EFA Flashcards
1
Q
How many subparts are there for EFA and what does each go over?
A
4 subpart A-D
Subpart A: Definitions
Subpart B: Funds Availability requirements
Subpart C: Check Collection and Return Requirements
Subpart D: Check 21 requirements
2
Q
What is the definition of an account under Subparts B-D?
A
B & C: A deposit that is a transaction account. Encompasses consumer and corporate accounts and includes accounts where withdraws or transfers can be made through any of the following:
- -negotiable instrument
- -Payment order of withdrawal
- -telephone
- -Electronic payment
However, subpart B an account does not include accounts where the account holder is a Bank or office of a bank outside of the US.
Subpart D: Any deposit at a bank including demand deposit or other transaction account and a savings deposit or other time deposit.
3
Q
What is the definition of a bank?
A
Insured banks, credit unions, agencies and branches of foreign banks, FHLB members.
For subparts C and D a bank also includes anyone in the business of banking, federal reserve banks, FHLBs and state/local govts to the extent they pay checks.
Subpart D also refers to the US treasury and USPS as banks to the extent they act as payors.
4
Q
What does the term “Paying bank” refer to?
A
Any bank at which or through which a check is payable and to which it is sent for payment or collection. For subpart D this can also include the US treasury and USPS.
5
Q
What is a reconverting bank?
A
The bank that creates a substitute check or is the first bank to transfer or present a substitute check to another party.
6
Q
What is a Check, including original checks and substitute checks (4)?
A
The term check includes both original checks and substitute checks.
• An original check is the first paper check issued with respect to a particular payment transaction.
• A substitute check is a paper reproduction of an original check that:
– Contains an image of the front and back of the original check,
– Bears a MICR line (routing account, check numbers) containing all of the information encoded on the original check’s MICR line, except as provided in the industry standard for substitute checks,
– Conforms in dimension, paper stock, and otherwise with industry standards for substitute checks, and
– Is suitable for automated processing in the same manner as the original check.
A substitute check for which a bank has provided the warranties is the legal equivalent of an original check if the substitute check accurately represents all of the information on the front and back of the original check and bears the legend ‘‘This is a legal copy of your check. You can use it the same way you would use the original check
7
Q
What is a copy of an original check?
A
A copy of an original check is any paper reproduction of an original check, including a paper printout of an electronic image, a photocopy, or a substitute check. A sufficient copy is a copy of an original check that accurately represents all of the information on the front and back of the check at the time of truncation or is otherwise sufficient to establish the validity of a claim.
8
Q
What does truncate mean in reference to checks?
A
Truncate means to remove an original check from the forward collection or return process and replace it with a substitute check or, by agreement, information relating to the original check. The truncating bank may or may not choose to provide subsequent delivery of the original check.
9
Q
What is a local check?
A
A local check is a check deposited in a depositary bank that is located in the same Federal Reserve Bank check-processing region as the paying bank.
However, in February 2010, the Federal Reserve consolidated all of its check processing operations into a single paper check- processing region. Accordingly, there are no longer nonlocal checks.
10
Q
What is an Electronic Check or Electronic Returned check? (2)
A
An electronic check and electronic returned check mean an electronic image of, and electronic information derived from, a paper check or paper returned check, respectively, that—
(1) Is sent to a receiving bank pursuant to an agreement between the sender and the receiving bank; and
(2) Conforms with ANS X9.100-187, unless the Board by rule or order determines that a different standard applies or the parties otherwise agree.
Electronic checks and electronic returned checks are subject to subpart C of Regulation CC as if they were checks or returned checks, except where provided in subpart C.
11
Q
What is an electronically created item?
A
An electronic image that has all the attributes of an electronic check or electronic returned check, but was created electronically and not derived from a paper check.
12
Q
What is a Consumer, Consumer Account, and a Customer?
A
- A consumer is a natural person who draws a check on a consumer account or cashes or deposits a returned check against a consumer account.
- A consumer account is an account used primarily for personal, family, or household purposes.
- A customer is a person who has an account with a bank.
13
Q
What is a Business day vs. a banking Day?
A
- A business day is any day except Saturday, Sunday, and a legal holiday (standard Federal Reserve holiday schedule).
- A banking day is a business day on which a bank is open for substantially all its banking activities.
Even though a bank may be open for regular business on a Saturday, that day is not considered a banking day for purposes of Regulation CC because Saturday is never a ‘‘business day’’ under the regulation. The fact that one branch is open to the public for substantially all its banking activities does not necessarily mean that specific day is a banking day for the other branches of the bank.
14
Q
What is an Indemnifying Bank?
