Availability of Funds And Collection Of Checks
Section 229.1 - Authority and purpose; organization.
Section 229.2 - Definitions.
Section 229.3 - Administrative enforcement.
Sec. 229.1 Authority and purpose; organization.
(a) Authority and purpose. This part
(Regulation CC; 12 CFR part 229) is issued by the Board of Governors
of the Federal Reserve System (Board) to implement the Expedited
Funds Availability Act (Act) (title VI of Pub. L. 100-86, 101
Stat. 552, 635), as amended by section 1001 of the Cranston-Gonzalez
National Affordable Housing Act of 1990 (Pub. L. 101-625, 104
Stat. 4079, 4424) and sections 212(h), 225, and 227 of the Federal
Deposit Insurance Corporation Improvement Act of 1991 (Pub. L.
102-242, 105 Stat. 2236, 2303, 2307).
(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.
Sec. 229.2 Definitions.
As used in this part, unless the context
(a) 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). As defined in these sections, account generally
includes accounts at a bank from which the account holder is permitted
to make transfers or withdrawals by negotiable or transferable
instrument, payment order of withdrawal, telephone transfer, electronic
payment, or other similar means for the purpose of making payments
or transfers to third persons or others. 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--
(1) A demand deposit account,
(2) A negotiable order of withdrawal
(3) A share draft account,
(4) An automatic transfer account, or
(5) Any other transaction account described
in 12 CFR 204.2(e).
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.
(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
(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-- For purposes of subpart
C of this part and, in connection therewith,
this subpart A, the term bank also includes any person engaged
business of banking, as well as a Federal Reserve Bank, a Federal
Loan Bank, and a state or unit of general local government to
extent that the state or unit of general local government acts
(1) An insured bank as defined in section
3 of the Federal Deposit Insurance Act (12 U.S.C. 18I3) 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.
(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 l(b) of the International Banking Act
(12 U.S.C. 3101).
For purposes of subpart C 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.
(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 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
(i) Cashier's check means a check that
(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;
(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,
(B) Will be used to pay the check; or
(2) The bank will pay the check upon
(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
(6) A traveler's check drawn on or payable
through or at a bank. 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 subpart
C, 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.
(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 the paying bank
(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
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 liabilities of the transferring banks, including the
(u) Noncash item means an item that would
otherwise be a check, except that--
(1) A passbook, certificate, or other
document is attached;
(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
(x) Nonproprietary ATM means an ATM that
is not a proprietary ATM.
(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;
(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; or
(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 subpart C, 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.
(aa) Proprietary ATM means an ATM that
(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
(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 on in nine-digit form; or
(2) The number in a bank's indorsement
in fractional or nine-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
(ff) State means a state, the District
of Columbia, Puerto Rico, or the U.S. Virgin Islands.
(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 by 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 US Virgin Islands, and
(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 Sec. 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.
Sec. 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 Act
is deemed to be a violation of a requirement imposed under that
(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
(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 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).
Subpart B - Availability
of Funds and Disclosure of Funds Availability Policies
Subpart C - Collection
Appendices A & B
Appendices C & D
Appendix E (Large
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