Mandatory Compliance Training Regulation CC Gettechnical Inc Instructor: Deborah L Crawford

Transcription

1 Mandatory Compliance Training Regulation CC 2016 Gettechnical Inc Instructor: Deborah L Crawford gettechnical@msn.com 1 2 1

2 Regulation CC Began in 1988 Governs Transaction Account holds and availability schedules Required to disclose availability when asked and at account opening 3 Substitute Checks 4 2

3 What is a substitute check? A substitute check is a special paper copy of the front and back of an original check. The substitute check may be slightly larger than the original check. Substitute checks are specially formatted so they can be processed as if they were original checks. The front of a substitute check should state: "This is a legal copy of your check. You can use it the same way you would use the original check." The following sample shows what a substitute check looks like

4 7 Funds availability and Holds 8 4

5 TRANSACTION ACCOUNTS Regulation CC applies to both business and consumer transaction accounts. A transaction account is one which the account holder is permitted to make unlimited transfers or withdrawals by negotiable or transferable instrument, payment order of withdrawal, telephone transfer, electronic payments to third persons others. This will include third party payments at an automated teller machine (ATM) or remote service unit or other electronic device. 9 Transaction accounts: Checking Accounts (DDAs, NOWs and Share draft Accounts) Savings Accounts if the ATM card is used to Pay Third Parties 10 5

6 11 Business Day A calendar day that excludes (weekends and federal holidays): Saturday Sunday January 1* Third Monday in January 1 Third Monday in February Last Monday in May July 4 th * First Monday in September Second Monday in October November 11* Fourth, Thursday in November December 25* 12 6

7 *If these dates fall on Sunday the next Monday is not a business day. A business day is still a business day even if the financial institution is not open. For example, Mardi Gras is a business day even though in New Orleans financial institutions are closed because Mardi Gras is not a Saturday, a Sunday or a federal holiday. 13 Banking Day A banking day is a day during which the financial institution is open for carrying on all of its business. Since business days are not Saturdays, a banking day is never a Saturday even if the financial institution is open for substantially all of its business. Financial institutions can set cut off times for accepting deposits. Under Regulation CC, the cut off period should be no earlier than 2:00 p.m. unless it is an ATM which can have a cut off of 12:00 noon. There are some exceptions to this if the financial institution closes earlier. 14 7

8 15 Check Definition A negotiable demand draft drawn on or payable through or at an office of a bank; A negotiable demand draft drawn on a Federal Reserve Bank or a Federal Home Loan Bank; A negotiable demand draft drawn on the Treasury of the United States; A demand draft drawn on a state government or unit of general local government that is not payable through or at a bank; A United States Postal Service money order; or A traveler s check drawn on or payable through or at a bank. 16 8

9 Local Check All US checks that are not next day items will be local checks

10 TYPES OF ITEMS Next Day Items All Local Checks Available Next Day First $200 of Local checks 2 nd Business Day 19 AVAILABILITY SCHEDULE: NEXT DAY ITEMS Type of Deposit Definition CASH Coin and Currency ELECTRONIC PAYMENT Wire Transfer and ACH transfer. Conditions for next day availability. Funds are next day available if: Deposited to an employee of a depository bank. Upon receipt of actually and finally collected funds which are posted to the Member s account If funds do not meet conditions, the funds become: 2 nd business day if it is deposited by mail, at a proprietary ATM, or other means Available for withdrawal not later than the business day after the banking day on which the financial institution received the electronic payment. (This one is slightly different than the others. It always is next day from day of receipt.) US TREASURY CHECK Deposited into Payee s account. Check drawn on the treasury of the and have a routing number beginning with the digits Deposited to an employee of the depository bank. STATE GOVERNMENT CHECK Check from the state, the,, or the US Virgin Islands LOCAL GOVERNMENT CHECK Check from any city, county, parish, town, township, village, or other general purpose political subdivision of a state. Does not include special purpose units of government, such as school districts or water districts. Deposited into payee s account. Use special deposits slips if financial institution requires. depository institution in same state as check drawn. Deposited to an employee of the depository bank. Deposited into payee s account. Use special deposit slips if financial institution requires. depository unit located in same state as local government. Check drawn on unit of general local government Local Check Local Check Local Check *FI = Financial Institution *FI = Financial Institution 20 10

