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6500 - Consumer Protection
{{2-29-08 p.7413}}
PART 229–AVAILABILITY OF FUNDS AND COLLECTION OF CHECKS
(REGULATION CC)
Subpart A—General
229.1
Authority and purpose; organization.
229.2
Definitions.
229.3
Administrative enforcement.
Subpart B–Availability of Funds and Disclosure of Funds
Availability Policies
229.10
Next-day availability.
229.11
[Reserved]
229.12
Availability schedule.
229.13
Exceptions.
229.14
Payment of interest.
229.15
General disclosure requirements.
229.16
Specific availability policy disclosure.
229.17
Initial disclosures.
229.18
Additional disclosure requirements.
229.19
Miscellaneous.
229.20
Relation to state law.
229.21
Civil liability.
Subpart C—Collection of Checks
229.30
Paying bank's responsibility for return of checks.
229.31
Returning bank's responsibility for return of checks.
229.32
Depositary bank's responsibility for returned checks.
229.33
Notice of nonpayment.
229.34
Warranties.
229.35
Indorsements.
229.36
Presentment and issuance of checks.
229.37
Variation by agreement.
229.38
Liability.
229.39
Insolvency of bank.
229.40
Effect of merger transaction.
229.41
Relation to state law.
229.42
Exclusions.
229.43
Checks payable in Guam, American Samoa, and the Northern Mariana
Islands
Subpart D—Substitute Checks
229.51
General provisions governing substitute checks.
229.52
Substitute check warranties.
229.53
Substitute check indemnity.
229.54
Expedited recredit for consumers.
229.55
Expedited recredit for banks.
229.56
Liability.
229.57
Consumer awareness.
229.58
Mode of delivery of information.
229.59
Relation to other law.
229.60
Variation by agreement.
Appendix
A to Part 229--Routing Number Guide to Next-Day Availability Checks and
Local Checks. Appendix B to Part
229—[Reserved]
Appendix C to Part
229—Model Availability Policy Disclosures, Clauses, and Notices.
Appendix D to Part
229—Indorsement Standards.
Appendix E to Part
229—Commentary.
Appendix F to Part
229—Official Board Interpretations: Preemption
Determinations.
{{2-29-08 p.7414}}
AUTHORITY: 12 U.S.C. 4001--4010, 12
U.S.C. 5001--5018.
SOURCE: Except as otherwise noted, the provisions of this Part 229
appear at 53 Fed. Reg. 19433, May 27, 1988, effective September 1,
1988, and 58 Fed. Reg. 50512, September 28, 1993, except for 12 CFR
229.12, which is effective on September 1, 1990.
Subpart A—General
§ 229.1 Authority and purpose; organization.
(a) Authority and purpose. This part is issued by
the Board of Governors of the Federal Reserve System (Board) to
implement the Expedited Funds Availability Act (12 U.S.C. 4001--4010)
(the EFA Act) and the Check Clearing for the 21st Century Act (12
U.S.C. 5001--5018) (the Check 21 Act).
(b) Organization. This part is divided into subparts and
appendices as follows--
(1) Subpart A contains general information. It sets forth--
(i) The authority, purpose, and organization;
(ii) Definition of terms; and
(iii) Authority for administrative enforcement of this part's
provisions.
(2) Subpart B of this part contains rules regarding the duty of
banks to make funds deposited into accounts available for withdrawal,
including availability schedules. Subpart B of this part also contains
rules regarding exceptions to the schedules, disclosure of funds
availability policies, payment of interest, liability of banks for
failure to comply with subpart B of this part, and other matters.
(3) Subpart C of this part contains rules to expedite the
collection and return of checks by banks. These rules cover the direct
return of checks, the manner in which the paying bank and returning
banks must return checks to the depositary bank, notification of
nonpayment by the paying bank, indorsement and presentment of checks,
same-day settlement for certain checks, the liability of banks for
failure to comply with subpart C of this part, and other matters.
(4) Subpart D of this part contains rules relating to substitute
checks. These rules address the creation and legal status of substitute
checks; the substitute check warranties and indemnity; expedited
recredit procedures for resolving improper charges and warranty claims
associated with substitute checks provided to consumers; and the
disclosure and notices that banks must provide.
[Codified to 12 C.F.R. § 229.1]
[Section 229.1 amended at 57 Fed. Reg. 36598, August 14,
1992, effective September 14, 1992; 57 Fed. Reg. 46972, October 14,
1992, effective January 3, 1994; 60 Fed. Reg. 51670, October 3, 1995,
effective November 2, 1995; 69 Fed. Reg. 47309, August 4, 2004,
effective October 28, 2004, except for model form C--5A in appendix C,
which is effective August 4, 2004, and paragraph (4) of appendix D,
which is effective on January 1,
2006]
§ 229.2 Definitions.
As used in this part, and unless the context requires otherwise, the
following terms have the meanings set forth in this section, and the
terms not defined in this section have the meanings set forth in the
Uniform Commercial Code:
(a) Account. (1) Except as provided in paragraphs
(a)(2) and (a)(3) of this section, account means a deposit
as defined in 12 CFR 204.2(a)(1)(i) that is a transaction account as
described in 12 CFR 204.2(e). "Account" also includes accounts at
a bank from which the account holder may make third party payments at
an ATM, remote service unit, or other electronic device, including by
debit card, but the term does not include savings deposits or accounts
described in 12 CFR 204.2(d)(2) even though such accounts permit third
party transfers. An account may be in the form of--
(i) A demand deposit account,
(ii) A negotiable order of withdrawal account,
(iii) A share draft account,
(iv) An automatic transfer account, or
(v) Any other transaction account described in 12 CFR
204.2(e).
{{8-31-04 p.7415}}
(2) For purposes of subpart B of this part and, in connection
therewith, this subpart A, account does not include an
account where the account holder is a bank, where the account holder is
an office of an institution described in paragraphs (e)(1) through
(e)(6) of this section or an office of a "foreign bank" as
defined in section 1(b) of the International Banking Act (12 U.S.C.
3101) that is located outside the United States, or where the direct or
indirect account holder is the Treasury of the United States.
(3) For purposes of subpart D of this part and, in connection
therewith, this subpart A, account means any deposit, as
defined in 12 CFR 204.2(a)(1)(i), at a bank, including a demand deposit
or other transaction account and a savings deposit or other time
deposit, as those terms are defined in 12 CFR 204.2.
(b) Automated clearinghouse or ACH means a
facility that processes debit and credit transfers under rules
established by a Federal Reserve bank operating circular on automated
clearinghouse items or under rules of an automated clearinghouse
association.
(c) Automated teller machine or ATM means an
electronic device at which a natural person may make deposits to an
account by cash or check and perform other account transactions.
(d) Available for withdrawal with respect to funds
deposited means available for all uses generally permitted to the
customer for actually and finally collected funds under the bank's
account agreement or policies, such as for payment of checks drawn on
the account, certification of checks drawn on the account, electronic
payments, withdrawals by cash, and transfers between accounts.
(e) "Bank" means--
(1) An "insured bank" as defined in section 3 of the
Federal Deposit Insurance Act (12
U.S.C. 1813) or a bank that is eligible to apply to become an
insured bank under section 5 of that Act
(12 U.S.C. 1815);
(2) A "mutual savings bank" as defined in section 3 of the
Federal Deposit Insurance Act (12 U.S.C. 1813);
(3) A "savings bank" as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813);
(4) An "insured credit union" as defined in section 101 of
the Federal Credit Union Act (12 U.S.C. 1752) or a credit union that is
eligible to make application to become an insured credit union under
section 201 of that Act (12 U.S.C. 1781);
(5) A "member" as defined in section 2 of the Federal Home
Loan Bank Act (12 U.S.C. 1422);
(6) A savings association as defined in section 3 of
the Federal Deposit Insurance Act (12 U.S.C. 1813) that is an insured
depository institution as defined in section 3 of that Act (12 U.S.C.
1813(c)(2)) or that is eligible to apply to become an insured
depository institution under section 5 of that Act (12 U.S.C. 1815); or
(7) An "agency" or a "branch" of a "foreign
bank" as defined in section 1(b) of the International Banking Act
(12 U.S.C. 3101).
For purposes of subparts C and D of this part and, in
connection therewith, this subpart A, the term bank also
includes any person engaged in the business of banking, as well as a
Federal Reserve bank, a Federal Home Loan bank, and a state or unit of
general local government to the extent that the state or unit of
general local government acts as a paying bank. Unless otherwise
specified, the term "bank" includes all of a bank's offices in
the United States, but not offices located outside the United States.
Note: For purposes of subpart D of this part and, in connection
therewith, this subpart A, bank also includes the Treasury
of the United States or the United States Postal Service to the extent
that the Treasury or the Postal Service acts as a paying bank.
(f) "Banking day" means that part of any business day on
which an office of a bank is open to the public for carrying on
substantially all of its banking functions.
(g) "Business day" means a calendar day other than a Saturday
or a Sunday, January 1, the third Monday in January, the third Monday
in February, the last Monday in May, July 4, the first Monday in
September, the second Monday in October, November 11, the
fourth
{{8-31-04 p.7416}}Thursday in November, or December
25. If January 1, July 4, November 11, or December 25 fall on a Sunday,
the next Monday is not a business day.
(h) "Cash" means United States coins and currency.
(i) "Cashier's check" means a check that is--
(1) Drawn on a bank;
(2) Signed by an officer or employee of the bank on behalf of the
bank as drawer;
(3) A direct obligation of the bank; and
(4) Provided to a customer of the bank or acquired from the bank
for remittance purposes.
(j) "Certified check" means a check with respect to which the
drawee bank certifies by signature on the check of an officer or other
authorized employee of the bank that--
(1)(i) The signature of the drawer on the check is genuine; and
(ii) The bank has set aside funds that--
(A) Are equal to the amount of the check, and
(B) Will be used to pay the check; or
(2) The bank will pay the check upon presentment.
(k) "Check" means--
(1) A negotiable demand draft drawn on or payable through or at
an office of a bank;
(2) A negotiable demand draft drawn on a Federal Reserve bank or
a Federal Home Loan bank;
(3) A negotiable demand draft drawn on the Treasury of the United
States;
(4) A demand draft drawn on a state government or unit of general
local government that is not payable through or at a bank;
(5) A United States Postal Service money order; or
(6) A traveler's check drawn on or payable through or at a bank.
Note: The term "check" does not include a noncash item or an
item payable in a medium other than United States money. A draft may be
a "check" even though it is described on its face by another
term, such as "money order." For purposes of subparts C and D,
and in connection therewith, subpart A, of this part, the term
"check" also includes a demand draft of the type described above
that is nonnegotiable.
(7) The term check includes an original check and a substitute
check.
(l) [Reserved]
(m) "Check processing region" means the geographical area
served by an office of a Federal Reserve bank for purposes of its check
processing activities.
(n) "Consumer account" means any account used primarily for
personal, family, or household purposes.
(o) "Depositary bank" means the first bank to which a check
is transferred even though it is also the paying bank or the payee. A
check deposited in an account is deemed to be transferred to the bank
holding the account into which the check is deposited, even though the
check is physically received and indorsed first by another bank.
(p) "Electronic payment" means a wire transfer or an ACH
credit transfer.
(q) "Forward collection" means the process by which a bank
sends a check on a cash basis to a collecting bank for settlement or to
the paying bank for payment.
(r) "Local check" means a check payable by or at a local
paying bank, or a check payable by a nonbank payor and payable through
a local paying bank.
(s) Local paying bank means a paying bank that is
located in the same check processing region as the physical location of
the branch, contractual branch or proprietary ATM of the depositary
bank in which that check was deposited.
(t) "Merger transaction" means--
(1) A merger or consolidation of two or more banks; or
(2) The transfer of substantially all of the assets of one or
more banks or branches to another bank in consideration of the
assumption by the acquiring bank of substantially all of the habilities
of the transferring banks, including the deposit liabilities.
(u) "Noncash item" means an item that would otherwise be a
check, except that--
(1) A passbook, certificate, or other document is
attached;
{{8-31-04 p.7417}}
(2) It is accompanied by special instructions, such as a request
for special advice of payment or dishonor;
(3) It consists of more than a single thickness of paper, except
a check that qualifies for handling by automated check processing
equipment; or
(4) It has not been preprinted or post-encoded in magnetic ink
with the routing number of the paying bank.
(v) "Nonlocal check" means a check payable by, through, or at
a nonlocal paying bank.
(w) "Nonlocal paying bank" means a paying bank that is not a
local paying bank with respect to the depositary bank.
(x) "Nonproprietary ATM" means an ATM that is not a
proprietary ATM.
(y) [Reserved]
(z) "Paying bank" means--
(1) The bank by which a check is payable, unless the check is
payable at another bank and is sent to the other bank for payment or
collection;
(2) The bank at which a check is payable and to which it is sent
for payment or collection;
(3) The Federal Reserve bank or Federal Home Loan bank by which a
check is payable; or
(4) The bank through which a check is payable and to which it is
sent for payment or collection, if the check is not payable by a bank;
(5) The state or unit of general local government on which a
check is drawn and to which it is sent for payment or collection.
For purposes of subparts C and D, and in connection therewith,
subpart A, "paying bank" includes the bank through which a check
is payable and to which the check is sent for payment or collection,
regardless of whether the check is payable by another bank, and the
bank whose routing number appears on a check in fractional or magnetic
form and to which the check is sent for payment or collection.
Note: For purposes of subpart D of this part and, in connection
therewith, this subpart A, paying bank also includes the
Treasury of the United States or the United States Postal Service for a
check that is payable by that entity and that is sent to that entity
for payment or collection.
(aa) Proprietary ATM means an ATM that is--
(1) Owned or operated by, or operated exclusively for, the
depositary bank;
(2) Located on the premises (including the outside wall) of the
depositary bank; or
(3) Located within 50 feet of the premises of the depositary
bank, and not identified as being owned or operated by another entity.
If more than one bank meets the owned or operated criterion of
paragraph (aa)(1) of this section, the ATM is considered proprietary to
the bank that operates it.
(bb) Qualified returned check means a returned check
that is prepared for automated return to the depositary bank by placing
the check in a carrier envelope or placing a strip on the check and
encoding the strip or envelope in magnetic ink. A qualified returned
check need not contain other elements of a check drawn on the
depositary bank, such as the name of the depositary bank.
(cc) Returning bank means a bank (other than the paying
or depositary bank) handling a returned check or notice in lieu of
return. A returning bank is also a collecting bank for purposes of UCC
4--202(b).
(dd) Routing number means--
(1) The number printed on the face of a check in fractional form
or in nine-digit form; or
(2) The number in a bank's indorsement in fractional or
none-digit form.
(ee) Similarly situated bank means a bank of similar
size, located in the same community, and with similar check handling
activities as the paying bank or returning bank.
(ff) State means a state, the District of Columbia,
Puerto Rico, or the U.S. Virgin Islands.
{{8-31-04 p.7418}}
For purposes of subpart D of this part and, in connection therewith,
this subpart A, state also means Guam, American Samoa, the
Trust Territory of the Pacific Islands, the Northern Mariana Islands,
and any other territory of the United States.
(gg) Teller's check means a check provided to a customer
of a bank or acquired from a bank for remittance purposes, that is
drawn on the bank, and drawn on another bank or payable through or at a
bank.
