VIDEO: Get Ready for the July 2025 Reg CC Changes
In this Compliance Clip (video), Adam talks about what you need to do now to prepare for the Regulation CC changes that will take effect in July 2025. Adam provides a short overview of the changes as well as the key steps in complying with the threshold amendments to Reg CC.
This Compliance Clip comes from our latest quarterly update - the Fall 2024 Quarterly Compliance Update.
Video Transcript
The following is a transcript of this video.
This Compliance Clip is going to talk about what you need to do to get ready for the July 2025 Regulation CC changes.
This is a topic that I just finished recording in our Fall 2024 Quarterly Compliance Update. In fact, part two of our Fall 2024 Quarterly Compliance Update spends half an hour talking about all the ins and outs of what needs to happen to get ready for those Reg CC changes.
Now, I figured in this Compliance Clip, which is supposed to be three to five minutes, I would talk on a high level about what you need to do to get ready for those changes. So in order to understand what we have to do, let's back all the way up and understand what we're talking about. So all the way back on June 24, 2019, the joint regulators issued a 63-page final rule that changed some parts of Regulation CC relating to the amounts of check holds in funds availability. Part of this rule was mandated by the Dodd-Frank Act and other parts were mandated by the Economic Growth Regulatory Relief and Consumer Protection Act. So this was a rule that was a long time coming. These initial rules became effective on July 1, 2020, and the rules require changes to happen every five years.
What we're talking here specifically is the dollar amounts that financial institutions have to make available to consumers when a deposit includes a check that the financial institution is wanting to place a hold on. In other words, it's the amount of funds that must be made available to consumers at the time of deposit.
For years, these threshold amounts were pretty low. It started with a hundred dollars for case-by-case holds and $5,000 for special exception holds. So if you had a $10,000 check in a bank, put a two-day case-by-case hold on it, you could get a hundred dollars on the next day and then on the second business day, you would get your full amount available to you. And say, for a large deposited item, the first $5,000 had to be made available to you before the remaining amount of the deposit.
Over time, inflation started to erode at these amounts, making these amounts less and less valuable to the consumer. In fact, a hundred dollars became less and less of a customer's check. So it was detrimental to consumers. So what the Dodd-Frank Act and a group did is they basically said, “Look, we need to adjust these availability amounts based on inflation so that inflation doesn't erode at how much is available to consumers.” And so that's what this rule essentially did. And we saw an inflation adjustment, you know, maybe a decade ago when it went from $100 to $200. And then on July 1, 2020, we saw that go from $200 to $225 based on inflation.
Now, what the rules also said is going forward, we need to keep up with inflation. Instead of doing it every year, which would be pretty complicated for financial institutions, they're doing inflation adjustments every five years. Fast forward on May 13, 2024, the Federal Reserve Board and the CFPB, who have joint rulemaking authority on Reg CC, issued a final rule amending Regulation CC to adjust for inflation dollar amounts relating to the availability of funds. And this adjustment comes from an increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers between the five-year period of July of 2018 and July of 2023.
And what we saw during that five-year period was essentially a 22% increase due to inflation. So therefore, what we have to do for our funds availabilities, we're essentially increasing those mounts by a 22% increase rounded to the nearest $25. That's how this works. These new thresholds are going to be effective on July 1, 2025. So they issued this nearly a year before, so there's still some time to implement this. Most financial institutions are going to wait till May or June to implement this. A lot of them may wait till July 1st, but this is something that there's a lot of I's to dot and T's to cross. So it's important to start thinking about this now and what you need to do to be ready by the July 1st timeframe.
Again, in our quarterly compliance update, we talked for half an hour but here, to try to summarize things, let me just break it down to two main things that you're going to have to do in your financial institution to be ready for the 2025 Regulation CC changes. It really comes down to two main things.
First of all, is you need to update your organization to comply with the new availability amounts. No longer do we have $100 for case by case holds. No longer is it $225. It's actually increasing up to $275. So we have to update the applicable amounts for availability based on inflation, both for case-by-case holds and special exception holds and another hold if you do it, and your policies and procedures.
The second thing we need to do after we update everything based on those inflation adjustments is we need to also notify our customers. Due to Reg CC, we have to notify customers of any change.
So those are the really the main things we have to do. Now, I will tell you there's a lot of I's to dot and T's to cross. And in our Fall 2024 Quarterly Compliance Update, I actually came up with a 10-step implementation plan that included things like updating your policies and procedures, talking to your board and so on and so forth. So this is a high-level overview of that. We just don't have time to go over more in this Compliance Clip that's supposed to be three to five minutes. And I'm sure I'm already over that at this point, but if you did want to take a deeper dive into these changes, our Fall 2024 Quarterly Compliance Update Part II is an entire half an hour that's focused on what you need to do for these changes. Specifically, we designed this program in our Fall 2024 Quarterly Compliance Update to be focused on the managers or compliance professionals who are responsible for making the change in your organization. So it's not designed for tellers or new account staff or anybody actually placing a hold or even really reviewing the hold. It's for those who are responsible for managing the program and rolling out the change in training staff. We actually have a training manual you can use to train your staff. And so our Fall 2024 Quarterly Compliance Update is designed specifically for those who are responsible for implementing this change in your organization.
So that's really it for this Compliance Clip.