree with a paying bank to present checks
for same-day settlement by a deadline earlier or later than 8:00 a.m.
(See § 229.36(f)(1)(ii).)
D. The Board expects to review the types of variation by agreement
that develop under this section and will consider whether it is
necessary to limit certain variations.
XXIV. Section
229.38 Liability
A. 229.38(a) Standard of care; liability; measure of damages
1. The standard of care established by this section applies to any
bank covered by the requirements of subpart C of the regulation. Thus,
the standard of care applies to a paying bank under
§§ 229.30 and 229.33, to a
returning bank under
§ 229.31, to a depositary
bank under §§ 229.32 and
229.33, to a bank erroneously
receiving a returned check or written notice of nonpayment as
depositary bank under § 229.32(d), and to a bank indorsing a check
under § 229.35. The standard
of care is similar to the standard imposed by U.C.C. 1--203 and
4--103(a) and includes a duty to act in good faith, as defined in
§ 229.2(nn) of this regulation.
2. A bank not meeting this standard of care is liable to the
depositary bank, the depositary bank's customer, the owner of the
check, or another party to the check. The depositary bank's customer is
usually a depositor of a check in the depositary bank (but see
§ 229.35(d)). 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). This subpart does
not absolve a collecting bank of liability to prior collecting banks
under U.C.C. 4--201.
3. Under this measure of damages, a depositary bank or other person
must show that the damage incurred results from the negligence proved.
For example, the depositary bank may not simply claim that its customer
will not accept a charge-back of a returned check, but must prove that
it could not charge back when it received the returned check and could
have charged back if no negligence had occurred, and must first attempt
to collect from its customer. (See Marcoux v. Van Wyk, 572
F.2d 651 (8th Cir. 1978); Appliance Buyers Credit Corp. v.
Prospect Nat'l Bank, 708 F.2d 290 (7th Cir. 1983).) Generally, a
paying or returning bank's liability would not be reduced because the
depositary bank did not place a hold on its customer's deposit before
it learned of nonpayment of the check.
4. This paragraph also states that it does not affect a paying
bank's liability to its customer. Under U.C.C. 4--402, for example, a
paying bank is liable to its customer for wrongful dishonor, which is
different from failure to exercise ordinary care and has a different
measure of damages.
B. 229.38(b) Paying Bank's Failure To Make Timely Return
1. Section 229.30(a)
imposes requirements on the paying bank for expeditious return of a
check and leaves in place the U.C.C. deadlines (as they may be modified
by § 229.30(c)), which may allow return at a different time. This
paragraph clarifies that the paying bank could be liable for failure to
meet either standard, but not for failure to meet both. The regulation
intends to preserve the paying bank's accountability for missing its
midnight or other deadline under the U.C.C. (e.g., sections 4--215 and
4--302), provisions that are not incorporated in this regulation, but
may be useful in establishing the time of final payment by the paying
bank.
C. 229.38(c) Comparative negligence
1. This paragraph establishes a "pure" comparative negligence
standard for liability under subpart C of this regulation. This
comparative negligence rule may have particular application where a
paying or returning bank delays in returning a check because of
difficulty in identifying the depositary bank. Some examples will
illustrate liability in such cases. In each example, it is assumed that
the returned check is received by the depositary
{{8-31-04 p.7418.103}}bank after it has
made funds available to its customer, that it may no longer recover the
funds from its customer, and that the inability to recover the funds
from the customer is due to a delay in returning the check contrary to
the standards established by
§§ 229.30(a) or
229.31(a).
2. Examples:
a. If a depositary bank fails to use the indorsement required by
this regulation, and this failure is caused by a failure to exercise
ordinary care, and if a paying or returning bank is delayed in
returning the check because additional time is required to identify the
depositary bank or find its routing number, the paying or returning
bank's liability to the depositary bank would be reduced or eliminated.
b. If the depositary bank uses the standard indorsement, but that
indorsement is obscured by a subsequent collecting bank's indorsement,
and a paying or returning bank is delayed in returning the check
because additional time was required to identify the depositary bank or
find its routing number, the paying or returning bank may not be liable
to the depositary bank because the delay was not due to its negligence.
Nonetheless, the collecting bank may be liable to the depositary bank
to the extent that its negligence in indorsing the check caused the
paying or returning bank's delay.
c. If a depositary bank accepts a check that has printing, a carbon
band, or other material on the back of the check that existed at the
time the check was issued, and the depositary bank's indorsement is
obscured by the printing, carbon band, or other material, and a paying
or returning bank is delayed in returning the check because additional
time was required to identify the depositary bank, the returning bank
may not be liable to the depositary bank because the delay was not due
to its negligence. Nonetheless, the paying bank may be liable to the
depositary bank to the extent that the printing, carbon band, or other
material caused the delay.
D. 229.38(d) Responsibility for Certain Aspects of Checks
1. Responsibility for back of check. The indorsement standard in
§ 229.35 is most effective
if the back of the check remains clear of other matter that may obscure
bank indorsements. Because bank indorsements are usually applied by
automated equipment, it is not possible to avoid pre-existing matter on
the back of the check. For example, bank indorsements are not required
to avoid a carbon band or printed, stamped, or written terms or
notations on the back of the check. Responsibility for back of check.
Accordingly, this provision places responsibility on the paying bank,
depositary bank, or reconverting bank, as appropriate, for keeping the
back of the check clear for bank indorsements during forward collection
and return.
2. ANS X9.100--140 provides that an image of an original check must
be reduced in size when placed on the first substitute check associated
with that original check. (The image thereafter would be constant in
size on any subsequent substitute check that might be created.) Because
of this size reduction, the location of an indorsement, particularly a
depositary bank indorsement, applied to an original paper check likely
will change when the first reconverting bank creates a substitute check
that contains that indorsement within the image of the original paper
check. If the indorsement was applied to the original paper check in
accordance with appendix D's location requirements for indorsements
applied to existing paper checks, and if the size reduction of the
image causes the placement of the indorsement to no longer be
consistent with the appendix's requirements, then the reconverting
bank bears the liability for any loss that results from the shift in
the placement of the indorsement. Such a loss could result either
because the original indorsement applied in accordance with appendix D
is rendered illegible by a subsequent indorsement that later is applied
to the substitute check in accordance with appendix D, or because the
subsequent bank cannot apply its indorsement to the substitute check
legibly in accordance with appendix D as a result of the shift in the
previous indorsement.
Example.
In accordance with appendix D's specifications, a depositary bank
sprays its indorsement onto a business-sized original check between 3.0
inches from the leading edge of the check and 1.5 inches from the
trailing edge of the check. The check's conversion to
electronic
{{8-31-04 p.7418.104}}form and
subsequent reconversion to paper form causes the location of the
depositary bank indorsement, now contained within the image of the
original check, to change such that it is less than 3.0 inches from the
leading edge of the substitute check. In accordance with appendix D's
specifications, a subsequent collecting bank sprays its indorsement
onto the substitute check between the leading edge of the check and 3.0
inches from the leading edge of the check and the indorsement happens
to be on top of the shifted depositary bank indorsement. If the check
is returned unpaid and the return is not expeditious because of the
illegibility of the depositary bank indorsement, and the depositary
bank incurs a loss that it would not have incurred had the return been
expeditious, the reconverting bank bears the liability for that loss.
3. Responsibility for payable-through checks.
a. This paragraph provides that the bank by which a payable-through
check is payable is liable for damages under paragraph (a) of this
section to the extent that the check is not returned through the
payable-through bank as quickly as would have been necessary to meet
the requirements of
§ 229.30(a)(1) (the
2-day/4-day test) had the bank by which it is payable received the
check as paying bank on the day the payable-through bank received it.
The location of the bank by which a check is payable for purposes of
the 2-day/4-day test may be determined from the location or the first
four digits of the routing number of the bank by which the check is
payable. This information should be stated on the check. (See
§ 229.36(e) and accompanying
Commentary.) Responsibility under paragraph (d)(2) does not include
responsibility for the time required for the forward collection of a
check to the payable-through bank.
b. Generally, liability under paragraph (d)(2) will be limited in
amount. 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. Thus, ordinarily the bank by which a
payable-through check is payable would be liable under paragraph (a)
only for checks in amounts up to $2,500, and the paying bank would be
responsible for notice of nonpayment for checks in the amount of $2,500
or more.
4. Responsibility under paragraphs (d)(1) and (d)(2) is treated as
negligence for comparative negligence purposes, and the contribution to
damages under paragraphs (d)(1) and (d)(2) is treated in the same way
as the degree of negligence under paragraph (c) of this section.
E. 229.38(e) Timeliness of Action
1. This paragraph excuses certain delays. It adopts the standard of
U.C.C. 4--109(b).
F. 229.38(f) Exclusion
1. This paragraph provides that the civil liability and class
action provisions, particularly the punitive damage provisions of
sections 611(a) and (b), and the bona fide error provision of 611(c) of
the Act (12 U.S.C. 4010(a),
(b), and (c)) do not apply to regulatory provisions adopted to improve
the efficiency of the payments mechanism. Allowing punitive damages for
delays in the return of checks where no actual damages are incurred
would only encourage litigation and provide little or no benefit to the
check collection system. In view of the provisions of paragraph (a),
which incorporate traditional bank collection standards based on
negligence, the provision on bona fide error is not included in subpart
C.
G. 229.38(g) Jurisdiction
1. The Act confers subject matter jurisdiction on courts of
competent jurisdiction and provides a time limit for civil actions for
violations of this subpart.
{{8-31-04 p.7418.105}}
H. 229.38(h) Reliance on Board Rulings
1. This provision shields banks from civil liability if they act in
good faith in reliance on any rule, regulation, or interpretation of
the Board, even if it were subsequently determined to be invalid. Banks
may rely on the Commentary to this regulation, which is issued as an
official Board interpretation, as well as on the regulation itself.
XXV. Section
229.39 Insolvency of Bank
A. Introduction
1. These provisions cover situations where a bank becomes insolvent
during collection or return and are derived from U.C.C. 4--216. They
are intended to apply to all banks.
B. 229.39(a) Duty of Receiver
1. This paragraph requires a receiver of a closed bank to return a
check to the prior bank if it does not pay for the check. This permits
the prior bank, as holder, to pursue its claims against the closed bank
or prior indorsers on the check.
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. If the bank with a preferred claim under this
paragraph recovers from a prior bank or other party to the check, the
prior bank or other party to the check is subrogated to the preferred
claim.
D. 229.39(c) Preference Against Paying, Collecting, or Depositary
Bank
1. This paragraph gives a bank a preferred claim against a closed
collecting, paying, or returning bank that receives settlement but does
not settle for a check. (See Commentary to § 229.35(b) for discussion
of prior and subsequent banks.) As in the case of § 229.39(b), if the
bank with a preferred claim under this paragraph recovers from a prior
bank or other party to the check, the prior bank or other party to the
check is subrogated to the preferred claim.
E. 229.39(d) Preference Against Presenting Bank
1. This paragraph gives a paying bank a preferred claim against a
closed presenting bank in the 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.
F. 229.39(e) Finality of Settlement
1. This paragraph provides that insolvency does not interfere with
the finality of a settlement, such as a settlement by a paying bank
that becomes final by expiration of the midnight deadline.
XXVI. Section 229.40
Effect on Merger Transaction
A. When banks merge, there is normally a period of adjustment
required before their operations are consolidated. To allow for this
adjustment period, the regulation provides that the merged banks may be
treated as separate banks for a period of up to one year after the
consummation of the transaction. The term merger transaction is defined
in § 229.2(t). This rule affects the status of the combined entity in
a number of areas in this subpart. For example:
1. The paying bank's responsibility for expeditious return
(§ 229.30).
2. The returning bank's responsibility for expeditious return
(§ 229.31).
{{8-31-04 p.7418.106}}
3. Whether a returning bank is entitled to an extra day to qualify
a return that will be delivered directly to a depositary bank that has
merged with the returning bank (§ 229.31(a)).
4. Where the depositary bank must accept returned checks
(§ 229.32(a)).
5. Where the depositary bank must accept notice of nonpayment
(§ 229.33(c)).
6. Where a paying bank must accept presentment of checks
(§ 229.36(b)).
XXVII. Section 229.41
Relation to State Law
A. This section specifies that state law relating to the collection
of checks is preempted only to the extent that it is inconsistent with
this regulation. Thus, this regulation is not a complete replacement
for state laws relating to the collection or return of checks.
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-of-nonpayment, and same-day settlement requirements of subpart C
of this part. Other provisions of this subpart continue to apply to
the checks. This exclusion does not apply to checks drawn by the U.S.
government on banks.
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
{{8-31-04 p.7418.107}}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) 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.
XXXVIII. Appendix C--Model Availability Policy
Disclosures, Clauses, and Notices; and Model Substitute Check Policy
Disclosure and Notices
A. Introduction
1. Appendix C contains model disclosure, clauses, and notices that
may be used by banks to meet their disclosure and notice
responsibilities under the regulation. Banks using the models (except
models C--22 through C--25) properly will be deemed 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.
{{8-31-04 p.7418.108}}
B. Model Availability Policy and Substitute Check Policy
Disclosures, Models C–1 through C–5A
1. Models C--1 through C--5A generally.
a. Models C--1 through C--5A are models for the availability policy
disclosures described in § 229.16 and substitute check policy
disclosure described in § 229.57. 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--5A generally do not reflect any optional
provisions of the regulation, or those that apply only to certain
banks. 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, case-by-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-by-case 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
{{8-31-04 p.7418.109}}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.
7. Model C--5A
A bank may use this form when it is providing the disclosure to its
consumers required by § 229.57 explaining that a substitute check is
the legal equivalent of an original check and the circumstances under
which the consumer may make a claim for expedited recredit.
