Proposed Reg CC Amendments: Collection of Checks and Funds Availability

The Federal Reserve Board has requested public comment on proposed amendments to Regulation CC (Availability of Funds and Collection of Checks) to encourage banks to clear and return checks electronically, add provisions that govern electronic items cleared through the check-collection system, and shorten the "exception" hold periods on deposited funds.

To encourage electronic collection and return of checks between banks, the proposal provides that a depositary bank would be entitled to the expeditious return of a check only if it agrees to receive returned checks electronically. In addition, the proposal would permit the bank responsible for paying a check to require that checks presented to it for same-day settlement be presented electronically. More generally, the proposal would apply Regulation CC's collection and return provisions, including warranties, to electronic check images that meet certain requirements.

Additionally, due to the faster collection and return timeframes that result from electronic collection and return, the proposal would shorten the safe-harbor period for an exception hold to four business days, which should enable the depositary bank to learn of the return of virtually all unpaid checks before being required to make these deposits available for withdrawal.

NJ passes bill to encourage banks to locate in underserved areas

A bill intended to encourage banks to locate in underserved communities received final legislative approval last week. If signed into law by Gov. Christie, the legislation would allow the creation of special districts in communities with few or no financial institutions.

Banks that locate in those districts would be eligible to hold State Treasury funds, and municipalities could choose such banks to hold their municipal deposits. Both steps would help to boost profitability and thereby serve as an incentive to locate in the districts.

"In many urban areas, residents are relegated to using check-cashing stores for their banking needs and forced to pay service fees that are disproportionately higher than those at established financial institutions," said Sen. Donald Norcross (D., Camden), a sponsor of the bill. "By providing incentives for banks to open in underserved communities, we will help provide fairer access to the banking services that residents depend on and prevent people from having to pay unnecessary and burdensome costs for basic financial transactions."

Modeled on a program in New York, the New Jersey legislation was created after the sudden closure of a Bank of America branch in Jersey City that left many residents without access to a local bank.

FinCEN Rule Strengthens SAR Confidentiality

FinCEN Rule Strengthens SAR Confidentiality;
Provides Guidance to Permit Sharing with Affiliates

VIENNA, Va. – The Financial Crimes Enforcement Network (FinCEN) today released a final rule – Confidentiality of Suspicious Activity Report as well as an advisory, and two guidance documents, and a Notice of Availability of Guidance that together clarify and strengthen the scope of Suspicious Activity Report (SAR) confidentiality, and expand the ability of certain financial institutions to share SAR information with most affiliates.

“FinCEN’s SAR confidentiality regulations along with parallel best practices guidance on sharing SAR information, also issued today, promote the protection of SAR information while seeking to ensure that the appropriate parties, but only those parties, have access to SARs,” said FinCEN Director James H. Freis, Jr. “It is essential to the partnership between the financial industry and government that sensitive financial information reported to FinCEN be protected. As to the newly issued guidance, we believe that allowing information sharing among affiliates will help the financial industry protect itself from abuses of financial crime, be consistent with industry efforts to strengthen enterprise-wide risk management, and also promote the reporting of even more useful information to FinCEN and law enforcement investigators,” said Freis.

The regulations clarify the scope of the statutory prohibition against the disclosure by a financial institution or by a government agency of a SAR or any information that would reveal the existence of a SAR.

The related advisory, Maintaining the Confidentiality of SARs is intended for all Bank Secrecy Act stakeholders: federal and state regulatory agencies, law enforcement, self-regulatory organizations, and financial institutions. The advisory emphasizes the importance of confidentiality for maintaining a vigorous suspicious activity reporting regime, and intends to help focus BSA stakeholders to be vigilant in managing information sharing.

In addition, FinCEN produced a pair of guidance documents for depository institutions and for the securities and futures industries that interpret a provision in the SAR confidentiality rules.

These guidance documents complement FinCEN’s previous guidance for banks and securities and futures industries, which permitted the sharing of SARs with head offices and parent companies. The new guidance allows for the sharing of a SAR with a domestic affiliate, provided that affiliate is itself subject to a SAR rule. The affiliates must be linked under a common ownership and cannot themselves be the subject of the SAR. The guidance made public today clarifies that sharing with foreign affiliates is not permitted at this time.

FinCEN developed the new rule, advisory, guidance, and notice in consultation with the Federal Banking Agencies, Securities and Futures Regulators, and the Internal Revenue Service.

The final rule and guidance become effective 30 days after publication in the Federal Register.

