SECTION
229.20—Relation to State Law
A. 229.20(a) In General 1. Several
states have enacted laws that govern when banks in those states must
make funds available to their customers. The EFA Act provides that
any state law in effect on September 1, 1989, that provides that funds
be made available in a shorter period of time than provided in this
regulation, will supersede the time periods in the EFA Act and the
regulation. The conference report on the EFA Act clarifies this provision
by stating that any state law enacted on or before September 1, 1989,
may supersede federal law to the extent that the law relates to the
time funds must be made available for withdrawal (H.R. Rep. No. 261,
100th Cong. 1st Sess. 182 (1987)).
2. Thus, if a state had wished to adopt a law governing
funds availability, it had to have made that law effective on or before
September 1, 1989. Laws adopted after that date do not supersede federal
law, even if they provide for shorter availability periods than are
provided under federal law. If a state that has a law governing funds
availability in effect before September 1, 1989, amended its law after
that date, the amendment would not supersede federal law, but an amendment
deleting a state requirement would be effective.
3. If a state provides for a shorter hold
for a certain category of checks than is provided for under federal
law, that state requirement will supersede the federal provision.
For example, most state laws base some hold periods on whether the
check being deposited is drawn on an in-state or out-of-state bank.
If a state contains more than one check-processing region, the state’s
hold period for in-state checks may be shorter than the federal maximum
hold period for nonlocal checks. Thus, the state schedule would supersede
the federal schedule to the extent that it applies to in-state, nonlocal
checks.
4. The EFA Act also provides that any state law that
provides for availability in a shorter period of time than required
by federal law is applicable to all federally insured institutions
in that state, including federally chartered institutions. If a state
law provides shorter availability only for deposits in accounts in
certain categories of banks, such as commercial banks, the superseding
state law continues to apply only to those categories of banks, rather
than to all federally insured banks in the state.
9-266
1. This paragraph reflects the statutory provision
that other provisions of state law that are inconsistent with federal
law are preempted. Preemption does not require a determination by
the Board to be effective.
9-267
1. This
section describes the standards the Board uses in making determinations
on whether federal law will preempt state laws governing funds availability.
A provision of state law is considered inconsistent with federal law
if it permits a depositary bank to make funds available to a customer
in a longer period of time than the maximum period permitted by the
EFA Act and this regulation. For example, a state law that permits
a hold of four business days or longer for local checks permits a
hold that is longer than that permitted under the EFA Act and this
regulation, and therefore is inconsistent and preempted. State availability
schedules that provide for availability in a shorter period of time
than required under Regulation CC supersede the federal schedule.
2. Under a state law, some categories of deposits
could be available for withdrawal sooner or later than the time required
by this subpart, depending on the composition of the deposit. For
example, the EFA Act and this regulation (section 229.10(c)(1)(vii))
require next-day availability for the first $275 of the aggregate
deposit of local or nonlocal checks on any day, and a state law could
require next-day availability for any check of $200 or less that is
deposited. Under the EFA Act and this regulation, if either one $300 check or
three $100 checks are deposited on a given day, $275 must be made
available for withdrawal on the next business day, and $25 must be
made available in accordance with the local or nonlocal schedule.
Under the state law, however, the two deposits would be subject to
different availability rules. In the first case, none of the proceeds
of the deposit would be subject to next-day availability; in the second
case, the entire proceeds of the deposit would be subject to next-day
availability. In this example, because the state law would, in some
situations, permit a hold longer than the maximum permitted by the
EFA Act, this provision of state law is inconsistent and preempted
in its entirety.
3. In addition to the differences between state and
federal availability schedules, a number of state laws contain exceptions
to the state availability schedules that are different from those
provided under the EFA Act and this regulation. The state exceptions
continue to apply only in those cases where the state schedule is
shorter than or equal to the federal schedule, and then only up to
the limit permitted by the Regulation CC schedule. Where a deposit
is subject to a state exception under a state schedule that is not
preempted by Regulation CC and is also subject to a federal exception,
the hold on the deposit cannot exceed the hold permissible under the
federal exception in accordance with Regulation CC. In such cases,
only one exception notice is required, in accordance with section
229.13(g). This notice need only include the applicable federal exception
as the reason the exception was invoked. For those categories of checks
for which the state schedule is preempted by the federal schedule,
only the federal exceptions may be used.
4. State laws that provide maximum availability periods
for categories of deposits that are not covered by the EFA Act would
not be preempted. Thus, state funds-availability laws that apply to
funds in time and savings deposits are not affected by the EFA Act
or this regulation. In addition, the availability schedules of several
states apply to “items” deposited to an account. The term items may encompass deposits, such as nonnegotiable instruments,
that are not subject to the Regulation CC availability schedules.
Deposits that are not covered by Regulation CC continue to be subject
to the state availability schedules. State laws that provide maximum
availability periods for categories of institutions that are not covered
by the EFA Act would also not be preempted. For example, a state law
that governs money market mutual funds would not be affected by the
EFA Act or this regulation.
5. Generally, state rules governing the disclosure
or notice of availability policies applicable to accounts also are
preempted. Nevertheless, a state law requiring disclosure of funds-availability
policies that apply to deposits other than “accounts,”
such as savings or time deposits, are not inconsistent with the EFA
Act and this subpart. Banks in these states would have to follow the
state disclosure rules for these deposits.
9-268
1. The
Board may issue preemption determinations upon the request of an interested
party in a state. The determinations will relate only to the provisions
of subparts A and B; generally the Board will not issue individual
preemption determinations regarding the relation of state UCC provisions
to the requirements of subpart C.
9-269
1. This provision sets forth the information that
must be included in a request by an interested party for a preemption
determination by the Board.