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 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–25
1. Model C--12 through C--25 generally. Model C--12
through C--25 provide models of 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."
{{8-31-04 p.7418.110}}
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
case-by-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
case-by-case hold.
7. Model C--17 Notice of locations where employees accept
consumer deposits and Model C--18 Notice at locations where employees
accept consumer deposits (case-by-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 off-premises 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.
11. Models C--22 through C--25 generally. Models C--22
through C--25 provide models for the various notices required when a
consumer who receives substitute checks makes an expedited recredit
claim under § 229.54 for a loss related to a substitute check. The
Check 21 Act does not provide banks that use these models with a safe
harbor. However, the Board has published these models to aid banks'
efforts to comply with § 229.54(e).
12. Model C--22 Valid Claim Refund Notice. A bank may
use this model when crediting the entire amount or the remaining amount
of a consumer's expedited recredit claim after determining that the
consumer's claims is valid. This notice could be used when the bank
provides the consumer a full recredit based on a valid claim
determination within ten days of the receipt of the consumer's claim
or when the bank recredits the remaining amount of
{{8-31-04 p.7418.110-A}}a consumer's
expedited recredit claim by the 45th calendar day after receiving the
consumer's claim, as required under § 229.54(e)(1).
13. Model C--23 Provisional Refund Notice. A bank may
use this model when providing a full or partial expedited recredit to a
consumer pending further investigation of the consumer's claim, as
required under § 229.54(e)(1).
14. Model C--24 Denial Notice. A bank may use this model
when denying a claim for an expedited recredit under § 229.54(e)(2).
15. Model C--25 Reversal Notice. A bank may use this
model when reversing an expedited recredit that was credited to a
consumer's account under § 229.54(e)(3).
XXX. § 229.51 General provisions governing substitute
checks
A. § 229.51(a) Legal Equivalence.
1. Section 229.51(a) states that a substitute check for which a
bank has provided the substitute check warranties is the legal
equivalent of the original check for all purposes and all persons if it
meets the accuracy and legend requirements. Where the law (or a
contract) requires production of the original check, production of a
legally equivalent substitute check would satisfy that requirement. A
person that receives a substitute check cannot be assessed costs
associated with the creation of the substitute check, absent agreement
to the contrary.
Examples.
a. A presenting bank presents a substitute check that meets the
legal equivalence requirements to a paying bank. The paying bank cannot
refuse presentment of the substitute check on the basis that it is a
substitute check, because the substitute check is the legal equivalent
of the original check.
b. A depositor's account agreement with a bank provides that the
depositor is entitled to receive original cancelled checks back with
his or her periodic account statement. The bank may honor that
agreement by providing original checks, substitute checks, or a
combination thereof. However, a bank may not honor such an agreement by
providing something other than an original check or a substitute check.
c. A mortgage company argues that a consumer missed a monthly
mortgage payment that the consumer believes she made. A legally
equivalent substitute check concerning that mortgage payment could be
used in the same manner as the original check to prove the payment.
2. A person other than a bank that creates a substitute check could
transfer, present, or return that check only by agreement unless and
until a bank provided the substitute check warranties.
3. To be the legal equivalent of the original check, a substitute
check must accurately represent all the information on the front and
back of the check as of the time the original check was truncated. An
accurate representation of information that was illegible on the
original check would satisfy this requirement. The payment instructions
placed on the check by, or as authorized by, the drawer, such as the
amount of the check, the payee, and the drawer's signature, must be
accurately represented, because that information is an essential
element of a negotiable instrument. Other information that must be
accurately represented includes (1) the information identifying the
drawer and the paying bank that is preprinted on the check, including
the MICR line; and (2) other information placed on the check prior to
the time an image of the check is captured, such as any required
identification written on the front of the check and any indorsements
applied to the back of the check. A substitute check need not capture
other characteristics of the check, such as watermarks, microprinting,
or other physical security features that cannot survive the imaging
process or decorative images, in order to meet the accuracy
requirement. Conversely, some security features that are latent on the
original check might become visible as a result of the check imaging
process. For example, the original check might have a faint
representation of the word "void" that will appear more clearly
on a photocopied or electronic image of the check. Provided the
inclusion of the clearer version of the word on the image used to
create a substitute check did not obscure the required information
listed above, a substitute check
{{8-31-04 p.7418.110-B}}that contained
such information could be the legal equivalent of an original check
under § 229.51(a). However, if a person suffered a loss due to
receipt of such a substitute check instead of the original check, that
person could have an indemnity claim under § 229.53 and, in the case
of a consumer, an expedited recredit claim under § 229.54.
4. To be the legal equivalent of the original check, a substitute
check must bear the legal equivalence legend described in
§ 229.51(a)(2). A bank may not vary the language of the legal
equivalence legend and must place the legend on the substitute check as
specified by generally applicable industry standards for substitute
checks contained in ANS X9.100--140.
5. In some cases, the original check used to create a substitute
check could be forged or otherwise fraudulent. A substitute check
created from a fraudulent original check would have the same status
under Regulation CC and the U.C.C. as the original fraudulent check.
For example, a substitute check of a fraudulent original check would
not be properly payable under U.C.C. 4--401 and would be subject to the
transfer and presentment warranties in U.C.C. 4--207 and 4--208.
B. 229.51(b) Reconverting Bank Duties
1. As discussed in more detail in appendix D and the
commentary to § 229.35, a reconverting bank must indorse (or, if it
is a paying bank with respect to the check, identify itself on) the
back of a substitute check in a manner that preserves all indorsements
applied, whether physically or electronically, by persons that
previously handled the check in any form for forward collection or
return. Indorsements applied physically to the original check before an
image of the check was captured would be preserved through the image of
the back of the original check that a substitute check must contain.
Indorsements applied physically to the original check after an image of
the original check was captured would be conveyed as electronic
indorsements (see paragraph 3 of the commentary to § 229.35(a)). If
indorsements were applied electronically after an image of the original
check was captured or were applied electronically after a previous
substitute check was converted to electronic form, the reconverting
bank must apply those indorsements physically to the substitute check.
A reconverting bank is not responsible for obtaining indorsements that
persons that previously handled the check should have applied but did
not apply.
2. A reconverting bank also must identify itself as such on the
front and back of the substitute check and must preserve on the back of
the substitute check the identifications of any previous reconverting
banks in accordance with appendix D. The presence on the back of a
substitute check of indorsements that were applied by previous
reconverting banks and identified with asterisks in accordance with
appendix D would satisfy the requirement that the reconverting bank
preserve the identification of previous reconverting banks. As
discussed in more detail in the commentary to § 229.35, the
reconverting bank and truncating bank routing numbers on the front of a
substitute check and, if the reconverting bank is the paying bank, the
reconverting bank's routing number on the back of a substitute check
are for identification only and are not indorsements or acceptances.
3. The reconverting bank must place the routing number of the
truncating bank surrounded by brackets on the front of the substitute
check in accordance with appendix D and ANS X9.100--140.
Example.
A bank's customer, which is a nonbank business, receives
checks for payment and by agreement deposits substitute checks instead
of the original checks with its depositary bank. The depositary bank is
the reconverting bank with respect to the substitute checks and the
truncating bank with respect to the original checks. In accordance with
appendix D and with ANS X9.100--140, the bank must therefore be
identified on the front of the substitute checks as a reconverting bank
and as the truncating bank, and on the back of the substitute checks as
the depositary bank and a reconverting bank.
C. 229.51(c) Applicable Law
1. A substitute check that meets the requirements for
legal equivalence set forth in this section is subject to any provision
of federal or state law that applies to original checks,
{{8-31-04 p.7418.110-C}}except to the
extent such provision is inconsistent with the Check 21 Act or subpart
D. A legally equivalent substitute check is subject to all laws that
are not preempted by the Check 21 Act in the same manner and to the
same extent as is an original check. Thus, any person could satisfy a
law that requires production of an original check by producing a
substitute check that is derived from the relevant original check and
that meets the legal equivalence requirements of § 229.51(a).
2. A law is not inconsistent with the Check 21 Act or subpart D
merely because it allows for the recovery of a greater amount of
damages.
Example.
A drawer that suffers a loss with respect to a substitute check that
was improperly charged to its account and for which the drawer has an
indemnity claim but not a warranty claim would be limited under the
Check 21 Act to recovery of the amount of the substitute check plus
interest and expenses. However, if the drawer also suffered damages
that were proximately caused because the bank wrongfully dishonored
subsequently presented checks as a result of the improper substitute
check charge, the drawer could recover those losses under U.C.C.
4--402.
XXXI § 229.52 Substitute Check Warranties
A. 229.52(a) Warranty Content and Provision
1. The responsibility for providing the substitute check warranties
begins with the reconverting bank. In the case of a substitute check
created by a bank, the reconverting bank starts the flow of warranties
when it transfers, presents, or returns a substitute check for which it
receives consideration. A bank that receives a substitute check created
by a nonbank starts the flow of warranties when it transfers, presents,
or returns for consideration either the substitute check it received or
an electronic or paper representation of that substitute check. To
ensure that warranty protections flow all the way through to the
ultimate recipient of a substitute check or paper or electronic
representation thereof, any subsequent bank that transfers, presents,
or returns for consideration either the substitute check or a paper or
electronic representation of the substitute check is responsible to
subsequent transferees for the warranties. Any warranty recipient could
bring a claim for a breach of a substitute check warranty if it
received either the actual substitute check or a paper or electronic
representation of a substitute check.
2. The substitute check warranties and indemnity are not given
under §§ 229.52 and 229.53 by a bank that truncates the original
check and by agreement transfers the original check electronically to a
subsequent bank for consideration. However, parties may, by agreement,
allocate liabilities associated with the exchange of electronic check
information.
Example.
A bank that receives check information electronically and uses it to
create substitute checks is the reconverting bank and, when it
transfers, presents, or returns that substitute check, becomes the
first warrantor. However, that bank may protect itself by including in
its agreement with the sending bank provisions that specify the sending
bank's warranties and responsibilities to the receiving bank,
particularly with respect to the accuracy of the check image and check
data transmitted under the agreement.
3. A bank need not affirmatively make the warranties because they
attach automatically when a bank transfers, presents, or returns the
substitute check (or a representation thereof) for which it receives
consideration. Because a substitute check transferred, presented, or
returned for consideration is warranted to be the legal equivalent of
the original check and thereby subject to existing laws as if it were
the original check, all U.C.C. and other Regulation CC warranties that
apply to the original check also apply to the substitute check.
4. The legal equivalence warranty by definition must be linked to a
particular substitute check. When an original check is truncated, the
check may move from electronic form to substitute check form and then
back again, such that there would be multiple substitute checks
associated with one original check. When a check changes form multiple
times in
{{8-31-04 p.7418.110-D}}the collection or
return process, the first reconverting bank and subsequent banks that
transfer, present, or return the first substitute check (or a paper or
electronic representation of the first substitute check) warrant the
legal equivalence of only the first substitute check. If a bank
receives an electronic representation of a substitute check and uses
that representation to create a second substitute check, the second
reconverting bank and subsequent transferees of the second substitute
check (or a representation thereof) warrant the legal equivalence of
both the first and second substitute checks. A reconverting bank would
not be liable for a warranty breach under § 229.52 if the legal
equivalence defect is the fault of a subsequent bank that handled the
substitute check, either as a substitute check or in other paper or
electronic form.
5. The warranty in § 229.52(a)(2), which addresses multiple
payment requests for the same check, is not linked to a particular
substitute check but rather is given by each bank handling the
substitute check, an electronic representation of a substitute check,
or a subsequent substitute check created from an electronic
representation of a substitute check. All banks that transfer, present,
or return a substitute check (or a paper or electronic representation
thereof) therefore provide the warranty regardless of whether the
ultimate demand for double payment is based on the original check, the
substitute check, or some other electronic or paper representation of
the substitute or original check, and regardless of the order in which
the duplicative payment requests occur. This warranty is given by the
banks that transfer, present, or return a substitute check even if the
demand for duplicative payment results from a fraudulent substitute
check about which the warranting bank had no knowledge.
Example.
A nonbank depositor truncates a check and in lieu thereof sends an
electronic version of that check to both Bank A and Bank B. Bank A and
Bank B each uses the check information that it received electronically
to create a substitute check, which it presents to Bank C for payment.
Bank A and Bank B each is a reconverting bank that made the substitute
check warranties when it presented a substitute check to and received
payment from Bank C. Bank C could pursue a warranty claim for the loss
it suffered as a result of the duplicative payment against either Bank
A or Bank B.
B. 229.52(b) Warranty Recipients.
1. A reconverting bank makes the warranties to the person to which
it transfers, presents, or returns the substitute check for
consideration and to any subsequent recipient that receives either the
substitute check or a paper or electronic representation derived from
the substitute check. These subsequent recipients could include a
subsequent collecting or returning bank, the depositary bank, the
drawer, the drawee, the payee, the depositor, and any indorser. The
paying bank would be included as a warranty recipient, for example
because it would be the drawee of a check or a transferee of a check
that is payable through it.
2. The warranties flow with the substitute check to persons that
receive a substitute check or a paper or electronic representation of a
substitute check. The warranties do not flow to a person that receives
only the original check or a representation of an original check that
was not derived from a substitute check. However, a person that
initially handled only the original check could become a warranty
recipient if that person later receives a returned substitute check or
a paper or electronic representation of a substitute check that was
derived from that original check.
