Compliance Matters: Comment on Reg CC Proposal

Submit comments by June 3 on new Fed amendments.

May 1, 2011

Comment on Reg CC Proposal

The Federal Reserve Board has requested public comment on proposed amendments to Regulation CC (Availability of Funds and Collection of Checks).

The amendments encourage financial institutions 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. Submit comments by June 3, 2011.

The proposal will implement a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) to increase the current $100 next-day availability requirement for certain check deposits to $200 as of July 21, 2011, and make many other substantive changes to Reg CC.

To facilitate the financial services industry’s continuing transition to complete electronic check collection and return, the Fed is proposing amendments to:

  • Provide that a depositary institution would
  • be entitled to the expeditious return of a check only if it agrees to receive returned checks electronically;
  • Permit the institution responsible for paying a check to require that checks presented to it
  • for same-day settlement be presented electronically;
  • Apply Reg CC’s collection and return provisions, including warranties, to electronic check images that meet certain requirements;
  • Change the availability schedule provisions to reflect the fact that there are no longer any “nonlocal” checks; and 
  • Revise the model forms found in the regulation’s Appendix C that institutions use to disclose funds-availability policies.

The Fed also requests comments on whether it should consider future changes to Reg CC to improve the check collection system.

This includes changes such as decreasing the time a paying bank can decide whether to pay a check to reduce the risk to a depositary bank of having to make funds available for withdrawal before learning whether the deposited check has been returned unpaid.


Credit Score Disclosures

In March, the Fed and the Federal Trade Commission proposed regulations implementing the Dodd-Frank Act’s credit score disclosure requirements.

The statute requires creditors to disclose credit scores and related information to consumers in risk-based pricing and adverse action notices under the Fair Credit Reporting Act (FCRA) if a credit score was used to set the credit
terms or take adverse action.

Credit unions were just required to comply with new risk-based pricing regulations in January 2011. The proposed regulations would add two new model risk-
based pricing notices to reflect the following credit score disclosure requirements:

  • A statement that a credit score takes into account information in a consumer report and a credit score can change over time;
  • The specific numerical credit score used to make the credit decision;
  • The range of possible scores (e.g., FICO scores from 300 to 850);
  • Key factors that adversely affected the credit score, such as late payments and high credit utilization;
  • The date the credit score was created; and
  • The credit bureau that provided the credit score.

The Fed also proposed amending the Reg B (Equal Credit Opportunity) model notice that combines the adverse action notice requirements for both Regula-tion B and FCRA.

The proposed amendments would revise the model notices to incorporate the credit score disclosures described above.

The agencies want to have final rules and revised model forms in place by July 21, 2011.

FinCEN Streamlines BSA Regs

The Financial Crimes Enforcement Network (FinCEN) reorganized its Bank Secrecy Act (BSA) regulations within a new chapter of Title 31 of the Code of Federal Regulations (CFR).

FinCEN’s rules now appearas “Title 31 Chapter X—Financial Crimes Enforcement Network.”

These regulations were previously included in the CFR as Part 103 in Chapter I under “Title 31—Money and Finance: Treasury.”

The reorganization streamlines the BSA regulations into general and industry-specific parts, making the regulatory obligations “clearer in their structure and more accessible to affected financial institutions.”

FinCEN hasn’t made any substantive changes to the BSA rules. FinCEN also incorporated the appropriate Chapter X citations within the BSA forms.

But the updated citations within the forms don’t create any new filing obligations.

Visit CUNA’s e-Guide to Federal Laws and Regulations at (select “regulations & compliance”)


Compliance Q&A

Q Under what circumstances can a credit union revise a Good Faith Estimate?

A The Real Estate Settlement Procedures Act (RESPA)permits a credit union to issue a revised Good Faith Estimate (GFE) when there have been “changed
circumstances” that would affect the loan terms or charges disclosed.

RESPA Section 3500.2 lists those “changed circumstances” as:

  • Acts of God, war, disaster, or other emergency;
  • Information that was used to provide the GFE changes or was found to be inaccurate after the GFE was issued (e.g., credit quality of the borrower, the amount of the loan, the estimated value of the property, etc.);
  • New information particular to the borrower or transaction that wasn’t relied on in providing the GFE; and
  • Other circumstances, such as boundary disputes, the need for flood insurance, environmental problems, etc.

Originator’s errors such as omissions wouldn’t be considered a “changed circumstance.” 

Q Does our credit union have to register on the Nationwide Mortgage Licensing System & Registry (NMLS) if no one in our lending department receives more than five residential mortgage applications a year?

A No. But as a residential mortgage lender the credit union would still need to have a policy in place to comply with the Secure and Fair Enforcement for Mortgage Licensing Act (SAFEAct).

SAFE Act registration requirements don’t apply to a credit union employee who has never been registered (or licensed) through the NMLS as a mortgage loan originator (MLO) if during the past 12 months the employee acted as an MLO for 5 or fewer residential mortgage loans. This is known as the Act’s de minimus exception.  The credit union would not have to register on the NMLS if none of its employees was required to register. But it would need to have a policy in place describing how the credit union planned to track the number of loans originated by its employees and describe how it would register its mortgage loan originators if it had to.

Q Does the CAN-SPAM Actcover e-statements that the member signs up for via the credit union’s home banking site? 

A No. The Controlling the Assault of Non-Solicited Pornography and Marketing (“CAN-SPAM”) Act imposes certain requirements on commercial e-mail messages, but not on “transactional” or “relationship” messages (with the exception that no e-mail may have a misleading header or subject line). 

“Transactional” or “relationship” e-mail messages are sent to complete or confirm a previously entered commercial transaction, to provide notice of a change in a previous transaction, or to deliver goods or services, or product updates. Some examples of “transactional” or “relationship” messages include: e-statements, notices of credit union elections, announcements of free financial education sessions, or other e-mails that don’t promote a credit union product or service.

For more information, visit CUNA’s e-Guide to Federal Laws and Regulations, available at (select “regulations & compliance”).