The Initial Disclosure - To Whom Do You Give It?

Your basic responsibility at the time of account opening, under Regulation CC, is to give the depositor a disclosure of your funds availability policy. However, not all depositors on all accounts are entitled to the disclosure.

Regulation CC only requires that you give the disclosure to holders of “transaction” accounts. [12 CFR 229.17 and .2(a)] Basically, a transaction account is one against which the depositor can write an unlimited number of checks or make an unlimited number of transfers in some other way to third parties. [12 CFR 204.2(e)] The most common examples of transaction accounts are checking accounts, NOW accounts, and share draft accounts. Money market deposit accounts, or MMDAs as they are sometimes called, are not transaction accounts because, although some institutions allow the depositor to write checks against the account or make other third-party transfers, the number of checks or third-party transfers is limited to no more than six preauthorized transfers per month. This restriction makes MMDAs savings deposits rather than transaction accounts. And, of course, regular savings accounts and time deposits are not transaction accounts because they generally do not allow any check writing and restrict third-party transfers.

Although you are only required to give the funds availability policy disclosure to holders of transaction accounts, you are not prohibited from also giving the disclosure to holders of other types of accounts. Some institutions have decided to give the disclosure to all new account holders, whether they are opening transaction accounts or not, to eliminate the possibility of failing to give it in a required situation. Of course, your actual availability policy for nontransaction accounts must match what your disclosure says if you give your disclosure to nontransaction account holders.

In the Regulation CC - Funds Availability Disclosures section, the word “account” will mean only “transaction account.”)

If an account has more than one depositor, you are only required to give the disclosure to one of them. [12 CFR 229.15(c)] Similarly, if a customer is opening more than one account at the same time, and the same funds availability policy applies to all the accounts, you only need to give that customer one disclosure. [12 CFR 229.15(c)] Neither the Regulation nor the Commentary address the issue of whether a depositor opening an account is entitled to the disclosure if the depositor has received the disclosure on an earlier date, either by opening an account at the earlier time or by having received it from you in a mailing. Since the issue is not addressed, we feel the safest approach is to give the disclosure to such a depositor.

Unlike other “disclosure” regulations such as Regulation Z (Truth-in-Lending) and Regulation E (Electronic Funds Transfers), Regulation CC is not limited in coverage to situations involving “consumers.” The disclosure requirements of Regulation CC apply whether the account holder is an individual, a partnership, a corporation, or any other sort of entity (with the exception of a few we’ll list momentarily) so long as the account being opened is a transaction account. And the purpose for opening the account, whether business or personal, does not matter. However, if the account holder is a bank, a savings and loan, a credit union, a mutual savings bank, a savings bank, an office of a “foreign bank,” or the U.S. Treasury, then the disclosure requirements of Regulation CC do not apply, even if the account is a transaction account. [12 CFR 229.2(a)(2)]

(Incidentally, Regulation CC does contain a definition of “consumer account.” How-ever, the term is only used in three circumstances, all of which will be discussed in more detail in Part II of the manual. They are: (1) the requirement that you post a statement of categories and availability periods at locations where deposits to “consumer accounts” are received, Section 229.18(b); (2) the requirement that you send notice of a change in your funds availability policy to holders of “consumer accounts,” Section 229.18(e); and (3) the option to use “calculated availability” on “nonconsumer accounts,” Section 229.19(d). Whether an account is a “consumer account” or not is of no relevance to whether you give the depositor an initial disclosure.