Our funds availability policy says we give next day availability to deposits our customers make unless we place a Reg CC hold on the deposit. The operations department is wanting to write into the wire transfer policy that orders for outgoing wires are to be taken only for collected funds. To me that seems to be in direct conflict with the CC next day availability policy. Am I right?

You are absolutely correct! Reg. CC §229.2(d) reads "Available for withdrawal with respect to funds deposited means available for all uses generally permitted to the customer for actually and finally collected funds under the bank's account agreement or policies, such as for payment of checks drawn on the account, certification of checks drawn on the account, electronic payments, withdrawals by cash, and transfers between accounts."

That means, unless you place a hold (case by case or exception) on deposited funds in the account (and provide the required notice of hold), you must allow a wire out of the account as if the funds were actually collected, on the day when you normally make the funds available for other purposes, such as in-clearing of checks. If you're a general next day availability bank, then "in on Monday, out on Tuesday" (to paraphrase a one-day cleaner's slogan) is the rule for your customer's deposits.

(Perhaps I should not have used a laundry analogy here?)

I am questioning if you do a contract or an agreement for the wire service and the customer agrees to the terms.

The terms state"only collected funds" are used for this service...will this action legally take you around the REG CC issue? I see many banks write this into deposit agreement & disclosures that only collected funds are used
for the wire service.

I believe banks are looking at the "risk issue"and OFAC on this front. Please comment....Thanks

I had to retrain branch personnel to look at recent deposits and either place a hold to make the funds unavailable, or allow the wire for our walk-in wire customers. Commercial customers wiring on repetitive basis must execute a wire transfer agreement under which they agree that wires will be based on the collected balance in their account.

Brenda
If your bank normally gives next day credit, did you have to change your Reg CC policy as well just for wires?

You cannot "contract your way around the Reg. CC issue." This is not like the UCC, where contracts can supersede the law.

It's straightforward -- if the funds are available under your Reg. CC funds availability policy, they are available for outbound wire transfers. The only way you can delay availability for wire transfers is to place a kosher Reg. CC hold (case-by-case or exception) and give a notice.

And don't even think about doing the hold only if the customer asks to wire funds!

We don't place the old solely because the customer wants to wire funds (at least we shouldn't be!) Branch personnel are supposed to review recent activity to determine whether they feel a collectibility issue exists and protect the bank accordingly. They can call to see if recent check deposits have cleared or protect the bank by placing a case-by-case hold if they feel there may be a collectibility issue. It is my understanding that we are allowed to protect the bank after a deposit is made if circumstances arise which cause us to feel we may have a collectibility issue. A seasoned con artist understands Reg CC rules probably better than we do. They will wait until the funds are available and come in for a cashier's check or attempt to wire the money out of the bank (of course, the checks deposited are usually nonlocal and we have not had time to get a callback alerting us of a return). And if they are really smart, they wait until the account has been opened for more than 30 days.

It sounds as if I may need to get back with bank counsel regarding our wire transfer agreement. It has been reviewed by bank counsel, outside auditors as well as our regulator and never cited as a compliance finding. But, who knows, maybe they all missed it.

Brenda,

I think the problem (if there is one) with your Wire agreement may be how people understand the word "collected." Back in the "good old days" before Reg. CC, "collected funds" was often understood to mean "funds that had sat in your account long enough we think the checks are good." We often assigned some arbitrary number of days to collection periods. Of course, that differed from truly collected, but we weren't about to call on every deposited check to see if it'd been paid.

With Reg. CC in the picture, we have added "available" to "collected" and "really collected." It's when bankers get "available" and "collected" confused that we get trouble. You might make funds "available" on a next-day basis (generally) and pay interest on "collected" funds (based on when you get use of the funds from the Fed). But neither of these schedules reflects the time it actually takes for a check to make it to the drawee and get paid.

If you take your Wire agreement to an attorney, make sure she or he understands Reg. CC before offering an opinion. Lots of attorneys don't.