(hh) Traveler's check means an instrument for the
payment of money that--
(1) Is drawn on or payable through or at a bank;
(2) Is designated on its face by the term "traveler's
check" or by any substantially similar term or is commonly known and
marketed as a traveler's check by a corporation or bank that is an
issuer of traveler's checks;
(3) Provides for a specimen signature of the purchaser to be
completed at the time of purchase; and
(4) Provides for a countersignature of the purchaser to be
completed at the time of negotiation.
(ii) "Uniform Commercial Code,"
"Code," or "U.C.C." means the Uniform
Commercial Code as adopted in a state.
(jj) United States means the states, including the
District of Columbia, the U.S. Virgin Islands, and Puerto Rico.
(kk) Unit of general local government means any city,
county, parish, town, township, village, or other general purpose
political subdivision of a state. The term does not include special
purpose units of government, such as school districts or water
districts.
(ll) Wire transfer means an unconditional
order to a bank to pay a fixed or determinable amount of money to a
beneficiary upon receipt or on a day stated in the order, that is
transmitted by electronic or other means through Fedwire, the Clearing
House Interbank Payments System, other similar network, between banks,
or on the books of a bank. Wire transfer does not include an
electronic fund transfer as defined in section 903(6) of the Electronic
Fund Transfer Act (15 U.S.C.
1693a(6)).
(mm) Fedwire has the same meaning as that set forth in
§ 210.26(e) of this chapter.
(nn) Good faith means honesty in fact and observance of
reasonable commercial standards of fair dealing.
(oo) Interest compensation means an amount of money
calculated at the average of the Federal Funds rates published by the
Federal Reserve Bank of New York for each of the days for which
interest compensation is payable, divided by 360. The Federal Funds
rate for any day on which a published rate is not available is the same
as the published rate for the last preceding day for which there is a
published rate.
(pp) Contractual branch, with respect to a bank, means a
branch of another bank that accepts a deposit on behalf of the first
bank.
(qq) Claimant bank means a bank that submits a claim for
a recredit for a substitute check to an indemnifying bank under
§ 229.55.
(rr) Collecting bank means any bank handling a check for
forward collection, except the paying bank.
(ss) Consumer means a natural person who--
(1) With respect to a check handled for forward collection, draws
the check on a consumer account; or
(2) With respect to a check handled for return, deposits the
check into or cashes the check against a consumer account.
(tt) Customer means a person having an account with a
bank.
(uu) Indemnifying bank means a bank that provides an
indemnity under § 229.53 with respect to a substitute check.
(vv) Magnetic ink character recognition line and MICR line
mean the numbers, which may include the routing number, account
number, check number, check amount, and other information, that are
printed near the bottom of a check in magnetic ink in accordance with
American National Standard Specifications for Placement and Location of
MICR Printing, X9.13 (hereinafter ANS X9.13) for an original check and
American National Standard
{{12-30-05 p.7418.01}}Specifications for
an Image Replacement Document--IRD, X9.100--140 (hereinafter ANS
X9.100--140) for a substitute check (unless the Board by rule or order
determines that different standards apply).
(ww) Original check means the first paper check issued
with respect to a particular payment transaction.
(xx) Paper or electronic representation of a substitute check
means any copy of or information related to a substitute check
that a bank handles for forward collection or return, charges to a
customer's account, or provides to a person as a record of a check
payment made by the person.
(yy) Person means a natural person, corporation,
unincorporated company, partnership, government unit or
instrumentality, trust, or any other entity or organization.
(zz) Reconverting bank means--
(1) The bank that creates a substitute check; or
(2) With respect to a substitute check that was created by a
person that is not a bank, the first bank that transfers, presents, or
returns that substitute check or, in lieu thereof, the first paper or
electronic representation of that substitute check.
(aaa) Substitute check means a paper reproduction of an
original check that--
(1) Contains an image of the front and back of the original
check;
(2) Bears a MICR line that, except as provided under ANS
X9.100--140 (unless the Board by rule or order determines that a
different standard applies), contains all the information appearing on
the MICR line of the original check at the time that the original check
was issued and any additional information that was encoded on the
original check's MICR line before an image of the original check was
captured;
(3) Conforms in paper stock, dimension, and otherwise with ANS
X9.100--140 (unless the Board by rule or order determines that a
different standard applies); and
(4) Is suitable for automated processing in the same manner as
the original check.
(bbb) Sufficient copy and copy. (1) A sufficient
copy is a copy of an original check that accurately represents all
of the information on the front and back of the original check as of
the time the original check was truncated or is otherwise sufficient to
determine whether or not a claim is valid.
(2) A copy of an original check means any paper
reproduction of an original check, including a paper printout of an
electronic image of the original check, a photocopy of the original
check, or a substitute check.
(ccc) Transfer and consideration. The terms
transfer and consideration have the meanings set
forth in the Uniform Commercial Code and in addition, for purposes of
subpart D--
(1) The term transfer with respect to a substitute
check or a paper or electronic representation of a substitute check
means delivery of the substitute check or other representation of the
substitute check by a bank to a person other than a bank; and
(2) A bank that transfers a substitute check or a paper or
electronic representation of a substitute check directly to a person
other than a bank has received consideration for the
substitute check or other paper or electronic representation of the
substitute check if it has charged, or has the right to charge, the
person's account or otherwise has received value for the original
check, a substitute check, or a representation of the original check or
substitute check.
(ddd) Truncate means to remove an original check from
the forward collection or return process and send to a recipient, in
lieu of such original check, a substitute check or, by agreement,
information relating to the original check (including data taken from
the MICR line of the original check or an electronic image of the
original check), whether with or without the subsequent delivery of the
original check.
(eee) Truncating bank means--
(1) The bank that truncates the original check; or
(2) If a person other than a bank truncates the original check,
the first bank that transfers, presents, or returns, in lieu of such
original check, a substitute check or, by agreement with the recipient,
information relating to the original check (including data taken from
the MICR line of the original check or an electronic image of the
original check), whether with or without the subsequent delivery of the
original check.
(fff) Remotely created check means a check that is not
created by the paying bank and that does not bear a signature applied,
or purported to be applied, by the person on whose
{{12-30-05 p.7418.02}}account the check is drawn.
For purposes of this definition, "account" means an account as
defined in paragraph (a) of this section as well as a credit or other
arrangement that allows a person to draw checks that are payable by,
through, or at a bank.
[Codified to 12 C.F.R. § 229.2]
[Section 229.2 amended at 53 Fed. Reg. 31292, August 18, 1988,
effective September 1, 1988; 54 Fed. Reg. 13850, April 6, 1989,
effective August 10, 1989; 57 Fed. Reg. 46972, October 14, 1992,
effective January 3, 1994; 57 Fed. Reg. 2, January 4, 1993, effective
January 5, 1993; 60 Fed. Reg. 51670, October 3, 1995, effective
November 2, 1995; 62 Fed. Reg. 13809, March 24, 1997, effective April
28, 1997; 69 Fed. Reg. 47309, effective October 28, 2004, except for
model form C--5A in appendix C, which is effective August 4, 2004, and
paragraph (4) of appendix D, which is effective on January 1, 2006; 70
Fed. Reg. 71225, November 28, 2005, effective July 1,
2006]
§ 229.3 Administrative enforcement.
(a) Enforcement agencies. Compliance with this part is
enforced under--
(1) Section 8 of the Federal Deposit Insurance Act
(12 U.S.C. 1818 et
seq.) in the case of--
(i) National banks, and federal branches and federal agencies of
foreign banks, by the Office of the Comptroller of the Currency;
(ii) Member banks of the Federal Reserve System (other than
national banks), and offices, branches, and agencies of foreign banks
located in the United States (other than federal branches, federal
agencies, and insured state branches of foreign banks), by the Board;
and
(iii) Banks insured by the Federal Deposit Insurance Corporation
(other than members of the Federal Reserve System) and insured state
branches of foreign banks, by the Board of Directors of the Federal
Deposit Insurance Corporation;
(2) Section 8 of the Federal Deposit Insurance Act, by the
Director of the Office of Thrift Supervision in the case of savings
associations the deposits of which are insured by the Federal Deposit
Insurance Corporation; and
(3) The Federal Credit Union Act (12 U.S.C. 1751 et seq.) by the
National Credit Union Administration Board with respect to any federal
credit union or credit union insured by the National Credit Union Share
Insurance Fund.
The terms used in paragraph (a)(1) of this section that are not
defined in this part or otherwise defined in section 3(s) of the
Federal Deposit Insurance Act (12
U.S.C. 1813(s)) shall have the meaning given to them in section
1(b) of the International Banking Act of 1978
(12 U.S.C. 3101).
(b) Additional powers. (1) For the purposes of the
exercise by any agency referred to in paragraph (a) of this section of
its powers under any statute referred to in that paragraph, a violation
of any requirement imposed under the EFA Act is deemed to be a
violation of a requirement imposed under that statute.
(2) In addition to its powers under any provision of law
specifically referred to in paragraph (a) of this section, each of the
agencies referred to in that paragraph may exercise, for purposes of
enforcing compliance with any requirement imposed under this part, any
other authority conferred on it by law.
(c) Enforcement by the Board. (1) Except to the extent
that enforcement of the requirements imposed under this part is
specifically committed to some other government agency, the Board shall
enforce such requirements.
(2) If the Board determines that--
(i) Any bank that is not a bank described in paragraph (a) of
this section; or
(ii) Any other person subject to the authority of the Board under
the EFA Act and this part, has failed to comply with any requirement
imposed by this part, the Board may issue an order prohibiting any
bank, any Federal Reserve Bank, or any other person subject to the
authority of the Board from engaging in any activity or transaction
that directly or indirectly involves such noncomplying bank or person
(including any activity or transaction involving the receipt, payment,
collection, and clearing of checks, and any related function of the
payment system with respect to checks).
{{8-31-04 p.7418.03}}
[Codified to 12 C.F.R. § 229.3]
[Section 229.3 amended at 53 Fed. Reg. May 27, 1988; 55 Fed. Reg.
21855, May 30, 1990; 57 Fed. Reg. 36600, August 14, 1992; 69 Fed. Reg.
47310, August 4, 2004, effective October 28, 2004, except for model
form C--5A in appendix C, which is effective August 4, 2004, and
paragraph (4) of appendix D, which is effective on January 1, 2006]
Subpart B—Availability of Funds and Disclosure of Funds
Availability Policies
§ 229.10 Next-day availability.
(a) Cash deposits. (1) A bank shall make funds
deposited in an account by cash available for withdrawal not later than
the business day after the banking day on which the cash is deposited,
if the deposit is made in person to an employee of the depositary bank.
(2) A bank shall make funds deposited in an account by cash
available for withdrawal not later than the second business day after
the banking day on which the cash is deposited, if the deposit is not
made in person to an employee of the depositary bank.
(b) Electronic payments.--(1) In general. A
bank shall make funds received for deposit in an account by an
electronic payment available for withdrawal not later than the business
day after the banking day on which the bank received the electronic
payment.
(2) When an electronic payment is received. An
electronic payment is received when the bank receiving the payment has
received both--
(i) Payment in actually and finally collected funds; and
(ii) Information on the account and amount to be credited.
A bank receives an electronic payment only to the extent that the
bank has received payment in actually and finally collected funds.
(c) Certain check deposits.--(1) General rule.
A depositary bank shall make funds deposited in an account by
check available for withdrawal not later than the business day after
the banking day on which the funds are deposited, in the case of--
(i) A check drawn on the Treasury of the United States and
deposited in an account held by a payee of the check;
(ii) A U.S. Postal Service money order deposited--
(A) In an account held by a payee of the money order; and
(B) In person to an employee of the depositary bank.
(iii) A check drawn on a Federal Reserve bank or Federal Home
Loan bank and deposited--
(A) In an account held by a payee of the check; and
(B) In person to an employee of the depositary bank;
(iv) A check drawn by a state or a unit of general local
government and deposited--
(A) In an account held by a payee of the check;
(B) In a depositary bank located in the state that issued the
check, or the same state as the unit of general local government that
issued the check;
(C) In person to an employee of the depositary bank; and
(D) With a special deposit slip or deposit envelope, if such slip
or envelope is required by the depositary bank under paragraph (c)(3)
of this section.
(v) A cashier's, certified, or teller's check deposited--
(A) In an account held by a payee of the check;
(B) In person to an employee of the depositary bank; and
(C) With a special deposit slip or deposit envelope, if such slip
or envelope is required by the depositary bank under paragraph (c)(3)
of this section.
(vi) A check deposited in a branch of the depositary bank and
drawn on the same or another branch of the same bank if both branches
are located in the same state or the same check processing region; and,
(vii) The lesser of--
(A) $100, or
{{8-31-04 p.7418.04}}
(B) The aggregate amount deposited on any one banking day to all
accounts of the customer by check or checks not subject to next-day
availability under paragraphs (c)(1)(i) through (vi) of this section.
(2) Checks not deposited in person. A depositary bank
shall make funds deposited in an account by check or checks available
for withdrawal not later than the second business day after the banking
day on which funds are deposited, in the case of a check deposit
described in and that meets the requirements of paragraphs (c)(1)(ii),
(iii), (iv), and (v), of this section, except that it is not deposited
in person to an employee of the depositary bank.
(3) Special deposit slip. (i) As a condition to making
the funds available for withdrawal in accordance with this section, a
depositary bank may require that a state or local government check or a
cashier's, certified, or teller's check be deposited with a special
deposit slip or deposit envelope that identifies the type of check.
(ii) If a depositary bank requires the use of a special deposit
slip or deposit envelope, the bank must either provide the special
deposit slip or deposit envelope to its customers or inform its
customers how the slip or envelope may be prepared or obtained and make
the slip or envelope reasonably available.
[Codified to 12 C.F.R.
§ 229.10]
§ 229.11 [Reserved]
§ 229.12 Availability schedule.
(a) Effective date. The availability schedule contained
in this section is effective September 1, 1990.
(b) Local checks and certain other checks. Except as
provided in paragraphs (d), (e), and (f) of this section, a depository
bank shall make funds deposited in an account by a check available for
withdrawal not later than the second business day following the banking
day on which funds are deposited, in the case of--
(1) A local check;
(2) A check drawn on the Treasury of the United States that is
not governed by the availability requirements of § 229.10(c);
(3) A. U.S. Postal Service money order that is not governed by
the availability requirements of § 229.10(c); and
(4) A check drawn on a Federal Reserve bank or Federal Home Loan
bank; a check drawn by a state or unit of general local government; or
a cashier's, certified, or teller's check; if any check referred to in
this paragraph (b)(4) is a local check that is not governed by the
availability requirements of § 229.10(c).
(c) Nonlocal checks--(1) In general. Except
as provided in paragraphs (d), (e), and (f) of this section, a
depositary bank shall make funds deposited in an account by a check
available for withdrawal not later than the fifth business day
following the banking day on which funds are deposited, in the case
of--
(i) A nonlocal check; and
(ii) A check drawn on a Federal Reserve bank or Federal Home Loan
bank; a check drawn by a state or unit of general local government; a
cashier's, certified, or teller's check; or a check deposited in a
branch of the depositary bank and drawn on the same or another branch
of the same bank, if any check referred to in this paragraph (c)(1)(ii)
is a nonlocal check that is not governed by the availability
requirements of § 229.10(c).
