The Initial Disclosure - In What Form Must it Be?

The disclosure must be in writing, and must be in a form that the depositor can keep. [12 CFR 229.15(a)] (According to the Commentary, you can satisfy these requirements by sending an electronic disclosure that displays the text and is in a form the customer can keep, if the customer agrees to such form of disclosure. Information is in a form the customer can keep if, for example, it can be downloaded or printed. [Commentary, §229.15(a)-1]) The language of the disclosure must be segregated from any other unrelated material you provide to the depositor, although it is permissible to include the disclosure within the same document as other account information. [12 CFR 229.15(a)] If you take this approach, you must be sure the disclosure is segregated from the other language in the document. For example, you might use a separate heading. Regardless of how you present the disclosure, its terms must be clear and conspicuous. [12 CFR 229.15(a)] Within the segregated disclosure itself, you can include language which is not required disclosure material so long as the additional language is related to your funds availability policy. [Commentary, §229.15(a)-2] For example, you could include a sentence telling the depositor that he or she is responsible for any problem with a deposit, such as the return of a deposited check.

Several format rules exist that affect the language you select for your disclosure. First, the regulation requires that you use a specific phrase whenever you disclose when funds will be available for withdrawal. The language is that the funds will be available for withdrawal “on the [number] business day after the day of deposit.” [12 CFR 229.15(b)] So, for example, if a category of deposits made on a Monday would be available for withdrawal on Friday under your policy, and all the days of that week are business days, then you would have to disclose that category of deposits as being available for withdrawal “on the fourth business day after the day of deposit.” (Tuesday is the first business day after the day of deposit; Wednesday is the second; and so forth.) Saying something like, “There will be three intervening business days between the day of deposit and the day the funds are available for withdrawal” is insufficient even though the same message is communicated. You must describe availability using the particular words we quoted, “…on the [number] business day after the day of deposit.”

(We discuss below what might be considered an exception to this format rule—the circumstances when you can disclose that funds will be available within a range of time periods after the day of deposit. But even under that rule, you must use the same general phrasing—the deposit will be available on the “first or second” day after the day of deposit.)

The second format rule has to do with what the Regulation means by “available for withdrawal.” The Regulation says that funds are “available for withdrawal” when they are available for ALL the uses to which the depositor can put actually and finally collected funds under the institution’s account agreement or policies. This includes such things as cash withdrawal, payment of checks drawn on the account, certification of checks drawn on the account, transfers between accounts, and so forth. [12 CFR 229.2(d)] In your disclosure, then, when you are disclosing when funds will be available for withdrawal, you must disclose when they will be available for ALL these purposes, assuming that your account agreement and policies allow for all these uses. For example, you may allow customers to get cash back from check deposits they make, but you might not make the rest of the deposit available to pay checks drawn on the account until the next business day. In this case, you should disclose that the funds are available for withdrawal on the first business day after the day of deposit, even though they are available immediately for cash-withdrawal purposes. The funds are not “available for withdrawal,” as that term is used in the Regulation, until the later time, when they have been made available not just for cash-withdrawal purposes, but for all the uses to which your customers can put their account funds.

The third format rule is that your disclosure should reflect what your availability policy is in most cases and should not reflect every possible availability time frame for a particular category of deposit. [12 CFR 229.16(a)] For example, you may make most local checks available for withdrawal on the second business day after the day of deposit, but occasionally a local check will be available on the first business day. Your disclosure should state that local checks will be available on the second business day, since that is the availability of most local checks. You need not mention that they will occasionally be available more quickly. However, if some customers are subject to longer availability time frames than what your usual policy imposes, those customers must receive a disclosure showing the longer time frames to which their deposits will be subject. [Commentary, §229.16(a)-2] If this situation exists—where you have a policy that applies in most cases, but some depositors are subject to longer availability—you would probably need two disclosure forms. One would disclose your usual policy, and the other would disclose the longer availability to which some depositors are subject.