Find FinCEN’s responses to public comments received on the guidance as it was proposed and additional information regarding the effective date and the rationale for the guidance in FinCEN’s Notice of Availability of Final Interpretative Guidance.

IRS Announces 2011 Standard Mileage Rates

On Friday December 3, 2010, the Internal Revenue Service announced the 2011 optional standard mileage rates to be used for calculating the deductible costs of an automobile for business, charitable, medical or moving purposes. These are the rates used to determine the amount of an employee’s ordinary and necessary expenses of local travel or transportation away from home that may be reimbursed.

The 2011 rates are as follows:

• 51 cents per mile for business miles driven


• 19 cents per mile for medical or moving miles driven


• 14 cents per mile for miles driven in service of charitable organizations

Deposit Insurance Coverage for Noninterest-Bearing Transaction Accounts Free Nationwide Seminars for Bank Employees

The FDIC will host two identical telephone seminars for bank officers and employees that will explain the insurance coverage rules and disclosure requirements regarding the new temporary unlimited insurance coverage for noninterest-bearing transaction accounts at all FDIC-insured depository institutions. Each seminar will consist of a 30-minute audio and slide presentation, followed by a one-hour question-and-answer period. The seminars, which are free to officers and employees of FDIC-insured banks and savings associations, will be conducted on December 14 and December 16, 2010.

For registration information, visit this FDIC link.

Overdraft Payment Programs and Consumer Protection Final Overdraft Payment Supervisory Guidance

The FDIC expects financial institutions' boards of directors and management to ensure that the institution mitigates the risks associated with offering automated overdraft payment programs and complies with all consumer protection laws and regulations, including providing clear and meaningful disclosures and other communications about overdraft payment programs, fees, and other features and options, and demonstrating compliance with new opt-in requirements for automated teller machine (ATM) withdrawals and one-time point-of-sale debit card transactions. In addition, the FDIC expects financial institutions to:

• Promptly honor customers' requests to decline coverage of overdrafts (i.e., opt-out) resulting from non-electronic transactions;


• Give consumers the opportunity to affirmatively choose the overdraft payment product that overall best meets their needs;


• Monitor accounts and take meaningful and effective action to limit use by customers as a form of short-term, high-cost credit, including, for example, giving customers who overdraw their accounts on more than six occasions where a fee is charged in a rolling twelve-month period a reasonable opportunity to choose a less costly alternative and decide whether to continue with fee-based overdraft coverage;


• Institute appropriate daily limits on overdraft fees; and consider eliminating overdraft fees for transactions that overdraw an account by a de minimis amount; and


• Not process transactions in a manner designed to maximize the cost to consumers.

For more on the topic, visit The Gold Book chapters: Bounce Protection and Overdraft Services Consent.

New Law Makes ATM Theft A Crime

On August 30, 2010, Governor Paterson signed S5536-A, which became Chapter 464 of the laws of 2010.  The law amends Penal Law sections 155.35 and 155.43 to make it a crime to steal an ATM or its contents.

The crime is classified as grand larceny in the 3^rd degree, a Class D felony.

If a person steals an ATM or its contents and has been previously convicted of grand larceny in the 3^rd degree within the previous five years, such crime is classified as aggravated grand larceny, a Class C felony.

For additional information on ATMs see Automatic Teller Machines.

The Penal Law changes became effective on November 1, 2010.

What's New: FDIC Changes and Notice Requirements

The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) yesterday approved a final rule to implement section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

The final rule revises the FDIC's deposit insurance regulations to include non-interest bearing transaction accounts as a new temporary deposit insurance account category. All funds held in such accounts are fully insured, without limit, and this coverage is separate from, and in addition to, the coverage provided to depositors for other accounts at an insured depository institution. This separate coverage will become effective on December 31, 2010, and will end on December 31, 2012.

Non-interest bearing accounts include only traditional, non-interest bearing demand deposit (or checking) accounts that allow for an unlimited number of transfers and withdrawals at any time, whether held by a business, individual or other type of depositor.

Insured institutions are required to notify customers of these changes by December 31. 2010.

For details, see Coverage of Non-Interest Bearing Transaction Accounts in the Federal Deposit Insurance section of The Gold Book.

What's New: 2011 Annual Adjustments for Reserve Calculations and Reporting

The Federal Reserve Board recently announced the annual indexing of the reserve requirement exemption amount and of the low reserve tranche for 2011. These amounts are used in the calculation of reserve requirements of depository institutions. The Board also announced the annual indexing of the nonexempt deposit cutoff level and the reduced reporting limit that will be used to determine deposit reporting panels effective 2011.

See sub-chapter Reserve Requirements for updated information.