XXXII. § 229.53 Substitute Check Indemnity
A. 229.53(a) Scope of Indemnity.
1. Each bank that for consideration transfers, presents, or returns
a substitute check or a paper or electronic representation of a
substitute check is responsible for providing the substitute check
indemnity. The indemnity covers losses due to any subsequent
recipient's receipt of the substitute check instead of the original
check. The indemnity therefore covers
{{8-31-04 p.7418.110-E}}the loss caused
by receipt of the substitute check as well as the loss that a bank
incurs because it pays an indemnity to another person. A bank that pays
an indemnity would in turn have an indemnity claim regardless of
whether it received the substitute check or a paper or electronic
representation of the substitute check. The indemnity would not apply
to a person that handled only the original check or a paper or
electronic version of the original check that was not derived from a
substitute check.
Examples.
a. A paying bank makes payment based on a substitute check that was
derived from a fraudulent original cashier's check. The amount and
other characteristics of the original cashier's check are such that,
had the original check been presented instead, the paying bank would
have inspected the original check for security features. The paying
bank's fraud detection procedures were designed to detect the fraud in
question and allow the bank to return the fraudulent check in a timely
manner. However, the security features that the bank would have
inspected were security features that did not survive the imaging
process (see the commentary to § 229.51(a)). Under these
circumstances, the paying bank could assert an indemnity claim against
the bank that presented the substitute check.
b. By contrast with the previous examples, the indemnity would not
apply if the characteristics of the presented substitute check were
such that the bank's security policies and procedures would not have
detected the fraud even if the original had been presented. For
example, if the check was under the threshold amount at which the bank
subjects an item to its fraud detection procedures, the bank would not
have inspected the item for security features regardless of the form of
the item and accordingly would have suffered a loss even if it had
received the original check.
c. A paying bank makes an erroneous payment based on an electronic
representation of a substitute check because the electronic cash letter
accompanying the electronic item included the wrong amount to be
charged. The paying bank would not have an indemnity claim associated
with that payment because its loss did not result from receipt of an
actual substitute check instead of the original check. However, the
paying bank could protect itself from such losses through its agreement
with the bank that sent the check to it electronically and may have
rights under other law.
d. A drawer has agreed with its bank that the drawer will not
receive paid checks with periodic account statements. The drawer
requested a copy of a paid check in order to prove payment and received
a photocopy of a substitute check. The photocopy that the bank provided
in response to this request was illegible, such that the drawer could
not prove payment. Any loss that the drawer suffered as a result of
receiving the blurry check image would not trigger an indemnity claim
because the loss was not caused by the receipt of a substitute check.
The drawer may, however, still have a warranty claim if he received a
copy of a substitute check, and may also have rights under the U.C.C.
B. 229.53(b) Indemnity Amount
1. If a recipient of a substitute check is making an indemnity
claim because a bank has breached one of the substitute check
warranties, the recipient can recover any losses proximately caused by
that warranty breach.
Examples.
a. A drawer discovers that its account has been charged for two
different substitute checks that were provided to the drawer and that
were associated with the same original check. As a result of this
duplicative charge, the paying bank dishonored several
subsequently-presented checks that it otherwise would have paid and
charged the drawer returned check fees. The payees of the returned
checks also charged the drawer returned check fees. The drawer would
have a warranty claim against any of the warranty banks, including its
bank, for breach of the warranty described in § 229.52(a)(2). The
drawer also could assert an indemnity claim. Because there is only one
original check for any payment transaction, if the collecting and
presenting bank had collected the original check instead
of
{{8-31-04 p.7418.110-F}}using a
substitute check the bank would have been asked to make only one
payment. The drawer could assert its warranty and indemnity claims
against the paying bank, because that is the bank with which the drawer
has a customer relationship and the drawer has received an indemnity
from that bank. The drawer could recover from the indemnifying bank the
amount of the erroneous charge, as well as the amount of the returned
check fees charged by both the paying bank and the payees of the
returned checks. If the drawer's account were an interest-bearing
account, the drawer also could recover any interest lost on the
erroneously debited amount and the erroneous returned check fees. The
drawer also recover its expenditures for representation in connection
with the claim. Finally, the drawer could recover any other losses that
were proximately caused by the warranty breach.
b. In the example above, the paying bank that received the
duplicate substitute checks also would have a warranty claim against
the previous transferor(s) of those substitute checks and could seek an
indemnity from that bank (or either of those banks). The indemnifying
bank would be responsible for compensating the paying bank for all the
losses proximately caused by the warranty breach, including
representation expenses and other costs incurred by the paying bank in
settling the drawer's claim.
2. If the recipient of the substitute check does not have a
substitute check warranty claim with respect to the substitute check,
the amount of the loss the recipient may recover under § 229.53 is
limited to the amount of the substitute check, plus interest and
expenses. However, the indemnified person might be entitled to
additional damages under some other provision of law.
Examples.
a. A drawer received a substitute check that met all the legal
equivalence requirements and for which the drawer was only charged
once, but the drawer believed that the underlying original check was a
forgery. If the drawer suffered a loss because it could not prove the
forgery based on the substitute check, for example because proving the
forgery required analysis of pen pressure that could be determined only
from the original check, the drawer would have an indemnity claim.
However, the drawer would not have a substitute check warranty claim
because the substitute check was the legal equivalent of the original
check and no person was asked to pay the substitute check more than
once. In that case, the amount of the drawer's indemnity under
§ 229.53 would be limited to the amount of the substitute check, plus
interest and expenses. However, the drawer could attempt to recover
additional losses, if any, under other law.
b. As described more fully in the commentary to § 229.53(a)
regarding the scope of the indemnity, a paying bank could have an
indemnity claim if it paid a legally equivalent substitute check that
was created from a fraudulent cashier's check that the paying bank's
fraud detection procedures would have caught and that the bank would
have returned by its midnight deadline had it received the original
check. However, if the substitute check was not subject to a warranty
claim (because it met the legal equivalence requirements and there was
only one payment request) the paying bank's indemnity would be limited
to the amount of the substitute check plus interest and expenses.
3. The amount of an indemnity would be reduced in proportion to the
amount of any amount loss attributable to the indemnified person's
negligence or bad faith. This comparative negligence standard is
intended to allocate liability in the same manner as the comparative
negligence provision of § 229.38(c).
4. An indemnifying bank may limit the losses for which it is
responsible under § 229.53 by producing the original check or a
sufficient copy. However, production of the original check or a
sufficient copy does not absolve the indemnifying bank from liability
claims relating to a warranty the bank has provided under § 229.52 or
any other law, including but not limited to subpart C of this part or
the U.C.C.
C. 229.53(c) Subrogation of Rights
1. A bank that pays an indemnity claim is subrogated to the rights
of the person it indemnified, to the extent of the indemnity it
provided, so that it may attempt to recover
{{8-31-04 p.7418.110-G}}that amount from
another person based on an indemnity, warranty, or other claim. The
person that the bank indemnified must comply with reasonable requests
from the indemnifying bank for assistance with respect to the
subrogated claim.
Example.
A paying bank indemnifies a drawer for a substitute check that the
drawer alleged was a forgery that would have been detected had the
original check instead been presented. The bank that provided the
indemnity could pursue its own indemnity claim against the bank that
presented the substitute check, could attempt to recover from the
forger, or could pursue any claim that it might have under other law.
The bank also could request from the drawer any information that the
drawer might possess regarding the possible identity of the forger.
XXXIII. § 229.54 Expedited Recredit for Consumers
A. 229.54(a) Circumstances Giving Rise to a Claim
1. A consumer may make a claim for expedited recredit under this
section only for a substitute check that he or she has received and for
which the bank charged his or her deposit account. As a result, checks
used to access loans, such as credit card checks or home equity line of
credit checks, that are reconverted to substitute checks would not give
rise to an expedited recredit claim, unless such a check was returned
unpaid and the bank charged the consumer's deposit account for the
amount of the returned check. In addition, a consumer who received only
a statement that contained images of multiple substitute checks per
page would not be entitled to make an expedited recredit claim,
although he or she could seek redress under other provisions of law,
such as § 229.52 or U.C.C. 4--401. However, a consumer who originally
received only a statement containing images of multiple substitute
checks per page but later received a substitute check, such as in
response to a request for a copy of a check shown in the statement,
could bring a claim if the other expedited recredit criteria were met.
Although a consumer must at some point have received a substitute check
to make an expedited recredit claim, the consumer need not be in
possession of the substitute check at the time he or she submits the
claim.
2. A consumer must in good faith assert that the bank improperly
charged the consumer's account for the substitute check or that the
consumer has a warranty claim for the substitute check (or both). The
warranty in question could be a substitute check warranty described in
§ 229.52 or any other warranty that a bank provides with respect to a
check under other law. A consumer could, for example, have a warranty
claim under § 229.34(b), which contains returned check warranties
that are made to the owner of the check.
3. A consumer's recovery under the expedited recredit section is
limited to the amount of his or her loss, up to the amount of the
substitute check subject to the claim, plus interest if the consumer's
account is an interest-bearing account. The consumer's loss could
include fees that resulted from the allegedly incorrect charge, such as
bounced check fees that were imposed because the improper charge caused
the bank to dishonor subsequently presented checks that it otherwise
would have honored. A consumer who suffers a total loss greater than
the amount of the substitute check plus interest could attempt to
recover the remainder of that loss by bringing warranty, indemnity, or
other claim under this subpart or other applicable law.
Examples.
a. A consumer who received a substitute check believed that he or
she wrote the check for $150, but the bank charged his or her account
for $1,500. The amount on the substitute check the consumer received is
illegible. If the substitute check contained a blurry image of what was
a legible original check, the consumer could have a claim for a breach
of the legal equivalence warranty in addition to an improper charge
claim. Because the amount of the check cannot be determined from the
substitute check provided to the consumer, the consumer, if acting in
good faith, could assert that the production of the original check or
a
{{8-31-04 p.7418.110-H}}better copy of
the original check is necessary to determine the validity of the claim.
The consumer in this case could attempt to recover his or her losses by
using the expedited recredit procedure. The consumer's losses
recoverable under § 229.54 could include $1,350 he or she believed
was incorrectly charged plus any improperly charged fees associated
with that charge up to $150 (plus foregone interest on the amount of
the consumer's loss if the account was an interest-bearing account).
The consumer could recover any additional losses, if any, under other
law, such as U.C.C. 4--401 and 4--402.
b. A consumer received a substitute check for which his or her
account was charged and believed that the original check from which the
substitute was derived was a forgery. The forgery was good enough that
analysis of the original check was necessary to verify whether the
signature is that of the consumer. Under those circumstances, the
consumer, if acting in good faith, could assert that the charge was
improper, that he or she therefore had incurred a loss in the amount of
the check (plus foregone interest if the account was an
interest-bearing account), and that he or she needed the original check
to determine the validity of the forgery claim. By contrast, if the
signature on the substitute check obviously was forged (for example, if
the forger signed a name other than that of the account holder) and
there was no other defect with the substitute check, the consumer would
not need the original check or a sufficient copy to determine the fact
of the forgery and thus would not be able to make an expedited recredit
claim under this section. However, the consumer would have a claim
under U.C.C. 4--401 if the item was not properly payable.
B. 229.54(b) Procedures for Making Claims
1. The consumer must submit his or her expedited recredit claim to
the bank within 40 calendar days of the later of the day on which the
bank mailed or delivered, by a means agreed to by the consumer, (1) the
periodic account statement containing information concerning the
transaction giving rise to the claim, or (2) the substitute check
giving rise to the claim. The mailing or delivery of a substitute check
could be in connection with a regular account statement, in response to
a consumer's specific request for a copy of a check, or in connection
with the return of a substitute check to the payee.
2. Section 229.54(b) contemplates more than one possible means of
delivering an account statement or a substitute check to the consumer.
The time period for making a claim thus could be triggered by the
mailed in-person, or electronic delivery of an account statement or by
the mailed or in-person delivery of a substitute check. In-person
delivery would include, for example, making an account statement or
substitute check available at the bank for the consumer's retrieval
under an arrangement agreed to by the consumer. In the case of a mailed
statement or substitute check, the 40-day period should be calculated
from the postmark on the envelope. In the case of in-person delivery,
the 40-day period should be calculated from the earlier of the calendar
day on which delivery occurred or the bank first made the statement or
substitute check available for the consumer's retrieval.
3. A bank must extend the consumer's time for submitting a claim
for a reasonable period if the consumer is prevented from submitting
his or her claim within 40 days because of extenuating circumstances.
Extenuating circumstances could include, for example, the extended
travel or illness of the consumer.
4. For purposes of determining the timeliness of a consumer's
actions, a consumer's claim if considered received on the banking day
on which the consumer's bank receives a complete claim in person or by
telephone or on the banking day on which the consumer's bank receives
a letter or e-mail containing a complete claim. (But see paragraphs
9--11 of this section for a discussion of time periods related to oral
claims that the bank requires to be put in writing.)
5. A consumer who makes an untimely claim would not be entitled to
recover his or her losses using the expedited recredit procedure.
However, he or she still could have rights under other law, such as a
warranty or indemnity claim under subpart D, a claim for an improper
charge to his or her account under U.C.C. 4--401, or a claim for
wrongful dishonor under U.C.C. 4--402.
{{8-31-04 p.7418.110-I}}
6. A consumer's claim must include the reason why the consumer
believes that his or her account was charged improperly or why he or
she has a warranty claim. A charge could be improper, for example, if
the bank charged the consumer's account for an amount different than
the consumer believes he or she authorized or charged the consumer more
than once for the same check, or if the check in question was a forgery
or otherwise fraudulent.
7. A consumer also must provide a reason why production of the
original check or a sufficient copy is necessary to determine the
validity of the claim identified by the consumer. For example, if the
consumer believed that the bank charged his or her account for the
wrong amount, the original check might be necessary to prove this claim
if the amount of the substitute check were illegible. Similarly, if the
consumer believed that his or her signature had been forged, the
original check might be necessary to confirm the forgery if, for
example, pen pressure or similar analysis were necessary to determine
the genuineness of the signature.
