Expedited Funds Availability (Reg CC) Flashcards
Under First National Bank’s Funds Availability Policy, funds are generally given next-day availability. However, case-by-case holds may be applied and exception holds are permitted under certain circumstances, including large deposits. On Monday, July 13, 2020, the FNB teller supervisor decides to place a large dollar exception hold on a $12,000 insurance proceeds check deposited by Mary Williams into her account. A hold notice is mailed to Mary at the close of business on Monday, July 13th.
When should funds be made available to the depositor?
A. $225 by Tuesday, July 14th, $11,775 by Wednesday, July 15th
B. $12,000 by Monday, July 20th
C. $225 by Tuesday, July 14th, $5,525 by Wednesday, July 15th, $7,250 by Monday, July 20th
D. $225 by Tuesday, July 14th, $5,300 by Wednesday, July 15th, and $6,475 by by Wednesday, July 22nd
D. $225 by Tuesday, July 14th, $5,300 by Wednesday, July 15th, and $6,475 by Wednesday, July 22nd
Under Regulation CC, when a large deposit exception hold is placed on a deposit, the first $5,525 must follow the bank’s normal availability schedule. Thus, $225 must be made available the next day, the 14th. It may place a large dollar exception hold on the amount exceeding $5,525 ($6,475) which must be available on the 7th business day after deposit (July 22nd). The remaining $5300 must be available on the next business day since the bank is a next-day availability bank - unless it chooses to place a case-by-case hold, in which case it would make that $5,300 available on the second day, July 15th.
What concerns the compliance professional the MOST when assessing risk related to a public enforcement action regarding payments and processing?
A. Payments made to a lockbox are credited when processed by the bank
B. Payments made in the branch are credited immediately upon receipt
C. Partial payments are credited on the date the full payment amount is received
D. Payments sent via the U.S. Postal Service are credited on the date received
A. Payments made to a lockbox are credited when processed by the bank
Answer A, regarding payments made to a lockbox, presents risk since these are credited when processed by the bank, which may be sometime later after the lockbox is accessed or when the payment is considered received. This is unclear, and thus presents the highest degree of risk. All other options are not as concerning, as these payments are credited as of the date of receipt, whether by mail, in person, or whether the payment is a partial payment.
What are the three deposits that must be made available on the next business day? (Funds from these types of deposits must be made available one business day after the banking day of deposit.)
Cash deposits
Electronic payments
Certain checks (US Treasury, USPS money orders, Federal Reserve Bank, Federal Home Loan Bank, state and local governments, Cashier’s checks, certified checks, teller checks)
What “certain checks” are subject to the next day availability rules? (Funds from these types of deposits must be made available one business day after the banking day of deposit.)
- US Treasury depsited in the payee’s account
- USPS money orders deposited IN person and into the payee’s account
- Federal Reserve Bank and Federal Home Loan Bank deposited IN person and into the payee’s account
- State and local governments deposited IN person and into the payee’s account
- Cashier’s checks, certified checks, teller checks deposited in person & into the payee’s account, using a special deposit slip if required by the bank
Items that would be subject to next-day availability rules but are not deposited in person, must be available for withdrawal when?
A. On the third business day after the funds are deposited
B. Same day
C. On the second business day after the funds are deposited
D. On the first business day after the funds are deposited
C. On the second business day after the funds are deposited
The following deposits were made on Monday at First National Bank:
* Martha Smith, a new customer, deposited $150 in checks into her checking account, which she had opened the previous week
* Jerry Williams, an established customer, deposited a $7,000 check from his father
* Amanda Thomas, also an established customer, deposited her $600 IRS refund into her account
What funds must be made available to these depositors on Tuesday?
A. $225 for each
B. $225 for Martha and Jerry; $600 for Amanda
C. $225 for Jerry; $600 for Amanda
D. $225 for Martha; $600 for Amanda
C. $225 for Jerry; $600 for Amanda
Jerry’s deposit is a check that does not have to be available the next day, with the exception of $225. Because Amanda’s check is on the U.S. Treasury, her entire deposit is available the next day. Martha’s account is a new account; therefore, none of her deposit is required to be made available on the next business day.
Which of the following accounts is considered to be a new account for delayed funds availability purposes?
A. A new account opened by an established customer who has had several transaction accounts with the bank for a long time
B. A new account opened by a customer who previously had an account but closed it 15 days before opening the new one
C. A new account opened by a customer who has had a regular savings account at the bank for five years
D. A new account opened by a customer who is a joint account holder on another checking account at the bank but who has no other individual account
C. A new account opened by a customer who has had a regular savings account at the bank for five years
A savings account is not a transaction account and therefore is not an account according to the definition given in Regulation CC. Therefore, the customer has not had an account at the bank at the time the new account was opened, so the new account exception applies.