What's New: 2011 Cost-of-Living Adjustments

The 2011 Cost-of-Living Adjustments (COLAs) for determining annual limits for most retirement plans remain the same as in 2010, except for the following:

• The adjusted gross income (AGI) limits for determining the deductible amount of traditional IRA contributions for single and married taxpayers who are active participants in an employer-sponsored retirement plan (see "Deductions" );


• The AGI limits for determining the deductible amount of traditional IRA contributions for married taxpayers filing jointly who aren’t active participants in an employer-sponsored retirement plan but whose spouses are (see "Deductions") ;


• The AGI limits for determining the maximum Roth IRA contributions permitted for taxpayers whose filing status is married filing jointly (see "Phaseouts) and;


• The adjusted gross income limits for taxpayers who qualify for the 50% nonrefundable tax credit on qualified retirement savings contributions (see "Credit for Pension Contributions").

Click here for a table summarizing the applicable limitations.

The Department of Justice Has Adopted Revised ADA Standards

Revised ADA regulations were issued on September 15, 2010 and take effect March 15, 2011. Compliance with the 2010 Standards for Accessible Design is permitted as of September 15, 2010, but not required until March 15, 2012. The Department of Justice has prepared fact sheets identifying the major changes in the rules (available at http://www.ada.gov/). Financial institutions seeking to replace/purchase ATM equipment should review the new guidelines and check with ATM vendors for hardware and software requirements.

See American Disabilities Act for more information.

New Power of Attorney Law Amendments

The NYS Power of Attorney laws that became effective September 1, 2009 were amended with a new law effective September 12, 2010.   The revisions to the power of attorney law are technical amendments and clarifications to certain sections of the law and the POA form to promote a better understanding of how the power of attorney (POA) rules work. Statutory short forms executed on or after September 12 must reflect the changes. Changes were also made to the Statutory Gifts Rider.

See Power of Attorney - New York Rules for additional information.

What's New: Significant Changes to (new) NYS Power of Attorney Rules

New York State Power of Attorney rules were significantly revised in 2009. A new bill is expected to be signed by Governor Paterson that will clarify, correct or revise many of the new provisions.

Please refer to the Power of Attorney section of the New Accounts chapter for details.

Official FDIC Sign Updated and Available

The Dodd-Frank Wall Street Reform and Consumer Protection Act signed by President Barack Obama on July 21, 2010, made permanent the current standard maximum deposit insurance amount (SMDIA) of $250,000. The FDIC coverage limit applies per depositor, per insured depository institution, for each account ownership category.

• The FDIC has updated the FDIC official sign for advertising deposit insurance coverage as prescribed in Part 328 of the FDIC's regulations.


• Insured depository institutions may order FDIC official signs from the FDIC, free of charge, at https://vcart.velocitypayment.com/fdic/.


• The FDIC encourages all insured depository institutions to acquire and post the new official sign without delay to increase depositor awareness of the permanent increase in deposit insurance coverage.


• All of the FDIC's deposit insurance coverage materials posted on its website - including "EDIE," its Electronic Deposit Insurance Estimator - have been updated to reflect the permanent $250,000 coverage.

The Compliance Chapter of The Gold Book addresses FDIC Official Sign requirements.

Basic FDIC Insurance Coverage Permanently Increased to $250,000 Per Depositor

On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which, in part, permanently raises the current standard maximum deposit insurance amount to $250,000. The standard maximum insurance amount of $100,000 had been temporarily raised to $250,000 until December 31, 2013. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category.

The temporary increase from $100,000 to $250,000 was effective from October 3, 2008, through December 31, 2010. On May 20, 2009, the temporary increase was extended through December 31, 2013.

"With this permanent increase of deposit insurance coverage to $250,000, depositors with CDs above $100,000 but below $250,000 will no longer have to worry about losing coverage on those CDs maturing beyond 2013.

To help consumers, bankers and others understand how the new law affects deposit insurance coverage and to help consumers verify whether their deposit accounts are fully protected, the FDIC provides the following resources:

• Information on deposit insurance on the FDIC Web site: Updated brochures on deposit insurance coverage (including the basic guide, Deposit Insurance Summary, and the more comprehensive guide, Your Insured Deposits) and a new version of the "Electronic Deposit Insurance Estimator" (EDIE), an interactive service that allows consumers to quickly and easily check whether their accounts are fully protected, are now available on the FDIC's Web site (www.fdic.gov).


• A toll-free consumer assistance line: Help and information about deposit insurance and other matters of interest to bank customers are available at 1-877-ASK-FDIC (1-877-275-3342) Monday through Friday from 8:00 a.m. to 8:00 p.m., Eastern Time. For the hearing-impaired, the number is 1-800-925-4618.

