The Fed Proposes Amendments to Regulation CC Regarding Collection of Checks and Availability of Funds

On March 3, 2011, the Federal Reserve Board requested public comment on proposed amendments to Regulation CC (Availability of Funds and Collection of Checks) to encourage banks to clear and return checks electronically, add provisions that govern electronic items cleared through the check-collection system, and shorten the “exception” hold periods on deposited funds.

To encourage electronic collection and return of checks between banks, the proposal provides that a depositary bank would be entitled to the expeditious return of a check only if it agrees to receive returned checks electronically. In addition, the proposal would permit the bank responsible for paying a check to require that checks presented to it for same-day settlement be presented electronically.

Additionally, due to the faster collection and return timeframes that result from electronic collection and return, the proposal would shorten the safe-harbor period for an exception hold to four business days, which should enable the depositary bank to learn of the return of virtually all unpaid checks before being required to make these deposits available for withdrawal. The proposal also eliminates the references in Regulation CC to “nonlocal” checks. As of February 2010, the Reserve Banks have ceased operations in all but one of their check processing offices, such that there is now only one check processing region, and all checks are local to each other. Appendix C to the regulation sets forth model funds-availability forms that banks may use as the basis of their disclosures to customers.

Click here to read the Board’s proposal in the Federal Register. Comments on the proposal are due June 3, 2011.

Posted in Business Solutions, Industry Insight.