A customer deposits a $7,000 local check and a $12,000 U.S. Treasury check in the bank on Monday. The bank’s policy is that it generally makes funds from checks available on the next business day, although it does place exception holds. When does the bank have to make these funds available?
A. $5,525 is available on Tuesday; the rest is available within a reasonable time period
B. $500 is available on Tuesday; $4,500 is available on Wednesday; and the remaining is available within a reasonable time period
C. $5,200 is available on Tuesday; $4,800 is available on Wednesday; and the remaining is available within a reasonable time period
D. $12,200 is available on Tuesday and $6,800 is available on Wednesday
A. $5,525 is available on Tuesday; the rest is available within a reasonable time period
The aggregate deposit is subject to the large deposit exception. The next day availability requirement for Treasury checks is not applicable to the entirety of a large deposit. Only $5,525 of the Treasury check must be made available on the next business day. In the case of a large deposit exception, the $225 does not have to be made available, so only $5,525 is required to be made available on the next business day. The remainder of the deposit can be made available within a reasonable period of time.
For which of the following deposits is a bank NOT required to give next day availability?
A. A deposit of seven $100 bills
B. A deposit of a Social Security check by mail
C. A deposit of a Social Security payment
D. The deposit of a cashier’s check at an ATM
D. The deposit of a cashier’s check at an ATM
This type of deposit must be made in person to a bank employee to be eligible for next-day availability.
What is the required timing for giving notice to customers regarding a change to a bank’s Regulation CC funds availability policy that improves or expedites availability?
A. At least 15 days prior to implementation
B. At least 30 days prior to implementation
C. No later than 15 days after implementation
D. No later than 30 days after implementation
D. No later than 30 days after implementation
A $7,000 check is presented to First National Bank, as the paying bank on Monday. First National is going to return the check to the depositary bank. Generally, First National mails return checks to the Federal Reserve Bank and mails its forward collection checks as well to avoid the costs of a courier. Other banks in the community send both return and forward collection checks to the Federal Reserve Bank by courier if the checks are over $5,000. Can First National follow its usual procedure in this case?
A. Yes. Provided the bank is consistent in its method of return, it does not have to use the most expeditious method.
B. Yes. Provided the bank uses the mail for forward collection, it can use the mail for returns.
C. No. The bank must use the method used by banks in similar circumstances.
D. No. The bank is always required to use the most expeditious method of return
C. No. The bank must use the method used by banks in similar circumstances.
The bank is not required to use the most expeditious method provided it uses the method a similarly situated bank would use for forward collection.
The manager of teller operations contacts the compliance manager about a high level of exceptions noted on hold notices during recent compliance monitoring. Which of the following recommendations is MOST appropriate for the compliance manager to make?
A. Require an officer’s review and signature on all hold notices.
B. Support the purchase of a new teller computer system to automate hold notices.
C. Increase the frequency and volume of compliance monitoring to better determine the weak areas.
D. Arrange remedial training on hold notice requirements for tellers where the exceptions were noted.
D. Arrange remedial training on hold notice requirements for tellers where the exceptions were noted.
While the other alternatives are appropriate also, the first action should be to retrain the tellers where the exceptions were noted. Training will help immediately correct the problem. The other actions would have an effect in the long term.
For which of the following deposits is a bank required to give next-day availability (assume that all checks are deposited into the account of the payee)?
A. A deposit of pesos
B. A deposit of a Social Security check by mail
C. A deposit of a U.S. Postal Money Order by mail
D. The deposit of a cashier’s check through the night deposit box
B. A deposit of a Social Security check by mail
This type of deposit does not need to be made in person to a bank employee to be eligible for next-day availability.
On which of the following deposits is a bank NOT required to give next day availability?
A. A cashier’s check deposited at a proprietary ATM
B. A Social Security check received through the mail to be deposited in the payee’s account
C. U.S. Postal Service money orders deposited in person to the payee’s account
D. Cash, where the deposit was made in person to a teller at the depository bank
A. A cashier’s check deposited at a proprietary ATM
Cashier’s checks must be deposited in person to get next day availability.