Visit the FDIC chapter of The Gold Book for details.

More on the new $100 BankNote

Be sure to sign up for The $100 BankNote, an electronic newsletter provided by the U.S. government to help businesses and organizations around the world prepare for the redesigned $100 note's introduction on February 10, 2011.

Visit www.newmoney.gov

FDIC Board Adopts Final Rule Extending Tag Program

The FDIC  has adopted a final rule extending the Transaction Account Guarantee (TAG) program for six months, from July 1, 2010 through December 31, 2010. Under the TAG program, customers of participating insured depository institutions are provided full coverage on qualifying transaction accounts.

FDIC Chairman Sheila Bair said: "While I believe that the TAG program has proven to be critical to ensuring our financial system's stability, it was established as a temporary program. Ultimately, it should be up to Congress to determine our insurance limits. Adoption of this final rule allows the opportunity for Congress to conclude its current deliberations relative to this program."

The final rule, adopted after a public comment period, is almost identical to the interim rule adopted on April 13, 2010. The rule requires that interest rates on qualifying NOW accounts offered by banks participating in the program be reduced to 0.25 percent from 0.5 percent. It requires TAG assessment reporting based on average daily account balances but makes no changes to the assessment rates for participating institutions. The rule also provides for an additional extension of the program, without further rulemaking, for a period of time not to exceed December 31, 2011.

See the FDIC chapter of The Gold Book for further details on the TAG program and FDIC coverage in general.

What's New: New Rules for Gift Cards

New Federal Reserve rules provide important protections for the purchase and use of gift cards. The final rules under Regulation Z that implement the Credit CARD Act of 2009, restrict the fees and expiration dates applicable to gift cards and apply to gift cards sold on or after August 22, 2010.

Content on this topic has been added to The Gold Book.

What's New: IOLA Fund Amends Interest Rate Options

Last month the IOLA Fund amended 21 NYCRR Section 7000.9(b)(1) to revise one of the IOLA interest rate options.  Institutions may pay the greater of 60% of the Federal Funds Rate or 1% on IOLA's.  This is a change to one of the interest rate options an institution may choose for paying interest on IOLA's, which are NOW accounts.  The 1% is a floor rate.

This rate change is effective April 7, 2010.  Go to www.IOLA.org, go to recent news on the right and go to the bottom and click on trustees regulations.  There you will be able to pull up the 13 page regulation and find section 7000.9(a) and (b).  The rates you may offer on IOLAs can be either under (a) or (b), your choice.

See the IOLA section of The Gold Book for updated material.

OTS Assesses Penalty and Restitution for Unfair Overdraft Protection Program

The Federal Reserve's final amendments to Regulation E enable consumers to limit the costs of overdraft services assessed on their deposit accounts. The amendments require financial institutions to provide a clear disclosure of the fees and terms associated with its overdraft services and to provide customers with a choice regarding the payment of overdrafts for ATM and one-time debit card transactions. The institution must provide a notice that allows a customer to opt in, or affirmatively consent, to the institution's payment of overdrafts for these types of transactions.

These amendments took effect on January 19, 2010, and carry a mandatory compliance date of July 1, 2010.

Last month, the OTS illustrated the affect of noncompliance by taking action against Woodforest Bank, a thrift institution based in Refugio, Texas. To avoid a lengthy dispute, Woodforest Bank agreed to repay more than $12 million to current and former customers "who were misled about the cost of overdraft protection and charged excessive overdraft-protection fees." According to the OTS, Woodforest's business relied "upon an unreasonably high level of aggregate fees."  Woodforest will also pay the federal Office of Thrift Supervision $400,000, the toughest penalty ever imposed by the regulator regarding overdraft fees.

"We believe that our overdraft protection programs now set a new industry standard for customer friendliness and consumer focus," James Dreibelbis, Woodforest's chief executive officer, said in a statement. OTS spokesman William Ruberry said Woodforest was incorrectly marketing overdraft protection as free, when it was really charging $34 per overdraft, plus additional daily fees if a customer failed to pay off the original penalties. Woodforest was also offering loans to repay overdraft fees, and the bank was requiring automatic account deductions to repay the loan. Such a requirement is against federal rules. Under the order, Woodforest has to limit fees and the number of transactions for which it can charge fees, overhaul marketing materials and clearly disclose rules, stop claiming that overdraft protection is good for people who have had financial trouble and give customers a chance to stop additional daily charges on overdrawn accounts.