11 Type of Deposit Definition Conditions for next day availability. Funds are next day available if: If funds do not meet conditions, the funds become: POSTAL MONEY ORDER Deposited to an employee of depository bank. Deposited into payee s account. Local Check ON US CHECK Check drawn on same financial institution or another branch of the same financial institution. Checks deposited in a branch of the depository Local Check bank and drawn on the same or another branch of the same financial institution, if both branches are located in the same state or checkprocessing region. CASHIER S CHECK 1. Check that is drawn on the financial institution. 2. Signed by an officer or employee of the FI *; on behalf of the FI as drawer. 3. Is provided to a Member of the FI or acquired from the FI for remittance purposes. Deposited to an employee of the depository bank. Deposited into the payee s account. Use special deposit slip if financial institution requires. Local Check CERTIFIED CHECK A check to which the drawee FI certifies by signature on the check of an officer or other authorized employee of the FI (1) the signature of the drawer on the check is genuine; and (2) That the bank has set aside funds which are equal to the amount of the check and will be used to pay the check. Deposited to an employee of a depository Local Check bank. Deposited into payees account. Use special deposit slip if financial institution requires. *FI = Financial Institution 21 Type of Deposit Definition Conditions for next day availability. Funds are next day available if: Availability of conditions in Column 2 are not met becomes: TELLER S CHECK A check provided to a Member of a FI or acquired from FI for remittance purposes, that is drawn by the FI, and drawn on another FI or payable through or at a FI Depositedtoanemployeeofthe depository bank. Deposited into the payee s account. Use special deposit slip if the financial institution requires. Alocalcheck Alocalcheck. Alocalcheck. FEDERAL RESERVE OR FEDERAL HOME LOAN BANK CHECK Depositedtoanemployeeofthe depository bank. Deposited into payee s account. Alocalcheck Alocalcheck. $200 OF Local Checks not subject to $200 of local checks must be available N/A next day availability the next day after day of deposit. Except for nonproprietary ATM s which the $200 is available the second business day of deposit. The portion of the Member s deposit to which the $200 must be applied is at the discretion of the depository bank as long as it is not applied to any checks subject to next day availability. *FI = Financial Institution *FI = Financial Institution 22 11

12 AVAILABILITY SCHEDULE FOR REGULAR ITEMS LOCAL CHECKs (ALL OTHER CHECKS BESIDES NEXT DAY) Available the 2 nd business day after the banking day of deposit. NONPROPRIETARY ATM Located off premises. (Proprietary ATM is treated as deposits to the branch). Contractual branch. May have a noon cut off. Deposits of cash, next day checks, andalllocalchecksmustbe made available by the 5th business day following the banking day of deposit. First $200 of the aggregate deposit at a nonproprietary ATM on any one banking day must be made available for withdrawal on the 5th business day after the banking day of deposit. CASH WITHDRAWAL Day funds become available after 5:00 p.m. Next $400 Cash (financial institutions may extend by one business day the time that funds, deposited into an account by checks, are available for cash, wiring, cashier check, teller s check, or certified check purchase.) EXCEPTIONS (1) Extend one business day. (1) Extension of schedule for certain deposits in Alaska, Hawaii, Puerto Rico and US Virgin Islands. (2) Extend one business day. (2) Extensions of schedule for check deposited on or payable at or through a paying bank not located in the same state as the depository bank. 23 WHEN FUNDS ARE CONSIDERED DEPOSITED The time funds must be made available for withdrawal is determined by the day the deposit is made

13 Staffed Teller ATM Where Funds Are Received When Deposit Is Considered Made When received by teller. When placed in the ATM. Lobby Box that is accessible to Members only during regular business hours (except if notice appears on box and they are treated as night depositories) When placed in the Lobby box. Funds mailed to depository Bank When received by the depository bank. When the deposit is removed and the contents of the Night depository or Lockbox deposit are accessible to the depository bank for processing. Off premise ATM if funds are not normally removed more than twice a week When they are removed from the ATM. Deposits made after financial institution is closed or after cut off On the next banking day

