[Federal Register Volume 83, Number 236 (Monday, December 10, 2018)]
[Proposed Rules]
[Pages 63431-63444]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-25746]


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FEDERAL RESERVE SYSTEM

12 CFR Part 229

[Regulation CC; Docket No. R-1637]
RIN 7100-AF 28

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1030

[Docket No. CFPB-2018-0035]
RIN 3170-AA31


Availability of Funds and Collection of Checks (Regulation CC)

AGENCY: Board of Governors of the Federal Reserve System (Board) and 
Bureau of Consumer Financial Protection (Bureau).

ACTION: Proposed rule and reopening of comment period for existing 
proposed rule.

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SUMMARY: The Board and the Bureau (Agencies) are proposing amendments 
to Regulation CC, which implements the Expedited Funds Availability Act 
(EFA Act) (2018 Proposal), and are also providing an additional 
opportunity for public comment on certain amendments to Regulation CC 
that the Board proposed in 2011 (2011 Funds Availability Proposal). In 
the 2018 Proposal, the Agencies are proposing a calculation methodology 
for implementing a statutory requirement to adjust the dollar amounts 
in the EFA Act every five years by the aggregate annual percentage 
increase in the Consumer Price Index for Wage Earners and Clerical 
Workers (CPI-W) rounded to the nearest multiple of $25. The 2018 
Proposal would also implement the Economic Growth, Regulatory Relief, 
and Consumer Protection Act (EGRRCPA) amendments to the EFA Act, which 
include extending coverage to American Samoa, the Commonwealth of the 
Northern Mariana Islands, and Guam, and would make certain other 
technical amendments.
    With regard to reopening comments on the 2011 Funds Availability 
Proposal, the Board published proposed amendments to Regulation CC in 
the Federal Register on March 25, 2011. As discussed in SUPPLEMENTARY 
INFORMATION, the Board and the Bureau now have joint rulemaking 
authority with respect to part of Regulation CC, related definitions, 
and appendices of the amendments that the Board proposed on that date. 
The Board and the Bureau are reopening the comment period for the 2011 
Funds Availability Proposal.

DATES: Comments on the 2018 Proposal and the 2011 Funds Availability 
Proposal must be received on or before February 8, 2019.

ADDRESSES: Comments should be directed to:
    Board: You may submit comments, identified by Docket No. R-1637; 
RIN 7100 AF-28, by any of the following methods:
     Agency website: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Email: [email protected]. Include the 
docket number and RIN in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Ann E. Misback, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue NW, 
Washington, DC 20551.
    All public comments will be made available on the Board's website 
at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons or to remove 
personally identifiable information at the commenter's request. 
Accordingly, comments will not be edited to remove any identifying or 
contact information. Public comments may also be viewed electronically 
or in paper in Room 3515, 1801 K Street NW (between 18th and 19th 
Streets NW), between 9:00 a.m. and 5:00 p.m. on weekdays.
    Bureau: You may submit comments, identified by Docket No. CFPB-
2018-0035 or RIN 3170-AA31, by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include Docket 
No. CFPB-2018-0035 or RIN 3170-AA31 in the subject line of the email.
     Mail/Hand Delivery/Courier: Comment Intake, Bureau of 
Consumer Financial Protection, 1700 G Street, NW, Washington, DC 20552.
    Instructions: All submissions should include the agency name and 
docket number or Regulatory Information Number (RIN) for this 
rulemaking. Because paper mail in the Washington, DC area and at the 
Bureau is subject to delay, commenters are encouraged to submit 
comments electronically. In general, all comments received will be 
posted without change to http://www.regulations.gov. In addition, 
comments will be available for public inspection and copying at 1700 G 
Street NW, Washington, DC 20552, on official business days between the 
hours of 10 a.m. and 5 p.m. Eastern Time. You can make an appointment 
to inspect the documents by telephoning (202) 435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or Social 
Security numbers, should not be included. Comments will not be edited 
to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Board: Gavin L. Smith, Senior Counsel 
(202) 452-3474, Legal Division, or Ian C.B. Spear, Manager (202) 452-
3959, Division of Reserve Bank Operations and Payment Systems; for 
users of Telecommunications Device for the Deaf (TDD) only, contact 
(202) 263-4869.
    Bureau: Joseph Baressi and Marta Tanenhaus, Senior Counsels, Office 
of Regulations, at (202) 435-7700. If you require this document in an 
alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. 2018 Proposal

A. Background

    Regulation CC (12 CFR part 229) implements the Expedited Funds 
Availability Act (EFA Act) and the Check Clearing for the 21st Century 
Act

[[Page 63432]]

(Check 21 Act).\1\ Subpart B of Regulation CC implements the 
requirements set forth in the EFA Act regarding the availability 
schedules within which banks must make funds available for withdrawal, 
exceptions to those schedules, disclosure of funds availability 
policies, and payment of interest. The EFA Act and subpart B of 
Regulation CC contain specified dollar amounts, including the minimum 
amount of deposited funds that banks must make available for withdrawal 
by opening of business on the next day for certain check deposits 
(``minimum amount''),\2\ the amount a bank must make available when 
using the EFA Act's permissive adjustment to the funds-availability 
rules for withdrawals by cash or other means (``cash withdrawal 
amount''),\3\ the amount of funds deposited by certain checks in a new 
account that are subject to next-day availability (``new-account 
amount''),\4\ the threshold for using an exception to the funds-
availability schedules when the aggregate amount of checks on any one 
banking day exceed the threshold amount (``large-deposit 
threshold''),\5\ the threshold for determining whether an account has 
been repeatedly overdrawn (``repeatedly overdrawn threshold''),\6\ and 
the civil liability amounts for failing to comply with the EFA Act's 
requirements.\7\
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    \1\ Expedited Funds Availability Act, 12 U.S.C. 4001 et seq.; 
Check Clearing for the 21st Century Act, 12 U.S.C. 5001 et seq.
    \2\ The minimum amount is currently $200. See section 1086(e) of 
the Dodd-Frank Act; 12 U.S.C. 4002(a)(2)(D).
    \3\ The cash withdrawal amount is currently $400. 12 U.S.C. 
4002(b)(3)(B).
    \4\ The new-account amount is currently $5,000. 12 U.S.C. 
4003(a)(3).
    \5\ The large-deposit threshold is currently $5,000. 12 U.S.C. 
4003(b)(1).
    \6\ The repeatedly overdrawn threshold is currently $5,000. 12 
CFR 229.13(d). This dollar amount is not specified in the EFA Act, 
but is a result of the authority of the Board and the Bureau under 
section 604(b)(3) of the EFA Act (12 U.S.C. 4003(b)(3)) to establish 
reasonable exceptions to time limitations for deposit accounts that 
have been overdrawn repeatedly. The Board and the Bureau propose to 
use their authority under section 604(b)(3) and also their authority 
under section 609(a) (12 U.S.C. 4008(a)), which is discussed below, 
to index the repeatedly overdrawn threshold in the same manner as 
the other dollar amounts. The Board and the Bureau believe that 
indexing the repeatedly overdrawn threshold would be consistent with 
the need identified by Congress to prevent such dollar amounts from 
being eroded by inflation.
    \7\ The civil liability amounts are currently ``not less than 
$100 nor greater than $1,000'' for an individual action and ``not 
more than $500,000 or 1 percent of the net worth'' of a depository 
institution for a class action. 12 U.S.C. 4010(a).
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    The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Dodd-Frank Act) made certain amendments to the EFA Act, and these 
amendments were effective on a date designated by the Secretary of the 
Treasury, July 21, 2011.\8\ Section 609(a) of the EFA Act, as amended 
by section 1086(d) of the Dodd-Frank Act,\9\ provides that the Board 
and the Director of the Bureau shall jointly prescribe regulations to 
carry out the provisions of the EFA Act, to prevent the circumvention 
or evasion of such provisions, and to facilitate compliance with such 
provisions.
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    \8\ Public Law 111-203, sections 1062, 1086, 1100H, 124 Stat. 
2081 (2010); 75 FR 57252 (Sept. 20, 2010).
    \9\ 12 U.S.C. 4008(a).
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    Additionally, section 1086(f) of the Dodd-Frank Act added section 
607(f) of the EFA Act, which provides that the dollar amounts under the 
EFA Act shall be adjusted every five years after December 31, 2011, by 
the annual percentage increase in the Consumer Price Index for Urban 
Wage Earners and Clerical Workers (CPI-W), as published by the Bureau 
of Labor Statistics, rounded to the nearest multiple of $25.\10\
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    \10\ 12 U.S.C. 4006(f).
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B. Proposed Effective Dates for Adjustments

    The Agencies believe that section 607(f) is reasonably interpreted 
to provide for five years to elapse between a given set of adjustments 
and the next set of adjustments, with the first set of adjustments 
occurring sometime after December 31, 2011. As regulators of financial 
institutions, the Agencies are familiar with the challenges that 
institutions can face if changes to regulatory requirements are too 
frequent or abrupt. The Agencies believe that Congress intended to 
balance that concern with the need to prevent the EFA Act's dollar 
amounts from being eroded by inflation. Congress did so by providing 
that the adjustments would be effective at five-year intervals; by 
providing that the first set of adjustments would not occur until after 
December 31, 2011, which ensured that at least a full calendar year 
would elapse after the Dodd-Frank Act's enactment in mid-2010; and by 
providing that the adjustments would be rounded to the nearest multiple 
of $25. Several years have now elapsed since December 31, 2011, and the 
Agencies intend to move towards issuing a final rule implementing 
section 607(f), while providing appropriate time after the issuance of 
that final rule for implementation by institutions.
    The Agencies anticipate publishing the first set of adjustments as 
a final rule in the first quarter of 2019. They propose that the first 
set of adjustments have an effective date of April 1, 2020. The 
Agencies anticipate publishing the second set of adjustments in the 
first quarter of 2024. They propose that the second set of adjustments 
have an effective date of April 1, 2025. The Agencies propose that each 
subsequent set of adjustments have an effective date of April 1 of 
every fifth year after 2025.
    The proposed effective dates should provide institutions with 
sufficient time to make any necessary disclosure and software 
changes.\11\ The Agencies request comment on the proposed effective 
dates for the adjustments. The Agencies request that entities affected 
by the adjustments provide details of the measures that would be 
necessary to implement them.
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    \11\ The proposed effective dates would be consistent with 
section 302 of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (Pub. L. 103-325, 108 Stat. 2160, 12 U.S.C. 
4802). That section provides that new regulations and amendments to 
regulations prescribed by Federal banking agencies, including the 
Board, that impose additional reporting, disclosures, or other new 
requirements on insured depository institutions shall take effect on 
the first day of a calendar quarter which begins on or after the 
date on which the regulations are published in final form (with 
certain exceptions).
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C. Proposed Methodology for Adjustments