A
Indemnifying bank means –
- For the purposes of §229.34, a bank that provides an indemnity under §229.34 with respect to remote deposit capture or an electronically-created item, or
- For the purposes of §229.53, a bank that provides an indemnity under §229.53 with respect to a substitute check.
15
Q
To qualify for next day availability the deposit must meet what two requirements?
Exceptions? (2)
A
-Generally, to qualify for next-day availability, the deposit must be both
• Made at a staffed teller station and
• Deposited into an account held by the payee of the check.
Exceptions:
-Exceptions are U.S. Treasury checks and on-us checks, which must receive next-day availability even if the deposit is not made at a staffed teller station.
-Cash and other next-day check deposits (such as Postal Service money orders, cashier’s checks, certified checks, checks drawn on a state or local government, and checks drawn on a Federal Reserve Bank or a FHLB) that are not made at a staffed teller station must be available for withdrawal on the second business day after the day of deposit.
16
Q
What types of deposits qualify for next day availability?
A
- Cash, electronic payments, and certain check deposits must generally be made available for withdrawal the business day after the banking day on which they were received.
- Among the covered check deposits are cashier’s, certified, and teller’s checks; government checks (including U.S. Treasury checks, USPS money orders, state and local government checks, and checks drawn on a Federal Reserve Bank or an FHLB); and certain on-us checks (checks drawn on the same bank, or a branch thereof).
17
Q
What is next day availability?
A
When a qualifying deposits must be made available for withdrawal the business day after the banking day on which they were received.
18
Q
What conditions must be met for a state or local govt check to receive next day availability?
A
For state and local government checks to receive next-day availability, the depositary bank must be located in the same state as the governmental unit issuing the check.
19
Q
True or false:
A bank can require the use of special deposit slips or envelopes.
A
True for deposits of state and local govt checks, cashiers, certified, and teller’s checks. The bank must either supply the slips or inform customers how a slip can be obtained.
20
Q
What conditions must be met for an on-us check to qualify for next day availability?
A
For an on-us check to receive next day availability, it must be drawn on the same branch or another branch of the bank where it is deposited. In addition, both branches must be located in the same state or check-processing region.
21
Q
What is the $225 rule?
A
Under a special rule for check deposits not subject to next-day availability, the depositary bank must provide next-day availability for withdrawal of the lesser of $225 or the aggregate amount deposited to all accounts including individual and joint accounts, held by the same customer on any one banking day.
This rule does not apply to deposits received at nonproprietary ATMs.
The $225 amount changes every 5 years to account for inflation and is rounded to the nearest $25. It was adjusted in 2020 and will adjust again in 2025.
22
Q
Under the permanent availability schedule, local check deposits must be made available when?
A
No later than the second business day following the day on which funds were deposited.
23
Q
When must funds be made available if deposited at nonproprietary ATMs (cash and all checks)?
A
No later than the fifth business day following the banking day on which they were deposited.
24
Q
When would a check meet the criteria for local check availability rather than next day availability which most checks normally receive?
A
Checks that would normally receive next-day availability are treated as local check deposits if they do not meet all the criteria for next-day availability under section 229.10(c). (certain checks generally deposited at a staffed teller station and into an account held by the payee of the check receive next-day availability. However, state and local government checks and certain on us checks are subject to additional rules.)
25
When do US Treasury Checks, USPS money orders, Cashier’s, certified, teller’s, and state and local government checks and checks drawn on a Federal Reserve Bank or FHLB that DO NOT qualify for next day or second day availability receive availability?
They receive funds availability according to local check availability.
26
What are the special rules regarding cash withdrawals, if the bank chooses to extend the availability schedule for cash or similar withdrawals by one day?
The depositary bank is allowed to extend the availability schedule for cash or similar withdrawals by one day.
If it does, a customer must also be allowed to withdraw $450 of the deposited funds (or the maximum amount that may be withdrawn from an ATM, but not more than $450) no later than 5:00 p.m. on the day the funds would have ordinarily become available for check withdrawals, that is, the second business day after the deposit.
This is in addition to the $225 that must be made available on the business day following deposit.
The remainder of the deposited funds would be available for cash withdrawal on the following, third business day.
27
What are the 6 exceptions to the availability schedule?
The regulation provides for exceptions in six situations:
• New accounts
• Deposits in excess of $5,525 on any one day
• Checks that have been returned unpaid and are being redeposited
• Deposits to accounts that have been repeatedly overdrawn
• Cases in which the bank has reasonable cause to believe the check being deposited is uncollectible
• Emergency conditions
Although banks may exceed the timeframes for availability in these situations, the exceptions generally may not be invoked if the deposit would ordinarily receive next-day availability.