14 REGULATION CC: EXCEPTION HOLD NOTICE 27 REGULATION CC: REASONABLE CAUSE HOLD NOTICE 28 14

15 REGULATION CC: ONE TIME HOLD NOTICES 29 You can place a hold for many reasons. If the hold is on a transaction account it has to be placed following the regulation cc rules. Regulation cc is mandatory for financial institutions and it governs the number of days you may place a hold

16 TO PLACE A HOLD OR NOT? How to Decide whether to place a hold or not Member Check How long has Member been with your institution How much available balance Any overdraft history Delinquent loans Recurring payroll ACH Local or out of state Check amount Have you seen this type of check before? Unusual markings? Good routing number? Stale-dated or post-dated? 31 AFTER DECIDING TO PLACE HOLD What kind of hold? Is the account holder in the first 30 days of opening an account? No Yes Choose Reason: Repeated over drafter Reasonable cause Redeposited item Large deposits Or If a local check can use Case-by-Case Hold Special rules for new accounts if your financial institution uses Cash-next day Next day items-first $5000 next day and balance in 9 days Plus travelers checks Local checksfinancial institution policy 32 16

17 If you have same day or next day availability you will have two options: Case by case holds Exception holds 33 If you have delayed availability as your general policy then you will only have exception holds

18 Type of Hold Case by Case Hold Use whenfinancialinstitution spolicyisbetterthanthefedschedule Large Deposits Use foraggregate depositsover $5000 Redeposited items Use forchecksthatarebeingdepositedasecondtime Repeated Overdrafter Overdrawnsix daysinsixmonthsor2 daysinsix $5,000 *Couldhavebeen overdrawniffinancialinstitutionpaidthecheck SUMMARY OF HOLDS Checks What business day available $200 Local Checks (All other checks except 2 nd day Yes next day items) Next day items Yes Local checks 7 th day (Could be more than $200 (AllChecks) depending on your policy) Next day items Local checks 7 th day No (All Checks) Next day items Local checks (All Checks) Reasonable Cause to Doubt Collectibility Next day items Use when financial institution has reason to doubt collectibility See Local checks hold form (All Checks) Emergency Conditions Hurricanes, tornadoes Next day items Local checks (All Checks) Next day items NewAccounts Checktoseeif yourinstitutionusesspecialrules Local checks Use first thirty days Member with financial institution. Do not give hold notice. 7 th day No 7 th day No 7 th day No 1 st $5,000 next day/over $5,000 9 days LC financial institution s policy No On us checks only have a one day hold 35 WHEN DOES THE $200 RULE APPLY? Type of Hold Case by Case Large Deposits Repeated Overdrafts Redeposited Items Reasonable Cause Emergency Conditions New Accounts $200 Cash Rule Apply Yes Yes No No No No No 36 18

19 37 Applies to Local Checks A financial institution that has a policy of making deposited funds available for withdrawal sooner than by the federal guidelines may extend the time when funds are available up to the time periods on a case by case basis as long as this is explained in its disclosure

20 Notice of Hold The Member must be notified at the time of making the deposit that a case by case hold has been placed on their funds or mailed the notice as soon as practicable but no later than the day after the facts became known

21 1. A Member of the financial institution comes in with the following deposit: $1,000 cash $500 cashier s check $1,000 local check Assume that the financial institution has next day availability on all items. If you placed a case bycase hold on these funds when would the funds become available assuming the deposits were made on Tuesday? 41 # 1 Answer: Monday Tuesday Wednesday Thursday Friday 1000 Cash 500 CC 1000 LC 1000 Cash 500 CC LC *You have to give $200 from the local checks. You may only place a case by case hold on local checks

22 HOLD NOTICE CASE BY CASE MODEL NOTICE C A Member of the financial institution comes in on Friday with the following deposit: $1000 Local check $5000 local check $1000 Treasurer s check Assume the financial institution s policy is next day availability. Using the case by case hold, extend the availability on these funds