    Section 607(f) does not specify which month's CPI-W should be used 
to measure inflation. The Agencies propose to use the July CPI-W, which 
is released by the Bureau of Labor Statistics in August. The Agencies 
propose to use the aggregate percentage change in the CPI-W from July 
2011 to July 2018 as the initial inflation measurement period for the 
first set of adjustments. (As discussed above, the Agencies anticipate 
that the first set of adjustments would be published as a final rule in 
the first quarter of 2019 and propose that it have an effective date of 
April 1, 2020.) The second set of adjustments would be based on the 
aggregate percentage change in the CPI-W for an inflation measurement 
period that begins in July 2018 and ends in July 2023. (As discussed 
above, the Agencies anticipate that the second set of adjustments would 
be published in the first quarter of 2024 and have a proposed effective 
date of April 1, 2025.) Each subsequent set of adjustments would be 
based on the aggregate percentage change in the CPI-W for an inflation 
measurement period that begins in July of every fifth year after 2018 
and ends in July of every fifth year after 2023. This use of July CPI-
W, starting with the July 2011 CPI-W, would align with section 607(f)'s 
effective date of July 21, 2011, and the Agencies expect it to provide 
a

[[Page 63433]]

reasonable period of time after the CPI-W data becomes available for 
the Agencies to publish the requisite adjustments and for financial 
institutions to implement them. The Agencies request comment on this 
approach and its interaction with the proposed effective dates 
discussed above.
    If there is an aggregate percentage increase in any inflation 
measurement period, then the aggregate percentage change would be 
applied to the dollar amounts in Regulation CC, and those amounts would 
be rounded to the nearest multiple of $25 to determine the new adjusted 
dollar amounts.\12\ Section 607(f) of the EFA Act provides that the 
adjustments are to be based on the ``annual percentage increase'' in 
the CPI-W, but does not specify how the adjustment is to be made in the 
event that the CPI-W is negative for one or more years in the inflation 
measurement period. The Agencies believe it is a reasonable 
interpretation of section 607(f) to account for negative movements in 
the CPI-W on a year-to-year basis and to factor those movements into 
the calculation. The Agencies believe that the purpose of section 
607(f) is to keep the dollar amounts in the EFA Act on a pace with 
inflation, as represented by the CPI-W. The funds-availability 
provisions of the EFA Act represent a balancing of interests--the 
interests of account customers in receiving prompt availability of 
their deposited funds and the interests of depository institutions in 
minimizing the risks from making funds available before learning of 
checks or other items being returned.\13\ Accounting for upward and 
downward movements in the CPI-W in calculating any cumulative increase 
to the dollar amounts is consistent with the approach Congress took in 
the EFA Act of balancing the interests of depository institutions and 
their customers.
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    \12\ For example, if the CPI-W in July of the year the last 
publication of an adjusted dollar amount occurred and the CPI-W in 
July of the year that is five years later were 100 and 114.7, 
respectively, the aggregate percentage change that results from 
changes in the CPI-W for each year of the period using the CPI-W 
values in July would be 14.7%. If the applicable dollar amount was 
$200 for the prior period, then the adjusted figure would become 
$225 as the change of $29.40 results in rounding to $25.
    \13\ The EFA Act's legislative history shows that one intent of 
the Act was to ``provide a fairer balance between the banks' 
interest in avoiding fraud and consumers' interests in having speedy 
access to their funds.'' S. Rep. No. 100-19, at 28 (1987); see also 
H.R. Rep. No. 100-52, at 14 (1987) (describing the efforts ``to 
protect depository institutions while furthering the original goals 
of the legislation to provide shorter time periods for funds 
availability.'')
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    Under the proposed calculation methodology, the dollar amount 
adjustments would always be zero or positive.\14\ If there is no 
aggregate percentage increase during the inflation measurement period 
(zero increase or net decrease) or if the aggregate percentage change 
when applied to the dollar amount does not result in a change because 
of rounding, the Agencies would not adjust that dollar amount. 
Moreover, in either of those situations, the aggregate percentage 
change would be calculated either from the CPI-W in July of the year 
that corresponds with the last publication of an adjusted dollar amount 
or, if there has never been an adjusted dollar amount, from the CPI-W 
in July 2011.\15\
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    \14\ Since 1939, no aggregate change in the CPI-W across a five-
year period has been negative. However, the proposed rule would also 
cover this potential scenario.
    \15\ For example, if the aggregate percentage change in the CPI-
W for an inflation measurement period was 4.0% and the applicable 
dollar amount was $200 from the prior period, then the adjusted 
figure would remain $200, as the change of $8.00 does not result in 
rounding to $25. However, if over the next inflation measurement 
period the aggregate percentage change for the five-year period was 
again 4.0%, then the adjusted figure would become $225, as the 
change of $16.32 does result in rounding to $25. The Board and 
Bureau calculate this adjustment by using the aggregate CPI-W change 
over two (or more) inflation measurement periods until the 
cumulative change results in publication of an adjusted dollar 
amount in the regulation.
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    The Agencies are proposing a new Sec.  229.11 and accompanying 
commentary to implement the CPI-W index calculation method to be used 
by the Agencies to adjust the dollar amounts in the EFA Act. The new 
Sec.  229.11 provides for the CPI-W calculation for the dollar amounts 
in Sec.  229.10(c)(1)(vii) regarding the minimum amount, Sec.  
229.12(d) for the cash withdrawal amount, Sec.  229.13(a) for the new-
account amount, Sec.  229.13(b) for the large-deposit threshold, Sec.  
229.13(d) for repeatedly overdrawn threshold, and Sec.  229.21(a) for 
the civil liability amounts.
    The Agencies request comment on the proposed calculation 
methodology to be applied to the dollar amounts in Regulation CC.

D. First Set of Adjustments

    As discussed above, for the first set of adjustments, the Agencies 
propose to use CPI-W data from July 2011 through July 2018.\16\ (As 
discussed above, the Agencies are proposing that this first set of 
adjustments have an effective date of April 1, 2020). In order to 
inform this rulemaking more fully, the Agencies have applied the 
proposed inflation calculation methodology to calculate the adjusted 
amounts that would result if the methodology is finalized.\17\ 
Specifically, if the proposed adjustment methodology is finalized, the 
adjusted amounts, based on the change in CPI-W from 222.686 in July 
2011 to 246.155 in July 2018, would be as follows:
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    \16\ As is discussed below, the agencies propose that five years 
of CPI data be used for all subsequent sets of adjustments.
    \17\ With respect to subsequent calculations such as the 
calculations that will be conducted in 2023, the Agencies expect to 
find that notice and opportunity for public comment for the 
calculations is impracticable, unnecessary, or contrary to the 
public interest, because the calculations would be technical and 
non-discretionary. See 5 U.S.C. 553(b)(B).
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     The minimum amount in Sec.  229.10(c)(1)(vii) would be 
adjusted to $225, as the change of $21.00 results in a rounding to the 
nearest multiple of $25;
     The cash withdrawal amount in Sec.  229.12(d) of $400 
would be adjusted to $450, as the change of $42.00 results in a 
rounding to the nearest multiple of $25;
     The new-account amount of $5,000 in Sec.  229.13(a), the 
large-deposit threshold of $5,000 in Sec.  229.13(b), and the 
repeatedly overdrawn threshold of $5,000 in Sec.  229.13(d) would each 
be adjusted to $5,525, as the change of $525 results in a rounding to 
the nearest multiple of $25; and
     In Sec.  229.21(a) the civil liability amount of $100 
would remain the same, as the change of $10.50 does not result in a 
rounding to $25, while the other civil liability amounts of $1,000 and 
$500,000 would be adjusted to $1,100 and $552,500, as the changes of 
$105 and $52,500, respectively, result in a rounding to the nearest 
multiple of $25.

E. Technical Amendments to Regulation CC and EGRRCPA Amendments

    The Agencies also propose amending the commentary to each of the 
sections containing dollar amounts by inserting a cross-reference to 
the new Sec.  229.11 containing the calculation method for indexing 
those dollar amounts every five years. In addition, the Agencies are 
proposing to update the dollar amounts with the adjusted dollar amounts 
throughout subpart B of Regulation CC, and the commentary thereto, and 
reflect these updates by the date on which depository institutions must 
comply with the adjusted dollar amounts.
    The Board and Bureau are proposing a technical change to Sec.  
229.1(a), which sets forth the authority and purpose of Regulation CC, 
to explain that the Board and Bureau have joint rulemaking authority 
under certain provisions of the EFA Act.
    In addition, the Economic Growth, Regulatory Relief, and Consumer 
Protection Act (EGRRCPA) made

[[Page 63434]]

amendments to the EFA Act to extend its application to American Samoa, 
the Commonwealth of the Northern Mariana Islands, and Guam.\18\ The 
effect of these statutory amendments is to subject banks in American 
Samoa, the Commonwealth of the Northern Mariana Islands, and Guam to 
the EFA Act's requirements related to funds availability, payment of 
interest, and disclosures. Banks in those territories would be able to 
avail themselves of the one-day extension of the availability schedules 
permitted by the EFA Act and Sec.  229.12(e) of Regulation CC. 
Accordingly, the Board and the Bureau are proposing to update Sec.  
229.2(ff), and (jj) (definitions of ``state,'' and ``United States''), 
as well as Sec.  229.12(e) and its corresponding commentary, to 
implement the statutory amendments. Specifically, the Board and the 
Bureau are proposing to add American Samoa, the Commonwealth of the 
Northern Mariana Islands, and Guam to the definitions of ``state'' and 
``United States'' in Sec.  229.2 (ff) & (jj) of Regulation CC, 
respectively. The Board and the Bureau are also proposing to remove 
Guam, American Samoa, and the Northern Mariana Islands from the list of 
territories in its definition of ``state'' for purposes of subpart D, 
as those territories are now included in the definition of State for 
Regulation CC generally. The Board and the Bureau are also proposing to 
add American Samoa, the Commonwealth of the Northern Mariana Islands, 
and Guam to the list of States and territories in Sec.  229.12(e), 
229.12(e)(1), and its corresponding commentary.
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    \18\ Public Law 115-174, section 208 (2018).
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    Because American Samoa, the Commonwealth of the Northern Mariana 
Islands, and Guam are considered to be in the United States under the 
EGRRCPA amendments, banks located in those territories would be 
considered ``banks'' under Regulation CC and checks drawn on those 
banks would meet the Regulation CC definition of ``check.'' Thus, the 
provisions of subpart C of Regulation CC with respect to check 
collection and return, including warranties and indemnities, would 
apply with respect to those banks and the checks deposited in and drawn 
on them. (The provisions of subpart D of Regulation CC with respect to 
substitute checks already apply to checks drawn on banks in these 
territories due to the broader definition of ``State'' in the Check 21 
Act.) The Board had promulgated Sec.  229.43 in subpart C to address 
how Regulation CC applied to checks drawn on banks located in Guam, 
American Samoa, and the Northern Mariana Islands when those checks are 
handled by other U.S. banks.\19\ As those territories are now covered 
by the EFA Act, and subpart C of Regulation CC would apply by its terms 
to checks drawn on banks in those territories, Sec.  229.43 is no 
longer necessary. Accordingly, the Board is proposing to delete Sec.  
229.43 and its corresponding commentary from subpart C of Regulation 
CC.
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    \19\ See 62 FR 13808, 13807 (March 24, 1997).
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    The EGRRCPA also amended the EFA Act's definition of ``receiving 
depository institution'' by adding ``located in the United States'' 
after ``proprietary ATM.'' \20\ Regulation CC uses the term 
``depositary bank'' instead of ``receiving depository institution,'' 
contains a separate definition of ``ATM,'' and establishes rules for 
determining when deposits at ATMs are received by the depositary 
bank.\21\ To implement the EGRRCPA provision, the Board and the Bureau 
are proposing to insert ``located in the United States'' in the 
definition of ``ATM'' in Sec.  229.2(c) and its corresponding 
commentary.
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    \20\ The definition of ``receiving depository institution'' in 
the EFA Act now reads ``the branch of a depository institution or 
the proprietary ATM located in the United States in which a check is 
first deposited.'' 12 U.S.C. 4001(20).
    \21\ See 12 CFR 229.2(o), 229.2(b), and 229.19(a), respectively, 
and associated commentary.
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F. Technical Amendments to the Bureau's Regulation DD

