BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.  20551

DIVISION OF CONSUMER
AND COMMUNITY AFFAIRS

CA 11-7

August 15, 2011

TO THE OFFICERS AND MANAGERS IN CHARGE OF CONSUMER AFFAIRS SECTIONS

SUBJECT: Funds Availability and Payment of Interest

The purpose of this letter is to provide information about two provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd Frank Act) that became effective on July 21, 2011. The Dodd-Frank Act revised funds availability requirements and removed restrictions on the payment of interest on demand deposit accounts. Details related to each provision are discussed below.

Funds Availability:

Section 1086 of the Dodd-Frank Act amended the Expedited Funds Availability Act to require depository institutions to make the first $200 of funds deposited into an account by certain checks available for withdrawal on the business day after the banking day the deposit is received. Previously, depository institutions were required to make the first $100 available on the business day after such a deposit.

The Federal Reserve Board (Board) recently proposed revisions to Regulation CC, including the changes described above. See 76 Fed. Reg. 16862 (Mar. 25, 2011). While Regulation CC has not yet been finalized, supervised institutions will nevertheless be expected to comply with applicable statutory requirements.

Payment of Interest on Demand Deposit Accounts:

Section 627 of the Dodd-Frank Act repealed Section 19(i) of the Federal Reserve Act (12 USC 371a) and eliminated the statutory authority under which the Board had established Regulation Q. Regulation Q, which prohibited member banks from paying interest on demand deposit accounts, has been repealed. See 76 Fed. Reg. 42015 (July 18, 2011). Member banks are now able, but are not required, to pay interest on demand deposit accounts. If a member bank decides to pay interest on some or all of its demand deposit accounts after July 21, 2011, it will need to notify affected customers that the account is no longer eligible for full (unlimited) deposit insurance coverage as a noninterest-bearing transaction account.

Please distribute this letter to supervised institutions in your district. If you have any questions, please contact Brian Fink, Supervisory Consumer Financial Services Analyst, (202) 912-7878, or Paul Robin, Manager, Oversight and Policy, at (202) 452-3140.

Sincerely,
(signed)

Sandra F. Braunstein
Director
Division of Consumer and Community Affairs

Attachment: Proposed Rule - Regulation CC (9.52 MB PDF)

Attachment: Regulation Q - Repealed (196 kb PDF)