28
What are the requirements under the new account exception to the availability schedule? (6)
- Accounts are new for the first 30 calendar days it is open.
- new accounts are exempt from the availability schedule for deposits of local checks, but next day availability is required for deposits of cash and for electronic payments.
- The first $5,525 of a day's aggregate deposits of checks must be given next day availability. The amount in excess must be made available no later than the 9th business day following the day of deposit.
- To qualify for next day availability on a new account, deposits must be made in person with an employee. If they are made at an ATM or ITM instead availability may be provided on the second business day after the day of deposit.
- Treasury checks are an exception for new accounts, and always must be given next day availability, regardless of how they were received.
- Banks are not required to make the first $225 of a days deposits of local checks, or the funds from on-us checks available next business day.
29
What are the requirements under the large deposit exception to the availability schedule?
A depositary bank may extend hold schedules when deposits other than cash or electronic payments exceed $5,525 on any one day. A hold may be applied to the amount in excess of $5,525.
To apply the rule, the depository bank may aggregate deposits made to multiple accounts held by the same customer, even if the customer is not the sole owner of the accounts.
30
What are the requirements under the Redeposited Checks exception to the availability schedule?
A depositary bank may delay making the funds from a check available if the check had previously been deposited and returned unpaid.
The exception does not apply to checks that were previously returned unpaid because of a missing indorsement or because the check was postdated when
presented.
31
What are the requirements under the repeated overdrafts exception to the availability schedule? (2)
If a customer’s account, or accounts, have been repeatedly overdrawn during the preceding six months, the bank may delay making the funds from a check available. A customer’s account may be considered repeatedly overdrawn in two ways.
First, the exception may be applied if the account was
overdrawn, or would have been overdrawn had check or other charges been paid, for six or more banking days during the preceding six months.
Second, the exception may be applied to customers who incurred overdrafts on two banking days within the preceding six-month period if the negative balance in the account(s) at that time was $5,525 or more. The exception may also apply if
the account would have been overdrawn by $5,525 or more had the check or other charges been paid.
32
What are the requirements under the Reasonable cause to doubt collectability exception to the availability schedule?
This exception may be applied to all types of checks. To trigger the exception, the depositary institution must have reasonable cause to believe that the check is not collectible and must disclose the basis for the extended hold to the customer.
The basis for reasonable cause may include, for example, communication with the paying bank indicating that:
• A stop-payment order has been placed on the check
• There are insufficient funds in the drawer’s account to cover the check
• The check will be returned unpaid
Or in cases where:
• The check was deposited six months after the date of the check (stale date)
• The check was postdated (future date)
• The depositary bank believes that the depositor may be engaged in check kiting
• The depositary bank has other confidential information, such as the insolvency or pending insolvency of the customer
If the bank uses this exception they must notify the customer in writing (mail/person) at the time of deposit or mailed 1 B day after the deposit is made. Notice must indicate that availability is being delayed and reason the bank believes the funds are uncollectable.
33
Can a bank assess an overdraft fee or returned check fee if the bank invokes the reasonable cause exception to the availability schedule?
It depends.
If a depositary bank invokes the reasonable-cause exception and does not inform the customer in writing at the time of the deposit, it may not charge the customer any overdraft or returned-check fees resulting from the hold if:
* The deposited check is paid by the paying bank and
* The overdraft would not have occurred or the check would not have been returned had the depositary bank not imposed the reasonable-cause hold.
However, the depositary bank may assess overdraft or returned-check fees if the exception hold notice states that the customer may be entitled to a refund of any overdraft or returned-check fees imposed and describes how the customer can obtain the refund. The bank must then refund the fees upon request.
34
What are the requirements under the emergency conditions exception to the availability schedule? (4)
Banks may suspend the availability schedule under the following emergency conditions:
• An interruption of communications or computer or other equipment facilities
• Suspension of payments by another bank
• War
• Any emergency condition beyond the control of the depositary bank
35
Whenever a bank invokes one of the exceptions to the availability schedules (other than the new-account exception), what is it required to do?
They must notify the customer in writing.
They can provide the general exception notice, the one-time exception notice for non-consumer accounts, or the exception notice for repeated overdrafts.
36
What elements are required in the general exception notice that is provided to customers when a bank evokes an exception to the availability schedule? (5)
The general notice of exception must include the following:
• The customer’s account number
• The date of the deposit
• The amount of the deposit that will be delayed
• The reason the exception was invoked
• The time period the funds will be available for withdrawal (unless unknown, as in an emergency situation)
37
True or false:
If the deposit is made at a staffed facility, the exception notice may be given to the person making the deposit, regardless of whether that person is the customer who holds the account.
