Regulation CC
Regulation CC is one of the banking regulations set forth by the Federal Reserve. Regulation CC addressed long hold times that customers were facing after they had deposited endorsed checks to banks, including implementing maximum hold times. Regulation CC implements the Expedited Funds Availability Act of 1987, which sets endorsement standards on checks paid by banks. The enactment of the Check Clearing for the 21st Century Act, implemented under Regulation CC, allowed check collection among banks in the U.S. to become predominantly electronic-based. The act lets banks send checks electronically instead of requiring them in paper form when processing funds with banks they have agreements in place with.
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What Is Regulation CC?
Regulation CC is one of the banking regulations set forth by the Federal Reserve. Regulation CC implements the Expedited Funds Availability Act of 1987. This act sets certain standards for endorsements on checks that are paid by banks and other depository institutions.
Understanding Regulation CC
Regulation CC is designed to require financial institutions to correctly process endorsed checks. The rules pertaining to endorsements are intended to correctly identify the endorsing bank. Unpaid checks are also required to be immediately returned to the paying bank.
Congress instituted the Expedited Funds Availability Act of 1987 because of concerns regarding the length of time holds were being placed on checks by banks after customers had deposited them. The Expedited Funds Availability Act created a maximum hold period for checks. Regulation CC put into effect the disclosure and funds-availability provisions of the legislation.
Financial institutions are required under Regulation CC to provide account-holding customers with disclosures that indicate when deposited funds will be available for withdrawal.
How Regulation CC Works
As part of the policies to regulate the check-clearing system, the Board of Governors of the Federal Reserve adopted rules to hasten the return of unpaid checks.
Check-return rules and same-day settlement rules are outlined and implemented under Regulation CC. The intent of those rules is to reduce risks to depository banks regarding the availability of funds for withdrawal after checks are deposited. The check-return rule better ensures that banks can discover whether or not the checks were returned as unpaid. Same-day settlement decreases the disparity between private sector banks and reserve banks when checks are presented for payment.
Special Considerations
Other rules and policies implemented under Regulation CC include the Check Clearing for the 21st Century Act. This legislation was created by Congress as a means to improve efficiency in the payment system. The act reduced certain legal impediments to electronic check processing. The act allowed for the creation of a substitute for paper checks in electronic check processing as a legal equivalent for original checks.
The act lets banks send checks electronically instead of requiring them in paper form when processing funds with banks they have agreements in place with. This also lets banks send substitute checks to banks with which they do not have electronic processing agreements.
The enactment of this act under Regulation CC has allowed check collection among banks in the United States to become predominantly electronic-based. This has also given banks the ability to offer their customers other types of electronic-based services.
Related terms:
Check Hold
A check hold denotes the maximum number of days that a bank can legally hold the money from a deposited check. read more
Check Clearing for the 21st Century Act (Check 21)
The Check Clearing for the 21st Century Act (Check 21) is a federal law that gives banks and other organizations the ability to create electronic image copies of consumers' checks. read more
Clearing
Clearing is when an organization acts as an intermediary to reconcile orders between transacting parties. A clearing bank approves checks for payments. read more
Descriptive Statement
A descriptive statement is a bank statement that lists deposits, withdrawals, service fees, and other such transactions in chronological order. read more
Electronic Check
An electronic check is a form of payment made via the internet that is designed to perform the same function as a conventional paper check. read more
Expedited Funds Availability Act (EFAA)
The Expedited Funds Availability Act (EFAA) was implemented to regulate the hold periods on deposits made to commercial banks. read more
Federal Reserve System (FRS)
The Federal Reserve System is the central bank of the United States and provides the nation with a safe, flexible, and stable financial system. read more
Regulation DD
Regulation DD is a federal policy that requires lenders to provide certain information about fees and interest when opening an account for a customer. read more
Regulation F
Regulation F establishes limits on the risks banks may take on in their business dealings with other financial institutions. read more
Reservable Deposit
Reservable deposits, like transaction accounts, savings accounts, and non-personal time deposits, are subject to Federal Reserve reserve requirements. read more