First National has an account for Mary Jones, who has had several overdrafts in her account over the past few months. On February 15, she overdrew her account and had a negative balance, which lasted for 10 days. As of March 14, the number of negative days in the statement cycle was three; and as of April 14, the number of days was six. The last overdraft occurred on May 14, and the account was overdrawn for three days. Mary has not been overdrawn since May. First National has extended the holds placed on all deposits to her account. How long can the bank continue to subject her account to extended hold periods?
A. Until May 14
B. Until October 14
C. Until July 14
D. Until April 14 of the next year
B. Until October 14
The bank can apply the extended hold because the depositor has been overdrawn for at least six days during the preceding six months. The six days is a running total. Basically, from any day in the year the bank should count back six months to determine if the number of overdrafts within that time period equals six or more. In this situation the six months begins to run from the April 14 date (the first date as of which the account has actually been overdrawn for six days). If Mary’s account has no more overdrafts, by October 14 it will no longer meet the criterion of having been overdrawn for six days during the previous six months—so the hold will have to be lifted.
A senior officer of a bank is considering breaking with tradition and opening the main office for general banking business on Saturdays. Before making the final decision, he requests your input. Which of the following describes the Regulation CC implications of his proposal?
A. Saturday is not a ‘‘business day’’ under the regulation, and the funds availability schedule will not be affected.
B. Funds availability disclosures and lobby notices will have to be revised for all branches.
C. An extra day of interest on Saturday deposits will have to be paid.
D. Being open on Saturday will shorten hold periods and increase exposure to operating losses.
A. Saturday is not a ‘‘business day’’ under the regulation, and the funds availability schedule will not be affected.
First National’s funds availability policy states that funds from checks are generally available for withdrawal on the next business day following the day of deposit. The policy also states that longer holds may be required on a case-by-case basis and advises customers to ask if they need to be sure of the availability of a specific deposit. Henry Cranston deposited a check into his account on Monday. Henry needed to use the funds on Tuesday but he did not ask about the availability at the time of the deposit. A bank teller accepted the deposit and gave Henry a receipt. After Henry left the bank, the teller’s supervisor noticed the check and decided that a longer hold needed to be placed and the funds would not be available until Wednesday . Which of the following actions must the bank perform?
A. The bank must make the funds available on Tuesday, because Henry was not notified at the time of the deposit.
B. The bank may hold the funds for a longer time period but must send Henry a hold notice.
C. The bank may hold the funds for a longer time period and need not notify Henry because he did not ask about the availability of the deposit.
D. The bank may hold the funds for a longer time period and may, at its option, send Henry a notice of the delay
B. The bank may hold the funds for a longer time period but must send Henry a hold notice.
The bank must send Henry a hold notice even if it is sent after the deposit is made. Notice must be sent no later than the first banking day following the day of the deposit.
Banks may extend the availability time period for cash or other similar withdrawals on deposits of checks by one business day provided that up to $__ of the deposited funds is made available by __ PM on the day that the funds would be made available under the schedule. This $__ is in addition to the initial $225 availability.
$400
5:00 pm
$400
The first $_____ of deposits into the payee’s new account of checks drawn on the US Treasury must be made available on the __ business day; amounts over $____ must be made available no later than on the ___ business day following the banking day of the deposit.
$5,525
next
$5,525
9th
The first $____ of in-person deposits into the payee’s new account of checks drawn on Federal Reserve Banks, Federal Home loan Banks, and state and local governments, and cashier’s, certified, teller and traveler’s checks must be available on the ___ business day; amounts over $____ must be available no later than on the __ business day following the day of deposit.
$5,525
next
$5,525
9th
For large deposit check holds, the first $____ is subject to the availability schedules; amounts over $____ are not subject to any hold restrictions except that these deposits can be held only for a reasonable amount of time. “Reasonable” means up to __ business days.
$5000
$5000
5
For redeposited check holds, checks may be held for _______________.
A reasonable period of time (5 business days).
To be subject to the repeated overdraft hold exception, the account must have had what?
- A negative balance for 6 or more banking days within the preceding 6 months
OR - A negative balance of $5000 or more for 2 or more banking days within the preceding 6 months.
For the repeated overdraft hold exception, how long may checks be held for?
A reasonable period of time (5 business days)
For items where there is reasonable cause to doubt collectibility, how long may checks be held for?
A reasonable period of time (5 business days)
How long must banks maintain documentation about the reasons to doubt collectibility on a check hold?
2 years
What are the bank’s responsibilities if the bank doubts the collectibility of an item and does not give the depositor a hold notice at the time of the deposit?
The bank may not assess a fee for overdrafts if the overdrafts would not have occurred except for the delayed availability of funds if the check was paid by the paying bank.
