NAFCU Letter to CFPB’s Director Richard Cordray Requesting Certain Changes to Regulation CC

July 3, 2013

The Honorable Richard Cordray


Consumer Financial Protection Bureau

1700 G Street, NW

Washington, DC 20552

RE:      Changes to Regulation CC

Dear Director Cordray:

On behalf of the National Association of Federal Credit Unions (NAFCU), the only trade association that exclusively represents federal credit unions, I write to you to request certain changes to Regulation CC, which implements the Expedited Funds Availability Act, and to express concerns we have regarding several aspects of the Federal Reserve Board’s 2011 proposed rule to amend Regulation CC.

As you know, as member-owned cooperatives, credit unions are predisposed to ensure their members’ needs are met and their interests protected. In light of this principle, we ask that the following changes be made to Regulation CC.

Suggested Changes to Regulation CC

Increase Number of Hold Days. Regulation CC, generally, requires a credit union to make personal checks available for withdrawal no later than two business days after the check is deposited.  However, the credit union will not know until after it makes the funds available whether the check is counterfeit or if there are insufficient funds. For example, a check deposited on Monday must be made available when the credit union opens for business on Wednesday. While the funds are available, however, the credit union will not be informed by the Federal Reserve that the check is not valid until 11:00am on Wednesday.

NAFCU believes that this places both the credit union and the member in undue risk and requests that the Consumer Financial Protection Bureau (CFPB) work with the Federal Reserve Board to increase the number of business days a credit union can hold a check from two to three days.

Holds on Cashier’s Checks and Money Orders. A cashier’s check or money order must be made available the next banking day after the day it was received. Unfortunately, with the increased availability of advanced technology to create counterfeit documents, including cashier’s checks and money orders, the next-day availability rule is proving to be outdated and unintentionally increases risk exposure to consumers and credit unions alike. Both consumers and credit unions are vulnerable targets of criminals that aim to take advantage of the combination of this rule and advancements in technology.

To mitigate the increased risk, NAFCU believes that the CFPB and the Federal Reserve Board should work together to allow credit unions to hold cashier’s checks or money orders. In some cases, the consumer is issued a fraudulent document in a sales transaction; in other cases, the consumer has been issued the fraudulent document for services rendered (often, a job online). In some cases, the consumer may seek to execute fraud upon the credit union.

2011 Proposed Changes by the Federal Reserve Board

NAFCU would like to take this opportunity to reiterate our concerns with aspects of the proposed changes to Regulation CC. Given that the CFPB has stated, in its semiannual regulatory agenda, that it will take action on the regulation, we believe it is important that these points are restated.

First, NAFCU opposes the proposed elimination of the provisions regarding case-by-case holds. While an institution may often times be required to make funds available before it learns of the check being returned unpaid, the case-by-case hold still offer some minimal protection.

Next, NAFCU is concerned with the proposed changes regarding the notice in lieu of return. As the check processing system becomes more digitized, it is true that there will be fewer and fewer instances where a notice in lieu of return is necessary. Nevertheless, it is still possible that there will be times where a notice in lieu of return is the best method available to an institution returning a check. Thus, there does not appear to be adequate justification for not providing the flexibility.

Further, NAFCU does not support eliminating § 226.36(f)(1). This section permits a paying bank to require paper checks presented for same-day settlement to be separated from other forward-collection checks or returned checks. Eliminating this provision is inconsistent with the expressed policy goals of the rule, which is to promote efficiency through increased use of electronic collection and return of checks. Permitting paper checks presented for same-day settlement to be grouped with all other paper simplifies matters for the depository bank that is processing paper checks.

If you have any questions or concerns, please feel free to contact me at (703) 842-2234 or Tessema Tefferi at (703) 842-2268.


Carrie Hunt

General Counsel and Vice President of Regulatory Affairs

cc: The Honorable Ben S. Bernanke, Chairman, the Board of Governors of the Federal Reserve System

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