23 # 2 ANSWER: Monday Tuesday Wednesday Thursday Friday 1000 LC 5000 LC 1000 TC TC 800 LC 5000 LC *You may take the $200 out of either the local check. Just make sure your hold notices reflect the proper amount. 45 HOLD NOTICE CASE BY CASE MODEL NOTICE C

24 47 General There are exceptions which can be invoked to extend the next day and local items availability schedules. When these holds are invoked, you can add five days to a local check. On us checks can only be held one day

25 Notice of Exception The financial institution must provide a written notice to the Member which includes: the account number, the date, the reason the exception was invoked and the day the funds will be available for withdrawal, unless it is emergency conditions and the financial institution does not know in good faith when the funds will be available. The Federal Reserve eliminated amount of deposit requirement on hold notices. Section (g) and ( c ) 49 Timing a. In person The notice shall be provided to the depositor at the time of the deposit, unless the deposit is not made in person to an employee of the depository financial institution or, if the facts upon which a determination to invoke on an exception listed below becomes available after the time of the deposit

26 b. Not in person or facts become known after time of deposit If the notice is not given at the time of the deposit, the depository financial institution shall mail or deliver the notice to the Member as soon as practical, but no later than the first business day following the day the facts become known to the depository bank, or the deposit is made whichever is later. 51 c. Emergency conditions If the availability of funds is delayed under the emergency conditions exception, the depository is not required to provide notice, if the funds subject to the exception become available before the notice must be sent

27 Types of Exceptions a. Large deposits Applies to: Next day items, local checks Under the large deposit exception, a depository bank may extend the hold placed on local and next day check deposits to the extent that the amount of the aggregate deposit on any banking day exceeds $5,000. While the first $5,000 of a day s deposit is subject to the availability provided for local, the amount in excess of $5,000 may be held for an additional period of time. $200 does have to be made available under this exception. 53 b. Redeposited checks Applies To: Next day items and local checks Checks that have been returned unpaid and redeposited by the Member or the depository bank. The redeposited check exception does not apply to checks returned unpaid due to missing endorsements or for checks that are postdated if it is no longer postdated when redeposited

28 The banking day on which the check is redeposited is considered to be the day of deposit. A depository bank that made $200 of a check available for withdrawal can charge back the full amount of the check including the $200 if the check is returned unpaid. The $200 does not have to be made available again if the check is redeposited. 55 c. Repeated overdrafts Applies to: Next day items, local checks There are two tests to determine if a Member is a repeated overdrafter and subject to this exception

29 Test One A Member s accounts are considered repeatedly overdrawn if on six banking days within the preceding six months, the available balance in any account held by the Member is negative, or the balance would have become negative, if checks or other charges to the account had been paid, rather than returned. 57 This test can be met based on separate occurrence (e.g., checks that are returned for insufficient funds on six different days), or based on one occurrence that remains on the account for six days

30 Test Two Under this test a Member incurs repeated overdrafts if, on two banking days within the preceding six months, the available balance in any account held by the Member is negative in an amount of $5,000 or more, or would have become negative in an amount of $5,000 or more if checks or other charges to the account had been paid. You do not have to give $200 the next day under this exception. 59 d. Reasonable cause to doubt collectibility Applies to: Next day items and local checks The financial institution has reasonable cause to believe the check is uncollectible, it may extend the time funds must be made available for withdrawal. This exception cannot be invoked on any class of checks or persons. You do not have to give the Member $200 the next day

31 e. Emergency conditions Applies to: Next day items and local checks The depository bank may extend the holds that are placed on deposits of local checks that are affected by emergency conditions. These conditions include (a) an interruption of communications or computer or other equipment failure; (b) a suspension of payments by another bank; (c) a war; (d) an emergency condition beyond the control of the depository bank. 61 f. New accounts Applies to: Transaction accounts in the first 30 days. Your institution may or may not use the new account exception. You must look on your account disclosure to see if you use this exception. If you do, the following availability will apply for Members who have not had a transaction account with you in the last 30 days. If you do not use this exception, then you will treat items as next day and local checks as has been previously discussed