8. The information that the consumer is required to provide under
§ 229.54(b)(2)(iv) to facilitate the bank's investigation of the
claim could include, for example, a copy of the allegedly defective
substitute check or information related to that check, such as the
number, amount, and payee.
9. A bank may accept an expedited recredit claim in any form but
could in its discretion require the consumer to submit the claim in
writing. A bank that requires a recredit claim to be in writing must
inform the consumer of that requirement and provide a location to which
such a written claim should be sent. If the consumer attempts to make a
claim orally, the bank must inform the consumer at that time of the
written notice requirement. A bank that receives a timely oral claim
and then requires the consumer to submit the claim in writing may
require the consumer to submit the written claim within 10 business
days of the bank's receipt of the timely oral claim. If the
consumer's oral claim was timely and the consumer's written claim was
received within the 10-day period for submitting the claim in writing,
the consumer would satisfy the requirement of § 229.54(b)(1) to
submit his or her claim within 40 days, even if the bank received the
written claim after that 40-day period.
10. A bank may permit but may not require a consumer to submit a
written claim electronically.
11. If a bank requires a consumer to submit a claim in writing, the
bank may compute time periods for the bank's action on the claim from
the date that the bank received the written claim. Thus, if a consumer
called the bank to make an expedited recredit claim and the bank
required the consumer to submit the claim in writing, the time at which
the bank must take action on the claim would be determined based on the
date on which the bank received the written claim, not the date on
which the consumer made the oral claim.
12. Regardless of whether the consumer's communication with the
bank is oral or written, a consumer complaint that does not contain all
the elements described in § 229.54(b) is not a claim for purposes of
§ 229.54. If the consumer attempts to submit a claim but does not
provide all the required information, then the bank has a duty to
inform the consumer that the complaint does not constitute a claim
under § 229.54 and identify what information is missing.
C. 229.54(c) Action on Claims
1. If the bank has not determined whether or not the consumer's
claim is valid by the end of the 10th business day after the banking
day on which the consumer submitted the claim, the bank must by that
time recredit the consumer's account for the amount of the consumer's
loss, up to the lesser of the amount of the substitute check or $2,500,
plus interest if the account is an interest-bearing account. A bank
must provide the recredit pending investigation for each substitute
check for which the consumer submitted a claim, even if the consumer
submitted multiple substitute check claims in the same
communication.
{{8-31-04 p.7418.110-J}}
2. A bank that provides a recredit to the consumer, either
provisionally or after determining that the consumer's claim is valid,
may reverse the amount of the recredit if the bank later determines
that the claim in fact was not valid. A bank that reverses a recredit
also may reverse the amount of any interest that it has paid on the
previously recredited amount. A bank's time for reversing a recredit
may be limited by a statute of limitations.
D. 229.54(d) Availability of Recredit
1. The availability of a recredit provided by a bank under
§ 229.54(c) is governed solely by § 229.54(d) and therefore is not
subject to the availability provisions of subpart B. A bank generally
must make a recredit available for withdrawal no later than the start
of the business day after the banking day on which the bank provided
the recredit. However, a bank may delay the availability of up to the
first $2,500 that it provisionally recredits to a consumer account
under § 229.54(c)(3)(i) if (1) the account is a new account, (2)
without regard to the substitute check giving rise to the recredit
claim, the account has been repeatedly overdrawn during the six month
period ending on the date the bank received the claim, or (3) the bank
has reasonable cause to believe that the claim is fraudulent. These
first two exceptions are meant to operate in the same manner as the
corresponding new account and repeated overdraft exceptions in subpart
B, as described in § 229.13(a) and (d) and the commentary thereto
regarding application of the exceptions. When a recredit amount for
which a bank delays availability contains an interest component, that
component also is subject to the delay because it is part of the amount
recredited under § 229.54(c)(3)(i). However, interest continues to
accrue during the hold period.
2. Section 229.54(d)(2) describes the maximum period of time that a
bank may delay availability of a recredit provided under § 229.54(c).
The bank may delay availability under one of the three listed
exceptions until the business day after the banking day on which the
bank determines that the consumer's claim is valid or the 45th
calendar day after the banking day on which the bank received the
consumer's claim, whichever is earlier. The only portion of the
recredit that is subject to delay under § 229.54(d)(2) is the amount
that the bank recredits under § 229.54(c)(3)(i) (including the
interest component, if any) pending its investigation of a claim.
E. 229.54(e) Notices Relating to Consumer Expedited Recredit
Claims
1. A bank must notify a consumer of its action regarding a recredit
claim no later than the business day after the banking day that the
bank makes a recredit, determines a claim is not valid, or reverses a
recredit, as appropriate. As provided in § 229.58, a bank may provide
any notice required by this section by U.S. mail or by any other means
through which the consumer has agreed to receive account information.
2. A bank that denies the consumer's recredit claim must
demonstrate to the consumer that the substitute check was properly
charged or that the warranty claim was not valid, such as by explaining
the reason that the substitute check charge was proper or the
consumer's warranty claim was not valid. For example, if a consumer
has claimed that the bank charged its account for an improper amount,
the bank denying that claim must explain why it determined that the
charged amount was proper.
3. A bank denying a recredit claim also must provide the original
check or a sufficient copy, unless the bank is providing the claim
denial notice electronically and the consumer has agreed to receive
that type of information electronically. In that case, § 229.58
allows the bank instead to provide an image of the original check or an
image of the sufficient copy that the bank would have sent to the
consumer had the bank provided the notice by mail.
4. A bank that relies on information or documents in addition to
the original check or sufficient copy when denying a consumer expedited
recredit claim also must either provide such information or documents
to the consumer or inform the consumer that he or she may request
copies of such information or documents. This requirement does not
apply to a bank that relies only on the original check or a sufficient
copy to make its determination.
{{8-31-04 p.7418.110-K}}
5. Models C--22 through C--25 in appendix C contain model language
for each of three notices described in § 229.54(e). A bank may, but
is not required to, use the language listed in the appendix. The Check
21 Act does not provide banks that use these models with a safe harbor.
However, the Board has published these models to aid banks' efforts to
comply with § 229.54(e).
F. 229.54(f) Recredit Does Not Abrogate Other Liabilities
1. The amount that a consumer may recover under § 229.54 is
limited to the lesser of the amount of his or her loss or the amount of
the substitute check, plus interest on that amount if his or her
account earns interest. However, a consumer's total loss associated
with the substitute check could exceed that amount, and the consumer
could be entitled to additional damages under other law. For example,
if a consumer's loss exceeded the amount of the substitute check plus
interest and he or she had both a warranty and an indemnity claim with
respect to the substitute check, he or she would be entitled to
additional damages under § 229.53 of this subpart. Similarly, if a
consumer was charged bounced check fees as a result of an improperly
charged substitute check and could not recover all of those fees
because of the § 229.54's limitation on recovery, he or she could
attempt to recover additional amounts under U.C.C. 4--402.
XXXIV. § 229.55 Expedited Recredit Procedures for
Banks
A. 229.55(a) Circumstances Giving Rise to a Claim
1. This section allows a bank to make an expedited recredit claim
under two sets of circumstances: first, because it is obligated to
provide a recredit, either to the consumer or to another bank that is
obligated to provide a recredit in connection with the consumer's
claim; and second, because the bank detected a problem with the
substitute check that, if uncaught, could have given rise to a consumer
claim.
2. The loss giving rise to an interbank recredit claim could be the
recredit that the claimant bank provided directly to its consumer
customer under § 229.54 or a loss incurred because the claimant bank
was required to indemnify another bank that provided an expedited
recredit to either a consumer or a bank.
Examples.
a. A paying bank charged a consumer's account based on a
substitute check that contained a blurry image of a legible original
check, and the consumer whose account was charged made an expedited
recredit claim against the paying bank because the consumer suffered a
loss and needed the original check or a sufficient copy to determine
the validity of his or her claim. The paying bank would have a warranty
claim against the presenting bank that transferred the defective
substitute check to it and against any previous transferring bank(s)
that handled that substitute check or another paper or electronic
representation of the check. The paying bank therefore would meet each
of the requirements necessary to bring an interbank expedited recredit
claim.
b. Continuing with the example in paragraph a, if the presenting
bank determined that the paying bank's claim was valid and provided a
recredit, the presenting bank would have suffered a loss in the amount
of the recredit it provided and could, in turn, make an expedited
recredit claim against the bank that transferred the defective
substitute check to it.
B. 229.55(b) Procedures for Making Claims
1. An interbank recredit claim under this section must be brought
within 120 calendar days of the transaction giving rise to the claim.
For purposes of computing this period, the transaction giving rise to
the claim is the claimant bank's settlement for the substitute check
in question.
2. When estimating the amount of its loss, § 229.55(b)(2)(ii)
states that the claimant bank should include "interest if
applicable." The quoted phrase refers to any interest that the
claimant bank or a bank that the claimant bank indemnified paid to a
consumer who has an interest-bearing account in connection with an
expedited recredit under § 229.54.
{{8-31-04 p.7418.110-L}}
3. The information that the claimant bank is required to provide
under § 229.55(b)(2)(iv) to facilitate investigation of the claim
could include, for example, a copy of any written claim that a consumer
submitted under § 229.54 or any written record the bank may have of a
claim the consumer submitted orally. The information also could include
a copy of the defective substitute check or information relating to
that check, such as the number, amount, and payee of the check.
However, a claimant bank that provides a copy of the substitute check
must take reasonable steps to ensure that the copy is not mistaken for
legal equivalent of the original check or handled for forward
collection or return.
4. The indemnifying bank's right to require a claimant bank to
submit a claim in writing and the computation of time from the date of
the written submission parallel the corresponding provision in the
consumer recredit section (§ 229.54(b)(3)). However, the indemnifying
bank also may require the claimant bank to submit a copy of the written
or electronic claim submitted by the consumer under that section, if
any.
C. 229.55(c) Action on Claims
1. An indemnifying bank that responds to an interbank expedited
recredit claim by providing the original check or a sufficient copy of
the original check need not demonstrate why that claim or the
underlying consumer expedited recredit claim is or is not valid.
XXXV. § 229.56 Liability
A. 229.56(a) Measure of Damages
1. In general, a person's recovery under this section is limited
to the amount of the loss up to the amount of the substitute check that
is the subject of the claim, plus interest and expenses (including
costs and reasonable attorney's fees and other expenses of
representation) related to that substitute check. However, a person
that is entitled to an indemnity under § 229.53 because of a breach
of a substitute check warranty also may recover under § 229.53 any
losses proximately caused by the warranty breach, including interest,
costs, wrongfully-charged fees imposed as a result of the warranty
breach, reasonable attorney's fees, and other expenses of
representation.
2. A reconverting bank also may be liable under § 229.38 for
damages associated with the illegibility of indorsements applied to
substitute checks if that illegibility results because the reduction of
the original check image and its placement on the substitute check
shifted a previously-applied indorsement that, when applied, complied
with appendix D. For more detailed discussion of this topic, see
§ 229.38 and the accompanying commentary.
B. 229.56(b) Timeliness of Action
1. A bank's delay beyond the time limits prescribed or permitted
by any provision of subpart D is excused if the delay is caused by
certain circumstances beyond the bank's control. This parallels the
standard of U.C.C. 4--109(b).
C. 229.56(c) Jurisdiction
1. The Check 21 Act confers subject matter jurisdiction on courts
of competent jurisdiction and provides a time limit for civil actions
for violations of subpart D.
D. 229.56(d) Notice of claims
1. This paragraph is designed to adopt the notice of claim
provisions of U.C.C. 4--207(d) and 4--208(e), with an added provision
that a timely § 229.54 expedited recredit claim satisfies the
generally-applicable notice requirement. The time limit described in
this paragraph applies only to notices of warranty and indemnity
claims. As provided in § 229.56(c), all actions under § 229.56 must
be brought within one year of the date that the cause of action
accrues.
{{12-30-05 p.7418.110-M}}
XXXVI. Consumer Awareness
A. 229.57(a) General Disclosure Requirement and Content
1. A bank must provide the disclosure required by § 229.57 under
two circumstances. First, each bank must provide the disclosure to each
of its consumer customers who receives paid checks with his or her
account statement. This requirement does not apply if the bank provides
with the account statement something other than paid original checks,
paid substitute checks, or a combination thereof. For example, this
requirement would not apply if a bank provided with the account
statement only a document that contained multiple check images per
page. Second, a bank also must provide the disclosure when it (a)
provides a substitute check to a consumer in response to that
consumer's request for a check or check copy or (b) returns a
substitute check to a consumer depositor. A bank must provide the
disclosure each time it provides a substitute check to a consumer on an
occasional basis, regardless of whether the bank previously provided
the disclosure to that consumer.
2. A bank may, but is not required to, use the model disclosure in
appendix C--5A to satisfy the disclosure content requirements of this
section. A bank that uses the model language is deemed to comply with
the disclosure content requirement(s) for which it uses the model
language, provided the information in the disclosure accurately
describes the bank's policies and practices. A bank also may include
in its disclosure additional information relating to substitute checks
that is not required by this section.
3. A bank may, by agreement or at the consumer's request, provide
the disclosure required by this section in a language other than
English, provided that the bank makes a complete English notice
available at the consumer's request.