(2) Nonlocal checks specified in appendix B-2 to this part must
be made available for withdrawal not later than the times prescribed in
that appendix.
(d) Time period adjustment for withdrawal by cash or similar
means. A depositary bank may extend by one business day the time
that funds deposited in an account by one or more checks subject to
paragraphs (b), (c), or (f) of this section are available for
withdrawal by cash or similar means. Similar means include electronic
payment, issuance of a cashier's or teller's check, or certification of
a check, or other irrevocable commitment to pay, but do not include the
granting of credit to a bank, a Federal Reserve bank, or a Federal Home
Loan bank that presents a check to the depositary bank for payment.
A
{{8-31-04 p.7418.05}}depositary bank shall,
however, make $400 of these funds available for withdrawal by cash or
similar means not later than 5:00 p.m. on the business day on which the
funds are available under paragraphs (b), (c), or (f) of this section.
This $400 is in addition to the $100 available under
§ 229.10(c)(1)(vii).
(e) Extension of schedule for certain deposits in Alaska,
Hawaii, Puerto Rico, and the U.S. Virgin Islands. The depositary
bank may extend the time periods set forth in this section by one
business day in the case of any deposit, other than a deposit described
in § 229.10, that is--
(1) Deposited in an account at a branch of a depositary bank if
the branch is located in Alaska, Hawaii, Puerto Rico, or the U.S.
Virgin Islands; and
(2) Deposited by a check drawn on or payable at or through a
paying bank not located in the same state as the depositary bank.
(f) Deposits at nonproprietary ATMs.
A depositary bank shall make funds deposited in an account at a
nonproprietary ATM by cash or check available for withdrawal not later
than the fifth business day following the banking day on which the
funds are deposited.
[Codified to 12 C.F.R. § 229.12]
[Section 229.12 amended at 55 Fed. Reg. 50818, December
11, 1990, effective September 1, 1990; 56 Fed. Reg. 7801, February 26,
1991, effective September 1, 1990; 57 Fed. Reg. 36601, August 14, 1992,
effective September 14, 1992; 60 Fed. Reg. 51670, October 3, 1995,
effective November 2, 1995]
§ 229.13 Exceptions.
(a) New accounts. For purposes of this paragraph, checks
subject to § 229.10(c)(1)(v)
include traveler's checks. (1) A deposit in a new account--
(i) Is subject to the requirements of § 229.10 (a) and (b) to
make funds from deposits by cash and electronic payments available for
withdrawal on the business day following the banking day of deposit or
receipt;
(ii) Is subject to the requirements of § 229.10(c)(1)(i)
through (v) and § 229.10(c)(2) only with respect to the first $5,000
of funds deposited on any one banking day; but the amount of the
deposit in excess of $5,000 shall be available for withdrawal not later
than the ninth business day following the banking day on which funds
are deposited; and
(iii) Is not subject to the availability requirements of
§§ 229.10(c)(1)(vi) and (vii) and
229.12.
(2) An account is considered a new account during the first 30
calendar days after the account is established. An account is not
considered a new account if each customer on the account has had,
within 30 calendar days before the account is established, another
account at the depositary bank for at least 30 calendar days.
(b) Large deposits. Sections 229.10(c), and 229.12 do
not apply to the aggregate amount of deposits by one or more checks to
the extent that the aggregate amount is in excess of $5,000 on any one
banking day. For customers that have multiple accounts at a depositary
bank, the bank may apply this exception to the aggregate deposits to
all accounts held by the customer, even if the customer is not the sole
holder of the accounts and not all of the holders of the accounts are
the same.
(c) Redeposited checks. Sections 229.10(c), and 229.12
do not apply to a check that has been returned unpaid and redeposited
by the customer or the depositary bank. This exception does not apply--
(1) To a check that has been returned due to a missing
indorsement and redeposited after the missing indorsement has been
obtained, if the reason for return indication on the check states that
it was returned due to a missing indorsement; or
(2) To a check that has been returned because it was post dated,
if the reason for return indicated on the check states that it was
returned because it was post dated, and if the check is no longer
postdated when redeposited.
(d) Repeated overdrafts. If any account or combination
of accounts of a depositary bank's customer has been repeatedly
overdrawn, then for a period of six months after the
{{8-31-04 p.7418.06}}last such overdraft,
§ § 229.10(c), and 229.12 do not apply to any of the accounts. A
depositary bank may consider a customer's account to be repeatedly
overdrawn if--
(1) On six or more banking days within the preceding six months,
the account balance is negative, or the account balance would have
become negative if checks or other charges to the account had been
paid; or
(2) On two or more banking days within the preceding six months,
the account balance is negative, or the account balance would have
become negative, in the amount of $5,000 or more, if checks or other
charges to the account had been paid.
(e) Reasonable cause to doubt
collectibility.--(1) In general. Sections 229.10(c),
and 229.12 do not apply to a check deposited in an account at a
depositary bank if the depositary bank has reasonable cause to believe
that the check is uncollectible from the paying bank. Reasonable cause
to believe a check is uncollectible requires the existence of facts
that would cause a well-grounded belief in the mind of a reasonable
person. Such belief shall not be based on the fact that the check is of
a particular class or is deposited by a particular class of persons.
The reason for the bank's belief that the check is uncollectible shall
be included in the notice required under paragraph (g) of this section.
(2) Overdraft and returned check fees. A depositary
bank that extends the time when funds will be available for withdrawal
as described in paragraph (e)(1) of this section, and does not furnish
the depositor with written notice at the time of deposit shall not
assess any fees for any subsequent overdrafts (including use of a line
of credit) or return of checks of other debits to the account, If--
(i) The overdraft or return of the check would not have occurred
except for the fact that the deposited funds were delayed under
paragraph (e)(1) of this section; and
(ii) The deposited check was paid by the paying bank.
Notwithstanding the foregoing, the depositary bank may assess an
overdraft or return check fee if it includes a notice concerning
overdraft and returned check fees with the notice of exception required
in paragraph (g) of this section and, when required, refunds any such
fees upon the request of the customer. The 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 exception is paid
and how to obtain a refund.
(f) Emergency conditions. Sections 229.10(c), and 229.12
do not apply to funds deposited by check in a depositary bank in the
case of--
(1) An interruption of communications or computer or other
equipment facilities;
(2) A suspension of payments by another bank;
(3) A war; or
(4) An emergency condition beyond the control of the depositary
bank, if the depositary bank exercises such diligence as the
circumstances require.
(g) Notice of exception.--(1) In general.
Subject to paragraphs (g)(2) and (g)(3) of this section, when a
depositary bank extends the time when funds will be available for
withdrawal based on the application of an exception contained in
paragraphs (b) through (e) of this section, it must provide the
depositor with a written notice.
(i) The notice shall include the following information--
(A) A number or code, which need not exceed four digits, that
identifies the customer's account;
(B) The date of the deposit;
(C) The amount of the deposit that is being delayed;
(D) The reason the exception was invoked; and
(E) The time period within which the funds will be available for
withdrawal.
(ii) Timing of notice. The notice shall be provided to
the depositor at the time of the deposit, unless the deposit is not
made in person to an employee of the depositary bank, or, if the facts
upon which a determination to invoke one of the exceptions in
paragraphs (b) through (e) of this section to delay a deposit only
become known to the depositary bank after the time of the deposit. If
the notice is not given at the time of the deposit, the depositary bank
shall mail or deliver the notice to the customer as soon as
practicable, but
{{8-31-04 p.7418.07}}no later than the first
business day following the day the facts become known to the depositary
bank, or the deposit is made, whichever is later.
(2) One-time exception notice. In lieu of providing
notice pursuant to paragraph (g)(1) of this section, a depositary bank
that extends the time when the funds deposited in a nonconsumer account
will be available for withdrawal based on an exception contained in
paragraph (b) or (c) of this section may provide a single notice to the
customer that includes the following information--
(i) The reason(s) the exception may be invoked; and
(ii) The time period within which deposits subject to the
exception generally will be available for withdrawal.
This one-time notice shall be provided only if each type of
exception cited in the notice will be invoked for most check deposits
in the account to which the exception could apply. This notice shall be
provided at or prior to the time notice must be provided under
paragraph (g)(1)(ii) of this section.
(3) Notice of repeated overdrafts exception. In lieu
of providing notice pursuant to paragraph (g)(1) of this section, a
depository bank that extends the time when funds deposited in an
account will be available for withdrawal based on the exception
contained in paragraph (d) of this section may provide a notice to the
customer for each time period during which the exception will be in
effect. The notice shall include the following information--
(i) The account number of the customer;
(ii) The fact that the availability of funds deposited in the
customer's account will be delayed because the repeated overdrafts
exception will be invoked;
(iii) The time period within which deposits subject to the
exception generally will be available for withdrawal; and
(iv) The time period during which the exception will apply.
This notice shall be provided at or prior to the time notice must be
provided under paragraph (g)(1)(ii) of this section and only if the
exception cited in the notice will be invoked for most check deposits
in the account.
(4) Emergency conditions exception notice. When a
depositary bank extends the time when funds will be available for
withdrawal based on the application of the emergency conditions
exception contained in paragraph (f) of this section, it must provide
the depositor with notice in a reasonable form and within a reasonable
time given the circumstances. The notice shall include the reason the
exception was invoked and the time period within which funds shall be
made available for withdrawal, unless the depositary bank, in good
faith, does not know at the time the notice is given the duration of
the emergency and, consequently, when the funds must be made available.
The depositary bank is not required to provide a notice if the funds
subject to the exception become available before the notice must be
sent.
(5) Record retention. A depositary bank shall retain a
record, in accordance with
§ 229.21(g), of each notice
provided pursuant to its application of the reasonable cause exception
under paragraph (e) of this section, together with a brief statement of
the facts giving rise to the bank's reason to doubt the collectibility
of the check.
(h) Availability of deposits subject to exceptions. (1)
If an exception contained in paragraphs (b) through (f) of this section
applies, the depositary bank may extend the time periods established
under § § 229.10(c) and 229.12 by a reasonable period of time.
(2) If a depositary bank invokes an exception contained in
paragraphs (b) through (e) of this section with respect to a check
described in § 229.10(c)(1)(i) through (v) or § 229.10(c)(2), it
shall make the funds available for withdrawal not later than a
reasonable period after the day the funds would have been required to
be made available had the check been subject to § 229.12.
(3) If a depositary bank invokes an exception under paragraph (f)
of this section based on an emergency condition, the depositary bank
shall make the funds available for withdrawal not later than a
reasonable period after the emergency has ceased or the period
established in § § 229.10(c), and 229.12, whichever
later.
{{8-31-04 p.7418.08}}
(4) For the purposes of this section, a "reasonable period"
is an extension of up to one business day for checks described in
§ 229.10(c)(1)(vi), five business days for checks described in
§ 229.12(b)(1) through (4), and six business days for checks
described in § 229.12(c)(1) and (2) or § 229.12(f). A longer
extension may be reasonable, but the bank has the burden of so
establishing.
[Codified to 12 C.F.R. § 229.13]
[Section 229.13 amended at 54 Fed. Reg. 13850, April 6,
1989, effective April 10, 1989; 55 Fed. Reg. 21855, May 30, 1990,
effective September 1, 1990; 57 Fed. Reg. 3279, January 29, 1992,
effective January 15, 1992; 57 Fed. Reg. 36598, August 14, 1992,
effective September 4, 1992; 60 Fed. Reg. 51671, October 3, 1995,
effective November 2, 1995; 62 Fed. Reg. 13809, March 24, 1997,
effective April 28, 1997; 69 Fed. Reg. 47310, August 4, 2004, effective
October 28, 2004, except for model form C--5A in appendix C, which is
effective August 4, 2004, and paragraph (4) of appendix D, which is
effective on January 1, 2006]
§ 229.14 Payment of interest.
(a) In general. A depositary bank shall begin to accrue
interest or dividends on funds deposited in an interest-bearing account
not later than the business day on which the depositary bank receives
credit for the funds. For the purposes of this section, the depositary
bank may--
(1) Rely on the availability schedule of its a Federal Reserve
bank, or a Federal Home Loan bank, or correspondent bank to determine
the time credit is actually received; and
(2) Accrue interest or dividends on funds deposited in
interest-bearing accounts by checks that the depositary bank sends to
paying banks or subsequent collecting banks for payment or collection
based on the availability of funds the depositary bank receives from
the paying or collecting banks.
(b) Special rule for credit unions. Paragraph (a) of
this section does not apply to any account at a bank described in
§ 229.2(e)(4), if the bank--
(1) Begins the accrual of interest or dividends at a later date
than the date described in paragraph (a) of this section with respect
to all funds, including cash, deposited in the account; and
(2) Provides notice of its interest or dividend payment policy in
the manner required under § 229.16(d).
(c) Exception for checks returned unpaid. This subpart
does not require a bank to pay interest or dividends on funds deposited
by a check that is returned unpaid.
[Codified to 12 C.F.R.
§ 229.14]
§ 229.15 General disclosure requirements.
(a) Form of disclosures. A bank shall make the
disclosures required by this subpart clearly and conspicuously in
writing. Disclosures, other than those posted at locations where
employees accept consumer deposits and ATMs and the notice on
preprinted deposit slips, must be in a form that the customer may keep.
The disclosures shall be grouped together and shall not contain any
information not related to the disclosures required by this subpart. If
contained in a document that sets forth other account terms, the
disclosures shall be highlighted within the document by, for example,
use of a separate heading.
(b) Uniform reference to day of availability. In its
disclosure, a bank shall 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.
(c) Multiple accounts and multiple account holders. A
bank need not give multiple disclosures to a customer that holds
multiple accounts if the accounts are subject to the
{{8-31-04 p.7418.09}}same availability policies.
Similarly, a bank need not give separate disclosures to each customer
on a jointly held account.
(d) Dormant or inactive accounts. A bank need not give
availability disclosures to a customer that holds a dormant or inactive
account.
[Codified to 12 C.F.R. § 229.15]
§ 229.16 Specific availability policy disclosure.
(a) General. To meet the requirements of a specific
availability policy disclosure under §§ 229.17 and 229.18(d), a bank
shall provide a disclosure describing the bank's policy as to when
funds deposited in an account are available for withdrawal. The
disclosure must reflect the policy followed by the bank in most cases.
A bank may impose longer delays on a case-by-case basis or by invoking
one of the exceptions in
§ 229.13, provided this is
reflected in the disclosure.
(b) Content of specific availability policy disclosure.
The specific availability policy disclosure shall contain the
following, as applicable--
(1) A summary of the bank's availability policy;
(2) A description of any categories of deposits or checks used by
the bank when it delays availability (such as local or nonlocal
checks); how to determine the category to which a particular deposit or
check 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); 1
(3) A description of any of the exceptions in § 229.13 that may
be invoked by the bank, including the time following a deposit that
funds generally will be available for withdrawal and a statement that
the bank will notify the customer if the bank invokes one of the
exceptions;
(4) A description, as specified in paragraph (c)(1) of this
section, 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; and
(5) A description of how the customer can differentiate between a
proprietary and a nonproprietary ATM, if the bank makes funds from
deposits at nonproprietary ATMs available for withdrawal later than
funds from deposits at proprietary ATMs.