    The Bureau is proposing a technical, non-substantive amendment to 
its Regulation DD, 12 CFR part 1030, to add a new paragraph (e) to 
Sec.  1030.1 that would cross-reference the Bureau's joint authority 
with the Board to issue regulations under certain provisions of the EFA 
Act that are codified within Regulation CC. The Bureau is also 
proposing related technical, non-substantive amendments to Sec.  
1030.7(c), and the commentary thereto, which states that interest shall 
begin to accrue not later than the business day specified for interest-
bearing accounts in the EFA Act and Regulation CC. In addition, the 
Bureau is proposing to fix technical errors in Appendix A to Regulation 
DD within the formulas that demonstrate how to calculate annual 
percentage yield (APY) and annual percentage yield earned (APYE). 
Specifically, certain terms within the formulas should be shown as 
exponents but currently are erroneously not shown as exponents. These 
typographical errors were inadvertently introduced into the APY and 
APYE formulas in Appendix A when the Bureau issued its restatement of 
Regulation DD in December 2011.\22\ As the preamble to the restated 
Regulation DD explained, it was intended to substantially duplicate the 
prior Regulation DD. The Bureau considers these typographical errors in 
the restated Regulation DD to be scrivener's errors that should be read 
as exponents. In now proposing to correct these typographical errors, 
the Bureau intends no change to how institutions should comply with 
Regulation DD. These technical, non-substantive amendments to 
Regulation DD would be effective thirty days after publication of a 
final rule.
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    \22\ 76 FR 79276 (Dec. 21, 2011).
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G. Bureau's Dodd-Frank Act Section 1022(b)(2)(A) Analysis

1. Overview
    Section 1022(b)(2)(A) of the Dodd-Frank Act provides that in 
prescribing a rule under the Federal consumer financial laws, the 
Bureau shall consider the potential benefits and costs to consumers and 
covered persons, including the potential reduction of access by 
consumers to consumer financial products or services resulting from 
such rule; the impact on depository institutions and credit unions with 
$10 billion or less in total assets as described in section 1026 of the 
Dodd-Frank Act; and the impact on consumers in rural areas.\23\
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    \23\ 12 U.S.C. 5512(b)(2)(A). Although the manner and extent to 
which section 1022(b)(2)(A) applies to a rulemaking of this kind is 
unclear, in order to inform this rulemaking more fully the Bureau 
performed the described analysis.
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    This analysis focuses on the benefits, costs, and impacts of the 
2018 Proposal. The Bureau is using a pre-statutory baseline to assess 
the impact of the 2018 Proposal. That is, the Bureau's analysis below 
considers the benefits, costs, and impacts of the relevant provisions 
of the EGRRCPA combined with the 2018 Proposal relative to the 
regulatory regime that pre-dates the EGRRCPA.\24\
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    \24\ The Bureau has discretion in future rulemakings to choose 
the most appropriate baseline for that particular rulemaking. Also 
note that the Bureau's analysis excludes the Board's proposed 
amendments to subpart C of Regulation CC.
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2. Potential Benefits and Costs to Consumers and Covered Persons
    This proposed rule, if implemented, adjusts for inflation the funds 
that must be available as required by the EFA Act and Regulation CC. 
Moreover, depository institutions located in American Samoa, the 
Northern Mariana Islands, and Guam will now be required to comply with 
the provisions in the EFA Act and subpart B of Regulation CC related to 
funds availability, payment of interest, and disclosures to their

[[Page 63435]]

customers. The Board and the Bureau are proposing to hold the real 
expected losses to depository institutions fixed by adjusting for 
inflation the funds that must be available. Thus, the Bureau does not 
expect any potential benefits, costs, or impacts to consumers or 
covered persons as a result of the adjustment methodology, other than 
the paperwork costs discussed below. The adjustments and methodology in 
this proposed rule are technical, and they merely apply the statutory 
method for adjusting amounts that must be available to consumers.
    The Bureau estimates that covered persons will face an average 
paperwork cost of $398.04 every five years to update notices already 
sent to consumers. The Bureau believes that the average depository 
institution will use 12 hours of compliance officer time at a mean 
hourly rate of $33.17.\25\
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    \25\ Bureau of Labor Statistics, National Occupational 
Employment and Wage Estimates (May 2016), available at https://www.bls.gov/oes/current/oes_nat.htm.
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    Additionally, the EGRRCPA made amendments to the EFA Act to extend 
its application to American Samoa, the Commonwealth of the Northern 
Mariana Islands, and Guam.\26\ The 2018 Proposal implements the EGRRCPA 
by extending the application of Regulation CC's requirements related to 
funds availability, payment of interest, and disclosures to 
institutions in American Samoa, the Commonwealth of the Northern 
Mariana Islands, and Guam. Consumers of depository institutions in 
American Samoa, Guam, and the Northern Mariana Islands will generally 
receive the same benefits of consumers of institutions already 
complying with subpart B of Regulation CC. This includes policy and 
other disclosures regarding funds availability and timely access to 
their funds. Consumers will generally not experience any costs 
associated with receiving these disclosures.
---------------------------------------------------------------------------

    \26\ Public Law 115-174, section 208 (2018).
---------------------------------------------------------------------------

    The Bureau has identified five institutions located in American 
Samoa, the Commonwealth of the Northern Mariana Islands, and Guam that 
are newly subject to Regulation CC as a result of the amendments made 
to the EFA Act by the EGRRCPA, and that will therefore face compliance 
costs associated with the 2018 Proposal should it be finalized. 
Although these institutions will incur costs to comply with the 
requirements of Regulation CC, the Bureau does not have data on the 
impact of the requirements of the 2018 Proposal on these institutions. 
The Bureau specifically requests information from commenters on the 
costs of complying with Regulation CC for institutions in American 
Samoa, the Commonwealth of the Northern Mariana Islands, and Guam and 
on those institutions' pre-statutory practices regarding funds 
availability.
    The Bureau requests comment on the analysis above and requests any 
relevant data.
3. Impact on Depository Institutions With No More Than $10 Billion in 
Assets
    The proposed rule will impact all depository institutions, 
including those with no more than $10 billion in assets. The Bureau 
expects that all depository institutions will experience an average 
cost of $398.04 to update quinquennial notices.
    The EGRRCPA amended the EFA Act to extend its application to 
institutions in American Samoa, the Commonwealth of the Northern 
Mariana Islands, and Guam. The Bureau identified five institutions that 
are now required to comply with Regulation CC, and all have no more 
than $10 billion in assets. The Bureau requests information from 
commenters on the total cost experienced by these depository 
institutions to comply with Regulation CC.
4. Impact on Access to Credit
    The Bureau does not expect this proposed rule, if implemented, to 
affect consumers' access to credit. The scope of this rulemaking is 
limited to funds available in depository accounts and is not directly 
related to credit access.
5. Impact on Rural Areas
    The Bureau does not believe that this proposed rule, if 
implemented, will have a unique impact on consumers in rural areas.

H. Interagency Consultations

    The Board and the Bureau have performed interagency consultations 
regarding this proposed rule consistent with section 609(e) of the EFA 
Act and section 1022(b)(2)(B) of the Dodd-Frank Act. Section 609(e) of 
the EFA Act provides that in prescribing regulations under section 
609(a), the Board and the Director of the Bureau shall consult with the 
Comptroller of the Currency, the Board of Directors of the Federal 
Deposit Insurance Corporation, and the National Credit Union 
Administration Board.\27\ Section 1022(b)(2)(B) of the Dodd-Frank Act 
provides that in prescribing a rule under the Federal consumer 
financial laws, the Bureau shall consult with the appropriate 
prudential regulators or other Federal agencies prior to proposing a 
rule and during the comment process regarding consistency with 
prudential, market, or systemic objectives administered by such 
agencies.\28\
---------------------------------------------------------------------------

    \27\ 12 U.S.C. 4008(a).
    \28\ 12 U.S.C. 5512(b)(2)(B). Although the manner and extent to 
which section 1022(b)(2)(B) applies to a rulemaking of this kind is 
unclear, in order to inform this rulemaking more fully the Bureau 
performed the described consultations.
---------------------------------------------------------------------------

I. Regulatory Flexibility Act

    Board: The Regulatory Flexibility Act (RFA) requires an agency to 
publish an initial regulatory flexibility analysis with a proposed rule 
or certify that the proposed rule will not have a significant economic 
impact on a substantial number of small entities. Based on its 
analysis, and for the reasons stated below, the Board believes that the 
proposed rule will not have a significant economic impact on a 
substantial number of small entities. Nevertheless, the Board is 
publishing an initial regulatory flexibility analysis and requests 
comment on all aspects of its analysis. The Board will, if necessary, 
conduct a final regulatory flexibility analysis after considering the 
comments received during the public comment period.
    1. Statement of the need for, and objectives of, the proposed rule. 
The proposed rule would memorialize the calculation method used to 
adjust the EFA Act dollar amounts every five years in accordance with 
section 607(f) of the EFA Act, as amended by section 1086(f) of the 
Dodd-Frank Act. The proposed rule would also implement statutory 
amendments to the EFA Act to extend its application to American Samoa, 
the Commonwealth of the Northern Mariana Islands, and Guam.
    2. Small entities affected by the proposed rule. The proposed rule 
would apply to all depository institutions regardless of their size. 
Pursuant to regulations issued by the Small Business Administration (13 
CFR 121.201), a ``small banking organization'' includes a depository 
institution with $550 million or less in total assets. Based on call 
report data, there are approximately 9,631 depository institutions that 
have total domestic assets of $550 million or less and thus are 
considered small entities for purposes of the RFA. All institutions 
will be required to update existing disclosures to their customers with 
any adjustments in the dollar amounts and update their software to 
adjust the availability amounts where necessary. The Board does not 
believe the proposed rule will have a significant