B. 229.57(b) Distribution
1. A consumer may request a check or a copy of a check on an
occasional basis, such as to prove that he or she made a particular
payment. A bank that responds to the consumer's request by providing a
substitute check must provide the required disclosure at the time of
the consumer's request if feasible. Otherwise, the bank must provide
the disclosure no later than the time at which the bank provides a
substitute check in response to the consumer's request. It would not
be feasible for a bank to provide notice to the consumer at the time of
the request if, for example, the bank did not know at the time of the
request whether it would provide a substitute check in response to that
request, regardless of the form of the consumer's request. It also
would not be feasible for a bank to provide notice at the time of the
request if the consumer's request was mailed to the bank or made by
telephone, even if the bank knew when it received the request that it
would provide a substitute check in response. A bank's provision to
the consumer of something other a substitute check, such as a photocopy
of a check or a statement containing images of multiple substitute
checks per page, does not trigger the notice requirement.
2. A consumer who does not routinely receive paid checks might
receive a returned substitute check. For example, a consumer deposits
an original check that is payable to him or her into his or her deposit
account. The paying bank returns the check unpaid and the depositary
bank returns the check to the depositor in the form of a substitute
check. A depositary bank that provides a returned substitute check to a
consumer depositor must provide the substitute check disclosure at that
time.
XXXVII. Variation by Agreement
Section 229.60 provides that banks involved in an interbank
expedited recredit claim under § 229.55 may vary the terms of that
section by agreement, but otherwise no person may vary the terms of
subpart D by agreement. A bank's decision to provide more generous
protections for consumers than this subpart requires, such as by
providing consumers additional time to submit expedited claims under
§ 229.54 under non-exigent circumstances, would not be a variation
prohibited under § 229.60.
{{12-30-05 p.7418.110-N}}
[Codified to 12 C.F.R. Part 229, Appendix E]
[Appendix E amended at 53 Fed. Reg. 31296, August 18, 1988,
effective September 1, 1988; 54 Fed. Reg. 32047, August 4, 1989,
effective February 1, 1990, except the amendment to section 229.36(e),
which is effective February 1, 1991; 55 Fed. Reg. 21856, May 30, 1990,
effective May 22, 1990; 55 Fed. Reg. 50818, December 11, 1990,
effective September 1, 1990; 56 Fed. Reg. 7801, February 26, 1991,
effective September 1, 1990; 57 Fed. Reg. 3280, January 29, 1992,
effective January 15, 1992; 57 Fed. Reg. 46973, October 14, 1992,
effective January 3, 1994; 58 Fed. Reg. 2, January 4, 1993, effective
January 5, 1993; 60 Fed. Reg. 51672, October 3, 1995, effective
November 2, 1995; 62 Fed. Reg. 13816, March 24, 1997, effective April
28, 1997; 68 Fed. Reg. 52078, September 2, 2003, effective November 1,
2003; 69 Fed. Reg. 47317, August 4, 2004, effective October 28, 2004,
except for model form C--5A, in Appendix C, which is effective on
January 1, 2006; 70 Fed. Reg. 71225, November 28, 2005, effective July
1, 2006]
Appendix F to Part 229--Official Board Interpretations;
Preemption Determinations
Uniform Commercial Code, Section 4–213(5)
Section 4--213(5) of the Uniform Commercial Code ("U.C.C.")
provides that money deposited in a bank is available for withdrawal as
of right at the opening of business of the banking day after deposit.
Although the language "deposited in a bank" is unclear, arguably
it is broader than the language "made in person to an employee of
the depositary bank", which conditions the next-day availability of
cash under Regulation CC
(§ 229.10(a)(1)). Under
Regulation CC, deposits of cash that are not made in person to an
employee of the depositary bank must be made available by the second
business day after the banking day of deposit (§ 229.10(a)(2)).
Therefore, this provision of the U.C.C. may call for the availability
of certain cash deposits in a shorter time than provided in Regulation
CC.
This provision of the U.C.C., however, is subject to section
4--103(1), which provides, in part, that "the effect of the
provisions of this Article may be varied by agreement *** ." (The
Regulation CC funds availability requirements may not be varied by
agreement.) U.C.C. section 4--213(5) supersedes the Regulation CC
provision in § 229.10(a)(2), but a depositary bank may not agree with
its customer under section 4--103(1) of the Code to extend availability
beyond the time periods provided in § 229.10(a) of Regulation CC.
California
Background
The Board has been requested, in accordance with
§ 229.20(d) of Regulation CC
(12 CFR Part 229), to determine whether the Expedited Funds
Availability Act (the "EFA Act") and subpart B (and in connection
therewith, subpart A) of Regulation CC preempt the provisions of
California law concerning availability of funds. This preemption
determination specifies those provisions of the California funds
availability law that supersede the Act and Regulation CC. (See also
the Board's preemption determination regarding the Uniform Commercial
Code, section 4--213(5), pertaining to availability of cash deposits.)
California has four separate sets of regulations establishing
maximum availability schedules. The regulations applicable to
commercial banks and branches of foreign banks located in California
(Cal. Admin. Code tit. 10, §§ 10.190401--10.190402) were
promulgatted by the Superintendent of Banks. The regulations applicable
to savings banks and savings and loan associations (Cal. Admin. Code
tit. 10, §§ 106.200--106.202) were adopted by the Savings and Loan
Commissioner. The regulations applicable to credit unions (Cal. Admin.
Code tit. 10, section 901) and to industrial loan companies (Cal.
Admin. Code tit. 10, section 1101) were adopted by the Commissioner of
Corporations.
{{4-28-00 p.7418.111}}
All the regulations were adopted pursuant to California Financial
Code § 866.5 and California Commercial Code section 4213(4)(a), under
which the appropriate state regulatory agency for each depository
institution must issue administrative regulations to define a
reasonable time for permitting customers to draw on items received for
deposit in the customer's account. California Financial Code section
867 also established availability periods for funds deposited by
cashier's check, certified check, teller's check, or depository check
under certain circumstances. Finally, California Financial Code
§ 866.2 establishes disclosure requirements.
The Board's determination with respect to these California laws and
regulations governing the funds availability requirements applicable to
depository institutions in California are as follows:
Commercial Banks and Branches of Foreign Banks Coverage
The California State Banking Department regulations, which apply to
California State commercial banks, California national banks, and
California branch offices of foreign banks, provide that a depositary
bank shall make funds deposited into a deposit account available for
withdrawal as provided in Regulation CC with certain exceptions. The
funds availability schedules in Regulation CC apply only to
"accounts" as defined in Regulation CC, which generally consist
of transaction accounts. The California funds availability law and
regulations apply to accounts as defined by Regulation CC as well as
savings accounts (other than time accounts), as defined in the Board's
Regulation D (12 CFR 204.2(d)).
(Note, however, that under
§ 229.19(e) of Regulation
CC, Holds on other funds, the federal availability schedules
may apply to savings, time, and other accounts not defined as
"accounts" under Regulation CC in certain circumstances.)
Availability schedules
Temporary schedule. Regulation CC provides that, until
September 1, 1990, nonlocal checks must be made available for
withdrawal by the seventh business day after the banking day of
deposit, except for certain nonlocal checks listed in appendix B--1,
which must be made available within a shorter time (by the fifth
business day following deposit for those California checks listed).
Under the temporary schedule in the California regulations, a
depositary bank with a four-digit routing symbol of 1210 ("1210
bank") or of 1220 ("1220 bank") that receives for deposit a
check drawn on a nonlocal, in-state commercial bank or foreign bank
branch 1
must make the funds available for withdrawal by the fourth business day
after the day of deposit. The California regulations provide that 1210
and 1220 banks must make deposited checks drawn on nonlocal in-state
thrifts (defined as savings and loan associations, savings banks, and
credit unions) available by the fifth business day after deposit, in
addition, California law provides that all other depositary banks must
make deposited checks drawn on a nonlocal in-state commercial bank or
foreign bank branch available by the fifth business day after deposit
and checks drawn on nonlocal in-state thrifts available by the sixth
business day after deposit. To the extent that these schedules provide
for shorter holds than Regulation CC and its appendix B--1, the state
schedules supersede the federal
schedules. 2
For example, the California four-day schedule that applies to checks
drawn on in-state nonlocal commercial banks or foreign
{{4-28-00 p.7418.112}}bank branches and
deposited in a 1210 or 1220 bank would be shorter than and would
supersede the federal schedules.
The California regulations do not specify whether the state
schedules apply to deposits of checks at nonproprietary ATMs. Under
the temporary schedules in Regulation CC, deposits at nonproprietary
ATMs must be made available for withdrawal by the seventh business day
following deposit. To the extent that the California schedules provide
for shorter availability for deposits at nonproprietary ATMs, they
would supersede the temporary schedule in Regulation CC for deposits at
nonproprietary ATMs specified in § 229.11(d).
Permanent schedule. Regulation CC provides that, as of
September 1, 1990, nonlocal checks must be made available for
withdrawal by the fifth business day after the banking day of deposit.
Under the permanent schedule in the California regulations, a
depositary bank with a four-digit routing symbol of 1210 or of 1220
that receives for deposit a check drawn on a nonlocal, in-state
commercial bank or foreign bank branch must make the funds available
for withdrawal by the fourth business day after the day of deposit.
These state schedules provide for shorter hold periods than and thus
supersede the federal schedules.
Second-day availability. Section 867 of the California
Financial Code requires depository institutions to make funds deposited
by cashier's check, teller's check, certified check, or depository
check available for withdrawal on the second business day following
deposit, if certain conditions are met. The Regulation CC next-day
availability requirement for cashier's checks and teller's checks
applies only to those checks issued to a customer of the bank or
acquired from the bank for remittance purposes. To the extent that the
state second-day availability requirement applies to cashier's and
teller's checks issued to a non-customer of the bank for other than
remittance purposes, the state two-day requirement supersedes the
federal local and nonlocal schedules.
Availability at start of day. The California regulations
do not specify when during the day funds must be made available for
withdrawal. Section 229.19(b)
of Regulation CC provides that funds must be made available at the
start of the business day. In those cases where federal and state law
provide for holds for the same number of days, to the extent that the
California regulations allow funds to be made available later in the
day than does Regulation CC, the federal law would preempt state law.
Exceptions to the availability schedules. Under the state
preemption standards of Regulation CC (see
§ 229.20(c) and accompanying
Commentary), for deposits subject to the state availability schedules,
a state exception may be used to extend the state availability schedule
up to the federal availability schedule. Once the deposit is held up to
the federal availability schedule limit under a state exception, the
depositary bank may further extend the hold under any federal exception
that can be applied to the deposit. If no state exceptions exist, then
no exceptions holds may be placed on deposits covered by state
schedules. Thus, to the extent that California law provides for
exceptions to the California schedules that supersede Regulation CC,
those exceptions may be applied in order to extend the state
availability schedules up to the federal availability schedules or such
later time as is permitted by a federal exception.
Disclosures
California law (Cal. Fin. Code § 866.2) requires depository
institutions to provide written disclosures of their general
availability policies to potential customers prior to opening any
deposit account. The law also requires that preprinted deposit slips
and ATM deposit envelopes contain a conspicuous summary of the general
policy. Finally, the law requires depository institutions to provide
specific notice of the time the customer may withdraw funds deposited
by check or similar instrument into a deposit account if the funds are
not available for immediate withdrawal.
Section 229.20(c)(2) of Regulation CC provides that inconsistency
may exist when a state law provides for disclosures or notices
concerning funds availability relating to accounts. California
Financial Code § 866.2 requires disclosures that differ from those
required by Regulation CC and, therefore, is preempted to the extent
that it applies to "accounts" as
{{4-28-00 p.7418.113}}defined in
Regulation CC. The state law continues to apply to savings accounts and
other accounts not governed by Regulation CC disclosure requirements.
Savings Institutions
Coverage
The California Department of Savings and Loan regulations, which
apply to California savings and loan associations and California
savings banks, provide that a depositary bank shall make funds
deposited into a transaction or non-transaction account available for
withdrawal as provided in Regulation CC. The funds availability
schedules in Regulation CC apply only to "accounts" as defined in
Regulation CC, which generally consist of transaction accounts. The
California funds availability law and regulations apply to accounts as
defined by Regulation CC as well as savings accounts as defined in the
Board's Regulation D (12 CFR
204.2(d)). (Note, however, that under
§ 229.19(e) of Regulation
CC, Holds on other funds, the federal availability schedules
may apply to savings, time, and other accounts not defined as
"accounts" under Regulation CC in certain circumstances.)
Availability Schedules
Second-day availability. Section 867 of the California
Financial Code requires depository institutions to make funds deposited
by cashier's check, teller's check, certified check, or depository
check available for withdrawal on the second business day following
deposit, if certain conditions are met. The Regulation CC next-day
availability requirement for cashier's checks and teller's checks
applies only to those checks issued to a customer of the bank or
acquired from the bank for remittance purposes. To the extent that the
state second-day availability requirement applies to cashier's and
teller's checks issued to a non-customer of the bank for other than
remittance purposes, the state two-day requirement supersedes the
federal local and nonlocal schedules.
Temporary and permanent schedules. Other than the
provisions of section 867 discussed above, California law incorporates
the Regulation CC availability requirements with respect to deposits to
accounts covered by Regulation CC. Because the state requirements are
consistent with the federal requirements, the California regulation is
not preempted by, nor does it supersede, the federal law.
Disclosures
California law (Cal. Fin. Code § 866.2) requires depository
institutions to provide written disclosures of their general
availability policies to potential customers prior to opening any
deposit account. The law also requires that preprinted deposit slips
and ATM deposit envelopes contain a conspicuous summary of the general
policy. Finally, the law requires depository institutions to provide
specific notice of the time the customer may withdraw funds deposited
by check or similar instrument into a deposit account if the funds are
not available for immediate withdrawal.