(c) Longer delays on a case-by-case basis--(1)
Notice in specific policy disclosure. A bank that has a
policy of making deposited funds available for withdrawal sooner than
required by this subpart may extend the time when funds are available
up to the time periods allowed under this subpart on a case-by-case
basis, provided the bank includes the following in its specific policy
disclosure--
(i) A statement that the time when deposited funds are available
for withdrawal may be extended in some cases, and the latest time
following a deposit that funds will be available for withdrawal;
(ii) A statement that the bank will notify the customer if funds
deposited in the customer's account will not be available for
withdrawal until later than the time periods stated in the bank's
availability policy; and
(iii) A statement that customers should ask if they need to be
sure about when a particular deposit will be available for withdrawal.
(2) Notice at time of case-by-case
delay.--(i) In general. When a depositary bank extends
the time when funds will be available for withdrawal on a case-by-case
basis, it
{{8-31-04 p.7418.10}}must provide the depositor
with a written notice. The notice shall include the following
information--
(A) A number or code, which need not exceed four digits, that
identifies the customer's account.
(B) The date of the deposit;
(C) The amount of the deposit that is being delayed; and
(D) The day the funds will be available for withdrawal.
(ii) Timing of notice. The notice shall be provided to
the depositor at the time of the deposit, unless the deposit is not
made in person to an employee of the depositary bank or the decision to
extend the time when the deposited funds will be available is made
after the time of the deposit. If notice is not given at the time of
the deposit, the depositary bank shall mail or deliver the notice to
the customer not later than the first business day following the
banking day the deposit is made.
(3) Overdraft and returned check fees. 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 shall 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--
(i) 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 paragraph (c)(1) of this section; and
(ii) The deposited check was paid by the paying bank.
Notwithstanding the foregoing, the depositary bank may assess an
overdraft or returned check fee if it includes a notice concerning
overdraft and returned check fees with the notice required in paragraph
(c)(2) of this section and, when required, refunds any such fees upon
the request of the customer. The 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 how to
obtain a refund.
(d) Credit union notice of interest payment policy. If a
bank described in
§ 229.2(e)(4) begins to
accrue interest or dividends on all deposits made in an
interest-bearing account, including cash deposits, at a later time than
the day specified in § 229.14(a), the bank's specific policy
disclosures shall contain an explanation of when interest or dividends
on deposited funds begin to accrue.
[Codified to 12 C.F.R. § 229.16]
[Section 229.16 amended at 53 Fed. Reg. 31292, August 18,
1988, effective September 1, 1988; 54 Fed. Reg. 13850, April 6, 1989,
effective April 10, 1989; 60 Fed. Reg. 51671, October 3, 1995,
effective November 2, 1995; 62 Fed. Reg. 13810, March 24, 1997,
effective April 28, 1997; 69 Fed. Reg. 47311, effective October 28,
2004 except for model form C--5A in appendix C, which is effective
August 4, 2004, and paragraph (4) of appendix D, which is effective on
January 1, 2006]
§ 229.17 Initial disclosures.
Before opening a new account, a bank shall provide a potential
customer with the applicable specific availability policy disclosure
described in § 229.16.
[Codified to 12 C.F.R. § 229.17]
[Section 229.17 amended at 60 Fed. Reg. 51671, October 3,
1995, effective November 2, 1995]
§ 229.18 Additional disclosure requirements.
(a) Deposit slips. A bank shall include on all
preprinted deposit slips furnished to its customers a notice that
deposits may not be available for immediate withdrawal.
(b) Locations where employees accept consumer deposits.
A bank shall post in a conspicuous place in each location where its
employees receive deposits to consumer
{{8-31-04 p.7418.11}}accounts a notice that sets
forth the time periods applicable to the availability of funds
deposited in a consumer account.
(c) Automated teller machines. (1) A depositary bank
shall post or provide a notice at each ATM location that funds
deposited in the ATM may not be available for immediate withdrawal.
(2) A depositary bank that operates an off-premises ATM from
which deposits are removed not more than two times each week, as
described in § 229.19(a)(4), shall disclose at or on the ATM the days
on which deposits made at the ATM will be considered received.
(d) Upon request. A bank shall provide to any person,
upon oral or written request, a notice containing the applicable
specific availability policy disclosure described in § 229.16.
(e) Changes in policy. A bank shall send a notice to
holders of consumer accounts at least 30 days before implementing a
change to the bank's availability policy regarding such accounts,
except that a change that expedites the availability of funds may be
disclosed not later than 30 days after implementation.
[Codified to 12 C.F.R. § 229.18]
§ 229.19 Miscellaneous.
(a) When funds are considered deposited. For the
purposes of this subpart--
(1) Funds deposited at a staffed facility, ATM, or contractual
branch are considered deposited when they are received at the staffed
facility, ATM, or contractual branch;
(2) Funds mailed to the depositary bank are considered deposited
on the day they are received by the depositary bank;
(3) Funds deposited to a night depository, lock box, or similar
facility are considered deposited on the day on which the deposit is
removed from such facility and is available for processing by the
depositary bank;
(4) Funds deposited at an ATM that is not on, or within 50 feet
of, the premises of the depositary bank are considered deposited on the
day the funds are removed from the ATM, if funds normally are removed
from the ATM not more than two times each week; and
(5) Funds may be considered deposited on the next banking day, in
the case of funds that are deposited--
(i) On a day that is not a banking day for the depositary bank;
or
(ii) After a cut-off hour set by the depositary bank for the
receipt of deposits of 2:00 p.m. or later, or, for the receipt of
deposits at ATMs, contractual branches, or off-premise facilities, of
12:00 noon or later. Different cut-off hours later than these times may
be established for receipt of different types of deposits, or receipt
of deposits at different locations.
(b) Availability at start of business day. Except as
otherwise provided in § 229.12(d), if any provision of this subpart
requires that funds be made available for withdrawal on any business
day, the funds shall be available for withdrawal by the later of:
(1) 9:00 a.m. (local time of the depositary bank); or
(2) The time the depositary bank's teller facilities (including
ATMs) are available for customer account withdrawals.
(c) Effect on policies of depositary bank. This part
does not--
(1) Prohibit a depositary bank from making funds available to a
customer for withdrawal in a shorter period of time than the time
required by this subpart;
(2) Affect a depositary bank's right--
(i) To accept or reject a check for deposit;
(ii) To revoke any settlement made by the depositary bank with
respect to a check accepted by the bank for deposit, to charge back the
customer's account for the amount of a check based on the return of the
check or receipt of a notice of nonpayment of the check, or to claim a
refund of such credit; and
(iii) To charge back funds made available to its customer for an
electronic payment for which the bank has not received payment in
actually and finally collected funds;
{{8-31-04 p.7418.12}}
(3) Require a depository bank to open or otherwise to make its
facilities available for customer transactions on a given business day;
or
(4) Supersede any policy of a depositary bank that limits the
amount of cash a customer may withdraw from its account on any one day,
if that policy--
(i) Is not dependent on the time the funds have been deposited in
the account, as long as the funds have been on deposit for the time
period specified in
§§ 229.10,
229.12, or
229.13; and
(ii) In the case of withdrawals made in person to an employee of
the depositary bank--
(A) Is applied without discrimination to all customers of the
bank; and
(B) Is related to security, operating, or bonding requirements of
the depositary bank.
(d) Use of calculated availability. A depositary bank
may provide availability to its nonconsumer accounts based on a sample
of checks that represents the average composition of the customer's
deposits, if the terms for availability based on the sample are
equivalent to or more prompt than the availability requirements of this
subpart.
(e) Holds on other funds. (1) A depositary bank that
receives a check for deposit in an account may not place a hold on any
funds of the customer at the bank, where--
(i) The amount of funds that are held exceeds the amount of the
check; or
(ii) The funds are not made available for withdrawal within the
times specified in §§ 229.10, 229.12, and 229.13.
(2) A depositary bank that cashes a check for a customer over the
counter, other than a check drawn on the depositary bank, may not place
a hold on funds in an account of the customer at the bank, if--
(i) The amount of funds that are held exceeds the amount of the
check; or
(ii) The funds are not made available for withdrawal within the
times specified in §§ 229.10, 229.12, and 229.13.
(f) Employee training and compliance. Each bank shall
establish procedures to ensure that the bank complies with the
requirements of this subpart, and shall provide each employee who
performs duties subject to the requirements of this subpart with a
statement of the procedures applicable to that employee.
(g) Effect of Merger Transaction. (1) In
general. For purposes of this subpart, except for the purposes of
the new accounts exception of § 229.13(a), and when funds are
considered deposited under § 229.19(a), two or more banks that have
engaged in a merger transaction may be considered to be separate banks
for a period of one year following the consummation of the merger
transaction.
(2) Merger transactions on or after July 1, 1998, and
before March 1, 2000. If banks have consummated a merger
transaction on or after July 1, 1998, and before March 1, 2000, the
merged banks may be considered separate banks until March 1, 2001.
[Codified to 12 C.F.R. § 229.19]
[Section 229.19 amended at 54 Fed. Reg. 13850, April 6,
1989, effective April 10, 1989; 60 Fed. Reg. 51671, October 3, 1995,
effective November 2, 1995; 62 Fed. Reg. 13810, March 24, 1997,
effective April 28, 1997; amended at 64 Fed. Reg. 14577, effective
April 1, 1999]
§ 229.20 Relation to state law.
(a) In general. Any provision of a law or regulation of
any state in effect on or before September 1, 1989, that requires funds
deposited in an account at a bank chartered by the state to be made
available for withdrawal in a shorter time than the time provided in
subpart B, and, in connection therewith, subpart A, shall--
(1) Supersede the provisions of the EFA Act and subpart B, and,
in connection therewith, subpart A, to the extent the provisions relate
to the time by which funds deposited or received for deposit in an
account are available for withdrawal; and
(2) Apply to all federally insured banks located within the
state. No amendment to a state law or regulation governing the
availability of funds that becomes effective after
{{8-31-04 p.7418.13}}September 1, 1989, shall
supersede the EFA Act and subpart B, and, in connection therewith,
subpart A, but unamended provisions of state law shall remain in
effect.
(b) Preemption of inconsistent law. Except as provided
in paragraph (a), the EFA Act and subpart B, and, in connection
therewith, subpart A, supersede any provision of inconsistent state
law.
(c) Standards for preemption. A provision of a state law
in effect on or before September 2, 1989, is not inconsistent with the
EFA Act, or subpart B, or in connection therewith, subpart A, if it
requires that funds shall be available in a shorter period of time than
the time provided in this subpart. Inconsistency with the EFA Act and
subpart B, and in connection therewith, subpart A, may exist when state
law--
(1) Permits a depositary bank to make funds deposited in an
account by cash, electronic payment, or check available for withdrawal
in a longer period of time than the maximum period of time permitted
under subpart B, and, in connection therewith, subpart A; or
(2) Provides for disclosures or notices concerning funds
availability relating to accounts.
(d) Preemption determinations. The Board may determine,
upon the request of any state, bank, or other interested party, whether
the EFA Act and subpart B, and, in connection therewith, subpart A,
preempt provisions of state laws relating to the availability of funds.
(e) Procedures for preemption determinations. A request
for a preemption determination shall include the following--
(1) A copy of the full text of the state law in question,
including any implementing regulations or judicial interpretations of
that law; and
(2) A comparison of the provisions of state law with the
corresponding provisions in the EFA Act and subparts A and B of this
part, together with a discussion of the reasons why specific provisions
of state law are either consistent or inconsistent with corresponding
sections of the EFA Act and subparts A and B of this part.
A request for a preemption determination shall be addressed to the
Secretary, Board of Governors of the Federal Reserve System.
[Codified to 12 C.F.R. § 229.20]
[Section 229.20 amended at 69 Fed. Reg. 47311, effective October
28, 2004 except for model form C--5A in appendix C, which is effective
August 4, 2004, and paragraph (4) of appendix D, which is effective on
January 1, 2006]
§ 229.21 Civil liability.
(a) Civil liability. A bank that fails to comply with
any requirement imposed under subpart B, and in connection therewith,
subpart A, of this part or any provision of state law that supersedes
any provision of subpart B, and in connection therewith, subpart A,
with respect to any person is liable to that person in an amount equal
to the sum of--
(1) Any actual damage sustained by that person as a result of the
failure;
(2) Such additional amount as the court may allow, except that--
(i) In the case of an individual action, liability under this
paragraph shall not be less than $100 nor greater than $1,000; and
(ii) In the case of a class action--
(A) No minimum recovery shall be applicable to each member of the
class; and
(B) The total recovery under this paragraph in any class action
or series of class actions arising out of the same failure to comply by
the same depositary bank shall not be more than the lesser of $500,000
or 1 percent of the net worth of the bank involved; and
(3) In the case of a successful action to enforce the foregoing
liability, the costs of the action, together with a reasonable
attorney's fee as determined by the court.
(b) Class action awards. In determining the amount of
any award in any class action, the court shall consider, among other
relevant factors--
(1) The amount of any damages awarded;
(2) The frequency and persistence of failures of
compliance;
{{8-31-04 p.7418.14}}
(3) The resources of the bank;
(4) The number of persons adversely affected; and
(5) The extent to which the failure of compliance was
intentional.
(c) Bona fide errors.--(1) General
rule. A bank is not liable in any action brought under this
section for a violation of this subpart if the bank demonstrates by a
preponderance of the evidence that the violation was not intentional
and resulted from a bona fide error, notwithstanding the maintenance of
procedures reasonably adapted to avoid any such error.
(2) Examples. Examples of a bona fide error include
clerical, calculation, computer malfunction and programming, and
printing errors, except that an error of legal judgment with respect to
the bank's obligation under this subpart is not a bona fide error.
(d) Jurisdiction. Any action under this section may be
brought in any United States district court or in any other court of
competent jurisdiction, and shall be brought within one year after the
date of the occurrence of the violation involved.
(e) Reliance on Board rulings. No provision of this
subpart imposing any liability shall apply to any act done or omitted
in good faith in conformity with any rule, regulation, or
interpretation thereof by the Board, regardless of whether such rule,
regulation, or interpretation is amended, rescinded, or determined by
judicial or other authority to be invalid for any reason after the act
or omission has occurred.
(f) Exclusions. This section does not apply to claims
that arise under subpart C of this part or to actions for wrongful
dishonor.
(g) Record retention. (1) A bank shall retain evidence
of compliance with the requirements imposed by this subpart for not
less than two years. Records may be stored by use of microfiche,
microfilm, magnetic tape, or other methods capable of accurately
retaining and reproducing information.
(2) If a bank has actual notice that it is being investigated, or
is subject to an enforcement proceeding by an agency charged with
monitoring that bank's compliance with the EFA Act and this subpart, or
has been served with notice of an action filed under this section, it
shall retain the records pertaining to the action or proceeding pending
final disposition of the matter, unless an earlier time is allowed by
order of the agency or court.
[Codified to 12 C.F.R. § 229.21]
[Section 229.21 amended at 60 Fed. Reg. 47311, effective October
28, 2004 except for model form C--5A in appendix C, which is effective
August 4, 2004, and paragraph (4) of appendix D, which is effective on
January 1, 2006]
Subpart C—Collection of Checks
§ 229.30 Paying bank's responsibility for return of checks.
