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Mauldin & Jenkins Financial Institutions Newsletter  |  April 2020
 
Is Your Bank Ready for Regulation CC Changes?
Emily Dent, CPA | Mauldin & Jenkins, LLC

In June of 2019, the Federal Reserve Board and the Consumer Financial Protection Bureau jointly announced changes to Regulation CC, the rules around the Expedited Funds Availability Act of 1987 (EFA Act). While certain provisions in the amended regulation went into effect later the same year, depository institutions have until July 1, 2020 to comply with others. Banks and credit unions should make understanding and preparing to meet the new requirements a priority in order to ensure a smooth transition and full compliance.

Besides extending EFA Act coverage to certain American territories in the Pacific, the wide-ranging amendment implements inflation-adjusted dollar amounts in a number of the Act’s provisions as required every five years by the Dodd-Frank Act.

The most significant changes for most financial institutions are the dollar adjustments cited in a few key sections of the updated regulation:

  • Section 229.10, Next day availability of funds – as of the new regulations’ effective date, mandates that $225 of non-next day check deposits must be available to depositors the next business day, up from $200.

  • Section 229.12(d), Time period adjustments for withdrawal by cash or similar means – Financial institutions may extend the period before funds are available by one business day for withdrawal in cash or similar means (including electronic payments, cashier’s check, teller’s check, and certified check). If an institution does utilize an extended time period, $450 (up from the current $400) must be available for depositors to withdraw by 5pm on the day funds would have been available under the bank’s normal policy, (without an extended period). The choice to utilize an extended cash withdrawal timeframe must be included in the bank’s funds availability disclosure.

  • Section 229.13, Exception holds – The amended regulation continues to provide distinct exception holding period requirements for

    • new accounts (the first 30 days after the account is opened; accounts opened by customers with other accounts established for longer than 30 days are not considered new),

    • large deposits, now defined as aggregate deposits exceeding $5,525 rather than the current threshold of $5,000, including deposits from multiple accounts, and

    • repeated overdrafts, which include accounts with a negative balance or one that would have been negative had all presented checks and other charges been paid

      • on six or more banking days in the prior six-month period, or

      • for more than $5,525 (up from $5,000) on at least two banking days in the prior six-month period.

Under the updated rules for new accounts and large deposit exceptions, the first $5,525 must be available on the second business day following the deposit (up from $5,000).  The amount above $5,525 (also raised from the current $5,000) must be available for depositors to access no later than the seventh business day after deposit for large deposit exception holds and no later than the ninth business day after deposit for new account exception holds.

Institutions that fail to fully comply with the updated Regulation CC will soon face higher potential civil liability:

  • Additional amounts allowed by the court in individual actions, above actual damage sustained, may be up to $1,100, up from $1,000.

  • Additional court-allowed amounts in a class action totaling up to $552,500 or 1% of the institution’s net worth, whichever is less (up from $500,000).

Existing civil liability provisions related to actual damages, additional court-allowed amounts in class actions, and the cost of court and attorney’s fees remain in place as well.

To ensure your bank is ready for the new standards, leaders should prepare a checklist and monitor progress as the effective date draws near. Your to-do list should include the following steps at a minimum:
Ron Mitchell, CPA
Financial Institutions Practice Leader

With the coronavirus and "shelter in place" orders we have lived through over the last several weeks, the world has changed significantly between the second and this third edition of our Financial Institutions Newsletter.

Mauldin & Jenkins remains committed to helping our clients through this unprecedented time, and to that end, we refer you to our website which continues to be updated for the latest information on programs designed to help individuals and businesses get through this time.

Please feel free to reach out to us if you have any questions or needs that we can help you with.
 
  • Send customer notices. Since the changes are beneficial to banking customers, notices can go out 30 days after the effective date.

  • Update disclosures. If the bank will provide notice to customers through updated disclosure statements, be sure to highlight what is changing.

  • Review and update branch signs as necessary.

  • Update hold notices, policies, and procedures in accordance with the amendments.

  • Update systems that handle relevant processes and record-keeping.

  • Revise training materials and provide updated materials to affected employees.

  • Notify the board about mandated changes and your preparations to comply.

Complying with the updated Regulation CC should not prove too burdensome. However, it is imperative for banks, credit unions and other depository institutions to take a proactive stance in preparing for compliance with all expedited funds availability and other provisions in Regulation CC. For help ensuring a smooth transition and preparing your bank to meet other emerging challenges, contact the knowledgeable advisors at Mauldin & Jenkins.


 
 
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Today’s regulatory and corporate accountability culture demands that financial institutions establish and maintain an effective enterprise-risk-management system.  This system requires effective internal controls, ongoing monitoring, and independent testing for compliance. Outsourcing can be an effective way to meet these demands. Our regional experience means we have the knowledge to advise our clients on the most up-to-date industry practices.

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The regulatory compliance environment continues to expand in complexity and our professionals can assist in answering questions on compliance matters that are most vital to every institution. We provide compliance services consulting as well as full-scope compliance assessments and reviews including consumer loan and deposit compliance, Bank Secrecy Act and Anti-Money Laundering, fair lending, AML validations, FACT Act as well as compliance training.

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Depending on the number of employees, certain financial institutions are required to have their employee benefit plans, including 401Ks, audited. We provide annual employee benefit plan audits by individuals who specialize in these type audits which allows us to not only perform an audit that complies with all related accounting and reporting requirements but to also perform the audit in a very effective and efficient manner in order to minimize disruption.


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