Regulation CC – What you need to know about 2020 changes

It has been nine years since the Dodd-Frank Act required the first set of adjustments to the hold amounts in Regulation CC. Other requirements from the regulation, such as model hold notices and the elimination of the word “non-local,” still seem to be in “proposal” state without any clear guidance from the Federal Reserve or Consumer Financial Protection Bureau regarding when these changes will be finalized, if ever. 

Back in 2011, financial institutions were required to increase, from $100 to $200, the amount available to consumers the next business day after the banking day that the applicable check deposits were made. These changes were made solely within the act but were not codified in the regulation. However, changes to the amounts required to be made available are now going into effect this year, including revisions to the amounts that must be available under certain exception holds. Are you prepared?

Beginning July 1, 2020, your financial institution will be required to provide $225 for next day availability for all instances where it was required to provide a minimum of $100 ($200). In addition, the $5,000 availability requirements for holds on new accounts, large deposits, and repeat overdrafts will increase to $5,525. The last dollar adjustment for check holds is to the amount required to be released for payment of cash or other similar means if your institution discloses and extends the amount available for withdrawal by one business day. The amount that must be available in this instance increases from $400 to $450. The final rule also established a timetable for future adjustments with the next adjustment expected on July 1, 2025, and continuing every fifth year thereafter. The adjustments will be based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) and rounded to the nearest multiple of $25. 

What should you do to ensure you are ready for the July compliance deadline?

• Update your initial disclosure – For all hold types disclosed, your financial institution should update initial account disclosures to reflect the increases in the amounts required to be made available. If you make disclosures available on your website, be sure to update those as well.
• Update your hold notices – Hold notice forms that include the amounts of available funds should be updated to reflect the increased amounts that will be available. 
• Provide your customers with notice of the change – When a change in policy expedites the consumer’s ability to use funds, the regulation requires disclosure of the change within 30 days after implementation. There is nothing that prohibits you from implementing these changes prior to July 1. In fact, some institutions are choosing to update disclosures and provide change notices earlier in the year, at the same time as other routine service charge change notices.
• Review the changes with your core provider – Some core systems allow holds to be placed automatically based on your financial institution’s specifications (such as for new accounts). If this automation is available on your core system, you should review to ensure the amounts automatically made available are reflective of the updated amounts.  
• Train your staff – Training should be provided to new account personnel, tellers and other applicable staff to ensure they are knowledgeable about the changes in policy and are prepared to discuss the changes with customers.

Following these steps will help prepare your financial institution for the July 1, 2020, requirements.