(a) Return of checks. If a paying bank determines not to
pay a check, it shall return the check in an expeditious manner as
provided in either paragraphs (a)(1) or (a)(2) of this section.
(1) Two-day/four-day test. A paying bank returns a
check in an expeditious manner if it sends the returned check in a
manner such that the check would normally be received by the depositary
bank not later than 4:00 p.m. (local time of the depositary bank) of--
(i) The second business day following the banking day on which
the check was presented to the paying bank, if the paying bank is
located in the same check processing region as the depositary bank; or
(ii) The fourth business day following the banking day on which
the check was presented to the paying bank, if the paying bank is not
located in the same check processing region as the depositary bank.
If the last business day on which the paying bank may deliver a
returned check to the depositary bank is not a banking day for the
depositary bank, the paying bank meets the two-day/four-day test if the
returned check is received by the depositary bank on or before the
depositary bank's next banking day.
{{8-31-04 p.7418.15}}
(2) Forward collection test. A paying bank also
returns a check in an expeditious manner if it sends the returned check
in a manner that a similarly situated bank would normally handle a
check--
(i) Of similar amount as the returned check;
(ii) Drawn on the depositary bank; and
(iii) Deposited for forward collection in the similarly situated
bank by noon on the banking day following the banking day on which the
check was presented to the paying bank. Subject to the requirement for
expeditious return, a paying bank may send a returned check to the
depositary bank, or to any other bank agreeing to handle the returned
check expeditiously under § 229.31(a). A paying bank may convert a
check to a qualified returned check. A qualified returned check shall
be encoded in magnetic ink with the routing number of the depositary
bank, the amount of the returned check, and a "2" in the case of
an original check (or a "5" in the case of a substitute check) in
position 44 of the qualified return MICR line as a return identifier. A
qualified returned original check shall be encoded in accordance with
ANS X9.13, and a qualified returned substitute check shall be encoded
in accordance with ANS X9.100--140. This paragraph does not affect a
paying bank's responsibility to return a check within the deadlines
required by the U.C.C., Regulation J (12 CFR Part 210), or
§ 229.30(c).
(b) Unidentifiable depositary bank. A paying bank that
is unable to identify the depositary bank with respect to a check may
send the returned check to any bank that handled the check for forward
collection even if that bank does not agree to handle the check
expeditiously under § 229.31(a). A paying bank sending a returned
check under this paragraph to a bank that handled the check for forward
collection must advise the bank to which the check is sent that the
paying bank is unable to identify the depositary bank. The expeditious
return requirements in § 229.30(a) do not apply to the paying bank's
return of a check under this paragraph.
(c) Extension of deadline. The deadline for return or
notice of nonpayment under the U.C.C. or Regulation J (12 CFR part
210), or § 229.36(f)(2) is extended to the time of dispatch of such
return or notice of nonpayment where a paying bank uses a means of
delivery that would ordinarily result in receipt by the bank to which
it is sent--
(1) On or before the receiving bank's next banking day following
the otherwise applicable deadline by the earlier of the close of that
banking day or a cutoff hour of 2 p.m. or later set by the receiving
bank under U.C.C. 4--108, for all deadlines other than those described
in paragraph (c)(2) of this section; this deadline is extended further
if a paying bank uses a highly expeditious means of transportation,
even if this means of transportation would ordinarily result in
delivery after the receiving bank's next cutoff hour or banking day
referred to above; or
(2) Prior to the cut-off hour for the next processing cycle (if
sent to a returning bank), or on the next banking day (if sent to the
depositary bank), for a deadline falling on a Saturday that is a
banking day (as defined in the applicable U.C.C.) for the paying bank.
(d) Identification of returned check. A paying bank
returning a check shall clearly indicate on the front of the check that
it is a returned check and the reason for return. If the check is a
substitute check, the paying bank shall place this information within
the image of the original check that appears on the front of the
substitute check.
(e) Depositary bank without accounts. The expeditious
return requirements of paragraph (a) of this section do not apply to
checks deposited in a depositary bank that does not maintain accounts.
(f) Notice in lieu of return. If a check is unavailable
for return, the paying bank may send in its place a copy of the front
and back of the returned check, or, if no such copy is available, a
written notice of nonpayment containing the information specified in
§ 229.33(b). The copy or
notice shall clearly state that it constitutes a notice in lieu of
return. A notice in lieu of return is considered a returned check
subject to the expeditious return requirements of this section and to
the other requirements of this subpart.
{{8-31-04 p.7418.16}}
(g) Reliance on routing number. A paying bank may return
a returned check based on any routing number designating the depositary
bank appearing on the returned check in the depositary bank's
indorsement.
[Codified to 12 C.F.R. § 229.30]
[Section 229.30 amended at 53 Fed. Reg. 31292, August 18, 1988,
effective September 1, 1988; 55 Fed. Reg. 21855, May 30, 1990,
effective May 22, 1990; 57 Fed. Reg. 46972, October 14, 1992, effective
January 3, 1994; 62 Fed. Reg. 13810, March 24, 1997, effective April
28, 1997; 69 Fed. Reg. 47311, effective October 28, 2004 except for
model form C--5A in appendix C, which is effective August 4, 2004, and
paragraph (4) of appendix D, which is effective on January 1,
2006]
§ 229.31 Returning bank's responsibility for return of checks.
(a) Return of checks. A returning bank shall return a
returned check in an expeditious manner as provided in either
paragraphs (a)(1) or (a)(2) of this section.
(1) Two-day/four-day test. A returning bank returns a
check in an expeditious manner if it sends the returned check in a
manner such that the check would normally be received by the depositary
bank not later than 4:00 p.m. (local time) of--
(i) The second business day following the banking day on which
the check was presented to the paying bank if the paying bank is
located in the same check processing region as the depositary bank; or
(ii) The fourth business day following the banking day on which
the check was presented to the paying bank if the paying bank is not
located in the same check processing region as the depositary bank.
If the last business day on which the returning bank may deliver a
returned check to the depositary bank is not a banking day for the
depositary bank, the returning bank meets this requirement if the
returned check is received by the depositary bank on or before the
depositary bank's next banking day.
(2) Forward collection test. A returning bank also
returns a check in an expeditious manner if it sends the returned check
in a manner that a similarly situated bank would normally handle a
check--
(i) Of similar amount as the returned check;
(ii) Drawn on the depositary bank; and
(iii) Received for forward collection by the similarly situated
bank at the time the returning bank received the returned check, except
that a returning bank may set a cut-off hour for the receipt of
returned checks that is earlier than the similarly situated bank's
cut-off hour for checks received for forward collection, if the cut-off
hour is not earlier than 2:00 p.m.
Subject to the retirement for expeditious return, the returning bank
may send the returned check to the depositary bank, or to any bank
agreeing to handle the returned check expeditiously under
§ 229.31(a). The returning bank may convert the returned check to a
qualified returned check. A qualified returned check shall be encoded
in magnetic ink with the routing number of the depositary bank, the
amount of the returned check, and a "2" in the case of an
original check (or a "5" in the case of a substitute check) in
position 44 of the qualified return MICR line as a return identifier. A
qualified returned original check shall be encoded in accordance with
ANS X9.13, and a qualified returned substitute check shall be encoded
in accordance with ANS X9.100--140. The time for expeditious return
under the forward collection test, and the deadline for return under
the U.C.C. and Regulation J (12 CFR part 210), are extended by one
business day if the returning bank converts a returned check to a
qualified returned check. This extension does not apply to the
two-day/four-day test specified in paragraph (a)(1) of this section or
when a returning bank is returning a check directly to the depositary
bank.
(b) Unidentifiable depositary bank. A returning bank
that is unable to identify the depositary bank with respect to a
returned check may send the returned check to--
{{8-31-04 p.7418.17}}
(1) Any collecting bank that handled the check for forward
collection if the returning bank was not a collecting bank with respect
to the returned check; or
(2) A prior collecting bank, if the returning bank was a
collecting bank with respect to the returned check; even if that
collecting bank does not agree to handle the returned check
expeditiously under § 229.31(a). A returning bank sending a returned
check under this paragraph must advise the bank to which the check is
sent that the returning bank is unable to identify the depositary bank.
The expeditious return requirements in paragraph (a) of this section do
not apply to return of a check under this paragraph. A returning bank
that receives a returned check from a paying bank under § 229.30(b),
or from a returning bank under this paragraph, but that is able to
identify the depositary bank, must thereafter return the check
expeditiously to the depositary bank.
(c) Settlement. A returning bank shall settle with a
bank sending a returned check to it for return by the same means that
it settles or would settle with the sending bank for a check received
for forward collection drawn on the depositary bank. This settlement is
final when made.
(d) Charges. A returning bank may impose a charge on a
bank sending a returned check for handling the returned check.
(e) Depositary bank without accounts. The expeditious
return requirements of paragraph (a) of this section do not apply to
checks deposited with a depositary bank that does not maintain
accounts.
(f) Notice in lieu of return. If a check is unavailable
for return, the returning bank may send in its place a copy of the
front and back of the returned check, or, if no copy is available, a
written notice of nonpayment containing the information specified in
§ 229.33(b). The copy or notice shall clearly state that it
constitutes a notice in lieu of return. A notice in lieu of return is
considered a returned check subject to the expeditious return
requirements of this section and to the other requirements of this
subpart.
(g) Reliance on routing number. A returning bank may
return a returned check based on any routing number designating the
depositary bank appearing on the returned check in the depositary
bank's indorsement or in magnetic ink on a qualified returned check.
[Codified to 12 C.F.R. § 229.31]
[Section 229.31 amended at 53 Fed. Reg. 31292, August 18, 1988,
effective September 1, 1988; 54 Fed. Reg. 13850, April 6, 1989,
effective April 10, 1989; 69 Fed. Reg. 47311, effective October 28,
2004 except for model form C--5A in appendix C, which is effective
August 4, 2004, and paragraph (4) of appendix D, which is effective on
January 1, 2006]
§ 229.32 Depositary bank's responsibility for returned checks.
(a) Acceptance of returned checks. A depositary bank
shall accept returned checks and written notices of nonpayment--
(1) At a location at which presentment of checks for forward
collection is requested by the depositary bank; and
(2)(i) At a branch, head office, or other location consistent
with the name and address of the bank in its indorsement on the check;
(ii) If no address appears in the indorsement, at a branch or
head office associated with the routing number of the bank in its
indorsement on the check;
(iii) If the address in the indorsement is not in the same check
processing region as the address associated with the routing number of
the bank in its indorsement on the check, at a location consistent with
the address in the indorsement and at a branch or head office
associated with the routing number in the bank's indorsement; or
(iv) If no routing number or address appears in its indorsement
on the check, at any branch or head office of the bank. A depositary
bank may require that returned checks be separated from forward
collection checks.
(b) Payment. A depositary bank shall pay the returning
or paying bank returning the check to it for the amount of the check
prior to the close of business on the banking day on which it received
the check ("payment date") by--
{{8-31-04 p.7418.18}}
(1) Debit to an account of the depositary bank on the books of
the returning or paying bank;
(2) Cash;
(3) Wire transfer; or
(4) Any other form of payment acceptable to the returning or
paying bank;
provided that the proceeds of the payment are available to the
returning or paying bank in cash or by credit to an account of the
returning or paying bank on or as of the payment date. If the payment
date is not a banking day for the returning or paying bank or the
depositary bank is unable to make the payment on the payment date,
payment shall be made by the next day that is a banking day for the
returning or paying bank. These payments are final when made.
(c) Misrouted returned checks and written notices of
nonpayment. If a bank receives a returned check or written notice
of nonpayment on the basis that it is the depositary bank, and the bank
determines that it is not the depositary bank with respect to the check
or notice, it shall either promptly send the returned check or notice
to the depositary bank directly or by means of a returning bank
agreeing to handle the returned check expeditiously under
§ 229.31(a), or send the check or notice back to the bank from which
it was received.
(d) Charges. A depositary bank may not impose a charge
for accepting and paying checks being returned to it.
[Codified to 12 C.F.R. § 229.32]
[Section 229.32 amended at 54 Fed. Reg. 13850, April 6, 1989,
effective April 10, 1989]
§ 229.33 Notice of nonpayment.
(a) Requirement. If a paying bank determines not to pay
a check in the amount of $2,500 or more, it shall provide notice of
nonpayment such that the notice is received by the depositary bank by
4:00 p.m. (local time) on the second business day following the banking
day on which the check was presented to the paying bank. If the day the
paying bank is required to provide notice is not a banking day for the
depositary bank, receipt of notice on the depositary bank's next
banking day constitutes timely notice. Notice may be provided by any
reasonable means, including the returned check, a writing (including a
copy of the check), telephone, Fedwire, telex, or other form of
telegraph.
(b) Content of notice. Notice must include the--
(1) Name and routing number of the paying bank;
(2) Name of the payee(s);
(3) Amount;
(4) Date of the indorsement of the depositary bank;
(5) Account number of the customer(s) of the depositary bank;
(6) Branch name or number of the depositary bank from its
indorsement;
(7) Trace number associated with the indorsement of the
depositary bank; and
(8) Reason for nonpayment.
The notice may include other information from the check that may be
useful in identifying the check being returned and the customer, and,
in the case of a written notice, must include the name and routing
number of the depositary bank from its indorsement. If the paying bank
is not sure of an item of information, it shall include the information
required by this paragraph to the extent possible, and identify any
item of information for which the bank is not sure of the accuracy.
(c) Acceptance of notice. The depositary bank shall
accept notices during its banking day--
(1) Either at the telephone or telegraph number of its return
check unit indicated in the indorsement, or, if no such number appears
in the indorsement or if the number is illegible, at the general
purpose telephone or telegraph number of its head office or the branch
indicated in the indorsement; and
{{12-30-05 p.7418.19}}
(2) At any other number held out by the bank for receipt of
notice of nonpayment, and, in the case of written notice, as specified
in § 229.32(a).
(d) Notification to customer. If the depositary bank
receives a returned check or notice of nonpayment, it shall send or
give notice to its customer of the facts by midnight of the banking day
following the banking day on which it received the returned check or
notice, or within a longer reasonable time.
(e) Depositary bank without accounts. The requirements
of this section do not apply to checks deposited in a depositary bank
that does not maintain accounts.
[Codified to 12 C.F.R. § 229.33]
[Section 229.33 amended at 69 Fed. Reg. 47311, effective October
28, 2004 except for model form C--5A in appendix C, which is effective
August 4, 2004, and paragraph (4) of appendix D, which is effective on
January 1, 2006]
§ 229.34 Warranties.
(a) Warranties. Each paying bank or returning bank that
transfers a returned check and receives a settlement or other
consideration for it warrants to the transferee returning bank, to any
subsequent returning bank, to the depositary bank, and to the owner of
the check, that--
(1) The paying bank, or in the case of a check payable by a bank
and payable through another bank, the bank by which the check is
payable, returned the check within its deadline under the U.C.C.,
Regulation J (12 CFR Part 210), or
§ 229.30(c) of this part;
(2) It is authorized to return the check;
(3) The check has not been materially altered; and
(4) In the case of a notice in lieu of return, the original check
has not and will not be returned.
