The below article is the Special Focus section of the July 2019 Compliance Journal. The full issue may be viewed by clicking here.
On July 3, 2019, the Board of Governors of the Federal Reserve System (FRB) and the Bureau of Consumer Financial Protection (CFPB) published a jointly issued final rule (rule) amending Regulation CC that implements a requirement to periodically adjust dollar amounts under the Expedited Funds Availability Act (EFA Act). This requirement stems from a Dodd-Frank Act amendment to the EFA Act a number of years ago.
The rule also extends Regulation CC’s coverage to American Samoa, the Commonwealth of the Northern Mariana Islands, and Guam, and makes certain other technical amendments. This article will only focus on the dollar amount adjustment provisions of the rule.
Specified Dollar Amounts Subject to Adjustment
Subpart B of Regulation CC implements the requirements set forth in the EFA Act regarding the availability schedules within which institutions must make funds available for withdrawal, exceptions to those schedules, disclosure of funds availability policies, and payment of interest.
The EFA Act and subpart B of Regulation CC contain the following specified dollar amounts concerning funds availability which are subject to adjustment: (1) The minimum amount of deposited funds that institutions must make available for withdrawal by opening of business on the next day for certain check deposits (“minimum amount’’) under 229.10(c)(1)(vii); (2) the amount an institution must make available when using the EFA Act’s permissive adjustment to the funds availability rules for withdrawals by cash or other means (‘‘cash withdrawal amount’’) under 229.12(d); (3) the amount of funds deposited by certain checks in a new account that are subject to next-day availability (‘‘new account amount’’) under 229.13(a); (4) the threshold for using an exception to the funds availability schedules if the aggregate amount of checks on any one banking day exceed the threshold amount (‘‘large deposit threshold’’) under 229.13(b); (5) the threshold for determining whether an account has been repeatedly overdrawn (‘‘repeatedly overdrawn threshold’’) under 229.13(d); and (6) the civil liability amounts for failing to comply with the EFA Act’s requirements under 229.21(a).
Frequency of Adjustments; Initial and Subsequent Adjustment Dates
The rule specifies that amounts for the six enumerated categories listed above must be adjusted every five years in accordance with a calculation set forth in the rule, with the first adjustment taking effect on July 1, 2020. Thus, each subsequent adjustment following July 1, 2020 will take effect every fifth July 1, (e.g. July 1, 2025; July 1, 2030, etc.).
Calculation Methodology of the Adjustment Amount
The adjustment amount will be calculated across an “inflation measurement period” (defined in the regulation) by the aggregate percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), rounded to one decimal, and then multiplied by the applicable existing dollar amount, the result of which being rounded to the nearest multiple of $25. However, no dollar amount adjustment will be made if the aggregate percentage change is zero or is negative, or when the aggregate percentage change multiplied by the applicable existing dollar amount and rounded to the nearest multiple of $25 results in no change.
When there is an aggregate negative percentage change over an inflation measurement period, or when an aggregate positive percentage change over an inflation measurement period multiplied by the applicable existing dollar amount and rounded to the nearest multiple of $25 results in no change, the aggregate percentage change over the inflation measurement period will be included in the calculation to determine the percentage change at the end of the subsequent inflation measurement period. That is, the cumulative change in the CPI–W over the two (or more) inflation measurement periods will be used in the calculation until the cumulative change results in publication of an adjusted dollar amount in the regulation.
Adjustments will likely be published in the Federal Register at least one year in advance of their effective date. The Agencies stated they anticipate publishing in the first half of 2024 the adjustment amounts that will take effect on July 1, 2025.
Initial Adjustment Amounts
The following is a list of current dollar amounts that apply prior to July 1, 2020, and the set of first adjustment amounts that will take effect on July 1, 2020.
- For purposes of the minimum amount under § 229.10(c)(1)(vii), the dollar amount in effect prior to July 1, 2020 is $200; effective July 1, 2020, the amount will be $225;
- For purposes of the cash withdrawal amount under § 229.12(d), the dollar amount in effect prior to July 1, 2020, the amount is $400; effective July 1, 2020, the amount will be $450;
- For purposes of the new account amount, large deposit threshold, and the repeatedly overdrawn threshold under §S 229.13(a), (b), and (d) respectively, the dollar amount in effect prior to July 1, 2020, the amount is $5,000; effective July 1, 2020, the amount will be $5,525; and
- For purposes of the civil liability amounts under § 229.21(a), the dollar amounts in effect prior to July 1, 2020, are $100, $1,000, and $500,000 respectively; effective July 1, 2020, the amounts will be $100, $1,100, and $552,500 respectively.
Updating Disclosures & Notices
Institutions will need to update funds availability policies, disclosures, and notices (including change-in-terms notices for existing accounts) that will be provided on and after the applicable effective date to reflect the appropriate adjusted amount(s). It should be noted that rule has not changed the timing or content requirements for such policies, disclosures, and notices.
Revised and New Commentary Examples in the Regulation
The rule has revised and added certain examples in the commentary to reflect the July 1, 2020 adjustment amounts, and to address the new adjustment amount calculation methodology. However, the rule neither addresses nor modifies model hold notice verbiage or format, as a separate rulemaking is underway for that purpose.
Fortunately, the rule provides a substantial period of time before the first set of adjusted amounts is effective on July 1, 2020. Institutions should read the rule and begin reviewing their funds availability policies, disclosures, and notices to identify needed changes, and devise an implementation strategy for accounts opened prior to July 1, 2020, and those opened on or after that date. In addition, the plan should address procedures for future adjustments. The final rule may be viewed at: https://www.govinfo.gov/content/pkg/FR-2019-07-03/pdf/2019-13668.pdf
By, Ally Bates