Section 229.20(c)(2) of
Regulation CC provides that inconsistency may exist when a state law
provides for disclosures or notices concerning funds availability
relating to accounts. To the extent that California Financial Code
§ 866.2 requires disclosures that differ from those required by
Regulation CC and apply to "accounts" as defined in Regulation CC
(generally, transaction accounts), the California law is preempted by
Regulation CC.
The Department of Savings and Loan regulations provide that for
those non-transaction accounts covered by state law but not by federal
law, disclosures in accordance with Regulation CC will be deemed to
comply with the state law disclosure requirements. To the extent that
the Department of Savings and Loan regulations permit reliance on
Regulation CC disclosures for transaction accounts and to the extent
the state regulations survive the preemption of California Financial
Code § 866.2, they are not preempted by, nor do they supersede, the
federal law. The state law continues to apply to savings accounts and
other non-transaction accounts not governed by Regulation CC disclosure
requirements.
{{4-28-00 p.7418.114}}
Credit Unions and Industrial Loan Companies
Each credit union and federally-insured industrial loan company that
maintains an office in California for the acceptance of deposits must
make funds deposited by check available for withdrawal in accordance
with the following table:
| Availability
|
IndustrialCreditUnion |
LoanCompany |
|---|
| $100 or less
checks; U.S. Treasury checks; state/local gov't checks. |
1st day
|
1st day |
| On us checks; cashier's/ certifies/teller's/ depository
checks. |
2nd day |
2nd day |
| In-state checks |
6th
day |
6th day |
| Out-of-state checks |
10th day
|
12th day
| |
|---|
Note: These time periods are stated in terms of
availability for withdrawal not later than the Xth business day
following the banking day of deposit to facilitate comparison with
Regulation CC. State regulations are stated in terms of availability at
the start of the business day subsequent to the number of days
specified in the regulation.
Coverage
The California law and regulations govern the availability of funds
to "demand deposits, negotiable order of withdrawal draft accounts,
savings deposits subject to automatic transfers, share draft accounts,
and all savings deposits and share accounts, other than time
deposits." (California Financial Code section 886(b)) The federal
preemption of state funds availability laws only applies to
"accounts" subject to Regulation CC, which generally includes
transaction accounts. Thus, the California funds availability
regulations continue to apply to deposits in savings and other accounts
(such as accounts in which the account-holder is another bank) that are
no "accounts" under Regulation CC. (Note, however, that under
§ 229.19(e) of Regulation
CC, Holds on other funds, the federal availability schedules
may apply to savings, time, and other accounts not defined as
"accounts" under Regulation CC in certain circumstances.)
The California law applies to any "Item" (California Financial
Code § 866.5 and California Commercial Code section 4213(4)(a)). The
California Commercial Code defines "item" to mean "any
instrument for the payment of money even though it is not negotiable
***" (Cal. Com. Code section 4104(g)). This term is broader in scope
than the definition of "check" in the Act and Regulation CC. The
Commissioner's regulations, however, define the term "item" to
include checks, negotiable orders of withdrawal, share drafts,
warrants, and money orders. As limited by the state regulations, the
state law applies only to instruments that are also "checks" as
defined in § 229.2(k) of
Regulation CC.
Connecticut
Background
The Board has been requested, in accordance with
§ 229.20(d) of Regulation CC
(12 CFR Part 229), to determine whether the Expedited Funds
Availability Act (the "Act") and subpart B (and in connection
therewith, subpart A) of Regulation CC, preempt provisions of
Connecticut law relating to the availability of funds. This preemption
determination specifies those provisions of the Connecticut funds
availability law that supersede the Act and Regulation CC. (See also
the Board's preemption determination regarding the Uniform Commercial
Code, section 4--213(5), pertaining to availability of cash deposits.)
In 1987, Connecticut amended its statute governing funds
availability (Conn. Gen. Stat. section 36--9v), which requires
Connecticut depository institutions to make funds deposited in a
checking, time, interest, or savings account available for withdrawal
with specified periods.
{{4-28-00 p.7418.115}}
Generally, the Connecticut statute, as amended, provides that items
deposited in a checking, time, interest, or savings account at a
depository institution must be available for withdrawal in accordance
with the following table:
|
Availability
|
|---|
| On us checks |
2nd day |
| In-state checks |
4th day
|
| Out-of-state checks |
6th day
|
Exceptions to the schedules are provided for items received for
deposit for the purpose of opening an account and for items that the
depositary bank has reason to believe will not clear. The Connecticut
statute also requires availability policy disclosures to depositors in
the form of written notices and notices posted conspicuously at each
branch.
Coverage
The Connecticut statute governs the availability of funds deposited
in savings and time accounts, as well as "accounts" as defined in
§ 229.2(a) of Regulation CC.
The federal preemption of state funds availability requirements only
applies to "accounts" subject to Regulation CC, which generally
consist of transaction accounts. Regulation CC does not affect the
Connecticut statute to the extent that the state law applies to
deposits in savings and other accounts (including transaction accounts
where the account holder is a bank, foreign bank or the U.S. Treasury)
that are not "accounts" under Regulation CC. (Note, however, that
under § 229.19(e) of
Regulation CC, Holds on other funds, the federal
availability schedules may apply to savings, time, and other accounts
not defined as "accounts" under Regulation CC, in certain
circumstances.)
The Connecticut statute applies to "items" deposited in
accounts. This term encompasses instruments that are not defined as
"checks" in Regulation CC (§ 229.2(k)), such as nonnegotiable
instruments, and are therefore not subject to Regulation CC's
provisions governing funds availability. Those items that are subject
to Connecticut law but are not subject to Regulation CC will continue
to be covered by the state availability schedules and exceptions.
Availability Schedules
Temporary schedule. Connecticut law provides that
certain checks that are nonlocal under Regulation CC must be available
in a shorter time (sixth business day after deposit for checks payable
by depository institutions not located in Connecticut) than under the
federal regulation (seventh business day after deposit under the
temporary schedule for nonlocal checks). Accordingly, the Connecticut
law supersedes Regulation CC with respect to nonlocal checks (other
than checks covered by appendix B--1) deposited in "accounts"
until the federal permanent availability schedules take effect on
September 1, 1990.
The Connecticut statute does not specify whether it applies to
deposits of checks at nonproprietary ATMs. Under the temporary schedule
in Regulation CC, deposits at nonproprietary ATMs must be made
available for withdrawal at the start of the seventh business day after
deposit. To the extent that the Connecticut schedules provide for
shorter availability for deposits at nonproprietary ATMs, they would
supersede the temporary schedule in Regulation CC for deposits at
nonproprietary ATMs specified in
§ 229.11(d).
Exceptions to the availability schedule. The
Connecticut law provides exceptions for items received for deposit for
the purpose of opening new accounts and for items that the depositary
bank has reason to believe will not clear. In all cases where the
federal availability schedule preempts the state schedule, only the
federal exceptions will apply. For deposits that are covered by the
state availability schedule (e.g., nonlocal out-of-state checks under
the temporary schedule), the state exceptions may be used to extend the
state availability schedule (of six business days) to meet the federal
availability schedule (of seven business days). Once the deposit is
held up to the federal availability schedule limit under a state
exception, the depositary bank may further extend the hold under any
federal exception that can be applied to the deposit. Any time a
depositary bank invokes an exception to extend a hold beyond the time
periods otherwise permitted by law, it must
{{4-28-00 p.7418.116}}give notice of
the extended hold to its customer, in accordance with
§ 229.13(g) of Regulation
CC.
Disclosures
The Connecticut statute (Conn. Gen. Stat. section 36--9v(b))
requires written notice to depositors of an institution's check hold
policy and requires a notice of the policy to be posted in each branch.
Regulation CC preempts state disclosure requirements concerning
funds availability that relate to "accounts" that are
inconsistent with the federal requirements. The state requirements are
different from, and therefore inconsistent with, the federal disclosure
rules. (§ 229.20(c)(2)).
Thus, the Connecticut statute is preempted by Regulation CC to the
extent that these disclosure provisions apply to "accounts" as
defined by Regulation CC. The Connecticut disclosure rules would
continue to apply to accounts, such as savings and time accounts, not
governed by the Regulation CC disclosure requirements.
Illinois
The Board has been requested, in accordance with
§ 229.20(d) of Regulation CC
(12 CFR Part 229), to determine whether the Expedited Funds
Availability Act and subpart B, and, in connection therewith, subpart
A, of Regulation CC, preempt provisions of Illinois law relating to the
availability of funds. Section 4-213(5) of the Uniform Commercial Code
as adopted in Illinois (Illinois Revised Statutes chapter 26, paragraph
4--213(5), enacted July 26, 1988) provides that:
Time periods after which deposits must be available for
withdrawal shall be determined by the provisions of the federal
Expedited Funds Availability Act (Title VI of the Competitive Equality
Banking Act of 1987) and the regulations promulgated by the Federal
Reserve Board for the implementation of that Act.
Section 4--213(5) of the Illinois law does not supersede Regulation
CC; and, because this provision of Illinois law does not permit funds
to be made available for withdrawal in a longer period of time than
required under the Act and Regulation, it is not preempted by
Regulation CC.
Maine
Background
The Board has been requested, in accordance with
§ 229.20(d) of Regulation CC
(12 CFR Part 229), to determine whether the Expedited Funds
Availability Act (the "Act") and subpart B (and in connection
therewith, subpart A) of Regulation CC, preempt the provisions of Maine
law concerning the availability of funds. This preemption determination
addresses the relation of the Act and Regulation CC to the Maine funds
availability law. (See also the Board's preemption determination
regarding the Uniform Commercial Code, section 4--213(5), pertaining to
availability of cash deposits.)
In 1985, Maine adopted a statute governing funds availability (Title
9--B MRSA section 241(5)), which requires Maine financial institutions
to make funds deposited in a transaction account, savings account, or
time account available for withdrawal within a reasonable period. The
Maine statute gives the Superintendent of Banking for the State of
Maine the authority to promulgate rules setting forth time limitations
and disclosure requirements governing funds availability.
The Superintendent of Banking issued regulations implementing the
Maine funds availability statute, effective July 1, 1987 (Regulation
18(IV)), and adopted amendments to this regulation, effective September
1, 1988. Under the revised regulation, funds deposited to any deposit
account in a Maine financial institution must be made available for
withdrawal in accordance with the Act and Regulation CC (Regulation
18--IV(A)(1)). The state regulation provides that an institution's
funds availability policies for accounts subject to Regulation CC be
disclosed in a manner consistent with the Regulation CC requirements.
Funds availability policies for accounts not subject to Regulation CC
must be disclosed in accordance with the state regulation (Regulation
18--IV(A)(2)).
{{4-28-00 p.7418.117}}
Coverage
The Maine law and regulation govern the availability of funds to any
deposit account, as defined in the Board's Regulation D
(12 CFR 204.2(a)). This coverage
is broader than the "accounts" covered in Regulation CC. The
Maine law continues to apply to all deposit accounts, including those
that are not accounts under Regulation CC. (Note, however, that under
§ 229.19(e) of Regulation
CC, Holds on other funds, the federal availability schedules
may apply to savings, time, and other accounts not defined as
"accounts" under Regulation CC, in certain circumstances.)
Availability Schedules and Disclosures
The Maine regulation incorporates the Regulation CC availability and
disclosure requirements with respect to deposits to accounts covered by
Regulation CC. Because the state requirements are consistent with the
federal requirements, the Maine regulation is not preempted by, nor
does it supersede, the federal law.
Massachusetts
Background
The Board has been requested, in accordance with
§ 229.20(d) of Regulation CC
(12 CFR Part 229), to determine whether the Expedited Funds
Availability Act (the "Act") and subpart B (and in connection
therewith, subpart A) of Regulation CC, preempt provisions of
Massachusetts law relating to the availability of funds. This
preemption determination addresses the relationship of the Act and
Regulation CC to the Massachusetts funds availability law. (See also
the Board's preemption determination regarding the Uniform Commercial
Code, section 4--213(5), pertaining to availability of cash deposits.)
In 1988, Massachusetts amended its statute governing funds
availability (Mass. Gen. L. ch. 167D, section 35), to require
Massachusetts banking institutions to make funds available for
withdrawal and disclose their availability policies in accordance with
the Act and Regulation CC. The Massachusetts law, however, provides
that "local originating depository institution" is to be defined
as any originating depository institution located in the Commonwealth.
Coverage
The Massachusetts statute governs the availability of funds
deposited in "any demand deposit, negotiable order of withdrawal
account, savings deposit, share account or other asset account."
Regulation CC applies only to "accounts" as defined in
§ 229.2(a). Regulation CC
does not affect the Massachusetts statute to the extent that the state
law applies to deposits in savings and other accounts (including
transaction accounts where the account holder is a bank, foreign bank,
or the U.S. Treasury) that are not "accounts" under Regulation
CC. (Note, however, that under
§ 229.19(e) of Regulation
CC, Holds on other funds, the federal availability schedules
may apply to savings, time, and other accounts not defined as
"accounts" under Regulation CC, in certain circumstances.)
Availability Schedules
The Massachusetts definition of "local originating depository
institution" (local paying bank in Regulation CC terminology)
requires that in-state checks that are nonlocal checks under Regulation
CC be made available in accordance with the Regulation CC local
schedule. The Massachusetts law supersedes Regulation CC under the
temporary and permanent schedule with respect to nonlocal checks
payable by banks located in Massachusetts and deposited into
"accounts." Regulation CC preempts the Massachusetts law,
however, to the extent the state law does not define banks located
outside of Massachusetts, but in the same check processing region as
the paying bank, as "local originating depository institutions."