These warranties are not made with respect to checks drawn on the
Treasury of the United States, U.S. Postal Service money orders, or
checks drawn on a state or a unit of general local government that are
not payable through or at a bank.
(b) Warranty of notice of nonpayment. Each paying bank
that gives a notice of nonpayment warrants to the transferee bank, to
any subsequent transferee bank, to the depositary bank, and to the
owner of the check that--
(1) The paying bank, or in the case of a check payable by a bank
and payable through another bank, the bank by which the check is
payable, returned or will return the check within its deadline under
the U.C.C., Regulation J (12 CFR Part 210), or § 229.30(c) of this
part;
(2) It is authorized to send the notice; and
(3) The check has not been materially altered.
These warranties are not made with respect to checks drawn on a state
or a unit of general local government that are not payable through or
at a bank. For purposes of this paragraph, the information encoded
after issue on the check or returned check includes any information
placed in the MICR line of a substitute check that represents that
check or returned check.
(c) Warranty of settlement amount, encoding, and offset.
(1) Each bank that presents one or more checks to a paying bank
and in return receives a settlement or other consideration warrants to
the paying bank that the total amount of the checks presented is equal
to the total amount of the settlement demanded by the presenting bank
from the paying bank.
(2) Each bank that transfers one or more checks or returned
checks to a collecting, returning, or depositary bank and in return
receives a settlement or other consideration warrants to the transferee
bank that the accompanying information, if any, accurately indicates
the total amount of the checks or returned checks transferred.
(3) Each bank that presents or transfers a check or returned
check warrants to any bank that subsequently handles it that, at the
time of presentment or transfer, the information encoded after issue in
magnetic ink on the check or returned check is correct.
{{12-30-05 p.7418.20}}
(4) If a bank settles with another bank for checks presented, or
for returned checks, for which it is the depositary bank, in amount
exceeding the total amount of the checks, the settling bank may set off
the excess settlement amount against subsequent settlements for checks
presented, or for returned checks for which it is the depositary bank,
that it receives from the other bank.
(d) Transfer and presentment warranties with respect to a
remotely created check. (1) A bank that transfers or presents a
remotely created check and receives a settlement or other consideration
warrants to the transferee bank, any subsequent collecting bank, and
the paying bank that the person on whose account the remotely created
check is drawn authorized the issuance of the check in the amount
stated on the check and to the payee stated on the check. For purposes
of this paragraph (d)(1), "account" includes an account as
defined in § 229.2(a) as well as a credit or other arrangement that
allows a person to draw checks that are payable by, through, or at a
bank.
(2) If a paying bank asserts a claim for breach of warranty under
paragraph (d)(1) of this section, the warranting bank may defend by
proving that the customer of the paying bank is precluded under U.C.C.
4--406, as applicable, from asserting against the paying bank the
unauthorized issuance of the check.
(e) Damages. Damages for breach of these warranties
shall not exceed the consideration received by the bank that presents
or transfers a check or returned check, plus interest compensation and
expenses related to the check or returned check, if any.
(f) Tender of defense. If a bank is sued for breach of a
warranty under this section, it may give a prior bank in the collection
or return chain written notice of the litigation, and the bank notified
may then give similar notice to any other prior bank. If the notice
states that the bank notified may come in and defend and that failure
to do so will bind the bank notified in an action later brought by the
bank giving the notice as to any determination of fact common to the
two litigations, the bank notified is so bound unless after seasonable
receipt of the notice the bank notified does come in and defend.
(g) Notice of claim. Unless a claimant gives notice of a
claim for breach of warranty under this section to the bank that made
the warranty within 30 days after the claimant has reason to know of
the breach and the identity of the warranting bank, the warranting bank
is discharged to the extent of any loss caused by the delay in giving
notice of the claim.
[Codified to 12 C.F.R. § 229.34]
[Section 229.34 amended at 54 Fed. Reg. 13850, April 6, 1989,
effective April 10, 1989; 57 Fed. Reg. 46972, October 14, 1992,
effective January 3, 1994; 62 Fed. Reg. 13810, March 24, 1997,
effective April 28, 1997; 69 Fed. Reg. 47311, effective October 28,
2004 except for model form C--5A in appendix C, which is effective
August 4, 2004, and paragraph (4) of appendix D, which is effective on
January 1, 2006; 70 Fed. Reg. 71225, November 28, 2005, effective July
1, 2006]
§ 229.35 Indorsements.
(a) Indorsement standards. A bank (other than a paying
bank) that handles a check during forward collection or a returned
check shall indorse the check in a manner that permits a person to
interpret the indorsement, in accordance with the indorsement standard
set forth in appendix D of this part.
(b) Liability of bank handling check. A bank that
handles a check for forward collection or return is liable to any bank
that subsequently handles the check to the extent that the subsequent
bank does not receive payment for the check because of suspension of
payments by another bank or otherwise. This paragraph applies whether
or not a bank has placed its indorsement on the check. This liability
is not affected by the failure of any bank to exercise ordinary care,
but any bank failing to do so remains liable. A bank seeking recovery
against a prior bank shall send notice to that prior bank reasonably
promptly after it learns the facts entitling it to recover. A bank may
recover from the bank with which it settled for the check by revoking
the settlement, charging back any credit given to an
{{12-30-05 p.7418.20-A}}account, or obtaining a
refund. A bank may have the rights of a holder with respect to each
check it handles.
(c) Indorsement by a bank. After a check has been
indorsed by a bank, only a bank may acquire the rights of a holder--
(1) Until the check has been returned to the person initiating
collection; or
(2) Until the check has been specially indorsed by a bank to a
person who is not a bank.
(d) Indorsement for depositary bank. A depositary bank
may arrange with another bank to apply the other bank's indorsement as
the depositary bank indorsement, provided that any indorsement of the
depositary bank on the check avoids the area reserved for the
depositary bank indorsement as specified in
appendix D. The
other bank indorsing as depositary bank is considered the depositary
bank for purposes of subpart C of this part.
[Codified to 12 C.F.R. § 229.35]
{{8-31-04 p.7418.21}}
[Section 229.35 amended at 55 Fed. Reg. 21855, effective May 22,
1990; 69 Fed. Reg. 47311, effective October 28, 2004 except for model
form C--5A in appendix C, which is effective August 4, 2004, and
paragraph (4) of appendix D, which is effective on January 1,
2006]
§ 229.36 Presentment and issuance of checks.
(a) Payable through and payable at checks. A check
payable at or through a paying bank is considered to be drawn on that
bank for purposes of the expeditious return and notice of nonpayment
requirements of this subpart.
(b) Receipt at bank office or processing center. A check
is considered received by the paying bank when it is received:
(1) At a location to which delivery is requested by the paying
bank;
(2) At an address of the bank associated with the routing number
on the check, whether in magnetic ink or in fractional form;
(3) At any branch or head office, if the bank is identified on
the check by name without address; or
(4) At a branch, head office, or other location consistent with
the name and address of the bank on the check if the bank is identified
on the check by name and address.
(c) Electronic presentment. A bank may present a check
to a paying bank by transmission of information describing the check in
accordance with an agreement with the paying bank. An electronic
presentment agreement may not extend return times or otherwise vary
the requirements of this part with respect to parties interested in the
check that are not party to the agreement.
(d) Liability of bank during forward collection.
Settlements between banks for the forward collection of a check
are final when made; however, a collecting bank handling a check for
forward collection may be liable to a prior collecting bank, including
the depositary bank, and the depositary bank's customer.
(e) Issuance of payable-through checks. (1) A bank that
arranges for checks payable by it to be payable through another bank
shall require that the following information be printed conspicuously
on the face of each check:
(i) The name, location, and first four digits of the nine-digit
routing number of the bank by which the check is payable; and
(ii) The words "payable through" followed by the name of
the payable-through bank.
(2) A bank is responsible for damages under § 229.38 to the
extent that a check payable by it and not payable through another bank
is labelled as provided in this section.
(f) Same-day settlement. (1) A check is considered
presented, and a paying bank must settle for or return the check
pursuant to paragraph (f)(2) of this section, if a presenting bank
delivers the check in accordance with reasonable delivery requirements
established by the paying bank and demands payment under this paragraph
(f)--
(i) At a location designated by the paying bank for receipt of
checks under this paragraph (f) that is in the check processing region
consistent with the routing number encoded in magnetic ink on the check
and at which the paying bank would be considered to have received the
check under paragraph (b) of this section or, if no location is
designated, at any location described in paragraph (b) of this section;
and
(ii) By 8 a.m. on a business day (local time of the location
described in paragraph (f)(1)(i) of this section).
A paying bank may require that checks presented for settlement
pursuant to this paragraph (f)(1) be separated from other
forward-collection checks or returned checks.
(2) If presentment of a check meets the requirements of paragraph
(f)(1) of this section, the paying bank is accountable to the
presenting bank for the amount of the check unless, by the close of
Fedwire on the business day it receives the check, it
either:
{{8-31-04 p.7418.22}}
(i) Settles with the presenting bank for the amount of the check
by credit to an account at a Federal Reserve Bank designated by the
presenting bank; or
(ii) Returns the check.
(3) Notwithstanding paragraph (f)(2) of this section, if a paying
bank closes on a business day and receives presentment of a check on
that day in accordance with paragraph (f)(1) of this section, the
paying bank is accountable to the presenting bank for the amount of the
check unless, by the close of Fedwire on its next banking day, it
either:
(i) Settles with the presenting bank for the amount of the check
by credit to an account at a Federal Reserve Bank designated by the
presenting bank; or
(ii) Returns the check.
If the closing is voluntary, unless the paying bank settles for or
returns the check in accordance with paragraph (f)(2) of this section,
it shall pay interest compensation to the presenting bank for each day
after the business day on which the check was presented until the
paying bank settles for the check, including the day of settlement.
[Codified 12 C.F.R. § 229.36]
[Section 229.36 amended at 54 Fed. Reg. 32047, August 4,
1989, effective February 1, 1991; 55 Fed. Reg. 21855, May 30 1990,
effective February 1, 1991; 57 Fed. Reg. 46972, October 14, 1992,
effective January 3, 1994; 60 Fed. Reg. 51671, October 3, 1995,
effective November 2, 1995; 62 Fed. Reg. 13810, March 24, 1997,
effective April 28, 1997]
§ 229.37 Variation by agreement.
The effect of the provisions of subpart C may be varied by
agreement, except that no agreement can disclaim the responsibility of
a bank for its own lack of good faith or failure to exercise ordinary
care, or can limit the measure of damages for such lack or failure; but
the parties may determine by agreement the standards by which such
responsibility is to be measured if such standards are not manifestly
unreasonable.
[Codified to 12 C.F.R.
§ 229.37]
§ 229.38 Liability.
(a) Standard of care; liability; measure of damages.
A bank shall exercise ordinary care and act in good faith in
complying with the requirements of this subpart. A bank that fails to
exercise ordinary care or act in good faith under this subpart may be
liable to the depositary bank, the depositary bank's customer, the
owner of a check, or another party to the check. The measure of damages
for failure to exercise ordinary care is the amount of the loss
incurred, up to the amount of the check, reduced by the amount of the
loss that party would have incurred even if the bank had exercised
ordinary care. A bank that fails to act in good faith under this
subpart may be liable for other damages, if any, suffered by the party
as a proximate consequence. Subject to a bank's duty to exercise
ordinary care or act in good faith in choosing the means of return or
notice of nonpayment, the bank is not liable for the insolvency,
neglect, misconduct, mistake, or default of another bank or person, or
for loss or destruction of a check or notice of nonpayment in transit
or in the possession of others. This section does not affect a paying
bank's liability to its customer under the U.C.C. or other law.
(b) Paying bank's failure to make timely return. If a
paying bank fails both to comply with
§ 229.30(a) and to comply
with the deadline for return under the U.C.C., Regulation J (12 CFR
Part 210), or § 229.30(c) in connection with a single nonpayment of a
check, the paying bank shall be liable under either § 229.30(a) or
such other provision, but not both.
(c) Comparative negligence. If a person, including a
bank, fails to exercise ordinary care or act in good faith under this
subpart in indorsing a check (§ 229.35), accepting a returned check
or notice of nonpayment
(§§ 229.32(a) and
229.33(c)), or otherwise, the
damages incurred by that person under § 229.38(a) shall be diminished
in proportion to the amount of negligence or bad faith attributable to
that person.
(d) Responsibility for certain aspects of
checks.--(1) A paying bank, or in the case of a check payable
through the paying bank and payable by another bank, the bank by
which
{{8-31-04 p.7418.22-A}}the check is payable, is
responsible for damages under paragraph (a) of this section to the
extent that the condition of the check when issued by it or its
customer adversely affects the ability of a bank to indorse the check
legibly in accordance with
§ 229.35. A depositary bank
is responsible for damages under paragraph (a) of this section to the
extent that the condition of the back of a check arising after the
issuance of the check and prior to acceptance of the check by it
adversely affects the ability of a bank to indorse the check legibly in
accordance with § 229.35. A reconverting bank is responsible for
damages under paragraph (a) of this section to the extent that the
condition of the back of a substitute check transferred, presented, or
returned by it--
(i) Adversely affects the ability of a subsequent bank to indorse
the check legibly in accordance with § 229.35; or
(ii) Causes an indorsement that previously was applied in
accordance with § 229.35 to be illegible.
Note: Responsibility under this paragraph (d) shall be treated as
negligence of the paying bank, depositary bank, or reconverting bank
for purposes of paragraph (c) of this section.
(2) Responsibility for payable through checks. In
the case of a check that is payable by a bank and payable through a
paying bank located in a different check processing region than the
bank by which the check is payable is responsible for damages under
paragraph (a) of this section, to the extent that the check is not
returned to the depositary bank through the payable through bank as
quickly as the check would have been required to be returned under
§ 229.30(a) had the bank by which the check is payable--
(i) Received the check as paying bank on the day the payable
through bank received the check; and
(ii) Returned the check as paying bank in accordance with
§ 229.30(a)(1).
Responsibility under this paragraph shall be treated as negligence of
the bank by which the check is payable for purposes of paragraph (c) of
this section.
(e) Timeliness of action. If a bank is delayed in acting
beyond the time limits set forth in this subpart because of
interruption of communication or computer facilities, suspension of
payments by a bank, war, emergency conditions, failure of equipment, or
other circumstances beyond its control, its time for acting is extended
for the time necessary to complete the action, if it exercises such
diligence as the circumstances require.
(f) Exclusion. Section
229.21 of this part and § 611 (a), (b), and (c) of the EFA
Act (12 U.S.C. 4010 (a), (b),
and (c)) do not apply to this subpart.
(g) Jurisdiction. Any action under this subpart may be
brought in any United States district court, or in any other court of
competent jurisdiction, and shall be brought within one year after the
date of the occurrence of the violation involved.
(h) Reliance on Board rulings. No provision of this
subpart imposing any liability shall apply to any act done or omitted
in good faith in conformity with any rule, regulation, or
interpretation thereof by the Board, regardless of whether the rule,
regulation, or interpretation is amended, rescinded, or determined by
judicial or other authority to be invalid for any reason after the act
or omission has occurred.