[[Page 63436]]

economic impact on the entities that it affects. Nevertheless, the 
Board invites comment on the effect of the proposed rule on small 
entities. Specifically, the extent of impact on small entities may 
depend on the contents of the institution's funds availability policy 
and the frequency of the institution's regularly scheduled re-prints of 
its availability policy disclosures. Small depository institutions that 
already make funds available the next day and do not utilize the 
exceptions for new accounts, large deposits, or repeated overdrafts may 
be less affected by the proposed rule. The economic impact on small 
entities from the proposed rule may include technology, labor, and 
other associated costs incurred to update their disclosures with the 
adjusted dollar amounts, if those cannot be accomplished within the 
institution's regular cycle. Moreover, depository institutions located 
in American Samoa, the Northern Mariana Islands, and Guam will now be 
required to comply with the provisions in the EFA Act and Regulation CC 
related to funds availability, payment of interest, and disclosures to 
their customers.
    3. Recordkeeping, reporting, and compliance requirements. The 
proposed rule would require institutions to update their existing EFA 
Act disclosures to their customers with the adjusted dollar amount as 
well as update software that determines availability, as applicable. No 
other additional recordkeeping, reporting, or compliance requirements 
would be required by the proposed rule.
    4. Other Federal rules. The Board has not identified any likely 
duplication, overlap and/or potential conflict between the proposed 
rule and any Federal rule.
    5. Significant alternatives to the proposed revisions. The Board 
solicits comment on any significant alternatives that would reduce the 
regulatory burden of this proposed rule on small entities.
    Bureau: The Regulatory Flexibility Act (RFA) generally requires an 
agency to conduct an initial regulatory flexibility analysis (IRFA) and 
a final regulatory flexibility analysis (FRFA) of any rule subject to 
notice-and-comment rulemaking requirements.\29\ These analyses must 
``describe the impact of the proposed rule on small entities.'' \30\ 
Neither an IRFA nor FRFA is required if the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities.\31\ The Bureau also is subject to certain 
additional procedures under the RFA involving the convening of a panel 
to consult with small business representatives prior to proposing a 
rule for which an IRFA is required.
---------------------------------------------------------------------------

    \29\ 5 U.S.C. 601 et seq.
    \30\ Id. at 603(a). For purposes of assessing the impacts of the 
proposed rule on small entities, ``small entities'' is defined in 
the RFA to include small businesses, small not-for-profit 
organizations, and small government jurisdictions. Id. at 601(6). A 
``small business'' is determined by application of Small Business 
Administration regulations and reference to the North American 
Industry Classification System (NAICS) classifications and size 
standards. Id. at 601(3). A ``small organization'' is any ``not-for-
profit enterprise which is independently owned and operated and is 
not dominant in its field.'' Id. at 601(4). A ``small governmental 
jurisdiction'' is the government of a city, county, town, township, 
village, school district, or special district with a population of 
less than 50,000. Id. at 601(5).
    \31\ Id. at 605(b).
---------------------------------------------------------------------------

    An IRFA is not required for this proposal because, if adopted, it 
would not have a significant economic impact on a substantial number of 
small entities. As discussed in the Bureau's section 1022(b)(2) 
Analysis above, the Bureau believes the proposed rule's inflation 
adjustments hold real expected losses fixed by adjusting for inflation 
the amount of funds that must be made available for withdrawal in 
accordance with the EFA Act and Regulation CC. Accordingly, these 
adjustments for inflation do not introduce costs for entities, 
including small entities. In addition, the proposed rule would 
implement in Regulation CC the EGRRCPA extension of the EFA Act's 
requirements to institutions in American Samoa, the Commonwealth of the 
Northern Mariana Islands, and Guam. The Bureau identified five 
institutions that will be required to comply with Regulation CC due to 
the EGRRCPA amendments to the EFA Act. Thus, the Bureau concludes that 
a substantial number of small entities is not impacted by the proposal 
to implement in Regulation CC the EGRRCPA amendments to the EFA Act.
    The Bureau recognizes that the proposed rule will have some impact 
on some entities, including those that are small. The Small Business 
Administration (SBA) defines small depository institutions as those 
with less than $550 million in assets.\32\ Following guidance from the 
Small Business Administration, the Bureau averaged the total assets 
reported in quarterly call reports during quarters 1 through 4 of 2017. 
The Bureau identified 9,631 entities that had average total assets less 
than $550 million. These are considered small for the purposes of the 
RFA. Using the methodology outlined in the Board's Paperwork Reduction 
Act analysis, the Bureau estimates that the quinquennial adjustments 
will have an average quinquennial cost of $398.04 for depository 
institutions. The Bureau estimates that about 1% of small entities face 
a significant economic impact from the quinquennial proposed 
information collection.
---------------------------------------------------------------------------

    \32\ Small Business Administration, Table of Small Business 
Standards (2016), available at https://www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-sba-size-standards/table-small-business-size-standards.
---------------------------------------------------------------------------

    In addition, the Bureau estimates the impact of all subpart B 
provisions for those covered persons required to comply with subpart B 
of Regulation CC as a result of the amendments the EGRRCPA made to the 
EFA Act. The EGRRCPA amended the EFA Act to extend its application to 
institutions in American Samoa, the Commonwealth of the Northern 
Mariana Islands, and Guam. The Bureau identified five institutions that 
will be required to comply with Regulation CC due to the EGRRCPA 
amendments to the EFA Act. Thus, the Bureau concludes that a 
substantial number of small entities is not impacted by the proposal to 
implement the EGRRCPA amendments to the EFA Act in Regulation CC.
    Accordingly, the Bureau Director, by signing below, certifies that 
this proposal, if adopted, would not have a significant economic impact 
on a substantial number of small entities.
    The Bureau requests comment on the analysis above and requests any 
relevant data.

J. Paperwork Reduction Act

    Board: Certain provisions of the proposed rule contain ``collection 
of information'' requirements within the meaning of the Paperwork 
Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521). In accordance with 
the requirements of the PRA, the Board may not conduct or sponsor, and 
the respondent is not required to respond to, an information collection 
unless it displays a currently-valid Office of Management and Budget 
(OMB) control number. The OMB control number for the Board is 7100-0235 
and will be extended, with revision. The Board reviewed the proposed 
rule under the authority delegated to the Board by OMB. Comments are 
invited on: (a) Whether the collections of information are necessary 
for the proper performance of the Board's functions, including whether 
the information has practical utility; (b) The accuracy of the 
estimates of the burden of the information collections, including the 
validity of the methodology and assumptions used; (c) Ways to enhance 
the quality, utility, and clarity of the information to be collected; 
(d) Ways to

[[Page 63437]]

minimize the burden of the information collections on respondents, 
including through the use of automated collection techniques or other 
forms of information technology; and (e) Estimates of capital or start-
up costs and costs of operation, maintenance, and purchase of services 
to provide information. All comments will become a matter of public 
record. Comments on aspects of this notice that may affect reporting, 
recordkeeping, or disclosure requirements and burden estimates should 
be sent to the addresses listed in the ADDRESSES section of this 
document. A copy of the comments may also be submitted to the OMB desk 
officer for the Board by mail to U.S. Office of Management and Budget, 
725 17th Street NW, #10235, Washington, DC 20503; by facsimile to (202) 
395-5806; or by email to: [email protected], Attention, 
Federal Banking Agency Desk Officer.
Proposed Information Collection
    Title of Information Collection: Disclosure Requirements Associated 
with Availability of Funds and Collection of Checks (Regulation CC).
    Frequency of Response: Quinquennial.
    Affected Public: Businesses or other for-profit.
    Respondents: State member banks and uninsured state branches and 
agencies of foreign banks.
    Abstract: Regulation CC (12 CFR part 229) implements the Expedited 
Funds Availability Act of 1987 (EFA Act) and the Check Clearing for the 
21st Century Act of 2003 (Check 21 Act).
    The EFA Act was enacted to provide depositors of checks with prompt 
funds availability and to foster improvements in the check collection 
and return processes. Subpart B of Regulation CC implements the EFA 
Act's funds-availability provisions and specifies availability 
schedules within which banks must make funds available for withdrawal. 
Subpart B also implements the EFA Act's rules regarding exceptions to 
the schedules, disclosure of funds-availability policies, and payment 
of interest.
    Current Action: The Agencies are adding section 229.11 to provide 
the CPI-W calculation methodology, which includes an explanation of how 
annual and cumulative changes (positive or negative) in the CPI-W will 
be taken into account, for the dollar amounts in section 
229.10(c)(1)(vii) regarding the minimum amount, section 229.12(d) for 
the cash withdrawal amount, section 229.13(a) for the new-account 
amount, section 229.13(b) for the large-deposit threshold, section 
229.13(d) for repeatedly overdrawn threshold, and section 229.21(a) for 
the civil liability amounts.
PRA Burden Estimates
    Number of respondents: 959 respondents (100 respondents for changes 
in policy).
    Estimated average hours per response: Specific availability policy 
disclosure and initial disclosures, .02 hours; Notice in specific 
policy disclosure, .05 hours; Notice of exceptions, .05 hours; 
Locations where employees accept consumer deposits, .25 hours; 
Quinquennial inflation adjustments for disclosures (annualized), 8 
hours; Annual notice of new ATMs, 5 hours; Changes in policy, 20 hours; 
Notification of quinquennial inflation adjustments, 4 hours; Notice of 
nonpayment on paying bank, .02 hours; Notification to customer, .02 
hours; Expedited recredit for consumers, .25 hours; Expedited recredit 
for banks, .25 hours; Consumer awareness, .02 hours; and Expedited 
recredit claim notice, .25 hours.
    Estimated annual burden hours: Specific availability policy 
disclosure and initial disclosures, 9,590 hours; Notice in specific 
policy disclosure, 33,565 hours; Notice of exceptions, 95,900 hours; 
Locations where employees accept consumer deposits, 240 hours; 
Quinquennial inflation adjustments for disclosures (annualized), 7,672 
hours; Annual notice of new ATMs, 4,795 hours; Changes in policy, 4,000 
hours; Notification of quinquennial inflation adjustments, 3,836 hours; 
Notice of nonpayment on paying bank, 671 hours; Notification to 
customer, 7,097 hours; Expedited recredit for consumers, 8,391 hours; 
Expedited recredit for banks, 3,596 hours; Consumer awareness, 5,754 
hours; and Expedited recredit claim notice, 5,994 hours.
    Current Total Estimated Annual Burden: 179,593 hours.
    Proposed Total Estimated Annual Burden: 191,101 hours.
    Bureau: The Bureau is not seeking OMB approval for the information 
collection requirements already accounted for by the Board above, or 
for which other agencies are responsible. Moreover, the Bureau's 
technical, non-substantive amendments to Regulation DD do not impose 
any new or additional information collection requirements that would 
require OMB approval.

K. Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 
Stat. 1338, 1471, 12 U.S.C. 4809) requires the Federal banking agencies 
to use plain language in all proposed and final rules published after 
January 1, 2000. The Board has sought to present the proposed rule in a 
simple and straightforward manner, and invites comment on the use of 
plain language and whether any part of the proposed rule could be more 
clearly stated.

II. Reopening of the Comment Period for the 2011 Funds Availability 
Proposal

    On March 25, 2011, the Board proposed amendments to Regulation CC 
(76 FR 16862). Pursuant to sections 1086 and 1100H of the Dodd-Frank 
Act, effective July 21, 2011, the Board and the Bureau assumed joint 
rulemaking authority with respect to some of those proposed amendments, 
including the proposed amendments to the funds availability provisions 
of subpart B of Regulation CC and the definitions and appendices 
applicable to subpart B.\33\ This Federal Register document refers to 
the portion of the proposed amendments published on March 25, 2011, 
that are now subject to the joint rulemaking authority of the Board and 
the Bureau as the 2011 Funds Availability Proposal. The Board has 
conducted a separate rulemaking process to address other proposed 
amendments published on that date that remain within its sole 
rulemaking authority, principally the proposed amendments to the check 
collection provisions of subpart C of Regulation CC.\34\
---------------------------------------------------------------------------

    \33\ Public Law 111-203, 124 Stat. 2085-86, 2113 (2010); 75 FR 
57252 (Sep. 20, 2010).
    \34\ The Board requested comment a second time on the subpart C 
amendments (79 FR 6673 (Feb. 4, 2014)) and adopted final amendments 
in June 2017 (82 FR 27552 (June 15, 2017)). The Board also requested 
comment on additional amendments to subpart C in June 2017 (82 FR 
25539 (June 2, 2017)).
---------------------------------------------------------------------------

    The Agencies recognize there may have been important changes in 
markets, technology, or industry practice since the public submitted 
comments seven years ago in response to the Board's 2011 Funds 
Availability Proposal. The Board and the Bureau therefore are now 
reopening the comment period in order to provide an opportunity for the 
public to provide comments with new, additional, or different views on 
the 2011 Funds Availability Proposal. In taking this step, the Agencies 
have not made any decision on whether to pursue any particular course 
with regard to the 2011 Funds Availability Proposal, including whether 
to make it or any aspects of it final. Instead, reopening the comment 
period will provide the Agencies with up-to-date public input to 
consider in deciding on a future

[[Page 63438]]

course with regard to the 2011 Funds Availability Proposal. Comments on 
the 2011 Funds Availability Proposal that were previously submitted 
during the initial comment period, which ended on June 3, 2011, remain 
part of the rulemaking docket. To assist with reconciling comments from 
parties who submitted comments in 2011 and who again submit comments in 
2018 that reflect changes to their previous viewpoints, the Agencies 
request that such commenters clarify the relationship between their two 
comments. Specifically, the Agencies request that the commenters 
clarify whether their 2018 comments in part or in whole supersede their 
previously submitted comments.
    The Board and the Bureau are aware of various issues that were not 
raised by the 2011 Funds Availability Proposal. For example, some 
members of the public have suggested that the Agencies clarify how the 
funds availability provisions in subpart B of Regulation CC apply to 
prepaid accounts and to checks deposited electronically through a 
process known as ``remote deposit capture.'' In addition, the Agencies 
have received requests to clarify the relationship between Regulation 
CC availability requirements and banks' responsibilities related to 
deposit reconciliation. At this time, the Agencies are requesting 
comment only on the issues raised by the 2011 Funds Availability 
Proposal and the 2018 Proposal. The Agencies will consider whether 
further action is appropriate with respect to new topics in the future.

List of Subjects

12 CFR Part 229

    Banks, Banking, Federal Reserve System, Reporting and recordkeeping 
requirements.

12 CFR Part 1030

    Advertising, Banks, Banking, Consumer protection, National banks, 
Reporting and recordkeeping requirements, Savings associations.

Board of Governors of the Federal Reserve System

Authority and Issuance

    For the reasons set forth in the preamble, the Board of Governors 
of the Federal Reserve System proposes to amend Regulation CC, 12 CFR 
part 229, as set forth below:

PART 229--AVAILABILITY OF FUNDS AND COLLECTIONS OF CHECKS 
(REGULATION CC)

0
1. The authority citation for part 229 continues to read as follows:

    Authority: 12 U.S.C. 4001-4010, 12 U.S.C. 5001-5018.

Subpart A--General

* * * * *
0
2. Section 229.1 paragraph (a) is revised to read as follows:


Sec.  229.1  Authority and purpose; organization

    (a) Authority and purpose. (1) In general. 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) 
(EFA Act) and the Check Clearing for the 21st Century Act (12 U.S.C. 
5001-5018) (Check 21 Act).
    (2) Joint authority of the Bureau. The Board issues regulations 
under Sections 603(d)(1), 604, 605, and 609(a) of the EFA Act (12 
U.S.C. 4002(d)(1), 4003, 4004, 4008(a)) jointly with the Director of 
the Bureau of Consumer Financial Protection (Bureau).
* * * * *
0
3. In Sec.  229.2, revise paragraphs (c), (ff), and (jj) to read as 
follows:


Sec.  229.2  Definitions

* * * * *
    (c) Automated teller machine or ATM means an electronic device 
located in the United States at which a natural person may make 
deposits to an account by cash or check and perform other account 
transactions.
* * * * *
    (ff) State means a state, the District of Columbia, Puerto Rico, 
American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, 
or the U.S. Virgin Islands. For purposes of subpart D of this part and, 
in connection therewith, this subpart A, state also means the Trust 
Territory of the Pacific Islands and any other territory of the United 
States.
* * * * *
    (jj) United States means the states, including the District of 
Columbia, the U.S. Virgin Islands, American Samoa, the Commonwealth of 
the Northern Mariana Islands, Guam, and Puerto Rico.
* * * * *

Subpart B--Availability of Funds and Disclosure of Funds 
Availability Policies


Sec. Sec.  229.10, 229.12, 229.13, and 229.21  [Amended]

0
4. In Sec.  229.10, 229.12, 229.13, remove the following dollar amount 
``$100'' wherever it appears and replace with the following dollar 
amount ``$225.''
0
5. In Appendix E to Part 229, remove the following dollar amounts 
wherever they appear in the appendix, and replace them as indicated in 
the table below:

------------------------------------------------------------------------
                 Section                      Remove            Add
------------------------------------------------------------------------
229.10(d)...............................          $5,000          $5,525
229.12(d)...............................             400             450
229.13(a)...............................           5,000           5,525
229.13(b)...............................           5,000           5,525
229.13(d)...............................           5,000           5,525
229.21(a)...............................           1,000           1,100
                                                 500,000         552,500
------------------------------------------------------------------------

* * * * *
0
6. Section 229.11 is added to read as follows:


Sec.  229.11  Adjustment of dollar amounts

    (a) Dollar amounts indexed. The dollar amounts specified in 
Sec. Sec.  229.10(c)(1)(vii), 229.12(d), 229.13(a), 229.13(b), 229. 
13(d), and 229.21(a) shall be adjusted effective on April 1, 2020, on 
April 1, 2025, and on April 1 of every fifth year after 2025, in 
accordance with the procedure set forth in Sec.  229.11(b) using the 
Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-
W), as published by the Bureau of Labor Statistics.
    (b) Indexing procedure.
    1. Inflation measurement periods. For dollar amount adjustments 
that are effective on April 1, 2020, the inflation measurement period 
begins in July 2011 and ends in July 2018. For dollar amount 
adjustments that are effective on April 1, 2025, the inflation 
measurement period begins in July 2018 and ends in July 2023. For 
dollar amount adjustments that are effective on April 1 of every fifth 
year after 2025, the

[[Page 63439]]

inflation measurement period begins in July of every fifth year after 
2018 and ends in July of every fifth year after 2023.
    2. Percentage change. Any dollar amount adjustment under this 
section shall be calculated across an inflation measurement period by 
the aggregate percentage change in the CPI-W, including both positive 
and negative percentage changes. The aggregate percentage change over 
the inflation measurement period will be rounded to one decimal place, 
using the CPI-W value for July (which is generally released by the 
Bureau of Labor Statistics in August).
    3. Adjustment amount. The adjustment amount for each dollar amount 
listed in Sec.  229.11(a) shall be equal to the aggregate percentage 
change multiplied by the existing dollar amount listed in Sec.  
229.11(c) and rounded to the nearest multiple of $25. The adjusted 
dollar amount will be equal to the sum of the existing dollar amount 
and the adjustment amount. No dollar adjustment will be made when the 
aggregate percentage change is zero or a negative percentage change, or 
when the aggregate percentage change multiplied by the existing dollar 
amount listed in Sec.  229.11(c) and rounded to the nearest multiple of 
$25 results in no change.
    4. Carry-forward. When there is an aggregate negative percentage 
change over an inflation measurement period, or when an aggregate 
positive percentage change over an inflation measurement period 
multiplied by the existing dollar amount listed in Sec.  229.11(c) and 
rounded to the nearest multiple of $25 results in no change, the 
aggregate percentage change over the inflation measurement period will 
be included in the calculation to determine the percentage change at 
the end of the subsequent inflation measurement period. That is, the 
cumulative change in the CPI-W over the two (or more) inflation 
measurement periods will be used in the calculation until the 
cumulative change results in publication of an adjusted dollar amount 
in the regulation.
    (c) Amounts.
    1. For purposes of Sec.  229.10(c)(1)(vii), the dollar amount in 
effect during a particular period is the amount stated below for that 
period.
    i. Prior to July 21, 2011, the amount is $100.
    ii. From July 21, 2011, through March 31, 2020, by operation of 
section 603(a)(2)(D) of the EFA Act (12 U.S.C. 4002(a)(2)(D)) the 
amount is $200.
    iii. Effective April 1, 2020, the amount is $225.
    2. For purposes of Sec.  229.12(d), the dollar amount in effect 
during a particular period is the amount stated below for that period.
    i. Prior to April 1, 2020, the amount is $400.
    ii. Effective April 1, 2020, the amount is $450.
    3. For purposes of Sec. Sec.  229.13(a), 229.13(b), and 229.13(d), 
the dollar amount in effect during a particular period is the amount 
stated below for that period.
    i. Prior to April 1, 2020, the amount is $5,000.
    ii. Effective April 1, 2020, the amount is $5,525.
    4. For purposes of Sec.  229.21(a), the dollar amounts in effect 
during a particular period are the amounts stated below for the period.
    i. Prior to April 1, 2020, the amounts are $100, $1,000, and 
$500,000 respectively.
    ii. Effective April 1, 2020, the amounts are $100, $1,100, and 
$552,500 respectively.
0
7. Amend Sec.  229.12 by:
0
a. Removing the following dollar amount ``$100'' wherever it appears 
and replace with the following dollar amount ``$225'' and
0
b. Revising paragraphs (e) and (e)(1) to read as follows:


Sec.  229.12  Availability Schedule

* * * * *
    (e) Extension of schedule for certain deposits in Alaska, Hawaii, 
Puerto Rico, American Samoa, the Commonwealth of the Northern Mariana 
Islands, Guam, 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 Sec.  
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, American Samoa, the 
Commonwealth of the Northern Mariana Islands, Guam, or the U.S. Virgin 
Islands; and
* * * * *


Sec.  229.21  Civil Liability [Amended]

0
8. In Sec.  229.21, remove the following dollar amount `` $100'' 
wherever it appears and replace with the following dollar amount 
``$225.''