Disclosures
The Massachusetts regulation incorporates the Regulation CC
disclosure requirements with respect to both accounts covered by
Regulation CC and savings and other accounts not governed by the
federal regulation. Because the state requirements are consistent
with
{{4-28-00 p.7418.118}}the federal
requirements, the Massachusetts regulation is not preempted by, nor
does it supersede, the federal law. The Massachusetts disclosure rules
would continue to apply to accounts not governed by the Regulation CC
disclosure requirements.
New Jersey
Background
The Board has been requested, in accordance with
§ 229.20(d) of Regulation CC
(12 CFR Part 229), to determine whether the Expedited Funds
Availability Act (the "Act") and subpart B (and in connection
therewith, subpart A) of Regulation CC preempt the provisions of New
Jersey law concerning disclosure of a bank's funds availability policy.
(See also the Board's preemption determination regarding the Uniform
Commercial Code, section 4--213(5), pertaining to availability of cash
deposits.)
New Jersey does not have a law or regulation establishing the
maximum time periods within which funds deposited by check or
electronic payment must be made available for withdrawal. New Jersey
does, however, have regulations concerning the disclosure of a banking
institution's availability policy (N.J.A.C. 3:1-15.1 et
seq.).
Disclosures
New Jersey law requires every banking institution (defined as any
state or federally chartered commercial bank, savings bank, or savings
and loan association) to provide written disclosure to all holders of
and applicants for deposit accounts which describes the institution's
funds availability policy. Institutions must also disclose to their
customers any significant changes to their availability policy.
Regulation CC preempts state disclosure requirements concerning
funds availability that relates to "accounts" that are
inconsistent with the federal requirements. The state requirements are
different from, and therefore inconsistent with, the federal disclosure
rules. (§ 229.20(c)(2)).
Thus, the New Jersey statute (N.J.A.C. sections 3.1--15.1 et
seq.) is preempted by Regulation CC to the extent that these
disclosure provisions apply to "accounts" as defined by
Regulation CC. The New Jersey disclosure rules would continue to apply
to other "deposit accounts," as defined by New Jersey law,
including money market accounts and savings accounts established by a
natural person for personal or family purposes, which are not governed
by the Regulation CC disclosure requirements.
New York
Background
The Board has been requested, in accordance with § 229.20(d) of
Regulation CC (12 CFR Part 229), to determine whether the Expedited
Funds Availability Act (the "Act") and subpart B (and in
connection therewith, subpart A) of Regulation CC, preempt the
provisions of New York law concerning the availability of funds. This
preemption determination addresses the relation of the Act and
Regulation CC to the New York funds availability law. (See also the
Board's preemption determination regarding the Uniform Commercial Code,
section 4--213(5), pertaining to availability of cash deposits.)
In 1983, the New York State Banking Department, pursuant to section
14--d of the New York Banking law, issued regulations requiring that
funds deposited in an account be made available for withdrawal within
specified time periods, and provided certain exceptions to those
availability schedules. Part 34 of the New York State Banking
Department's General Regulations established time frames within which
commercial banks, trust companies, and branches of foreign banks
("banks"); and savings banks, savings and loan associations, and
credit unions ("savings institutions") must make funds deposited
in customer accounts available for withdrawal.
The Banking Department amended Part 34, effective September 1, 1988,
generally to exclude accounts covered by Regulation CC from the scope
of the state regulation. Part 34.4(a)(2) and (b)(2) of the revised New
York rules, however, continue to apply to checks deposited to accounts,
as defined in Regulation CC. These provisions require that the proceeds
of nonlocal checks payable by a New York institution be made available
for withdrawal not later than the start of the fourth business day
following deposit, if deposited
{{4-28-00 p.7418.119}}in a bank, or the
fifth business day following deposit, if deposited in a savings
institution. The revised regulation also provides that, with respect to
savings accounts and time deposits, New York institutions could elect
to comply with either the state or federal availability and disclosure
requirements.
This preemption determination supersedes the determination issued by
the Board on August 18, 1988 (53 FR 32357 (August 24, 1988)).
Coverage
The New York law and regulation govern the availability of funds in
savings accounts and time deposits, as well as "accounts" as
defined in § 229.2(a) of
Regulation CC. The New York law continues to apply to deposits to
savings accounts and time deposits that are not accounts under
Regulation CC. (Note, however, that under
§ 229.19(e) of Regulation
CC, Hold on other funds, the federal availability schedules
may apply to savings, time, and other accounts not defined as
"accounts" under Regulation CC, in certain circumstances.)
The New York law and regulation apply to "items" deposited to
accounts. Part 34.3(e) defines "item" as "a check, negotiable
order of withdrawal or money order deposited into an account." The
Board interprets the definition of "item" in New York law to be
consistent with the definition of "check" in Regulation CC
(§ 229.2(k)).
Availability Schedules
The provisions of New York law governing the availability of
in-state nonlocal items provide for shorter hold than is provided under
Regulation CC, and supersede the federal availability requirements.
With the exception of these provisions, the New York regulation does
not apply to deposits to accounts covered by Regulation CC.
Temporary schedule. The time periods for the
availability of in-state nonlocal checks, contained in Part 34.4(a)(2)
and (b)(2), are shorter than the seventh business day availability
required for nonlocal checks under § 229.11(c) of Regulation CC,
although they are not necessarily shorter than the schedules for
nonlocal checks set forth in
§ 229.11(c)(2) and appendix
B--1 of Regulation CC. Thus, these state schedules supersede the
federal schedule to the extent that they apply to an item payable by a
New York bank or savings institution that is defined as a nonlocal
check under Regulation CC and the applicable state schedule is less
than the applicable schedule specified in § 229.11(c) and appendix
B--1.
Permanent schedule. The New York schedule for banks
supersedes the Regulation CC requirement in the permanent schedule,
effective September 1, 1990, that nonlocal checks be made available for
withdrawal by the start of the fifth business day following deposit, to
the extent that the in-state checks are defined as nonlocal under
Regulation CC, and the Regulation CC schedule for nonlocal checks is
not shortened under
§ 229.12(c)(2) and appendix
B--2 of Regulation CC. In addition, the New York schedule for savings
institutions supersedes the Regulation CC time period adjustment for
withdrawal by cash or similar means in the permanent schedule, to the
extent that the in-state checks are defined as nonlocal under
Regulation CC, and the Regulation CC schedule for nonlocal checks is
not shortened under § 229.12(c)(2) and appendix B--2.
Exceptions to the availability schedules. New York law
provides exceptions to the state availability schedules for large
deposits, new accounts, repeated overdrafters, doubtful collectibility,
foreign items, and emergency conditions (Part 34.4). The state
exceptions apply only with respect to deposits of in-state nonlocal
checks that are subject to the state availability schedule. For these
deposits, the depositary bank may invoke a state exception and place a
hold on the deposit up to the federal availability schedule limit for
that type of deposit. Once the federal availability schedule limit is
reached, the depositary bank may further extend the hold under any of
the federal exceptions that apply to that deposit. Any time a
depositary bank invokes an exception to extend a hold beyond the time
periods otherwise permitted by law, it must give notice of the extended
hold to its customer in accordance with § 229.12(g) of Regulation
CC.
{{4-28-00 p.7418.120}}
Disclosures
The revised New York regulation does not contain funds availability
disclosure requirements applicable to accounts subject to Regulation
CC.
Rhode Island
Background
The Board has been requested, in accordance with
§ 229.20(d) of Regulation CC
(12 CFR Part 229), to determine whether the Expedited Funds
Availability Act (the "Act") and subpart B (and in connection
therewith, subpart A) of Regulation CC, supersede provisions of Rhode
Island law relating to the availability of funds. This preemption
determination specifies those provisions in the Rhode Island funds
availability law that supersede the Act and Regulation CC. (See also
the Board's preemption determination regarding the Uniform Commercial
Code, section 4--213(5), pertaining to availability of cash deposits.)
In 1986, Rhode Island adopted a statute governing funds availability
(R.I. Gen. Laws tit. 6A, sections 4--601 through 4--608), which
requires Rhode Island depository institutions to make checks deposited
in a personal transaction account available for withdrawal within
certain specific periods. Commercial banks and thrift institutions
(mutual savings banks, savings banks, savings and loan institutions and
credit unions) must make funds available for withdrawal in accordance
with the following table:
|
Commercial banks |
Thriftinstitutions |
|---|
| Treasury checks,
Rhode Island Government checks, first-indorsed |
2nd |
2nd
|
| In-state cashier's checks less than $2,500 |
2nd |
2nd
|
| On-us checks |
2nd |
3rd |
| In-state clearinghouse
checks |
3rd |
4th |
| In-state nonclearinghouse checks
|
5th |
6th |
| 1st or 2nd Federal Reserve District checks
(out-of-state) |
7th |
7th |
| Other checks |
9th
|
10th
|
Note: These time periods are stated in terms of
availability for withdrawal not later than the Xth business day
following the banking day of deposit to facilitate comparison with
Regulation CC. State regulations are stated in terms of availability at
the start of the business day subsequent to the number of days
specified in the regulation.
The Rhode Island statute also provides restrictions and exceptions
to the schedules and requires institutions to make certain disclosures
to their customers.
Coverage
The Rhode Island statute governing the availability of funds
deposited in "personal transaction accounts," a term not defined
in the statute. The federal law would continue to apply to
"accounts," as defined in
§ 229.2(a), that are not
"personal transaction accounts."
The Rhode Island statute applies to "items," defined as
checks, negotiable orders of withdrawal, or money orders. The Board
interprets the definition of item to be consistent with the definition
of "check" in Regulation CC (§ 229.2(k)).
Availability Schedules
Temporary schedule. Rhode Island law requires
availability for certain checks in the same time as does Regulation CC.
Thus, in these instances, the federal law does not preempt the state
law. Rhode Island law requires commercial banks (but not thrift
institutions) to make checks payable by a depositary institution that
uses the same in-state clearing facility as the depositary bank
available for withdrawal on the third business day following the day of
the deposit. This is the same time period contained in Regulation CC
for local checks payable by a bank that is a member of the same local
clearinghouse as the depositary bank. (The Board views the definition
of "the same in-state clearing facility" as having the same
meaning as the term "the same check clearinghouse association" in
the
{{4-28-00 p.7418.121}}federal law's
provision that allows banks to limit the customer's ability to withdraw
cash on the third business day if the local check being deposited is
payable by a bank that is not a member of the same local clearinghouse
as the depositary bank.) Since the Rhode Island law and the federal law
both require the funds to be made available no later than the third
business day, the state law is not preempted by the federal law.
The Rhode Island law also requires commercial banks and savings
institutions to make checks payable by a depository institution located
in the First or Second Federal Reserve District (outside of Rhode
Island) available on the seventh business day following deposit. To the
extent that this provision applies to checks payable by institutions
located outside the Boston check processing region, it provides for
availability in the same time as required for nonlocal checks under the
temporary federal schedule, and thus is not preempted by the federal
law.
The Rhode Island statute does not specify whether it applies to
deposits of checks at nonproprietary ATMs. Under the temporary schedule
in Regulation CC, deposits at nonproprietary ATMs must be made
available for withdrawal at the opening of the seventh business day
after deposit. To the extent that the Rhode Island schedules provide
for shorter availability for deposits at nonproprietary ATMs, they
would supersede the temporary schedule.
Exceptions to the availability schedules. The Rhode
Island law contains exceptions for reason to doubt collectibility or
ability of the depositor to reimburse the depositary bank, for new
accounts, for large checks, and for foreign checks. In all cases where
the federal availability schedule preempts the state schedule, only the
federal exceptions will apply. For deposits that are covered by the
state availability schedule, the state exceptions may be used to extend
the state availability schedule to meet the federal availability
schedule. Once the deposit is held up to the federal availability
schedule limit under a state exception, the depositary bank may further
extend the hold under any federal exception that can be applied to the
deposit. Thus, if the state and federal availability schedules are the
same for a particular deposit, both a state and a federal exception
must be applicable to that deposit in order to extend the hold beyond
the schedule. Any time a depositary bank invokes an exception to extend
a hold beyond the time periods otherwise permitted by law, it must give
notice of the extended hold to its customer, in accordance with
§ 229.13(g) of Regulation
CC.
Business day/banking day. The Rhode Island statute
defines "business day" as excluding Saturday, Sunday and legal
holidays. This definition is preempted by the Regulation CC definitions
of "business day" and "banking day". Thus, for determining
the permissible hold under the Rhode Island schedules that supersede
the Regulation CC schedule, deposits are considered made on the
specified number of "business days" following the "banking
day" of deposit.
Disclosures
The Rhode Island statute requires written notice to depositors of an
institution's check hold policy and requires a notice on deposit slips.
Regulation CC preempts state disclosure requirements concerning funds
availability that relate to accounts that are inconsistent with the
federal requirements. The state requirements are different from, and
therefore inconsistent with, the federal rules. (§ 229.20(c)(2))
Thus, Regulation CC preempts the Rhode Island disclosure requirements
concerning funds availability.
WISCONSIN
Background
The Board has been requested, in accordance with
§ 229.20(d) of Regulation CC
(12 CFR Part 229), to determine whether the Expedited Funds
Availability Act (the Act) and subpart B (and in connection therewith,
subpart A) of Regulation CC preempt the provisions of Wisconsin law
concerning availability of funds. This preemption determination
specifies those provisions of the Wisconsin funds availability law that
are not preempted by
{{4-28-00 p.7418.122}}the Act and
Regulation CC. (See also the Board's preemption determination regarding
the Uniform Commercial Code, section 4--213(5), pertaining to
availability of cash deposits.)