Usually when I am tempted to disagree with John and think about it, I decide he was right and go on. However, knowing that I would do exactly what Brenda is doing if I was still a real banker, I have to step up to the plate:

From OCC AL 96-6

To combat check kiting, the board and senior management need to ensure the effectiveness of internal controls used to identify suspicious activity and minimize risk. While fraudulent conduct cannot be detected or prevented in every case, there are certain minimal controls that should be implemented to reduce the likelihood that a check kite will go undetected. The types of internal controls which banks should consider include:

*Officer approval on drawings against uncollected funds, overdrafts, and wire transfers. Such authority should be strictly enforced and not exceed an individual's lending authority. [Abridged]

From Ken:

The OCC advocates officer approval before paying out "uncollected funds;" it does not condition the suggestion on whether there is a previously existing hold. (The AL goes on to say that a bank should have thorough knowledge of Reg CC exception holds.) So, if the bank finds a draw is against uncollected funds, it is expected to protect itself, even if there is no pre-existing hold.

As John notes, the definition of "available for withdrawal" is critical here. My counterpoint is that the phrase does not have a universal meaning for all banks; it clearly acknowledges the particular bank's account agreement and policies are an issue. If Brenda is not going to send the wire unless the customer signs the agreement and the agreement conditions the service on an accounting concept (uncollected funds) not a legal concept (a hold), her bank's policies are clear; they are not being set arbitrarily in the heat of the moment.

Reg CC clearly indicates that its subpart C cannot be altered by agreement and the same statement should apply to the rest of the regulation. However, I honestly believe there is a small amount of room for the bank to maneuver when it is being asked to give guaranteed funds in exchange for uncollected funds. The AL cannot be cited as legal authority, but its existence indicates the argument in support of refusing to wire uncollected funds can clearly be made in good faith.

If there is one thing thing this service is best at, it's presentation of divergent opinions. And if there is one thing that I am getting better at as I mellow (you can't be in this job for over a quarter-century without mellowing), it's listening to other long-time professionals.

Ken is right on target. Compliance is a risk-management tool, and a carefully-crafted wire transfer agreement that provides for the use of collected funds -- together with a definition of that term that provides for verification if the bank requires -- is another risk management tool.

Although I think it's possible that a bank that brandishes a collected funds requirement in its wire contract might be taken to task under Regulation CC, the odds are probably weighted heavily against such a customer move. And the prospect of losing five figure sums to charged-back checks following a wire out of equally large sums should make a bank think about sharpening the tools in its wire contracts.

If this sounds like I've made a 180° turn, if you call it 170°, I'll agree.

Thanks, Ken, for weighing in on this discussion!

We give next day also. However, the main office told us that ATM withdrawals are not next day.
We were not aware of this until a customer that had put a deposit in tried to get funds the next day at an ATM. He could come in the bank & get it but not ATM. After reading the above, is what
were doing correct? If not can you give me regulation as I'll need to bring this to the main office attention.
Thanks

The Regulation is Reg CC. The funds availability rules for ATMs vary depending upon whether the ATM is on-site or off-site and whether it's your ATM. Here are a few references to look at:

Sec. 229.12 Availability schedule. (f) Deposits at nonproprietary ATMs. A depositary bank shall make funds deposited in an account at a nonproprietary ATM by cash or check available for withdrawal not later than the fifth business day following the banking day on which the funds are deposited.

Sec. 229.19 Miscellaneous. When funds are considered deposited: (4) Funds deposited at an ATM that is not on, or within 50 feet of, the premises of the depositary bank are considered deposited on the day the funds are removed from the ATM, if funds normally are removed from the ATM not more than two times each week; and
(5) Funds may be considered deposited on the next banking day, in the case of funds that are deposited--
(i) On a day that is not a banking day for the depositary bank;

And look at the Reg CC commentary, too.

If you are saying the customer made a deposit on Monday that is available on Tuesday under your general next day availability policy, but the customer cannot get those funds at one of your ATMs (only at the teller line), then you possibly have a Regulation CC violation.

§229.19(b)reads: Availability at start of business day. Except as otherwise provided in §229.12(d), if any provision of this subpart requires that funds be made available for withdrawal on any business day, the funds shall be available for withdrawal by the later of:

(1) 9:00 a.m. (local time of the depositary bank); or

(2) The time the depositary bank's teller facilities (including ATMs) are available for customer account withdrawals.

The reference to §229.12(d) is to the provision that allows you to delay access to cash one more day so long as you make $400 (in addition to $100 available at start of day) available by 5:00 p.m.