On June 24, 2019, the Bureau of Consumer Financial Protection (the Bureau) and the Federal Reserve Board (the Board) jointly announced a final rule amending Regulation CC. The Bureau and the Board (the Agencies) have joint rulemaking authority for certain provisions of Regulation CC, including over the funds-availability rules.
As you may recall, the Agencies issued a proposed rule late last fall that would implement certain cost of living adjustments (COLA) required by the Dodd-Frank Act (the 2018 proposal). The Agencies also used the occasion to provide an additional opportunity for the public to comment on proposed amendments to Regulation CC that the Board published in 2011 (the 2011 proposal), but for which no final rules were ever implemented.
The Final Rule
The final rule is limited to implementing changes based on the 2018 proposal, which includes the COLA adjustments required by the Dodd-Frank Act as well as certain amendments made by the Economic Growth, Regulatory Relief, and Consumer Protection Act.
The final rule does not address the 2011 proposal, or the comments received regarding the same. At this time, there is no specific timeline for whether or when the Agencies will implement any of the changes put forth in the 2011 proposal. However, the Agencies stated that they would attempt to coordinate future amendments to Regulation CC with the predetermined effective dates for making future inflation adjustments.
Under the final rule, cost of living adjustments are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The final rule implements the first set of adjustments and provides a timetable for adjustments to be made every five (5) years thereafter. The current changes go into effect July 1, 2020. Thus, the next COLA changes are scheduled to be effective July 1, 2020, and every five (5) years thereafter.
The current adjustment impacts a number of dollar amounts incorporated into Subpart B of the Regulation including:
- The $200 rule (formerly the $100 rule) under Sec.229.10(c)
- The $400 rule under Sec. 229.12(d)
- The $5,000 new account threshold under Sec. 229.13(a)
- The $5,000 large deposit threshold under Sec. 229.13(b), and
- The $5,000 threshold for determining a repeat overdraft under Sec. 229.13(d)(2).
The amendments being made to Regulation CC that are coming out of the Economic Growth, Regulatory Relief, and Consumer Protection Act include extending coverage of the Expedited Funds Availability Act, which is implemented by Regulation CC, to American Samoa, the Commonwealth of the Northern Mariana Islands, and Guam.
Required Updates to the Funds Availability Disclosure
Regulation CC requires institutions that offer transaction (e.g., checking) accounts to have a funds availability disclosure. Many of the dollar amounts being adjusted appear throughout the funds availability disclosure. The exact updates that need to be made will vary by financial institution, depending on each institution’s funds availability policy. As a result, financial institutions that offer checking accounts will need to update their funds availability disclosure to reflect the changes to their policy (i.e., the changed dollar amounts). This change impacts both consumer and commercial accounts.
Required Change Notices
Regulation CC requires institutions to send change notices to holders of consumer accounts. However, because these changes actually expedite the availability of funds (i.e., they make more money available to the consumer sooner) the change notices do not need to be given out prior to the effective date of the change. Instead, the change notices can be provided to the consumer not later than 30 days after the effective date.
Regulation CC requires an institution to conspicuously post, at locations where the institution’s employees accept deposits, a notice that sets forth institutions’ funds availability time periods applicable to a consumer account. Institutions with a “delayed” availability policy (also called a second-day availability policy) will need to update their posters because the $200 rule, stated on the poster, is being adjusted.
Among other things, financial institutions will also need to update their information technology systems, revise their training materials, and train staff on the changes.
The mandatory compliance date is July 1, 2020. However, early compliance is permitted. An institution choosing to comply early will need to send the change notice within 30 days after they implement the change.
The final rule is limited to implementing changes based on the 2018 proposal. As a result, all financial institutions that offer checking accounts are impacted by this final rule. Institutions will need to update disclosures, send change notices, review (and update if necessary) funds availability posters, update information technology systems, revise training materials, and train staff.
At this time, there is no specific timeline for whether or when the Agencies will implement any of the changes put forth in the 2011 proposal. However, the Agencies stated that they would attempt to coordinate future amendments to Regulation CC with the predetermined effective dates for making inflation adjustments.
As we continue to sift through the details of this final rule, you are encouraged to sign-up to receive notices of future updates at www.wolterskluwerfs.com/RegCC.