What Is Regulation CC?
Regulation CC is a crucial banking regulation established by the Federal Reserve. It enforces the Expedited Funds Availability Act (EFAA) of 1987 and the Check Clearing for the 21st Century Act (Check 21). These acts set specific requirements ensuring the timely availability of deposits made into transaction accounts, addressing the length of hold times that banks previously placed on deposited checks.
Key Takeaways
- Regulation CC enforces the Expedited Funds Availability Act, mandating banks to make deposited funds available at specified times.
- It requires financial institutions to disclose when deposited funds will be available for withdrawal.
- Regulation CC addresses long hold times for deposited checks by implementing maximum hold periods.
- The enactment of the Check Clearing for the 21st Century Act allows for predominantly electronic-based check collections among U.S. banks.
Understanding Regulation CC
Regulation CC is crafted to ensure financial institutions process deposited checks promptly and return unpaid checks immediately to the paying bank. Congress introduced the Expedited Funds Availability Act of 1987 to curbing significantly lengthy hold periods for checks and implemented Regulation CC to enforce disclosure and availability provisions.
Regulation CC mandates financial institutions to provide account-holders with information on when deposits can be accessed.
How Regulation CC Works
To streamline the check-clearing system, the Board of Governors of the Federal Reserve enacted rules under Regulation CC, expediting the return of unpaid checks and encouraging same-day settlements.
- Check-Return Rules and Same-Day Settlement: These rules are designed to curtail risks to depository banks concerning fund availability post-deposits. Check-return rules ensure banks can promptly determine unpaid checks, while same-day settlements ensure equal opportunities between private-sector banks and reserve banks for payment and checks presentation.
Regulation CC Requirements
Regulation CC includes the Check Clearing for the 21st Century Act, enacted to enhance efficiency in the payment system by permitting electronic check processing substitutions. This legislative measure cleared certain legal barriers hindering electronic checks, allowing banks to send checks electronically rather than requiring paper forms when processing agreed-upon funds.
Moreover, non-agreement scenarios allow banks to send substitute checks as legal equivalents of original checks. This transition to electronic-based check collections reshaped U.S. banking practices, fostering various electronic banking services for customers.
How Does Regulation CC Protect You?
When depositing cash or checks into your bank account, Regulation CC determines the timeline for accessing your funds. The regulation provides that banks disclose fund availability schedules to customers.
- Example: Cash deposits should become accessible the next business day after the deposit day. Government and other specified checks similarly adhere to this swift accessibility, with banks required to notify customers about the availability schedule of their funds.
Check Processing Evolution in Reserve Banks
With the implementation of the Check 21 Act, checks are electronically sent between banks, facilitating smoother interbank collections and ultimately reducing the Federal Reserve’s check-processing offices from 45 in 2003 to just a single office by 2010.
How Long Do Checks Take To Clear?
For checks processed via the Federal Reserve Banks, institution accounts collecting funds are credited, and those paying are debited typically within one business day, ensuring swift transaction completion.
The Bottom Line
Regulation CC enhances banking services by regulating fund availability for withdrawals based on their origin, amount, and other critical factors. It mandates that banks disclose hold-release schedules to customers and transition check processing to predominantly electronic systems, boosting efficiency, reducing errors, and minimizing the number of check-processing offices significantly.
Related Terms: Expedited Funds Availability Act, Check 21 Act, electronic check processing, check holds, same-day settlement.
References
- The Federal Reserve. “Regulation CC (Availability of Funds and Collection of Checks)”.
- The Federal Reserve. “Check Services”.
