Regulation cc

What Is Regulation CC?

Regulation CC, officially known as 12 CFR Part 229, is a banking regulation issued by the Board of Governors of the Federal Reserve System that governs the availability of funds and the collection of checks. It falls under the broader category of banking regulation and consumer protection. Its primary purpose is to standardize how quickly financial institutions must make deposited funds available to their customers and to streamline the national check clearing process¹⁷. Regulation CC also establishes rules for the return of unpaid checks, aiming to reduce risks for depositary banks.

History and Origin

Regulation CC was enacted to implement the Expedited Funds Availability Act (EFAA) of 1987. Before this legislation, consumers often faced lengthy hold periods on deposited checks, sometimes waiting weeks for funds to become available. Congress passed the EFAA to address these concerns and standardize these practices across the banking industry¹⁶. The Federal Reserve Board was tasked with writing and implementing the rules, which became Regulation CC. Initially, the regulation focused on establishing maximum permissible hold periods and speeding up the return of unpaid checks to mitigate risk to institutions¹⁵. Subsequent amendments, notably the Check Clearing for the 21st Century Act (Check 21) in 2003, further enhanced the efficiency of the payment system by facilitating electronic check processing and the creation of substitute checks, which are legally equivalent to original paper checks¹³, ¹⁴. The Consumer Financial Protection Bureau (CFPB) and the Federal Reserve Board regularly adjust dollar amounts within Regulation CC for inflation, with recent changes effective July 1, 2025¹¹, ¹².

Key Takeaways

• Regulation CC sets the maximum timeframes for how long banks can hold deposited funds before making them available to customers.
• It mandates disclosures by financial institutions regarding their funds availability policies.
• The regulation includes rules designed to expedite the collection and return of checks, reducing processing times.
• Regulation CC incorporates provisions from the Check Clearing for the 21st Century Act (Check 21), facilitating electronic check processing.
• Dollar amounts within Regulation CC, such as the minimum next-day availability and large deposit thresholds, are periodically adjusted for inflation by the Federal Reserve and the CFPB.

Interpreting Regulation CC

Regulation CC outlines specific timeframes for funds availability, which financial institutions must adhere to when customers make a deposit. For instance, cash deposits and certain types of check deposits, such as U.S. Treasury checks, cashier's checks, and checks drawn on a Federal Reserve Bank, generally must have funds available by the next banking day after the day of deposit¹⁰. Other checks may be subject to longer hold periods, though Regulation CC sets maximum limits. The regulation aims to strike a balance between providing consumers with timely access to their money and allowing banks sufficient time to process checks and detect potential check fraud. Understanding a bank's specific funds availability policy, which must be disclosed under Regulation CC, is crucial for account holders.

Hypothetical Example

Consider a scenario where a customer, Sarah, deposits a personal check for $1,000 into her transaction account on a Tuesday. Under the general provisions of Regulation CC, her bank might make the first $275 of that deposit available by the next business day (Wednesday), with the remaining funds available on the second business day (Thursday) or later, depending on the bank's policy and the type of check⁸, ⁹. If Sarah had deposited a U.S. Treasury check of the same amount, the full $1,000 would typically be available on Wednesday because U.S. Treasury checks are subject to expedited funds availability rules.

Practical Applications

Regulation CC is fundamental to the daily operations of banks and credit unions across the United States, directly impacting how consumers access their money and how the broader payment system functions. It mandates specific procedures for check collection and return, aiming to create a more efficient and less risky environment for financial institutions. For example, the regulation's provisions for an expeditious return of checks help depositary banks mitigate the risk of making funds available before a check is returned unpaid⁷. The increasing prevalence of electronic transfer methods has further streamlined many aspects covered by Regulation CC. While the regulation has significantly reduced overall hold periods, check fraud remains a concern within the financial industry. The FBI's Internet Crime Complaint Center (IC3) reported nearly $200 million in losses categorized as "Credit Card/Check Fraud" in 2024, highlighting ongoing risks despite regulatory frameworks⁶. Consumers can report suspected fraud to IC3 through their website⁵.

Limitations and Criticisms

While Regulation CC has largely succeeded in standardizing funds availability and speeding up check processing, some limitations and criticisms have emerged over time. One recurring point of contention has been the balance between expedited funds availability and the prevention of check fraud. Banks require time to process checks and verify funds, and shorter hold periods, while beneficial for consumers, can potentially increase a financial institution's exposure to losses from fraudulent checks. The Consumer Financial Protection Bureau (CFPB) has acknowledged the need to consider fraud implications when contemplating further reductions in hold times⁴. Additionally, despite the significant move towards electronic payment systems, Regulation CC continues to govern paper checks and substitute checks, meaning some processing delays can still occur.

Regulation CC vs. Expedited Funds Availability Act (EFAA)

Regulation CC and the Expedited Funds Availability Act (EFAA) are closely related but distinct. The Expedited Funds Availability Act is the federal law passed by Congress in 1987 that mandated banks to make funds available to their customers within specific timeframes and to disclose their funds availability policies. Regulation CC, on the other hand, is the specific set of rules and regulations issued by the Federal Reserve Board that implements the EFAA³. Think of the EFAA as the legislative directive, and Regulation CC as the detailed operational framework that financial institutions must follow to comply with that law. The EFAA provides the overarching requirements, while Regulation CC provides the precise definitions, schedules, exceptions, and enforcement mechanisms for compliance.

FAQs

What does "funds availability" mean under Regulation CC?

"Funds availability" refers to the time period after you deposit money into your deposit account when your bank makes those funds accessible for withdrawal, bill payment, or other transactions. Regulation CC sets maximum limits on these hold periods.

Are all deposits subject to the same availability rules under Regulation CC?

No, funds availability varies depending on the type of deposit. Cash, electronic payments, and certain types of checks like U.S. Treasury checks or cashier's checks often have next-day availability. Other personal or business checks may be subject to longer hold periods, though these are still capped by Regulation CC's schedule.

Can a bank place a hold on my deposited check for longer than the standard timeframes?

Yes, Regulation CC allows for certain exceptions that may permit a bank to extend a hold, such as for large deposits, repeated overdrafts, or if there is reasonable cause to doubt the collectibility of the check. The bank must provide you with a notice explaining the extended hold.

Does Regulation CC apply to all types of financial transactions?

Regulation CC primarily applies to deposits made to transaction accounts via checks and certain electronic transfers. It does not directly govern all forms of payment or investment accounts, but its principles of funds availability are a cornerstone of banking operations.

Who enforces Regulation CC?

Compliance with Regulation CC is primarily enforced by the federal banking regulatory agencies, such as the Federal Reserve Board, the Consumer Financial Protection Bureau (CFPB), and the National Credit Union Administration (NCUA), for the institutions they supervise¹, ².