True
38
When would the exception notice need to be provided to the customer via mail?
If the deposit is not made at a staffed facility, the exception notice may be mailed to the customer no later than the business day following the banking day of deposit.
39
When would a bank provide the one-time exception notice to a consumer rather than the general notice?
If most of the check deposits into a particular nonconsumer account qualify for either the large-deposit exception or the redeposited-check exception, the bank may send a one-time notice rather than a general notice
40
What are the required elements of the one-time exception notice? (2)
The onetime notice must be sent either the first time the exception is invoked or before that time. It must state both:
• The reason the exception may be invoked and
• The time period when the funds will generally be made available.
41
If most of the check deposits into a particular account qualify for the repeated overdraft exception, the bank must send what notice in lieu of the general exception notice?
They must send the specified period notice when the overdraft exception is first invoked.
42
What are the required elements of the specified period exception notice used for the repeat overdraft exception? (4)
It must state all of the following:
• The customer’s account number
• The fact that access to the funds is being delayed because the repeated-overdraft exception is being invoked
• The time period during which the exception will apply
• The time period within which the funds generally will be available for withdrawal
43
What is are the general availability requirements for deposits subject to exceptions of the availability schedule?
For deposits subject to exceptions to the availability schedules, other than deposits into new accounts, the depositary bank is permitted to delay availability for a reasonable time beyond the schedule.
Generally, a reasonable period is considered to be no more than one business day for on-us checks and five business days for local checks. If a depositary bank extends its availability beyond these timeframes, it must be able to prove that the extended delay is reasonable.
44
What is the general rule regarding the payment of interest on deposits to interest bearing accounts?
A depositary bank must begin accruing interest on interest bearing accounts no later than the business day on which it receives provisional credit for the deposited funds.
A depositary bank typically receives credit on checks within one or two days following deposit. It receives credit on cash deposits, electronic payments, and checks that are drawn on itself on the day the cash, check, or electronic payment is received. And if a nonproprietary ATM is involved, it usually receives credit on the day the bank that operates the ATM credits the depositary bank for the amount of deposit.
A depositary bank may rely on the availability schedule of its Federal Reserve Bank, FHLB, or correspondent bank when determining when the depositary bank receives credit (section 229.14(a)(1)). If availability is delayed beyond the time specified in that schedule, a bank may charge back to the account any interest erroneously paid or accrued on the basis of that schedule.
45
True or false:
A depositary bank may accrue interest on checks deposited to all of its interest-bearing accounts based on an average of
when the bank receives credit for all checks sent for payment or collection
True
For example, if a bank
receives credit on 20% of the funds deposited by check
on the business day of deposit (such as via on-us checks), 70%on the business day following deposit, and 10% on the second business day following deposit, the bank may apply these percentages to determine the day on which interest
must begin to accrue for check deposits into all interest bearing accounts, regardless of when the bank received credit for deposits into any particular account.
Consequently, a bank
may begin accruing interest uniformly across all interest bearing accounts rather than having to track the type of check deposited to each account.
46
True or false:
The regulation limits bank policy from accruing interest on balances that exceed a specified amount or on the minimum balance maintained in the account during the given period.
False:
Nothing in the general rule limits a depositary bank policy that provides that interest may accrue only on balances that exceed
a specified amount or on the minimum balance maintained in the account during a given period. However, the balance must
be determined according to the date the bank receives credit for the funds.
47
True or false:
There is a limit on a policy that provides that interest may accrue sooner than required by the regulation.
False
48
What types of accounts are not subject to the general rule concerning the timing of interest payments?
- money market deposit accounts
- savings deposit accounts and
- time deposit accounts
However, for simplicity of operation, a bank may accrue interest on such deposits in the same manner that it accrues interest on transaction accounts.
49
True or false:
Banks are required to pay interest on funds deposited in an interest bearing account by a check that was returned unpaid
False:
Banks are not required to pay interest on funds deposited in an interest-bearing account by a check that has been returned unpaid, regardless of the reason for return.
50
What general disclosures are required regarding funds availability? and what are the format requirements? (5)
- A bank must disclose its funds availability policy to its
customers. (This is the policy followed by the bank in most cases)
-The disclosures must be clear and conspicuous and must be in writing.
-Disclosures other
than those posted at locations where employees accept consumer deposits, at ATMs, or on preprinted deposit slips must be in a form that customers can keep.
-They must be grouped together and must not contain information unrelated to the requirements of Regulation
CC.
-If other account terms are included in the same
document, disclosures related to the regulation should be highlighted, for example, by having a separate heading.
