Introduction: State Funds Availability Laws and Federal Preemption Issues

This section will examine state-law funds availability rules and how those rules relate to Regulation CC. Generally speaking, Regulation CC preempts state rules to the extent the state rules are inconsistent with Regulation CC. But the state rules supersede the federal rules where the state rules require availability of checks in a time frame shorter than the federal availability time frame. Because the federal rules usually do not completely preempt the state’s rules, the rules which ultimately govern are frequently a combination of the federal rules and the state rules.

First, we will look at some of the general principles the Federal Reserve Board has employed in making what are called “preemption determinations.” Preemption determinations are made by the Board at the request of interested parties in a state, and they are intended to clarify the extent to which Regulation CC preempts the state-law and the state law supersedes Regulation CC. The Board has developed a number of rules that it applies in all these determinations, and we will study them. After looking at these general preemption principles, we will look at the preemption determination the Board has made regarding Section 4-213(5) of the Uniform Commercial Code. All 50 states have adopted this section of the Code and, so, the Board has made a single analysis of it—rather than addressing the issue separately for each state. Finally, we will try to determine how the federal and state laws mesh in each state, starting with those for which the Federal Reserve Board has issued a preemption determination.