[Codified to 12 C.F.R. § 229.38]
[Section 229.38 amended at 54 Fed. Reg. 13850, April 6, 1989,
effective April 10, 1989; 54 Fed. Reg. 32047, August 4, 1989, effective
February 1, 1990]
§ 229.39 Insolvency of bank.
(a) Duty of receiver. A check or returned check
in, or coming into, the possession of a paying, collecting, depositary,
or returning bank that suspends payment, and which is not paid, shall
be returned by the receiver, trustee, or agent in charge of the closed
bank to the bank or customer that transferred the check to the closed
bank.
(b) Preference against paying or depositary bank. If a
paying bank finally pays a check, or if a depositary bank becomes
obligated to pay a returned check, and suspends payment without making
a settlement for the check or returned check with the prior bank that
is or
{{8-31-04 p.7418.22-B}}becomes final, the prior bank
has a preferred claim against the paying bank or the depositary bank.
(c) Preference against collecting, paying, or returning bank.
If a collecting, paying, or returning bank receives settlement
from a subsequent bank for a check or returned check, which settlement
is or becomes final, and suspends payments without making a settlement
for the check with the prior bank, which is or becomes final, the prior
bank has a preferred claim against the collecting or returning bank.
(d) Preference against presenting bank. If a paying bank
settles with a presenting bank for one or more checks, and if the
presenting bank breaches a warranty specified in § 229.34(c)(1) or
(3) with respect to those checks and suspends payments before
satisfying the paying bank's warranty claim, the paying bank has a
preferred claim against the presenting bank for the amount of the
warranty claim.
(e) Finality of settlement. If a paying or depositary
bank gives, or a collecting, paying, or returning bank gives or
receives, a settlement for a check or returned check and thereafter
suspends payment, the suspension does not prevent or interfere with the
settlement becoming final if such finality occurs automatically upon
the lapse of a certain time or the happening of certain events.
[Codified to 12 C.F.R. § 229.39]
[Section 229.39 amended at 57 Fed. Reg. 46973, October 14,
1992, effective January 3, 1994; 62 Fed. Reg. 13810, March 24, 1997,
effective April 28, 1997]
§ 229.40 Effect of merger transaction.
(a) In general.
For purposes of this subpart, two or more banks that have engaged in
a merger transaction may be considered to be separate banks for a
period of one year following the consummation of the merger
transaction.
(b) Merger transactions on or after July 1, 1998, and before
March 1, 2000. If banks have consummated a merger transaction on
or after July 1, 1998, and before March 1, 2000, the merged banks may
be considered separate banks until March 1, 2000.
[Codified to 12 C.F.R. § 229.40]
[Section 229.40 amended at 64 Fed. Reg. 14577, effective April 1,
1999]
§ 229.41 Relation to state law.
The provisions of this subpart supersede any inconsistent
provisions of the U.C.C. as adopted in any state, or of any other state
law, but only to the extent of the inconsistency.
[Codified to 12 C.F.R.
§ 229.41]
§ 229.42 Exclusions.
The expeditious-return
(§§ 229.30(a) and
229.31(a)) and
notice-of-nonpayment
(§ 229.33), and same-day
settlement (§ 229.36(f))
requirements of this subpart do not apply to a check drawn upon the
United States Treasury, to a U.S. Postal Service money order, or to a
check drawn on a state or a unit of general local government that is
not payable through or at a bank.
[Codified to 12 C.F.R. § 229.42]
[Section 229.42 amended at 62 Fed. Reg. 13810, March 24,
1997, effective April 28, 1997]
§ 229.43 Checks payable in Guam, American Samoa, and the
Northern Mariana Islands.
(a) Definitions. The definitions in
§ 229.2 apply to this
section, unless otherwise noted. In addition, for the purposes of this
section---
(1) Pacific island bank means an office of an
institution that would be a bank as defined in § 229.2(e) but for the
fact that the office is located in Guam, American Samoa, or the
Northern Mariana Islands;
{{10-31-07 p.7418.22-C}}
(2) Pacific island check means a demand draft drawn on
or payable through or at a Pacific island bank, which is not a check as
defined in § 229.2(k).
(b) Rules applicable to Pacific island checks. To the
extent a bank handles a Pacific island check as if it were a check
defined in § 229.2(k), the bank is subject to the following sections
of this part (and the word "check" in each such section is
construed to include a Pacific island check)--
(1) § 229.31, except that the returning bank is not subject to
the requirement to return a Pacific island check in an expeditious
manner.
(2) § 229.32;
(3) § 229.34(c)(2), (c)(3), (d), (e), and (f);
(4) § 229.35; for purposes of § 229.35(c), the Pacific island
bank is deemed to be a bank;
(5) § 229.36(d);
(6) § 229.37;
(7) § 229.38(a) and (c) through (h);
(8) § 229.39(a), (b), (c) and (e); and
(9) § 229.40 through 229.42.
[Codified to 12 C.F.R. § 229.43]
[Section 229.43 added at 62 Fed. Reg. 13810, March 24,
1997, effective April 28, 1997]
Subpart D—Substitute Checks
§ 229.51 General provisions governing substitute checks.
(a) Legal equivalence. A substitute check for which a
bank has provided the warranties described in § 229.52 is the legal
equivalent of an original check for all persons and all purposes,
including any provision of federal or state law, if the substitute
check--
(1) Accurately represents all of the information on the front and
back of the original check as of the time the original check was
truncated; and
(2) Bears the legend, "This is a legal copy of your check. You
can use it the same way you would use the original check."
(b) Reconverting bank duties. A bank shall ensure that a
substitute check for which it is the reconverting bank--
(1) Bears all indorsements applied by parties that previously
handled the check in any form (including the original check, a
substitute check, or another paper or electronic representation of such
original check or substitute check) for forward collection or return;
(2) Identifies the reconverting bank in a manner that preserves
any previous reconverting bank identifications, in accordance with ANS
X9.100--140 and appendix D of this part; and
(3) Identifies the bank that truncated the original check, in
accordance with ANS X9.100--140 and appendix D of this part.
(c) Applicable law. A substitute check that is the legal
equivalent of an original check under paragraph (a) of this section
shall be subject to any provision, including any provision relating to
the protection of customers, of this part, the U.C.C., and any other
applicable federal or state law as if such substitute check were the
original check, to the extent such provision of law is not inconsistent
with the Check 21 Act or this subpart.
[Codified to 12 C.F.R. § 229.51]
[Section 229.51 added at 69 Fed. Reg. 47311, August 4, 2004,
effective October 28, 2004, except for model form C--5A in Appendix C,
which is effective on January 1, 2006]
§ 229.52 Substitute check warranties.
(a) Content and provision of substitute check warranties.
A bank that transfers, presents, or returns a substitute check (or
a paper or electronic representation of a substitute check) for which
it receives consideration warrants to the parties listed in paragraph
(b) of this section that--
{{10-31-07 p.7418.22-D}}
(1) The substitute check meets the requirements for legal
equivalence described in § 229.51(a)(1)--(2); and
(2) No depositary bank, drawee, drawer, or indorser will receive
presentment or return of, or otherwise be charged for, the substitute
check, the original check, or a paper or electronic representation of
the substitute check or original check such that that person will be
asked to make a payment based on a check that it already has paid.
(b) Warranty recipients. A bank makes the warranties
described in paragraph (a) of this section to the person to which the
bank transfers, presents, or returns the substitute check or a paper or
electronic representation of such substitute check and to any
subsequent recipient, which could include a collecting or returning
bank, the depositary bank, the drawer, the drawee, the payee, the
depositor, and any indorser. These parties receive the warranties
regardless of whether they received the substitute check or a paper or
electronic representation of a substitute check.
[Codified to 12 C.F.R. § 229.52)
[Section 229.52 added at 69 Fed. Reg. 47312, August 4, 2004,
effective October 28, 2004, except for model form C--5A in Appendix C,
which is effective on January 1, 2006]
§ 229.53 Substitute check indemnity.
(a) Scope of indemnity. A bank that transfers, presents,
or returns a substitute check or a paper or electronic representation
of a substitute check for which it receives consideration shall
indemnify the recipient and any subsequent recipient (including a
collecting or returning bank, the depositary bank, the drawer, the
drawee, the payee, the depositor, and any indorser) for any loss
incurred by any recipient of a substitute check if that loss occurred
due to the receipt of a substitute check instead of the original check.
(b) Indemnity amount--(1) In general. Unless
otherwise indicated by paragraph (b)(2) or (b)(3) of this section, the
amount of the indemnity under paragraph (a) of this section is as
follows:
(i) If the loss resulted from a breach of a substitute check
warranty provided under § 229.52, the amount of the indemnity shall
be the amount of any loss (including interest, costs, reasonable
attorney's fees, and other expenses of representation) proximately
caused by the warranty breach.
(ii) If the loss did not result from a breach of a substitute
check warranty provided under § 229.52, the amount of the indemnity
shall be the sum of--
(A) The amount of the loss, up to the amount of the substitute
check; and
(B) Interest and expenses (including costs and reasonable
attorney's fees and other expenses of representation) related to the
substitute check.
(2) Comparative negligence. (i) If a loss described
in paragraph (a) of this section results in whole or in part from the
indemnified person's negligence or failure to act in good faith, then
the indemnity amount described in paragraph (b)(1) of this section
shall be reduced in proportion to the amount of negligence or bad faith
attributable to the indemnified person.
(ii) Nothing in this paragraph (b)(2) reduces the rights of a
consumer or any other person under the U.C.C. or other applicable
provision of state or federal law.
(3) Effect of producing the original check or a sufficient
copy--
(i) If an indemnifying bank produces the original check or a
sufficient copy, the indemnifying bank shall--
(A) Be liable under this section only for losses that are
incurred up to the time that the bank provides that original check or
sufficient copy to the indemnified person; and
(B) Have a right to the return of any funds it has paid under
this section in excess of those losses.
(ii) The production by the indemnifying bank of the original
check or a sufficient copy under paragraph (b)(3)(i) of this section
shall not absolve the indemnifying bank from any liability under any
warranty that the bank has provided under § 229.52 or other
applicable law.
{{8-31-04 p.7418.22-E}}
(c) Subrogation of rights--(1) In general.
An indemnifying bank shall be subrogated to the rights of the
person that it indemnifies to the extent of the indemnity it has
provided and may attempt to recover from another person based on a
warranty or other claim.
(2) Duty of indemnified person for subrogated claims.
Each indemnified person shall have a duty to comply with all
reasonable requests for assistance from an indemnifying bank in
connection with any claim the indemnifying bank brings against a
warrantor or other person related to a check that forms the basis for
the indemnification.
[Codified to 12 C.F.R. § 229.53]
[Section 229.53 added at 69 Fed. Reg. 47312, August 4, 2004,
effective October 28, 2004, except for model form C--5A in Appendix C,
which is effective on January 1, 2006]
§ 229.54 Expedited recredit for consumers.
(a) Circumstances giving rise to a claim. A consumer may
make a claim under this section for a recredit with respect to a
substitute check if the consumer asserts in good faith that--
(1) The bank holding the consumer's account charged that account
for a substitute check that was provided to the consumer (although the
consumer need not be in possession of that substitute check at the time
he or she submits a claim);
(2) The substitute check was not properly charged to the consumer
account or the consumer has a warranty claim with respect to the
substitute check;
(3) The consumer suffered a resulting loss; and
(4) Production of the original check or a sufficient copy is
necessary to determine whether or not the substitute check in fact was
improperly charged or whether the consumer's warranty claim is valid.
(b) Procedures for making claims. A consumer shall make
his or her claim for a recredit under this section with the bank that
holds the consumer's account in accordance with the timing, content,
and form requirements of this section.
(1) Timing of claim. (i) the consumer shall submit
his or her claim such that the bank receives the claim by the end of
the 40th calendar day after the later of the calendar day on which the
bank mailed or delivered, by a means agreed to by the consumer--
(A) The periodic account statement that contains information
concerning the transaction giving rise to the claim; or
(B) The substitute check giving rise to the claim.
(ii) If the consumer cannot submit his or her claim by the time
specified in paragraph (b)(1)(i) of this section because of extenuating
circumstances, the bank shall extend the 40-calendar-day period by an
additional reasonable amount of time.
(iii) If a consumer makes a claim orally and the bank requires
the claim to be in writing, the consumer's claim is timely if the oral
claim was received within the time described in paragraphs
(b)(1)(i)--(ii) of this section and the written claim was received
within the time described in paragraph (b)(3)(ii) of this section.
(2) Content of claim. (i) The consumer's claim
shall include the following information:
(A) A description of the consumer's claim, including the reason
why the consumer believes his or her account was improperly charged for
the substitute check or the nature of his or her warranty claim with
respect to such check;
(B) A statement that the consumer suffered a loss and an estimate
of the amount of that loss;
(C) The reason why production of the original check or a
sufficient copy is necessary to determine whether or not the charge to
the consumer's account was proper or the consumer's warranty claim is
valid; and
(D) Sufficient information to allow the bank to identify the
substitute check and investigate the claim.
{{8-31-04 p.7418.22-F}}
(ii) If a consumer attempt to make a claim but fails to provide
all the information in paragraph (b)(2)(i) of this section that is
required to constitute a claim, the bank shall inform the consumer that
the claim is not complete and identify the information that is missing.
(3) Form and submission of claim; computation of time for
bank action. The bank holding the account that is the subject of
the consumer's claim may, in its discretion, require the consumer to
submit the information required by this section in writing. A bank that
requires a written submission--
(i) May permit the consumer to submit the written claim
electronically;
(ii) Shall inform a consumer who submits a claim orally of the
written claim requirement at the time of the oral claim and may require
such consumer to submit the written claim such that the bank receives
the written claim by the 10th business day after the banking day on
which the bank received the oral claim; and
(iii) Shall compute the time periods for acting on the
consumer's claim described in paragraph (c) of this section from the
date on which the bank received the written claim.
(c) Action on claims. A bank that receives a claim that
meets the requirements of paragraph (b) of this section shall act as
follows:
(1) Valid consumer claim. If the bank determines that
the consumer's claim is valid, the bank shall--
(i) Recredit the consumer's account for the amount of the
consumer's loss, up to the amount of the substitute check, plus
interest if the account is an interest-bearing account, no later than
the end of the business day after the banking day on which the bank
makes that determination; and
(ii) Send to the consumer the notice required by paragraph (e)(1)
of this section.
(2) Invalid consumer claim. If a bank determines that
the consumer's claim is not valid, the bank shall send to the consumer
the notice described in paragraph (e)(2) of this section.
(3) Recredit pending investigation. If the bank has
not taken an action described in paragraph (c)(1) or (c)(2) of this
section before the end of the 10th business day after the banking day
on which the bank received the claim, the bank shall--
(i) By the end of that business day--
(A) Recredit the consumer's account for the amount of the
consumer's loss, up to the lesser of the amount of the substitute
check or $2,500, plus interest on that amount if the account is an
interest-bearing account; and
(B) Send to the consumer the notice required by paragraph (e)(1)
of this section; and
(ii) Recredit the consumer's account for the remaining amount of
the consumer's loss, if any, up to the amount of the substitute check,
plus interest if the account is an interest-bearing account, no later
than the end of the 45th calendar day after the banking day on which
the bank received the claim and send to the consumer the notice
required by paragraph (e)(1) of this section, unless the bank prior to
that time has determined that the consumer's claim is or is not valid
in accordance with paragraph (c)(1) or (c)(2) of this section.