51
In the general funds availability disclosure, what are the requirements regarding uniform reference to day of availability? (2)
In its disclosure, the bank must describe funds as being available for withdrawal on ‘‘the _____ business day after’’ the day of deposit.
In this calculation, the first
business day is the business day following the banking day the deposit was received, and the last business day is the day on which the funds are made available.
52
True or false:
A bank is not required to give availability disclosures to customers who have dormant or inactive accounts?
True
53
How many funds availability disclosures must be provided if the account has more than one account holder or if an account holder has more than one account?
A bank is not required to give multiple disclosures if the account holder has more than one account with the same availability policies.
Similarly, a bank is not required to give separate disclosures if there is more than one account holder. Disclosures to one of the account holders is sufficient.
54
If a bank wishes to impose longer delays on a case by case basis or invoke an exception hold, what disclosure must they provide in addition to the general funds availability disclosure?
They must provide the specific availability policy disclosure.
55
What is the required content of the Specific availability policy disclosure? (4)
A bank’s specific availability policy disclosure must include, as applicable, the following:
• A summary of the bank’s availability policy
• A description of the categories of deposits or
checks used by the bank when it delays availability,
such as local checks; how to determine the category to which a particular deposit or check (such as a payable-through draft) belongs; and when each category will be available for withdrawal (including a description of the bank’s business days and when a deposit is considered received)
• A description of any of the exceptions specified in
section 229.13 that may be invoked by the bank, including the time at which the deposited funds generally will become available for withdrawal and
a statement that the bank will notify the customer if
the bank invokes one of the exceptions
• A description of any case-by-case policy of delaying availability that may result in deposited funds being available for withdrawal later than the time periods stated in the bank’s availability policy (specific requirements are laid out in section
229.16(c)(1))
56
If a bank has a case by case policy what information must be disclosed in the Specific Availability Policy disclosure regarding Case by Case holds? (3)
• A statement that the time when deposited funds are
available for withdrawal may be extended in some cases, and a statement of the latest time deposited funds will be available for withdrawal
• A statement that the bank will notify the customer if
funds deposited in the customer’s account will not
be available for withdrawal until after the time periods stated in its availability policy
• A statement that customers should ask if they need to know when a particular deposit will be available for withdrawal
57
In what circumstance can a bank evoke a case by case hold?
If the bank has a policy of making deposited funds available for withdrawal sooner than require, then it may extend the time when funds are available up to the time periods allowed under the regulation on a case by case basis.
58
When a depositary bank extends the time that funds will be available for withdrawal on a case-by-case basis, it must provide the depositor with a _____ _____ at the time of deposit. It must include what 4 things?
Written notice that contains:
- Customer account number
- Date of deposit
- Amount of deposit being delayed
- day the funds will be available for withdrawal
If the deposit was not made in person, the bank can provide the deposit via mail by the first business day following the banking day the deposit was made.
59
A depositary bank that extends the time when funds will be available for withdrawal on a case-by- case basis and does not furnish the depositor with written notice at the time of deposit may not assess any fees for any subsequent overdrafts (including use of a line of credit) or return of checks or other debits to the account if? (2)
Any exceptions?
• The overdraft or return of the check or other debit
would not have occurred except for the fact that the
deposited funds were delayed under section 229.16(c)(1) of the regulation and
• The deposited check was paid by the paying bank.
However, the depositary bank may assess an overdraft or returned-check fee if it includes a notice concerning overdraft and returned-check fees with the case by case notice and, when required, refunds any such fees upon the request of the customer. The overdraft and returned-check notice must state that the customer may be entitled to a refund of overdraft or returned-check fees that are assessed if the
check subject to the delay is paid, and also must state how to obtain a refund.
60
When must a bank provide the general funds availability policy, and specific availability policy to the customer?
before an account is opened.
61
What are the additional disclosure requirements are there outside of the funds availability policy disclosures? (5)
- Deposit slips given to customers must include a notice that deposits may not be available for immediate withdrawal
- A bank must post a notice at each location where employees accept deposits that sets the time periods applicable to the availability of funds deposited.
- at each ATM location, a bank must post or provide a notice that funds deposited may not be available for immediate withdrawal. Off site ATMs must disclose the days on which deposits made at the ATM will be considered received, if deposits are not removed more than 2x a week.
- The specific availability policy must be made available to anyone who requests it
- 30 days before implementing a change in the availability policy, a bank must send notification of the change to all account holders adversely affected by the change. Changes that result in faster availability may be disclosed no later than 30 days after implementation.
62
When are funds considered to be received when deposited at a staffed teller station or staffed ATM?
When received by the teller or when placed in the ATM.
63
When are funds considered to be received when mailed to the bank for deposit?