Appendix E to Part 229--Commentary

* * * * *
0
 9. Amend Appendix E to Part 229 to read as follows:
0
A. In Section II.D, revise paragraph 1.
0
B. In Section IV.D, revise paragraph 5 and add paragraph 7.
0
C. Section V is revised.
0
D. In Section VI.B, paragraph 4 is added.
0
E In Section VI.E paragraphs 1 and 2 are revised.
0
F. Section VII.C, paragraph 2 is revised and paragraph 4 is added.
0
G. In Section VII.E, paragraph 5 is added.
0
H. In Section VII.H, paragraph 2(b) is revised.
0
I. In Section XIV.C, paragraph 2 is revised.
0
J. In Section XV.A, paragraph 2 is added.
0
K. Section XXIX is removed and reserved.
    The additions and revisions read as follows:

Appendix E to Part 229--Commentary

II. Section 229.2 Definitions

* * * * *

D. 229.2(c) Automated Teller Machine (ATM)

    1. ATM is not defined in the EFA Act. The regulation defines an 
ATM as an electronic device located in the United States at which a 
natural person may make deposits to an account by cash or check and 
perform other account transactions. Point-of-sale terminals, 
machines that only dispense cash, night depositories, and lobby 
deposit boxes are not ATMs within the meaning of the definition, 
either because they do not accept deposits of cash or checks (e.g., 
point-of-sale terminals and cash dispensers) or because they only 
accept deposits (e.g., night depositories and lobby boxes) and 
cannot perform other transactions. A lobby deposit box or similar 
receptacle in which written payment orders or deposits may be placed 
is not an ATM.
* * * * *

IV. Section 229.10 Next-Day Availability

* * * * *

D. 229.10(c) Certain Check Deposits [Amended]

* * * * *

5. First $225

    a. The EFA Act and regulation also require that up to $225 of 
the aggregate deposit by check or checks not subject to next-day 
availability on any one banking day be made available on the next 
business day. For example, if $70 were deposited in an account by 
check(s) on a Monday, the entire $70 must be available for 
withdrawal at the start of business on Tuesday. If $400 were 
deposited by check(s) on a Monday, this section requires that $225 
of the funds be available for withdrawal at the start of business on 
Tuesday. The portion of the customer's deposit to which the $225 
must be applied is at the discretion of the depositary bank, as long 
as it is not applied to any checks subject to next-day availability. 
The $225 next-day availability rule does not apply to deposits at 
nonproprietary ATMs.
    b. The $225 that must be made available under this rule is in 
addition to the amount that must be made available for withdrawal

[[Page 63440]]

on the business day after deposit under other provisions of this 
section. For example, if a customer deposits a $1,000 Treasury check 
and a $1,000 local check in its account on Monday, $1,225 must be 
made available for withdrawal on Tuesday--the proceeds of the $1,000 
Treasury check, as well as the first $225 of the local check.
    c. A depositary bank may aggregate all local and nonlocal check 
deposits made by a customer on a given banking day for the purposes 
of the $225 next-day availability rule. Thus, if a customer has two 
accounts at the depositary bank, and on a particular banking day 
makes deposits to each account, $225 of the total deposited to the 
two accounts must be made available on the business day after 
deposit. Banks may aggregate deposits to individual and joint 
accounts for the purposes of this provision.
    d. If the customer deposits a $500 local check and gets $225 
cash back at the time of deposit, the bank need not make an 
additional $225 available for withdrawal on the following day. 
Similarly, if the customer depositing the local check has a negative 
book balance, or negative available balance in its account at the 
time of deposit, the $225 that must be available on the next 
business day may be made available by applying the $225 to the 
negative balance, rather than making the $225 available for 
withdrawal by cash or check on the following day.
* * * * *
    7. Dollar Amount Adjustment--See section 229.11 for the rules 
regarding adjustments for inflation every five years to the dollar 
amounts used in this section.
* * * * *

V. Section 229.11 Adjustment of Dollar Amounts

    1. Example of a positive adjustment. If the CPI-W for July (and 
released in August) of the base year and the adjustment year were 
100 and 114.7, respectively, the aggregate percentage change for the 
period would be 14.7%. If the applicable dollar amount was $200 for 
the prior period, then the adjusted figure would become $225, as the 
change of $29.40 results in rounding to $25.
    2. Example of no adjustment. If the CPI-W for July (and released 
in August) of the base year and the adjustment year were 100 and 
104, respectively, the aggregate percentage change would be 4.0%. If 
the applicable dollar amount was $200 for the prior period, then the 
adjusted figure would remain $200, as the change of $8.00 does not 
result in rounding to $25.
    3. Example of accounting for aggregate decrease in subsequent 
period. If the CPI-W for July (and released in August) of the base 
year and the adjustment year were 100 and 95, respectively, the 
aggregate percentage change would be -5%, and no adjustment to the 
dollar amounts would occur. The CPI-W for July (and released in 
August) of the base year would be the starting point for calculating 
any CPI-W increase across subsequent five-year periods. Therefore, 
if the CPI-W in July (and released in August) of the base year and 
the CPI-W in July (and released in August) of the years at the end 
of the next two five-year periods were 100, 95, and 109, 
respectively, the aggregate percentage change for the entire period 
would be 9.0%. If the applicable dollar amount was $5,000 for the 
prior period, then the adjusted figure would become $5,450 as the 
change of $450 does not require rounding because it is a multiple of 
$25.
    4. Example of accounting for aggregate lack of dollar amount 
change in subsequent period. If the CPI-W for July (and released in 
August) of the base year and the year at the end of the subsequent 
five-year period were 100 and 105, respectively, the aggregate 
change over the five-year period would be 5%, and no adjustment to 
the $200 amount would occur, as the change of $10 does not result in 
rounding to $225. Nonetheless, the CPI-W for July (and released in 
August) of the base year would be the starting point for calculating 
any CPI-W percentage increase across the subsequent five-year 
period. Therefore, if the CPI-W in July (and released in August) of 
the base year and the CPI-W in July (and released in August) of the 
years at the end of the next two five-year periods were 100, 105, 
and 112.6, respectively, the aggregate percentage change for the 
entire period would be 12.6%. If the applicable dollar amount was 
$200 for the prior period, then the adjusted figure would become 
$225 as the change of $25.20 results in rounding to $225, the 
nearest multiple of $25.
* * * * *

VI. Section 229.12 Availability Schedule

A. 229.12(a) Effective Date

* * * * *

B. 229.12(d) Time Period Adjustment for Withdrawal by Cash or 
Similar Means

* * * * *
    4. Dollar Amount Adjustment--See section 229.11 for the rules 
regarding adjustments for inflation every five years to the dollar 
amounts in this section.
* * * * *

E. 229.12(e) Extension of Schedule for Certain Deposits in Alaska, 
Hawaii, Puerto Rico, American Samoa, the Commonwealth of the 
Northern Mariana Islands, Guam, and the U.S. Virgin Islands

    1. The EFA Act and regulation provide an extension of the 
availability schedules for check deposits at a branch of a bank if 
the branch is located in Alaska, Hawaii, Puerto Rico, American 
Samoa, the Commonwealth of the Northern Mariana Islands, Guam, or 
the U.S. Virgin Islands.
    The schedules for local checks, nonlocal checks (including 
nonlocal checks subject to the reduced schedules of appendix B), and 
deposits at nonproprietary ATMs are extended by one business day for 
checks deposited to accounts in banks located in these jurisdictions 
that are drawn on or payable at or through a paying bank not located 
in the same jurisdiction as the depositary bank. For example, a 
check deposited in a bank in Hawaii and drawn on a San Francisco 
paying bank must be made available for withdrawal not later than the 
third business day following deposit. This extension does not apply 
to deposits that must be made available for withdrawal on the next 
business day.
    2. The Congress did not provide this extension of the schedules 
to checks drawn on a paying bank located in Alaska, Hawaii, Puerto 
Rico, American Samoa, the Commonwealth of the Northern Mariana 
Islands, Guam, or the U.S. Virgin Islands and deposited in an 
account at a depositary bank in the 48 contiguous states. Therefore, 
a check deposited in a San Francisco bank drawn on a Hawaii paying 
bank must be made available for withdrawal not later than the second 
rather than the third business day following deposit.

VII. Section 229.13 Exceptions

B. 229.13(a) New Accounts

* * * * *
    4. Dollar Amount Adjustment--See section 229.11 for the rules 
regarding adjustments for inflation every five years to the dollar 
amounts in this section.
* * * * *

C. 229.13(b) Large Deposits

* * * * *
    2. The following example illustrates the operation of the large-
deposit exception. If a customer deposits $2,000 in cash and a 
$9,000 local check on a Monday, $2,225 (the proceeds of the cash 
deposit and $225 from the local-check deposit) must be made 
available for withdrawal on Tuesday. An additional $5,300 of the 
proceeds of the local check must be available for withdrawal on 
Wednesday in accordance with the local schedule, and the remaining 
$3,475 may be held for an additional period of time under the large-
deposit exception.
* * * * *
    4. Dollar Amount Adjustment--See section 229.11 for the rules 
regarding adjustments for inflation every five years to the dollar 
amounts in this section.
* * * * *

E. 229.13(d) Repeated Overdrafts

* * * * *
    5. Dollar Amount Adjustment--See section 229.11 for the 
calculation method used to adjust the dollar amounts in this section 
every five years.
* * * * *

H. 229.13(g) Notice of Exception

* * * * *

2. One-Time Exception Notice

* * * * *
    b. In the case of a deposit of multiple checks, the depositary 
bank has the discretion to place an exception hold on any 
combination of checks in excess of $5,525. The notice should enable 
a customer to determine the availability of the deposit in the case 
of a deposit of multiple checks. For example, if a customer deposits 
a $5,525 local check and a $5,525 nonlocal check, under the large-
deposit exception, the depositary bank may make funds available in 
the amount of (1) $225 on the first business day after deposit, 
$5,300 on the second business day after deposit (local check), and 
$5,525 on the eleventh business day after deposit (nonlocal check 
with six-day exception hold), or (2) $225 on the first

[[Page 63441]]

business day after deposit, $5,300 on the fifth business day after 
deposit (nonlocal check), and $5,525 on the seventh business day 
after deposit (local check with five-day exception hold). The notice 
should reflect the bank's priorities in placing exception holds on 
next-day (or second-day), local, and nonlocal checks.
* * * * *