(4) Reversal of recredit. A bank may reverse a
recredit that it has made to a consumer account under paragraph (c)(1)
or (c))(3) of this section, plus interest that the bank has paid, if
any, on that amount, if the bank--
(i) Determines that the consumer's claim was not valid; and
(ii) Notifies the consumer in accordance with paragraph (e)(3) of
this section.
(d) Availability of recredit--(1) Next-day
availability. Except as provided in paragraph (d)(2) of this
section, a bank shall make any amount that it recredits to a consumer
account under this section available for withdrawal no later than the
start of the business day after the banking day on which the bank
provides the recredit.
(2) Safeguard exceptions. A bank may delay
availability to a consumer of a recredit provided under paragraph
(c)(3)(i) of this section until the start of the earlier of the
business day after the banking day on which the bank determines the
consumer's claim is
{{8-31-04 p.7418.22-G}}valid or the 45th calendar
day after the banking day on which the bank received the oral or
written claim, as required by paragraph (b) of this section, if--
(i) The consumer submits the claim during the 30-calendar day
period beginning on the banking day on which the consumer account was
established;
(ii) Without regard to the charge that gave rise to the recredit
claim--
(A) On six or more business days during the six-month period
ending on the calendar day on which the consumer submitted the claim,
the balance in the consumer account was negative or would have become
negative if checks or other charges to the account had been paid; or
(B) On two or more business days during such six-month period,
the balance in the consumer account was negative or would have become
negative in the amount of $5,000 or more if checks or other charges to
the account had been paid; or
(iii) The bank has reasonable cause to believe that the claim is
fraudulent, based on facts that would cause a well-grounded belief in
the mind of a reasonable person that the claim is fraudulent. The fact
that the check in question or the consumer is of a particular class may
not be the basis for invoking this exception.
(3) Overdraft fees. A bank that delays availability as
permitted in paragraph (d)(2) of this section may not impose an
overdraft fee with respect to drafts drawn by the consumer on such
recredited funds until the fifth calendar day after the calendar day on
which the bank sent the notice required by paragraph (e)(1) of this
section.
(e) Notices relating to consumer expedited recredit
claims--(1) Notice of recredit. A bank that recredits
a consumer account under paragraph (c) of this section shall send
notice to the consumer of the recredit no later than the business day
after the banking day on which the bank recredits the consumer account.
This notice shall describe--
(i) The amount of the recredit; and
(ii) The date on which the recredited funds will be available for
withdrawal.
(2) Notice that the consumer's claim is not valid. If
a bank determines that a substitute check for which a consumer made a
claim under this section was in fact properly charged to the consumer
account or that the consumer's warranty claim for that substitute
check was not valid, the bank shall send notice to the consumer no
later than the business day after the banking day on which the bank
makes that determination. This notice shall--
(i) Include the original check or a sufficient copy, except as
provided in § 229.58;
(ii) Demonstrate to the consumer that the substitute check was
properly charged or the consumer's warranty claim is not valid; and
(iii) Include the information or documents (in addition to the
original check or sufficient copy), if any, on which the bank relied in
making its determination or a statement that the consumer may request
copies of such information or documents.
(2) Notice of a reversal of recredit. A bank that
reverses an amount it previously recredited to a consumer account shall
send notice to the consumer no later than the business day after the
banking day on which the bank made the reversal. This notice shall
include the information listed in paragraph (e)(2) of this section and
also describe--
(i) The amount of the reversal, including both the amount of the
recredit (including the interest component, if any) and the amount of
interest paid on the recredited amount, if any, being reversed; and
(ii) The date on which the bank made the reversal.
(f) Other claims not affected. Providing a recredit in
accordance with this section shall not absolve the bank from liability
for a claim made under any other provision of law, such as a claim for
wrongful dishonor of a check under the U.C.C., or from liability for
additional damages, such as damages under § 229.53 or § 229.56 of
this subpart or U.C.C. 4--402.
[Codified to 12 C.F.R. § 229.54]
[Section 229.54 added at 69 Fed. Reg. 47312, August 4,
2004, effective October 28, 2004, except for model form C--5A in
Appendix C, which is effective on January 1, 2006]
{{8-31-04 p.7418.22-H}}
§ 229.55 Expedited recredit for banks.
(a) Circumstances giving rise to a claim. A bank that
has an indemnity claim under § 229.53 with respect to a substitute
check may make an expedited recredit claim against an indemnifying bank
if--
(1) The claimant bank or a bank that the claimant bank has
indemnified--
(i) Has received a claim for expedited recredit from a consumer
under § 229.54; or
(ii) Would have been subject to such a claim if the consumer
account had been charged for the substitute check;
(2) The claimant bank is obligated to provide an expedited
recredit with respect to such substitute check under § 229.54 or
otherwise has suffered a resulting loss; and
(3) The production of the original check or a sufficient copy is
necessary to determine the validity of the charge to the consumer
account or the validity of any warranty claim connected with such
substitute check.
(b) Procedures for making claims. A claimant bank shall
send its claim to the indemnifying bank, subject to the timing,
content, and form requirements of this section.
(1) Timing of claim. The claimant bank shall submit
its claim such that the indemnifying bank receives the claim by the end
of the 120th calendar day after the date of the transaction that gave
rise to the claim.
(2) Content of claim. The claimant bank's claim shall
include the following information--
(i) A description of the consumer's claim or the warranty claim
related to the substitute check, including why the bank believes that
the substitute check may not be properly charged to the consumer
account;
(ii) A statement that the claimant bank is obligated to recredit
a consumer account under § 229.54 or otherwise has suffered a loss
and an estimate of the amount of that recredit or loss, including
interest if applicable;
(iii) The reason why production of the original check or a
sufficient copy is necessary to determine the validity of the charge to
the consumer account or the warranty claim; and
(iv) Sufficient information to allow the indemnifying bank to
identify the substitute check and investigate the claim.
(3) Requirements relating to copies of substitute checks.
If the information submitted by a claimant bank under paragraph
(b)(2) of this section includes a copy of any substitute check, the
claimant bank shall take reasonable steps to ensure that the copy
cannot be mistaken for the legal equivalent of the check under
§ 229.51(a) or sent or handled by any bank, including the
indemnifying bank, or forward collection or return.
(4) Form and submission of claim; computation of time.
The indemnifying bank may, in its discretion, require the claimant
bank to submit the information required by this section in writing,
including a copy of the paper or electronic claim submitted by the
consumer, if any. An indemnifying bank that requires a written
submission--
(i) May permit the claimant bank to submit the written claim
electronically;
(ii) Shall inform a claimant bank that submits a claim orally of
the written claim requirement at the time of the oral claim; and
(iii) Shall compute the 10-day time period for acting on the
claim described in paragraph (c) of this section from the date on which
the bank received the written claim.
(c) Action on claims. No later than the 10th business
day after the banking day on which the indemnifying bank receives a
claim that meets the requirements of paragraph (b) of this section, the
indemnifying bank shall--
(1) Recredit the claimant bank for the amount of the claim, up to
the amount of the substitute check, plus interest if applicable;
(2) Provide to the claimant bank the original check or a
sufficient copy; or
(3) Provide information to the claimant bank regarding why the
indemnifying bank is not obligated to comply with paragraph (c)(1) or
(c)(2) of this section.
{{8-31-04 p.7418.22-I}}
(d) Recredit does not abrogate other liabilities.
Providing a recredit to a claimant bank under this section does
not absolve the indemnifying bank from liability for claims brought
under any other law or from additional damages under § 229.53 or
§ 229.56.
(e) Indemnifying bank's right to a refund. (1) If a
claimant bank reverses a recredit it previously made to a consumer
account under § 229.54 or otherwise receives reimbursement for a
substitute check that formed the basis of its claim under this section,
the claimant bank shall provide a refund promptly to any indemnifying
bank that previously advanced funds to the claimant bank. The amount of
the refund to the indemnifying bank shall be the amount of the reversal
or reimbursement obtained by the claimant bank, up to the amount
previously advanced by the indemnifying bank.
(2) If the indemnifying bank provides the claimant bank with the
original check or a sufficient copy under paragraph (c)(2) of this
section, § 229.53(b)(3) governs the indemnifying bank's entitlement
to repayment of any amount provided to the claimant bank that exceeds
the amount of losses the claimant bank incurred up to that time.
[Codified to 12 C.F.R. § 229.55]
[Section 229.55 added at 69 Fed. Reg. 47314, August 4, 2004,
effective October 28, 2004, except for model form C--5A in Appendix C,
which is effective on January 1, 2006]
§ 229.56 Liability.
(a) Measure of damages--(1) In general.
Except as provided in paragraph (a)(2) or (a)(3) of this section
or § 229.53, any person that breaches a warranty described in
§ 229.52 or fails to comply with any requirement of this subpart with
respect to any other person shall be liable to that person for an
amount equal to the sum of--
(i) The amount of the loss suffered by the person as a result of
the breach or failure, up to the amount of the substitute check; and
(ii) Interest and expenses (including costs and reasonable
attorney's fees and other expenses of representation) related to the
substitute check.
(2) Offset of recredits. The amount of damages a
person receives under paragraph (a)(1) of this section shall be reduced
by any amount that the person receives and retains as a recredit under
§ 229.54 or § 229.55.
(3) Comparative negligence. (i) If a person incurs
damages that resulted in whole or in part from that person's
negligence or failure to act in good faith, then the amount of any
damages due to that person under paragraph (a)(1) of this section shall
be reduced in proportion to the amount of negligence or bad faith
attributable to that person.
(ii) Nothing in this paragraph (a)(3) reduces the rights of a
consumer or any other person under the U.C.C. or other applicable
provision of federal or state law.
(b) Timeliness of action. Delay by a bank beyond any
time limits prescribed or permitted by this subpart is excused if the
delay is caused by interruption of communication or computer
facilities, suspension of payments by another bank, war, emergency
conditions, failure of equipment, or other circumstances beyond the
control of the bank and if the bank uses such diligence as the
circumstances require.
(c) Jurisdiction. A person may bring an action to
enforce a claim under this subpart in any United States district court
or in any other court of competent jurisdiction. Such claim shall be
brought within one year of the date on which the person's cause of
action accrues. For purposes of this paragraph, a cause of action
accrues as of the date on which the injured person first learns, or by
which such person reasonably should have learned, of the facts and
circumstances giving rise to the cause of action, including the
identity of the warranting or indemnifying bank against which the
action is brought.
(d) Notice of claims. Except as otherwise provided in
this paragraph (d), unless a person gives notice of a claim under this
section to the warranting or indemnifying bank within 30 calendar days
after the person has reason to know of both the claim and the identity
of the warranting or indemnifying bank, the warranting or indemnifying
bank is discharged from liability in an action to enforce a claim under
this subpart to the extent of
{{8-31-04 p.7418.22-J}}any loss caused by the delay
in giving notice of the claim. A timely recredit claim by a consumer
under § 229.54 constitutes timely notice under this paragraph.
[Codified to 12 C.F.R. § 229.56]
[Section 229.56 added at 69 Fed. Reg. 47314, August 4, 2004,
effective October 28, 2004, except for model form C--5A in Appendix C,
which is effective on January 1, 2006]
§ 229.57 Consumer awareness.
(a) General disclosure requirement and content. Each
bank shall provide, in accordance with paragraph (b) of this section, a
brief disclosure to each of its consumer customers that describes--
(1) That a substitute check is the legal equivalent of an
original check; and
(2) The consumer recredit rights that apply when a consumer in
good faith believes that a substitute check was not properly charged to
his or her account.
(b) Distribution--(1) Disclosure to consumers who
receive paid checks with periodic account statements. A bank shall
provide the disclosure described in paragraph (a) of this section to a
consumer customer who receives paid original checks or paid substitute
checks with his or her periodic account statement--
(i) No later than the first regularly scheduled communication
with the consumer after October 28, 2004, for each consumer who is a
customer of the bank on that date; and
(ii) At the time the customer relationship is initiated, for each
customer relationship established after October 28, 2004.
(2) Disclosure to consumers who receive substitute checks
on an occasional basis.
(i) The bank shall provide the disclosure described in paragraph
(a) of this section to a consumer customer of the bank who requests an
original check or a copy of a check and receives a substitute check. If
feasible, the bank shall provide this disclosure at the time of the
consumer's request; otherwise, the bank shall provide this disclosure
no later than the time at which the bank provides a substitute check in
response to the consumer's request.
(ii) The bank shall provide the disclosure described in paragraph
(a) of this section to a consumer customer of the bank who receives a
returned substitute check, at the time the bank provides such
substitute check.
(3) Multiple account holders. A bank need not give
separate disclosures to each customer on a jointly held account.
[Codified to 12 C.F.R. § 229.57]
[Section 229.57 added at 69 Fed. Reg. 47315, August 4, 2004,
effective October 28, 2004, except for model form C--5A in Appendix C,
which is effective on January 1, 2006]
§ 229.58 Mode of delivery of information.
A bank may deliver any notice or other information that it is
required to provide under this subpart by United States mail or by any
other means through which the recipient has agreed to receive account
information. If a bank is required to provide an original check or a
sufficient copy, the bank instead may provide an electronic image of
the original check or sufficient copy if the recipient has agreed to
receive that information electronically.
[Codified to 12 C.F.R. § 229.58]
[Section 229.58 added at 69 Fed. Reg. 47315, August 4, 2004,
effective October 28, 2004, except for model form C--5A in Appendix C,
which is effective on January 1, 2006]
§ 229.59 Relation to other law.
The Check 21 Act and this subpart supersede any provision of federal
or state law, including the Uniform Commercial Code, that is
inconsistent with the Check 21 Act or this subpart, but only to the
extent of the inconsistency.
[Codified to 12 C.F.R. § 229.59]
{{8-29-08 p.7418.22-K}}
[Section 229.59 added at 69 Fed. Reg. 47315, August 4, 2004,
effective October 28, 2004, except for model form C--5A in Appendix C,
which is effective on January 1, 2006]
§ 229.60 Variation by agreement.
Any provision of § 229.55 may be varied by agreement of the banks
involved. No other provision of this subpart may be varied by agreement
by any person or persons.
[Codified to 12 C.F.R. § 229.60]
[Section 229.60 added at 69 Fed. Reg. 47314, August 4, 2004,
effective October 28, 2004, except for model form C--5A in Appendix C,
which is effective on January 1,
2006]
1 A bank that distinguishes in its disclosure between local and
nonlocal checks based on the routing number on the check must disclose
that certain checks, such as some credit union share drafts that are
payable by one bank but payable through another bank, will be treated
as local or nonlocal checks based upon the location of the bank by
which they are payable and not on the basis of the location of the bank
whose routing number appears on the check. A bank that makes funds from
nonlocal checks available for withdrawal within the time periods
required for local checks under §§ 229.12 and 229.13 is not required
to provide this disclosure on payable-through checks to its customers.
The statement concerning payable-through checks must describe how the
customer can determine whether these checks will be treated as local or
nonlocal, or state that special rules apply to such checks and that the
customer may ask about the availability of these checks. Go Back to Text
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