Considered deposited on the banking day they are received by the depositary bank; in this case, funds are considered ‘‘received’’ at the time the mail is delivered to the bank, even if it is initially delivered
to a mail room rather than the check-processing area.
64
When are funds considered to be received when deposited at a night depository?
Considered deposited on the banking day the funds are removed from the night depository and are accessible to the depositary bank for processing.
For example, some businesses deposit their funds in a locked bag at the night depository late in the evening and return to the
bank the following day to open the bag; others have
an agreement with the bank that the deposit bag must
be opened under the dual control of the bank and the
depositor. In both cases, the funds are considered
deposited when the customer returns to the bank and opens the deposit bag.
65
When are funds considered to be received when deposited through a lock box arrangement?
Considered deposited on the day the funds are
removed from the lock box and are accessible to the
depositary bank for processing. A lock box is a post office box that is typically used by a corporation for the collection of bill payments or other check receipts.
66
When are funds considered to be received if deposited at off-premises ATMs that are not serviced more than 2x a week?
Considered deposited on the day they are removed from the ATM. This special provision is geared toward banks whose practice is to service remote ATMs
infrequently. A depositary bank that uses this provision must post a notice at the ATM informing depositors that funds deposited at the ATM may not be considered received on the date of deposit.
67
When are funds considered to be received if deposited on a day the bank is closed or after the bank's cutoff hour?
May be considered deposited on the next banking day.
68
What are the permissible cutoff hours under EFA?
Generally, a bank may establish a cutoff hour of 2:00 p.m. or later for receipt of deposits at its main office or branch offices and a cutoff hour of 12:00 noon or later for deposits made at
ATMs, lock boxes, night depositories, or other off-premises facilities.
Different cutoff hours may be established for different types of deposits—for example, a 2:00 p.m. cutoff for receipt of check deposits and a later time for receipt of wire transfers is permissible. Location can also play a role in the establishment of cutoff hours; for example, different cutoff hours may be established for ATM deposits and over-the- counter deposits, or for different teller stations at the same branch.
With the exception of the 12:00 noon cutoff hour for deposits at ATMs and off-premises facilities, the cutoff hour for receipt of deposits may not be earlier than 2:00 p.m.
69
What are the permissible hours of funds availability?
Generally, funds must be available for withdrawal by 9:00 a.m. or the time a depositary bank’s teller facilities, including ATMs, are available for customer account withdrawals,
whichever is later.
Thus, if a bank has no ATMs and its branch facilities are available for customer transactions beginning at
10:00 a.m., funds must be available for withdrawal by 10:00 a.m. If a bank has 24-hour ATM service, funds must be available for ATM withdrawals by 9:00 a.m.
70
True or false:
A bank is permitted to provide availability to its customer in a shorter time than that prescribed in the regulation.
The bank my also adopt different funds availability policies for different segments of its customer base.
True so long as each policy meets the schedules in the regulation.
For example, it may differentiate between
its corporate and consumer customers, or may adopt different policies for its consumer customers based on whether a customer has an overdraft line of credit associated with his or her account.
71
True or false:
If a bank has a policy of limiting cash withdrawals at ATMs to $250 a day the regulation requires the bank dispense $400 of the proceeds of the customer's deposit that must be made available for cash withdrawal on that day.
False
Some small banks do not keep cash on their premises and do not offer cash withdrawal services to their customers. Others limit the amount of cash on their premises, for reasons
related to bonding, and as a result reserve the right to limit the amount of cash a customer may withdraw on a given day or to require advance notice for large cash withdrawals.
Nothing in the regulation is intended to prohibit these practices if they are applied uniformly and are based on
security, operating, or bonding requirements and if the policy is not dependent on the length of time the funds have been in the customer’s account, as long as the permissible hold has
expired.
72
What are the requirements under calculated availability for nonconsumer accounts? (3)
Under calculated availability, a specified percentage of funds from check deposits may be made available to the customer on the next business day, with the remaining percentage deferred until subsequent days.
The determination of the percentage of deposited funds that will be made available each day is based
on the customer’s typical deposit mix as determined by a sample of the customer’s deposits.
Use of calculated availability is permitted only if, on average, the availability
terms that result from the sample are equivalent to or more prompt than the requirements of the regulation.
73
Is the following example permissible under EFA?
A customer cashes a check (other than an on-us check) over the counter, and the bank places a hold on the funds in the customer's savings account equivalent to the check cashed.
Yes
If a customer deposits a check, the bank may place a hold on any of the customer’s funds to the extent that the funds held do not exceed the amount of the check deposited and if the total amount of funds held are made available for withdrawal within the times required in the regulation.
74
What are the training requirements under EFA?
