FAQ regarding a change in Federal Funds Availability, effective July 1, 2020
On June 24, 2019, the Consumer Financial Protection Bureau (the Bureau) and the Federal Reserve Board (the Board) jointly announced a final rule amending Regulation CC. The final rule includes the COLA changes required by the Dodd-Frank Act as well as certain amendments made by the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).
The amendments coming out of EGRRCPA include extending Regulation CC coverage to American Samoa, the Commonwealth of the Northern Mariana Islands, and Guam. The effective date for the EGRRCPA changes is September 3, 2019.
The COLA changes are effective July 1, 2020, and impact a number of dollar amounts incorporated into Subpart B of the Regulation including:
- The minimum amount in § 229.10(c) – the $200 rule (formerly the $100 rule) will be adjusted to $225;
- The cash withdrawal amount of $400, in § 229.12(d), will be adjusted to $450;
- The new-account amount of $5,000 in § 229.13(a), the large-deposit threshold of $5,000 in § 229.13(b), and the repeatedly overdrawn threshold of $5,000 in § 229.13(d) will each be adjusted to $5,525; and
- In § 229.21(a), the civil liability amounts of $1,000 and $500,000 will be adjusted to $1,100 and $552,500 respectively.
When are the Regulation CC changes effective?The effective date for the EGRRCPA changes is September 3, 2019. The COLA changes are effective July 1, 2020.
Who does this affect?Any financial institution with a funds availability policy needs to make updates. Regulation CC requires institutions that offer transaction (e.g., checking) accounts to have a funds availability disclosure.
What happened to the 2011 Regulation CC changes? Should customers wait to update their funds availability policy?Customers should not wait. The final rule does not address 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. The obvious implication is that, any changes coming out of the 2011 proposal would likely not go into effect until July 1, 2025. Thus, any institution that waits will likely be out of compliance on July 1, 2020. Don’t wait.
What steps does a financial institution need to take to ensure they are complying with the Regulation CC changes?
Institutions will need to:
- Update Disclosures
- Send Change Notices
- Review (and update if necessary) Funds Availability posters
- Update Hold Notices
- Update Terms & Conditions
- Update Your Policies and Procedures
- Update Information Technology Systems
- Revise Training Materials and of course, Train Staff
Is early compliance permitted?Early compliance is permitted. A financial institution can choose to update its policy at any time before the mandatory effective date. The change notice must be sent within 30 days after the institution updates its policy. Institutions will want to coordinate the timing of their disclosure/content updates and the sending of change notices with their system updates. We encourage early compliance so that financial institutions can ensure their orders are delivered in time for the July 1, 2020, effective date.
Who should be sending a change notice?Any financial institution with a funds availability policy that is changing will need to send a change notice. It is possible, but hard to imagine, an institution’s funds availability policy not being impacted by these changes.
Does an institution really need to send a change notice? Aren’t these changes favorable to the consumer?Yes. Regulation CC requires institutions to send change notices regardless of whether the change is favorable or unfavorable to the consumer. 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 provided 30 days 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.
Who needs to receive a change notice?Regulation CC requires institutions to send change notices to holders of consumer accounts. So even though Reg. CC applies generally to commercial accounts, the change notice requirements only apply to consumer accounts. Institutions may want to consider sending change notices to some commercial accounts, for example, being sensitive to commercial accounts owned by sole proprietorships.
A single disclosure to a consumer that holds multiple accounts, or a single disclosure to one of the account holders of a jointly held account, satisfies the disclosure requirements of the regulation.
Will Wolters Kluwer be offering a “summary” version of the Regulation CC change notice?Wolters Kluwer is only offering a change notice that rediscloses the whole policy with the changes highlighted. Wolters Kluwer explored offering a “summary” version of the change notice, but developing a change notice that was meaningful to consumers but still efficient to create proved to be problematic. In other words, we determined that creating a summary version was just as much work for us, and our financial institution customers, as was simply redisclosing the entire policy with the changes highlighted.
What is on the change notice? Can I get a sample?Because Wolters Kluwer is only offering a change notice that rediscloses the whole policy with the changes highlighted, and because funds availability policies are highly tailored documents (specific to each financial institution), samples are not available.
Can the Regulation CC change notice be included on a statement?Regulation CC permits a change notice to be given in any form as long as it is clear and conspicuous. The Agencies have interpreted this to mean a change notice can be included “on” or “with” a periodic statement. We believe a change notice “with” the periodic statement is more “conspicuous” than a change notice “on” the periodic statement. Also, the space available to print messages on a periodic statement is often very limited. Thus, providing a meaningful change notice to consumers, one that puts the changes in context, may be difficult to do “on” a periodic statement. Short messages, such as one that only regurgitates the dollar amount increases, may not be very meaningful, and thus may not be very “clear” to the consumer.
Because Wolters Kluwer is only offering a change notice that rediscloses the whole policy with the changes highlighted, we recommend sending the change notice “with” the periodic statement as opposed to putting it “on” the periodic statement.
Do all posters need to be updated? What’s the process for updating a poster?Financial institutions should review their posters to determine if there are any dollar amounts that need to be updated. For those institutions that use the model language, the only poster that would be impacted would be the poster for institutions with a delayed (a.k.a. a second day) availability policy.
Are the changes that need to be made to the funds availability initial disclosure different for consumer v. commercial customers?Generally the answer is now. The only difference would be if an institution has an availability policy that is different for its consumer and commercial accounts. Also, change notices only need to be sent out for consumer accounts.
What hold notices are impacted by these Regulation CC COLA changes?The hold notices that need to be updated are any that refer to the threshold amount of $5,000, which is changing to $5,525. Specifically, this would be for the large deposit and repeat overdraft safeguard exceptions. For hold notices that use the model text, only the large deposit model uses the dollar amount.
What does the process look like? What expectations do we need to set with the customer?
Step 1: Determine your timeline: select the effective date your financial institution is driving toward. Coordinate the timing of your disclosure/content updates and the sending of change notices with your system updates. Note that content must be updated by July 1, 2020, and change notices must be sent no later than July 31, 2020 (or 30 days after your effective date, if you choose to comply prior to July 1, 2020).
Step 2: Updating your content to the most current revision:
a. Ensure system-generated content is updated and/or order your printed product for new customers
b. Send change notices to consumer accounts within 30 days after your effective date