32 NEW ACCOUNTS AVAILABILITY SCHEDULE Type of Item Availability CASH Next day. ELECTRONIC PAYMENTS Next Day Items: Treasury checks, Postal Money Orders, Federal Reserve or Federal Home Loan Bank Checks, State or Local Government, Cashier s, Certified, Teller s and Traveler s Checks (May have to have special deposit slip with some items. This also includes Traveler s checks which do not appear in the other next day items.) Wires and ACH Next day after financial institution receives funds. Aggregate of funds $5000 and below are available the next day from the total of these items. Funds above $5000 are available on the 9 th business day after the banking day of deposit. $200 Cash Does not apply to new accounts. Local Financial institution s policy

33 Problem #1 Member B comes in with a deposit of $91,000 of local checks on Wednesday morning. You use the large deposit exception. The financial institution follows next day availability schedule. When will these funds become available? 65 #1 Answer Monday Tuesday Wednesday Thursday Friday 91,000LC 5, * $4800* $86,

34 Note: The financial institution s policy is next day availability. In order to extend the hold on the five thousand, the financial institution could place a case by case hold on the first five thousand. If the financial institution used two hold forms then $200 would be available on Thursday and $4800 would be available on Friday (2 th day) and then the $86,000 on the following Friday (7 th day). 67 EXCEPTION HOLD NOTICE MODEL NOTICE C

35 HOLD NOTICE CASE BY CASE MODEL NOTICE C 16 *USE THIS IF YOU WANT TO EXTEND THE FIRST $4900 ON A CASE BY CASE HOLD Problem 2 Member C deposits a check for $18,000 on Thursday morning which you have reason to doubt collectibility. The check is a local check. The financial institution gives next day availability on all checks. When are the funds available? 70 35

36 #2 Answer Monday Tuesday Wednesday Thursday Friday $18,000 $18, REASONABLE CAUSE HOLD NOTICE MODEL NOTICE C

37 Problem 3 Member A comes in with the following items on Monday after the financial institution s cut off period of 2:00 p.m. Cash of $500, and a cashier s check for $25,000. This is a new account. The bank makes local checks available on the ninth business day after the banking day of deposit. When would the funds be available for the Member? 73 #3 Answer Monday Tuesday Wednesday Thursday Friday 500 Cash 25,000 CC 500 Cash 5,000 CC 20,000 CC 74 37

38 No hold notice required on new accounts. You told them the new account rules at the beginning when you opened the account. 75 C 3 Model Your Ability to Withdraw Funds Our policy is to make funds from your cash and check deposits available to you on the first business day after the day we receive your deposit. Electronic direct deposits will be available on the day we receive the deposit. Once they are available, you can withdraw the funds in cash and we will use the funds to pay checks that you have written. For determining the availability of your deposits, every day is a business day, except Saturdays, Sundays, and federal holidays. If you make a deposit before (time of day) on a business day that we are open, we will consider that day to be the day of your deposit. However, if you make a deposit after (time of day) or on a day we are not open, we will consider that the deposit was made on the next business day we are open

39 Model Continued Longer Delays May Apply In some cases, we will not make all of the funds that you deposit by check available to you on the first business day after the day of your deposit. Depending on the type of check that you deposit, funds may not be available until the second business day after the day of your deposit. The first $200 of your deposits, however, may be available on the first business day. If we are not going to make all of the funds from your deposit available on the first business day, we will notify you at the time you make your deposit. We will also tell you when the funds will be available. If your deposit is not made directly to one of our employees, or if we decide to take this action after you have left the premises, we will mail you the notice by the day after we receive your deposit. 77 Model Continued If you will need the funds from a deposit right away, you should ask us when the funds will be available. In addition, funds you deposit by check may be delayed for a longer period under the following circumstances: We believe a check you deposit will not be paid. You deposit checks totaling more than $5,000 on any one day. You deposit a check that has been returned unpaid. You have overdrawn your account repeatedly in the last six months. There is an emergency, such as failure of computer or communications equipment. We will notify you if we delay your ability to withdraw funds for any of these reasons, and we will tell you when the funds will be available. They will generally be available no later than the seventh business day after the day of your deposit