The EFA Act requires banks to inform each employee who performs duties subject to the act about its requirements. The act and Regulation CC also require banks to establish and
maintain procedures designed to ensure and monitor employee compliance with the requirements.
75
What are the effects of Mergers on EFA?
Merged banks may be treated as separate banks for a period of up to one year after consummation of the
merger transaction.
However, a customer of any bank that is a party to the merger transaction and has an established account with the merging bank may not be
treated as a new account holder under the new-account exception of section 229.13(a).
A deposit in any branch
of the merged bank is considered deposited in the bank for purposes of the availability schedules in accordance with section 220.19(a).
This rule affects the status of the combined entity in a
number of areas, for example,
• When the resulting bank is a participant in a check clearinghouse association
• When an ATM is a proprietary ATM
• When a check is drawn on a branch of the depositary bank
76
True or false:
A bank will not be considered liable for violations of Regulation CC if it can demonstrate, by a preponderance of evidence, that violations resulted from bona fide errors and that is maintains procedures designed to avoid such errors.
True
77
What does subpart C of the regulation cover?
Subpart C covers the check-collection system and includes rules to speed the collection and return of checks. Basically, these rules cover the return responsibilities of paying and
returning banks, notices of non-payment for large-dollar
returns by the paying bank, and mandatory check
indorsement standards.
78
True or false:
Electronic checks and electronic returned checks are not subject to subpart C- collection of checks.
False
Electronic checks and electronic returned checks are subject to subpart C as if they were checks or returned checks, except where “paper check” or
“paper returned check” is specified.
79
What is the two-day test under subpart C of EFA?
This subpart generally requires paying and returning banks to return checks expeditiously using a "two-day" test. Under the test a return is expeditious if a local check is received by the depositary bank by 2pm of the second business day after presentment.
80
What are the requirements under Subpart C regarding nonpayment of checks of $5,000 or more? (2)
A paying bank must generally provide timely notification of nonpayment if it determines not to pay a check of $5000 or more regardless of the cannel of collection.
They must notify its customer that a check is being returned and the paying bank's responsibility for giving notice of nonpayment.
81
A substitute check for which a bank has provided warranties is the legal equivalent of an original check if what? (2)
If the sub check:
- accurately represents all of the info on the front and bank of the original check and
- Bears the legend "this is a legal copy of your check. You can use it in the same way you would use the original check"
82
What are the requirements regarding substitute check warranties and indemnity under subpart D? (3)
-Starting with the reconverting bank, any bank that transfers, presents, or returns a substitute check (or a paper or electronic
representation of a substitute check) and receives consideration for that check warrants that the substitute check meets the legal-equivalence requirements and that a check that has already been paid will not be presented for subsequent payment.
- Such a bank also provides an indemnity to cover losses that the recipient and any subsequent recipient of the substitute check (or paper or electronic representation of a substitute check) incurred because of the receipt of a substitute check instead of the original check.
- A bank that rejects a check submitted for deposit and returns to its customer a substitute check (or paper or electronic representation of a substitute check) makes these warranties and indemnifications regardless of whether the bank received consideration.
83
What are the conditions under which a consumer may make an expedited recredit claim for losses associated with the consumer's receipt of a substitute check? (4)
To use the expedited recredit procedure, the consumer must be able to assert in good faith that
• The consumer’s account was charged for a substitute check that was provided to the consumer,
• The consumer’s account was improperly charged or the consumer has a warranty claim,
• The consumer suffered a loss, and
• The consumer needs the original check or a sufficient copy to determine the validity of the claim.
84
To make an expedited recredit claim the consumer must comply with what timing requirements? (2)
Consumer’s claim must be received by the bank that
holds the consumer’s account no later than the fortieth calendar day after the later of:
• The calendar day on which the bank mailed (or delivered by a means agreed to by the consumer) the periodic statement describing the contested transaction or
• The calendar day on which the bank mailed (or
delivered by a means agreed to by the consumer) the substitute check itself.
However the bank must give the consumer an additional, reasonable period of time if the consumer experiences ‘‘extenuating circumstances’’ that prevent timely submission of the claim.
And the bank may voluntarily give the consumer more time to submit a claim than the rule allows.
85
An expedited recredit claim is not considered complete and does not constitute a claim until is contains what 4 required pieces of information?
What if a customer submits an incomplete claim?
The rule requires that the claim contain
• A description of why the consumer believes the account was improperly charged or the nature of the consumer’s warranty claim,
• A statement that the consumer has suffered a
loss, and an estimate of the amount of the loss,
• A reason why the original check (or a copy of the check that is better than the substitute check the consumer already received) is necessary to determine whether the consumer’s
claim is valid, and
• Sufficient information to allow the bank to identify the substitute check and investigate the claim.
