Q: The bank offers a service that allows funding new accounts through an ACH transfer authorized from the bank. For example, the Customer is opening a new account at Bank B and has an existing account at Bank A. Our service allows the customer to authorize Bank B (us) to debit Bank A when funding a newly established account. Must our bank make these funds available within two business days under Regulation CC? We are concerned with fraudulent funding that Bank A may have the right to revoke from us, after the customer-funded their new account and withdraws the funds.
- The funding of the new account is an ACH debit, instead of credit, under Regulation CC; and therefore, is not covered by the Regulation. Accordingly, the funds availability for this type of ACH transfer is governed by the bank account agreement with Bank A, which can be delayed for a reasonable amount of time, until the bank can determine that the transfer was not fraudulent.
Regulation CC, § 229.10(b), requires making an electronic payment available for withdrawal within two business days after receiving the funds. Additionally, § 229.2(p), defines electronic payment to mean, in part, “an ACH credit transfer.” And § 229.2(b), defines an ACH to mean, in part, a facility that processes debit and credit transfers.
Further, the commentary to § 229.2(b), clarifies that in an ACH credit transfer, the originator orders that its account be debited and another account credited. In an ACH debit transfer, the originator, with prior authorization, orders another account to be debited and the originator’s account to be credited. In the question, the originator is indeed ordering another account debited and the originator’s account credited. Accordingly, the originator is making an ACH debit transfer, which is not an electronic payment under Regulation CC; and therefore, is not subject to the two-day funds’ availability requirement.
Electronic payments—(1) In general. A bank shall make funds received for deposit in an account by an electronic payment available for withdrawal not later than the business day after the banking day on which the bank received the electronic payment. Regulation CC, § 229.10(b), https://www.ecfr.gov/cgi-bin/text-idx?SID=1b93d21e8747bf42176b8d0016c97f43&mc=true&node=se12.3.229_110&rgn=div8
Electronic payment means a wire transfer or an [ACH credit] transfer. Regulation CC, § 229.2(p), https://www.ecfr.gov/cgi-bin/text-idx?SID=1b93d21e8747bf42176b8d0016c97f43&mc=true&node=se12.3.229_12&rgn=div8
Automated clearinghouse or ACH means a facility that processes debit and credit transfers under rules established by a Federal Reserve Bank operating circular on automated clearinghouse items or under rules of an automated clearinghouse association. Regulation CC, § 229.2(b), https://www.ecfr.gov/cgi-bin/text-idx?SID=c01c9a69022b2017f50ff88b61b34147&mc=true&node=se12.3.229_12&rgn=div8
The reference to “debit and credit transfers” does not refer to the corresponding debit and credit entries that are part of the same transaction, but to different kinds of ACH payments. In an ACH credit transfer, the originator orders that its account be debited and another account credited. In an ACH debit transfer, the originator, with prior authorization, orders another account to be debited and the originator’s account to be credited. Appendix E to Part 229—Commentary C2, https://www.ecfr.gov/cgi-bin/text-idx?SID=1b93d21e8747bf42176b8d0016c97f43&mc=true&node=ap12.3.229.0000_0nbspnbspnbsp.e&rgn=div9
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