40 Model Continued Special Rules for New Accounts If you are a new account holder, the following special rules will apply during the first 30 days your account is open. Funds from electronic direct deposits to your account will be available on the day we receive the deposit. Funds from deposits of cash, wire transfers, and the first $5,000 of a day's total deposits of cashier's, certified, teller's, travelers, and federal, state and local government checks will be available on the first business day after the day of your deposit if the deposit meets certain conditions. For example, the checks must be payable to you (and you may have to use a special deposit slip). The excess over $5,000 will be available on the ninth business day after the day of your deposit. If your deposit of these checks (other than a U.S. Treasury check) is not made in person to one of our employees, the first $5,000 will not be available until the second business day after the day of your deposit. Funds from all other check deposits will be available on the (9) business day after the day of your deposit. (Note this number is flexible but 9 might be the longest you could justify) 79 PRACTICE, PRACTICE, PRACTICE 40

41 Situation #1 Joe Smith Member 30 years Joe has never been overdrawn. He has $ on deposit. He comes in and has an insurance check for $8600 and it is made payable to him only. Would you hold? What hold if you would? 81 Situation #2 Same Member but different but check is made payable to ABC CU and JOE SMITH Would you hold and what hold would you place? 82 41

42 Situation #3 Jane Smith 10 years at Credit Union Overdrawn six times a month Average Balance is $ $25,000 Treasury Check 83 Situation #4 Sally Jones 25 Days with Credit Union Average balance Local Check for $ Can you hold? What hold? 84 42

43 Situation #5 Bill Boudreaux has been with Credit Union 30 years Bill never been overdrawn Bill has been employed by Ebay Wants to deposit check from new employer for $2500 Bill has $10,000 in savings What should you do

44 Model C 12A Case by case hold without cash withdrawal limitation 87 Model C 12B Case by case hold notice with cash withdrawal limitation 88 44

45 Model C 9 Exception or reasonable cause hold notice 89 Model C 10 One time notice for large deposit and redeposited check exception holds 90 45

46 Model C 11 One time notice for repeated overdraft exception holds 91 Model C 13 Notice at locations where employees accept consumer deposits 92 46

47 Type of Hold Case by Case Hold Use when financial institution s policy is same day or next day SUMMARY OF HOLDS for Next Day Policies Large Deposits Next day items Useforaggregatedepositsover$5000(All numbers will index every Other checks five years) (AllChecks) Redeposited items Use for checks that are being deposited a second time Checks What business day available (proposed) $200 Other Checks (All other checks except 2 nd day Yes next day items) Next day items Other checks (All Checks) 7 th day /4th day 7 th day/4th days No Yes (Could be more than $200 depending on check could be $5000) Repeated Overdrafter Overdrawn six days in six months or 2 days in six $5,000 *Could have been overdrawn if financial institution paid the check Next day items Other checks (All Checks) 7 th day /4 th day No Reasonable Cause to Doubt Collectibility Next day items Use when financial institution has reason to doubt collectibility See Other checks hold form (All Checks) 7 th day/4th day No Emergency Conditions Hurricanes, tornadoes Next day items Other checks (All Checks) 7 th day/4th day No 1 Next day items st $5,000 next day/over New Accounts Check to see if your institution uses special rules $5,000 9 days Other checks Use first thirty days account holder with financial institution. Do not $5000 will index with (All other checks except next day give hold notice. inflationo LC Financial items) Institution s policy No 93 C-3A C-3A Next- Day Availability, Case-by-Case Holds to Statutory Limits Without Cash- Withdrawal Limitation, and Section Exception 94 47

48 95 Thanks for attending! Gettechnical Inc gettechnical@msn.com TTS info@ttstrain.com CUWebinars.com Upcoming CUWebinars July 28 th - Electronic Transactions - SWIFT Breaches Highlight Growing Wire Fraud July 28 th Compliance Perspectives: A Monthly Update August 5 th - ALERT! New Customer Due Diligence Rules: Part Two Consumers August 10 th - Best-Ever Compliance Checklist for Consumer Loans August 23 rd - Flood Insurance Review and Update Don t forget about our listing of OnDemand programs at CUWebinars.com! 96 48