XIV. Section 229.20 Relation to State Law

* * * * *

C. 229.20(c) Standards for Preemption

* * * * *
    2. Under a state law, some categories of deposits could be 
available for withdrawal sooner or later than the time required by 
this subpart, depending on the composition of the deposit. For 
example, the EFA Act and this regulation (Sec.  229.10(c)(1)(vii)) 
require next-day availability for the first $225 of the aggregate 
deposit of local or nonlocal checks on any day, and a state law 
could require next-day availability for any check of $200 or less 
that is deposited. Under the EFA Act and this regulation, if either 
one $300 check or three $100 checks are deposited on a given day, 
$225 must be made available for withdrawal on the next business day, 
and $75 must be made available in accordance with the local or 
nonlocal schedule. Under the state law, however, the two deposits 
would be subject to different availability rules. In the first case, 
none of the proceeds of the deposit would be subject to next-day 
availability; in the second case, the entire proceeds of the deposit 
would be subject to next-day availability. In this example, because 
the state law would, in some situations, permit a hold longer than 
the maximum permitted by the EFA Act, this provision of state law is 
inconsistent and preempted in its entirety.
* * * * *

XV. Section 229.21 Civil Liability

A. 229.21(a) Civil Liability

* * * * *
    2. Dollar Amount Adjustment--See section 229.11 for the rules 
regarding adjustments for inflation every five years to the dollar 
amounts in this section.
* * * * *

XXIX. Section 229.43 Checks Payable in Guam, American Samoa, and the 
Northern Mariana Islands [Removed and Reserved]

* * * * *

Bureau of Consumer Financial Protection

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau of Consumer 
Financial Protection proposes to amend Regulation DD, 12 CFR part 1030, 
as follows:

PART 1030--TRUTH IN SAVINGS (REGULATION DD)

0
10. The authority citation for part 1030 continues to read as follows:

    Authority: 12 U.S.C. 4302-4304, 4308, 5512, 5581.

0
11. Section 1030.1 is amended by adding paragraph (e) to read as 
follows:


Sec.  1030.1  Authority, purpose, coverage, and effect on state laws.

* * * * *
    (e) Relationship to Regulation CC. The Director of the Bureau and 
the Board of Governors of the Federal Reserve System jointly issue 
regulations under sections 603(d)(1), 604, 605, and 609(a) of the 
Expedited Funds Availability Act (12 U.S.C. 4002(d)(1), 4003, 4004, 
4008(a)) that are codified within Regulation CC (12 CFR part 229).
0
12. Section 1030.7 is amended by revising paragraph (c) to read as 
follows:


Sec.  1030.7  Payment of interest.

* * * * *
    (c) Date interest begins to accrue. Interest shall begin to accrue 
not later than the business day specified for interest-bearing accounts 
in section 606 of the Expedited Funds Availability Act (12 U.S.C. 4005) 
and in Sec.  229.14 of that act's implementing Regulation CC (12 CFR 
part 229). Interest shall accrue until the day funds are withdrawn.
0
13. Appendix A to part 1030 is revised to read as follows:

Appendix A to Part 1030--Annual Percentage Yield Calculation

    The annual percentage yield measures the total amount of 
interest paid on an account based on the interest rate and the 
frequency of compounding. The annual percentage yield reflects only 
interest and does not include the value of any bonus (or other 
consideration worth $10 or less) that may be provided to the 
consumer to open, maintain, increase or renew an account. Interest 
or other earnings are not to be included in the annual percentage 
yield if such amounts are determined by circumstances that may or 
may not occur in the future. The annual percentage yield is 
expressed as an annualized rate, based on a 365-day year. 
Institutions may calculate the annual percentage yield based on a 
365-day or a 366-day year in a leap year. Part I of this appendix 
discusses the annual percentage yield calculations for account 
disclosures and advertisements, while Part II discusses annual 
percentage yield earned calculations for periodic statements.

Part I. Annual Percentage Yield for Account Disclosures and Advertising 
Purposes

    In general, the annual percentage yield for account disclosures 
under Sec. Sec.  1030.4 and 1030.5 and for advertising under Sec.  
1030.8 is an annualized rate that reflects the relationship between 
the amount of interest that would be earned by the consumer for the 
term of the account and the amount of principal used to calculate 
that interest. Special rules apply to accounts with tiered and 
stepped interest rates, and to certain time accounts with a stated 
maturity greater than one year.

A. General Rules

    Except as provided in Part I.E. of this appendix, the annual 
percentage yield shall be calculated by the formula shown below. 
Institutions shall calculate the annual percentage yield based on 
the actual number of days in the term of the account. For accounts 
without a stated maturity date (such as a typical savings or 
transaction account), the calculation shall be based on an assumed 
term of 365 days. In determining the total interest figure to be 
used in the formula, institutions shall assume that all principal 
and interest remain on deposit for the entire term and that no other 
transactions (deposits or withdrawals) occur during the term. This 
assumption shall not be used if an institution requires, as a 
condition of the account, that consumers withdraw interest during 
the term. In such a case, the interest (and annual percentage yield 
calculation) shall reflect that requirement. For time accounts that 
are offered in multiples of months, institutions may base the number 
of days on either the actual number of days during the applicable 
period, or the number of days that would occur for any actual 
sequence of that many calendar months. If institutions choose to use 
the latter rule, they must use the same number of days to calculate 
the dollar amount of interest earned on the account that is used in 
the annual percentage yield formula (where ``Interest'' is divided 
by ``Principal'').
    The annual percentage yield is calculated by use of the 
following general formula (``APY'' is used for convenience in the 
formulas):
    APY=100 [(1+Interest/Principal)(365/Days in term)-1],
    ``Principal'' is the amount of funds assumed to have been 
deposited at the beginning of the account.
    ``Interest'' is the total dollar amount of interest earned on 
the Principal for the term of the account.
    ``Days in term'' is the actual number of days in the term of the 
account. When the ``days in term'' is 365 (that is, where the stated 
maturity is 365 days or where the account does not have a stated 
maturity), the annual percentage yield can be calculated by use of 
the following simple formula:
    APY=100 (Interest/Principal)

Examples

    (1) If an institution pays $61.68 in interest for a 365-day year 
on $1,000 deposited into a NOW account, using the general formula 
above, the annual percentage yield is 6.17%:
    APY=100[(1+61.68/1,000)(365/365)-1]
    APY=6.17%
    Or, using the simple formula above (since, as an account without 
a stated term, the term is deemed to be 365 days):
    APY=100(61.68/1,000)
    APY=6.17%
    (2) If an institution pays $30.37 in interest on a $1,000 six-
month certificate of deposit (where the six-month period used by the 
institution contains 182 days), using the general formula above, the 
annual percentage yield is 6.18%:
    APY=100[(1+30.37/1,000)(365/182)-1]

[[Page 63442]]

    APY=6.18%

B. Stepped-Rate Accounts (Different Rates Apply in Succeeding 
Periods)

    For accounts with two or more interest rates applied in 
succeeding periods (where the rates are known at the time the 
account is opened), an institution shall assume each interest rate 
is in effect for the length of time provided for in the deposit 
contract.

Examples

    (1) If an institution offers a $1,000 6-month certificate of 
deposit on which it pays a 5% interest rate, compounded daily, for 
the first three months (which contain 91 days), and a 5.5% interest 
rate, compounded daily, for the next three months (which contain 92 
days), the total interest for six months is $26.68 and, using the 
general formula above, the annual percentage yield is 5.39%:
    APY=100[(1+26.68/1,000)(365/183)-1]
    APY=5.39%
    (2) If an institution offers a $1,000 two-year certificate of 
deposit on which it pays a 6% interest rate, compounded daily, for 
the first year, and a 6.5% interest rate, compounded daily, for the 
next year, the total interest for two years is $133.13, and, using 
the general formula above, the annual percentage yield is 6.45%:
    APY=100[(1+133.13/1,000)(365/730)-1]
    APY=6.45%

C. Variable-Rate Accounts

    For variable-rate accounts without an introductory premium or 
discounted rate, an institution must base the calculation only on 
the initial interest rate in effect when the account is opened (or 
advertised), and assume that this rate will not change during the 
year.
    Variable-rate accounts with an introductory premium (or 
discount) rate must be calculated like a stepped-rate account. Thus, 
an institution shall assume that: (1) The introductory interest rate 
is in effect for the length of time provided for in the deposit 
contract; and (2) the variable interest rate that would have been in 
effect when the account is opened or advertised (but for the 
introductory rate) is in effect for the remainder of the year. If 
the variable rate is tied to an index, the index-based rate in 
effect at the time of disclosure must be used for the remainder of 
the year. If the rate is not tied to an index, the rate in effect 
for existing consumers holding the same account (who are not 
receiving the introductory interest rate) must be used for the 
remainder of the year.
    For example, if an institution offers an account on which it 
pays a 7% interest rate, compounded daily, for the first three 
months (which, for example, contain 91 days), while the variable 
interest rate that would have been in effect when the account was 
opened was 5%, the total interest for a 365-day year for a $1,000 
deposit is $56.52 (based on 91 days at 7% followed by 274 days at 
5%). Using the simple formula, the annual percentage yield is 5.65%:
    APY=100(56.52/1,000)
APY=5.65%

D. Tiered-Rate Accounts (Different Rates Apply to Specified Balance 
Levels)

    For accounts in which two or more interest rates paid on the 
account are applicable to specified balance levels, the institution 
must calculate the annual percentage yield in accordance with the 
method described below that it uses to calculate interest. In all 
cases, an annual percentage yield (or a range of annual percentage 
yields, if appropriate) must be disclosed for each balance tier.
    For purposes of the examples discussed below, assume the 
following:

------------------------------------------------------------------------
                                           Deposit balance required to
        Interest rate (percent)                     earn rate
------------------------------------------------------------------------
5.25...................................  Up to but not exceeding $2,500.
5.50...................................  Above $2,500 but not exceeding
                                          $15,000.
5.75...................................  Above $15,000.
------------------------------------------------------------------------

    Tiering Method A. Under this method, an institution pays on the 
full balance in the account the stated interest rate that 
corresponds to the applicable deposit tier. For example, if a 
consumer deposits $8,000, the institution pays the 5.50% interest 
rate on the entire $8,000.
    When this method is used to determine interest, only one annual 
percentage yield will apply to each tier. Within each tier, the 
annual percentage yield will not vary with the amount of principal 
assumed to have been deposited.
    For the interest rates and deposit balances assumed above, the 
institution will state three annual percentage yields--one 
corresponding to each balance tier. Calculation of each annual 
percentage yield is similar for this type of account as for accounts 
with a single interest rate. Thus, the calculation is based on the 
total amount of interest that would be received by the consumer for 
each tier of the account for a year and the principal assumed to 
have been deposited to earn that amount of interest.
    First tier. Assuming daily compounding, the institution will pay 
$53.90 in interest on a $1,000 deposit. Using the general formula, 
for the first tier, the annual percentage yield is 5.39%:

APY=100[(1+53.90/1,000)(365/365)-1]
APY=5.39%

    Using the simple formula:
APY=100(53.90/1,000)

APY=5.39%

    Second tier. The institution will pay $452.29 in interest on an 
$8,000 deposit. Thus, using the simple formula, the annual 
percentage yield for the second tier is 5.65%:
APY=100(452.29/8,000)
APY=5.65%

    Third tier. The institution will pay $1,183.61 in interest on a 
$20,000 deposit. Thus, using the simple formula, the annual 
percentage yield for the third tier is 5.92%:

APY=100(1,183.61/20,000)
APY=5.92%

    Tiering Method B. Under this method, an institution pays the 
stated interest rate only on that portion of the balance within the 
specified tier. For example, if a consumer deposits $8,000, the 
institution pays 5.25% on $2,500 and 5.50% on $5,500 (the difference 
between $8,000 and the first tier cut-off of $2,500).
    The institution that computes interest in this manner must 
provide a range that shows the lowest and the highest annual 
percentage yields for each tier (other than for the first tier, 
which, like the tiers in Method A, has the same annual percentage 
yield throughout). The low figure for an annual percentage yield 
range is calculated based on the total amount of interest earned for 
a year assuming the minimum principal required to earn the interest 
rate for that tier. The high figure for an annual percentage yield 
range is based on the amount of interest the institution would pay 
on the highest principal that could be deposited to earn that same 
interest rate. If the account does not have a limit on the maximum 
amount that can be deposited, the institution may assume any amount.
    For the tiering structure assumed above, the institution would 
state a total of five annual percentage yields--one figure for the 
first tier and two figures stated as a range for the other two 
tiers.
    First tier. Assuming daily compounding, the institution would 
pay $53.90 in interest on a $1,000 deposit. For this first tier, 
using the simple formula, the annual percentage yield is 5.39%:

APY=100(53.90/1,000)
APY=5.39%

    Second tier. For the second tier, the institution would pay 
between $134.75 and $841.45 in interest, based on assumed balances 
of $2,500.01 and $15,000, respectively. For $2,500.01, interest 
would be figured on $2,500 at 5.25% interest rate plus interest on 
$.01 at 5.50%. For the low end of the second tier, therefore, the 
annual percentage yield is 5.39%, using the simple formula:

APY=100(134.75/2,500)
APY=5.39%

    For $15,000, interest is figured on $2,500 at 5.25% interest 
rate plus interest on $12,500 at 5.50% interest rate. For the high 
end of the second tier, the annual percentage yield, using the 
simple formula, is 5.61%:
APY=100(841.45/15,000)
APY=5.61%

    Thus, the annual percentage yield range for the second tier is 
5.39% to 5.61%.
    Third tier. For the third tier, the institution would pay 
$841.45 in interest on the low end of the third tier (a balance of 
$15,000.01). For $15,000.01, interest would be figured on $2,500 at 
5.25% interest rate, plus interest on $12,500 at 5.50% interest 
rate, plus interest on $.01 at 5.75% interest rate. For the low end 
of the third tier, therefore, the annual percentage yield (using the 
simple formula) is 5.61%:

APY=100 (841.45/15,000)
APY=5.61%

    Since the institution does not limit the account balance, it may 
assume any maximum amount for the purposes of computing the annual 
percentage yield for the high end of the third tier. For an assumed 
maximum balance amount of $100,000, interest would be figured on 
$2,500 at 5.25%

[[Page 63443]]

interest rate, plus interest on $12,500 at 5.50% interest rate, plus 
interest on $85,000 at 5.75% interest rate. For the high end of the 
third tier, therefore, the annual percentage yield, using the simple 
formula, is 5.87%.

APY=100 (5,871.79/100,000)
APY=5.87%

    Thus, the annual percentage yield range that would be stated for 
the third tier is 5.61% to 5.87%.
    If the assumed maximum balance amount is $1,000,000 instead of 
$100,000, the institution would use $985,000 rather than $85,000 in 
the last calculation. In that case, for the high end of the third 
tier the annual percentage yield, using the simple formula, is 
5.91%:

APY = 100 (59134.22/1,000,000)
APY = 5.91%

    Thus, the annual percentage yield range that would be stated for 
the third tier is 5.61% to 5.91%.

E. Time Accounts With a Stated Maturity Greater Than One Year That 
Pay Interest at Least Annually

    1. For time accounts with a stated maturity greater than one 
year that do not compound interest on an annual or more frequent 
basis, and that require the consumer to withdraw interest at least 
annually, the annual percentage yield may be disclosed as equal to 
the interest rate.

Example

    (1) If an institution offers a $1,000 two-year certificate of 
deposit that does not compound and that pays out interest semi-
annually by check or transfer at a 6.00% interest rate, the annual 
percentage yield may be disclosed as 6.00%.
    (2) For time accounts covered by this paragraph that are also 
stepped-rate accounts, the annual percentage yield may be disclosed 
as equal to the composite interest rate.

Example

    (1) If an institution offers a $1,000 three-year certificate of 
deposit that does not compound and that pays out interest annually 
by check or transfer at a 5.00% interest rate for the first year, 
6.00% interest rate for the second year, and 7.00% interest rate for 
the third year, the institution may compute the composite interest 
rate and APY as follows:
    (a) Multiply each interest rate by the number of days it will be 
in effect;
    (b) Add these figures together; and
    (c) Divide by the total number of days in the term.
    (2) Applied to the example, the products of the interest rates 
and days the rates are in effect are (5.00% x 365 days) 1825, (6.00% 
x 365 days) 2190, and (7.00% x 365 days) 2555, respectively. The sum 
of these products, 6570, is divided by 1095, the total number of 
days in the term. The composite interest rate and APY are both 
6.00%.

Part II. Annual Percentage Yield Earned for Periodic Statements

    The annual percentage yield earned for periodic statements under 
Sec.  1030.6(a) is an annualized rate that reflects the relationship 
between the amount of interest actually earned on the consumer's 
account during the statement period and the average daily balance in 
the account for the statement period. Pursuant to Sec.  1030.6(b), 
however, if an institution uses the average daily balance method and 
calculates interest for a period other than the statement period, 
the annual percentage yield earned shall reflect the relationship 
between the amount of interest earned and the average daily balance 
in the account for that other period.
    The annual percentage yield earned shall be calculated by using 
the following formulas (``APY Earned'' is used for convenience in 
the formulas):

A. General Formula

APY Earned = 100 [(1 + Interest earned/
Balance)(365/Days in period)-1]

    ``Balance'' is the average daily balance in the account for the 
period.
    ``Interest earned'' is the actual amount of interest earned on 
the account for the period.
    ``Days in period'' is the actual number of days for the period.

Examples

    (1) Assume an institution calculates interest for the statement 
period (and uses either the daily balance or the average daily 
balance method), and the account has a balance of $1,500 for 15 days 
and a balance of $500 for the remaining 15 days of a 30-day 
statement period. The average daily balance for the period is 
$1,000. The interest earned (under either balance computation 
method) is $5.25 during the period. The annual percentage yield 
earned (using the formula above) is 6.58%:

APY Earned = 100 [(1 + 5.25/1,000)(365/30)-1]
APY Earned = 6.58%

    (2) Assume an institution calculates interest on the average 
daily balance for the calendar month and provides periodic 
statements that cover the period from the 16th of one month to the 
15th of the next month. The account has a balance of $2,000 
September 1 through September 15 and a balance of $1,000 for the 
remaining 15 days of September. The average daily balance for the 
month of September is $1,500, which results in $6.50 in interest 
earned for the month. The annual percentage yield earned for the 
month of September would be shown on the periodic statement covering 
September 16 through October 15. The annual percentage yield earned 
(using the formula above) is 5.40%:

APY Earned = 100 [(6.50/1,500)(365/30)-1]
APY Earned = 5.40%

    (3) Assume an institution calculates interest on the average 
daily balance for a quarter (for example, the calendar months of 
September through November), and provides monthly periodic 
statements covering calendar months. The account has a balance of 
$1,000 throughout the 30 days of September, a balance of $2,000 
throughout the 31 days of October, and a balance of $3,000 
throughout the 30 days of November. The average daily balance for 
the quarter is $2,000, which results in $21 in interest earned for 
the quarter. The annual percentage yield earned would be shown on 
the periodic statement for November. The annual percentage yield 
earned (using the formula above) is 4.28%:

APY Earned = 100 [(1 + 21/2,000)(365/91)-1]
APY Earned = 4.28%

B. Special Formula for Use Where Periodic Statement Is Sent More 
Often Than the Period for Which Interest Is Compounded

    Institutions that use the daily balance method to accrue 
interest and that issue periodic statements more often than the 
period for which interest is compounded shall use the following 
special formula:
[GRAPHIC] [TIFF OMITTED] TP10DE18.000

    The following definition applies for use in this formula (all 
other terms are defined under Part II):
    ``Compounding'' is the number of days in each compounding 
period.
    Assume an institution calculates interest for the statement 
period using the daily balance method, pays a 5.00% interest rate, 
compounded annually, and provides periodic statements for each 
monthly cycle. The account has a daily balance of $1,000 for a 30-
day statement period. The interest earned is $4.11 for the period, 
and the annual percentage yield earned (using the special formula 
above) is 5.00%:
[GRAPHIC] [TIFF OMITTED] TP10DE18.001


[[Page 63444]]


    APY Earned=5.00%

0
14. In Supplement I to part 1030, under Section 1030.7--Payment of 
Interest, paragraph 7(c)--Date interest begins to accrue is revised to 
read as follows:

Supplement I to Part 1030--Official Interpretations

* * * * *

Section 1030.7--Payment of Interest

* * * * *
    (c) Date interest begins to accrue.
    1. Relation to Regulation CC. Institutions may rely on the 
Expedited Funds Availability Act (EFAA) and Regulation CC (12 CFR 
part 229) to determine, for example, when a deposit is considered 
made for purposes of interest accrual, or when interest need not be 
paid on funds because a deposited check is later returned unpaid.
    2. Ledger and collected balances. Institutions may calculate 
interest by using a ``ledger'' or ``collected'' balance method, as 
long as the crediting requirements of the EFAA are met (12 CFR 
229.14).
    3. Withdrawal of principal. Institutions must accrue interest on 
funds until the funds are withdrawn from the account. For example, 
if a check is debited to an account on a Tuesday, the institution 
must accrue interest on those funds through Monday.

    By order of the Board of Governors of the Federal Reserve 
System, November 19, 2018.
Ann E. Misback,
Secretary of the Board.
    Dated: September 20, 2018.
Mick Mulvaney,
Acting Director, Bureau of Consumer Financial Protection.
[FR Doc. 2018-25746 Filed 12-7-18; 8:45 am]
 BILLING CODE P