If a consumer submits an incomplete complaint, the bank must so inform
the consumer and must tell the consumer what information is missing.
86
Can a bank require a recredit claim be submitted in writing?
Do the timing requirements change if so?
A bank, at its discretion, may require the consumer to
submit the claim in writing. If a consumer makes an oral
claim to a bank that requires a written claim, the bank
must inform the consumer of the written requirement at
that time.
Under those circumstances, the bank must receive the written claim by the later of 10 business days from the date of an oral claim or the expiration of the consumer’s initial 40-day period for submitting a timely claim. As long as the original oral claim fell within the 40-day requirement for notification and a complete written claim was received within the additional 10-day window, the claim meets the timing requirements and, even if the written claim was received after the expiration of the initial 40-day period.
87
A bank must act on a consumer's recredit claim no later than the ____ business day after the banking day on which it received the consumers claim.
10th
88
If a bank determines the the consumer's recredit claim is valid what must it do?
If the bank determines that the consumer’s claim is
valid, it must recredit the consumer’s account no later
than the end of the business day after the banking day
on which it makes that determination. The amount of the recredit should equal the amount of the consumer’s loss, up to the amount of the substitute
check, plus interest on that amount if the account is an interest-bearing account. The bank must then notify the consumer of the recredit
89
If a bank determines that the consumer's recredit claim is invalid what must it do?
If the bank determines that the consumer’s claim is
| invalid, it must notify the consumer of that decision
90
If a bank has not determined the validity of a consumer's recredit claim by the 10th business day after the banking day on which it received the claim, what must the bank do?
The bank must recredit the consumer’s account for the amount of the consumer’s loss, up to the amount of the
substitute check or $2,500, whichever is less.
The bank must also recredit interest on that amount if the consumer’s account is an interest-bearing account.
The bank must send a notice to that effect.
If the consumer’s loss was more than $2,500, the
bank has until the end of the forty-fifth calendar day
from the date of the claim to recredit any remaining
amount of the consumer’s loss, up to the amount of
the substitute check (plus interest), unless it
determines prior to that time that the claim was invalid and notifies the consumer of that decision.
91
EFA generally requires that recredited funds receive next day availability. However, a bank that provisionally recredits funds pending further investigation may invoke what safeguard exceptions to delay availability? (2)
The safeguard exceptions apply to new accounts and repeatedly overdrawn accounts and also when the bank has reasonable cause to suspect that the claim is fraudulent.
A bank may delay availability of a provisionally recredited amount until the start of the earlier of
(1) the business day after the banking day on which the bank determines that the consumer’s claim is valid or (2) the forty-fifth calendar day after the banking day on which the bank received the claim if the account is new, the account is overdrawn, or the bank has reasonable cause to believe that the claim is fraudulent.
When the bank delays availability under this section, it may not impose overdraft fees on checks drawn against the provisionally credited funds until the fifth calendar day after the day on which the bank sent the notice regarding the delayed availability.
If, after providing the recredit, the bank determines that the consumer’s claim was invalid, the bank may reverse the recredit. This reversal must be accompanied by a consumer notification
92
What are the notice requirements related to expedited recredit claims? (3)
* The bank must send the notice of recredit no later than the business day after the banking day on which the bank recredits the consumer’s account. The notice must include the amount of the recredit and the date the recredited funds will be available for withdrawal.
* The bank must send notice that the consumer’s claim is not valid no later than the business day after the banking day on which the bank makes this determination. The notice must include the original check or a sufficient copy of it. Also, it must demonstrate to the consumer why the claim is not valid. Further, the notice must include either any information or document that the bank used in making its determination or an indication that the consumer may request copies of this information.
* The bank must send the notice of a reversal of recredit no later than the business day after the banking day on which the bank made the reversal. The notice must include all the information required in a notice of invalid claim plus the amount (including interest) and date of the reversal
93
What disclosures must a bank provide to customers regarding Subpart D-Substitute checks?
How can this be provided to both consumers who receive cancelled checks with periodic statements and to customers who only receive a substitute check occasionally?
A bank must provide its consumer customers with a
disclosure that explains that a substitute check is the
legal equivalent of the original check and describes the consumer’s recredit rights for substitute checks. A bank may use, but is not required to use, the Board’s model form.
Customers who receive canceled checks with periodic account statements:
Accounts Pre 2004 can receive the disclosure via periodic statements. Otherwise the disclosure can be provided with new account disclosures.
Those who occasionally receive sub checks:
-Provide the disclosure when they receive a sub check or upon request