Wisconsin Statutes sections 404.213(4m), 215.136, and 186.117
require Wisconsin banks, savings and loan associations, and credit
unions, respectively, to make funds deposited in accounts available for
withdrawal within specified time frames. Generally, checks drawn on the
U. S. Treasury, the State of Wisconsin, or on a local government
located in Wisconsin must be made available for withdrawal by the
second day following deposit. (The law governing commercial banks
determines availability based on banking day; the laws governing
savings and loan associations and credit unions determine availability
based on business days.) In-state and out-of-state checks must be made
available for withdrawal within five days and eight days following
deposit, respectively. Exceptions are provided for new accounts and
reason to doubt collectibility. In addition, Wisconsin Statutes section
404.103 permits commercial banks to vary these availability
requirements by agreement.
Coverage
Wisconsin law defines "account", with respect to the rules
governing commercial banks, as "any account with a bank and includes
a checking, time, interest or savings account" (Wisconsin Statutes
section 404.104(1)(a)). The statutes relating to the funds availability
requirements applicable to savings and loan associations and credit
unions do not define the term "account." The federal preemption
of state funds availability requirements applies only to
"accounts" subject to Regulation CC, which generally consist of
transaction accounts. Regulation CC does not affect the Wisconsin law
to the extent that the state law applies to deposits in savings, time,
and other accounts (including transaction accounts where the account
holder is a bank, foreign bank, or the U. S. Treasury) that are not
"accounts" under Regulation CC. (Note, however, that under
§ 229.19(e) of Regulation
CC, Holds on Other Funds, the federal availability schedules
may apply to savings, time, and other accounts not defined as
"accounts" under Regulation CC in certain circumstances.)
The Wisconsin statute applies to "items" deposited in
accounts. This term encompasses instruments that are not defined as
"checks" in Regulation CC
(§ 229.2(k)) such as
nonnegotiable instruments, and are therefore not subject to Regulation
CC's provisions governing funds availability. Those items that are
subject to Wisconsin law but are not subject to Regulation CC will
continue to be covered by the state availability schedules and
exceptions.
Availability Schedules
Temporary schedule. The Wisconsin statute requires that
in-state nonlocal checks be made available for withdrawal not later
than the fifth day following deposit (Wisconsin Statutes sections
404.213(4m)(b)(2); 215.136(2)(b); 186.117(2)(b)). This time period is
shorter than the seventh business day availability required for
nonlocal checks under § 229.11(c) of Regulation CC, although it is
not shorter than the schedules for nonlocal checks set forth in
§ 229.11(c)(2) and appendix B-1 of Regulation CC. Thus, the state
schedule for in-state nonlocal checks supersedes the Federal schedule
to the extent that it applies to an item payable by a Wisconsin bank
that is defined as a nonlocal check under Regulation CC and is not
subject to reduced schedules under § 229.11(c)(2) and appendix B-1.
Permanent Schedule. Under the federal permanent
availability schedule, nonlocal checks must be made available for
withdrawal not later than the fifth business day following deposit. The
fifth day availability requirement for in-state items in the Wisconsin
statute supersedes the Regulation CC time period adjustment for
withdrawal by cash or similar means in the permanent schedule, to the
extent that the in-state checks are defined as nonlocal under
Regulation CC.
Next-day availability. Under the Wisconsin statute, the
proceeds of state and local government checks must be made available
for withdrawal by the second day following deposit, if the check is
indorsed only by the person to whom it was issued (Wisconsin Statutes
section 404.213(4m)(b)(1); 215.136(2)(b); and 186.117(2)(a)).
Regulation CC requires next-day availability for these checks if they
are (1) deposited in an account of a payee of the check, (2) deposited
in a depositary bank located in the same state as the
state
{{4-28-00 p.7418.123}}or local
government that issued the check, (3) deposited in person to an
employee of the depositary bank, and (4) deposited with a special
deposit slip, if the depositary bank informed its customers that use of
such a slip is a condition to next-day availability. Under the Federal
law, if a state or local government check is not deposited in person to
an employee of the depositary bank, but meets the other conditions set
forth in § 229.10(c)(1)(iv),
the funds must be made available for withdrawal not later than the
second business day following deposit. The Wisconsin statute supersedes
Regulation CC to the extent that the state law does not permit the use
of a special deposit slip as a condition to receipt of second-day
availability.
Exceptions to the schedules. Wisconsin law provides
exceptions to the state availability schedules for new accounts (those
opened less than 90 days) and reason to doubt collectibility (Wisconsin
Statutes sections 404.213(4m)(b); 215.136(2); and 186.117(2)). The
state availability law also permits commercial banks to vary the funds
availability requirements by agreement (Wisconsin Statute section
404.103(1)). In all cases where the federal schedule preempts the state
schedule, only the federal exceptions apply. For deposits that are
covered by the state availability schedule (e.g., in-state nonlocal
checks), a state exception must apply in order to extend the state
availability schedule up to the federal availability schedule. Once the
deposit is held up to the federal availability limit under a state
exception, the depositary bank may further extend the hold only if a
Federal exception can be applied to the deposit. Any time a depositary
bank invokes an exception to extend a hold beyond the time periods
otherwise permitted by law, it must give notice of the extended hold to
its customer in accordance with
§ 229.13(g) of Regulation
CC.
Business day/banking day. The definitions of "business
day" and "banking day" in the Wisconsin statutes are preempted
by the Regulation CC definition of those terms. For determining the
permissible hold under the Wisconsin schedules that supersede the
Regulation CC schedule, deposits are considered available for
withdrawal on the specified number of "business days" following
the "banking day" of deposit.
Wisconsin law considers funds to be deposited, for the purpose of
determining when they must be made available for withdrawal, when an
item is "received at the proof and transit facility of the
depository." For the purposes of this preemption determination,
funds are considered deposited under Wisconsin law in accordance with
the rules set forth in
§ 229.19(a) of Regulation
CC.
Disclosures
The Wisconsin statute does not require disclosure of a bank's funds
availability policy. The state law does require, however, that a bank
give notice to its customer if it extends the time within which funds
will be available for withdrawal due to the bank's doubt as to the
collectibility of the item (Wisconsin Statutes sections 404.213(4m)(b);
215.136(2); and 186.117(2)).
Regulation CC preempts state disclosure requirements concerning
funds availability that relate to "accounts" that are
inconsistent with the federal requirements. The state requirement is
different from, and therefore inconsistent with, the federal disclosure
rules (§ 229.20(c)(2)). Thus, the Wisconsin statute is preempted by
Regulation CC to the extent that the state notice requirement applies
to "accounts" as defined by Regulation CC. The Wisconsin
requirement would continue to apply to accounts, such as savings and
time accounts, not governed by the Regulation CC disclosure
requirements.
[Codified to 12 C.F.R. Part 229, Appendix F]
[Appendix F added at 53 Fed. Reg. 32356, August 24, 1988,
effective September 1, 1988; amended at 53 Fed. Reg. 44328, November 2,
1988, effective October 24, 1988; 53 Fed. Reg. 47524, November 28,
1988; 53 Fed. Reg. 51748, December 23, 1988, effective December 19,
1988; 54 Fed. Reg. 13838, April 6, 1989, effective March 31, 1989; 55
Fed. Reg. 11358, March 28, 1990, effective March 22, 1990; 60 Fed. Reg.
51703, October 3, 1995, effective November 2, 1995]
{{4-28-00 p.7418.124}}
Board Policy Statement on Delayed Disbursement of Teller's Checks
and Cashier's Checks
Delayed disbursement is the practice of issuing checks that are
payable by, through, or at a bank 1
located in a geographic area such that collection of the checks is
generally delayed. Although many classes of checks are subject to
delayed disbursement, the effects of delayed disbursement are
particularly significant in the case of teller's
checks. 2
The delayed disbursement of teller's checks imposes float costs on the
depositary bank, which must generally make the proceeds of these checks
available for withdrawal on the business day following deposit. In
addition, delayed disbursement often increases the costs to process and
transport these checks.
The Expedited Funds Availability Act ("Act") and Regulation CC
(12 CFR Part 229) require a depositary bank to provide customers with
next-day availability, under specified conditions, for certain checks
deposited in transaction accounts, including cashier's
checks 3
and teller's checks. Depending on the location of the paying bank, a
depositary bank may not receive credit for the check by the time funds
must be made available to the customer for withdrawal. Thus, the
practice of delayed disbursement permits a bank issuing such checks to
impose costs, in terms of lost interest, on other banks and to benefit
from interest or earnings credits earned on outstanding checks until
the checks are presented for payment.
The Board recognizes that many banks that issue teller's checks
benefit from the specialization and economies of scale of certain banks
and other service providers that can perform the tracking,
reconciliation, and payment services associated with teller's checks at
a lower cost than the issuing bank would incur by issuing and paying
cashier's checks. In addressing the delayed disbursement problem, the
Board believes that it is desirable to reduce the float created by the
issuance of these checks while at the same time minimize the disruption
of efficient teller's check services.
As a general matter, the Board believes that a depositary bank
located in the same community as the bank that issues a teller's check
should be able to receive next-day credit for the teller's check. The
Board has determined, after review of Federal Reserve collection
patterns and deposit deadlines across the country, that depositary
banks in most areas generally can receive next-day credit for checks
that are encoded with a nonlocal city routing
number 4
and presented in a nonlocal Federal Reserve city. For checks that are
encoded with a nonlocal RCPC or country routing number and presented in
a nonlocal check processing region, credit is generally deferred by one
or two days. The Board recognizes, however, that depositary banks
located on the west coast generally may not be able to receive next-day
availability for checks presented in most nonlocal cities. In addition,
in other isolated areas of the country, next-day credit is generally
not available for any check payable by a nonlocal paying bank. The
Board recognizes that banks in these areas may benefit by having access
to a centralized teller's check service provider.
{{4-28-00 p.7418.125}}
The Board believes that banks issuing teller's checks and teller's
check service providers should take steps to ensure that delays in the
collection and return of teller's checks are kept to a minimum. First,
the Board believes that any disbursement practice designed to extend
the time needed to collect a teller's check is inappropriate. Although
the Board believes that centralized disbursement is economically
efficient in some cases, the location of the paying bank should be
chosen so as to minimize collection time.
Second, the Board has determined that depositary banks can generally
receive credit faster for checks payable by a bank with a city routing
number than for checks payable by a bank with an RCPC or country
routing number. The Board believes that teller's check service
providers that serve issuing banks in check processing regions that are
nonlocal to the paying bank should help speed the collection and return
of teller's checks by use of a city presentment point and a city
routing number in the MICR line of its teller's checks.
Some teller's check service providers confine the scope of their
services to a state or other limited geographic area. Because the state
or area may be divided into more than one check processing region, such
service providers may use a paying bank that is nonlocal to many of
their customer banks. In addition, the state or area may contain no
Federal Reserve city. The Board recognizes that it may be impractical
for such service providers to use a city presentment point.
Third, the Board believes that those teller's check service
providers that serve banks nationwide should accept teller's checks at
more than one presentment point, particularly those providers that
serve west coast banks. For example, a teller's check service provider
that uses an east coast paying bank could shorten collection and return
times for its California customers by also providing a west coast
presentment point for teller's checks.
The Board recognizes that similar delayed disbursement problems
arise in connection with cashier's checks, issued by a bank with
multistate branches, that depositary banks must send to a central
location for payment. The Board believes that the same general
guidelines should apply to the disbursement of cashier's checks as
apply to teller's checks and will take further action regarding
cashier's checks should abusive delayed disbursement practices continue
to occur.
The Board will monitor the industry's adherence to the policy
statement and delayed disbursement practices in general and, should
abuses continue, will consider formal regulatory action.
[Source: 54 Fed. Reg. 13840, April 6, 1989, effective April 10,
1989]
[The page following this is 7421.]
1The California regulation uses the term "paying bank"
when describing the institution on which these checks are drawn, but
does not define "paying bank" or "bank." Regulation CC's
definitions of "paying bank" and "bank" include savings
institutions and credit unions as well as commercial banks and branches
of foreign banks. However, because the California regulation makes
separate provisions for checks drawn on savings institutions and credit
unions, the Board concludes that the term "paying bank," as used
in the California regulation, includes only commercial banks and
foreign bank branches. Go Back to Text
2Appendix B--1 of Regulation CC provides that the federal
schedules will be the same as the California schedules (5 days) in the
following cases: A depositary bank bearing a 1210 routing number
receiving for deposit checks bearing a 3220 or a 3223 routing number,
and a depositary bank bearing a 1220 routing number receiving for
deposit checks bearing a 3210 routing number. In the cases where
federal and state law are the same, the state law is not preempted by,
nor does it supersede, the federal law. Go Back to Text
1 Regulation CC defines "bank" to include all depository
institutions, including commercial banks, savings and loan
associations, and credit unions. A depositary bank is defined as the
first bank to which a check is transferred. A paying bank is a bank by,
at, or through which a check is payable and to which it is sent for
collection. Go Back to Text
2 Regulation CC defines a "teller's check" as a check
provided to a customer of a bank, or acquired from a bank for
remittance purposes, that is drawn by the bank and drawn on another
bank or payable through or at another bank. For the purposes of this
policy statement, "teller's check" includes checks drawn on a
Federal Reserve bank or a Federal Home Loan bank. Go Back to Text
3 Regulation CC defines "cashier's check" as a check
provided to a customer of a bank, or acquired from a bank for
remittance purposes, that is drawn on the bank, is signed by an officer
or employee of the bank on behalf of the bank as drawer, and is a
direct obligation of the bank. Go Back to Text
4 These checks are payable by banks located in the same city as
a Federal Reserve office. RCPC ("Regional Check Processing
Center") checks are payable by banks in areas designated within the
territories of Federal Reserve offices but outside Federal Reserve
cities. Certain Federal Reserve regions also contain country zones,
which are generally more remote from Federal Reserve cities than are
RCPC zones. Go Back to Text
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