New York

The Board has been requested, in accordance with section 229.20(d) of Regulation CC (12 CFR 229), to determine whether the Expedited Funds Availability Act (the act) and subpart B (and in connection therewith, subpart A) of Regulation CC, preempt the provisions of New York law concerning the availability of funds. This preemption determination addresses the relation of the act and Regulation CC to the New York funds-availability law. (See also the Board’s preemption determination regarding the Uniform Commercial Code, section 4-213(5), pertaining to availability of cash deposits (at 9-660).)

In 1983, the New York State Banking Department, pursuant to section 14-d of the New York Banking Law, issued regulations requiring that funds deposited in an account be made available for withdrawal within specified time periods, and provided certain exceptions to those availability schedules. Part 34 of the New York State Banking Department’s general regulations established time frames within which commercial banks, trust companies, and branches of foreign banks (banks); and savings banks, savings and loan associations, and credit unions (savings institutions) must make funds deposited in customer accounts available for withdrawal.

The Banking Department amended part 34, effective September 1, 1988, generally to exclude accounts covered by Regulation CC from the scope of the state regulation. Part 34.4(a)(2) and (b)(2) of the revised New York rules, however, continue to apply to checks deposited to accounts, as defined in Regulation CC. These provisions require that the proceeds of nonlocal checks payable by a New York institution be made available for withdrawal not later than the start of the fourth business day following deposit, if deposited in a bank, or the fifth business day following deposit, if deposited in a savings institution. The revised regulation also provides that, with respect to savings accounts and time deposits, New York institutions could elect to comply with either the state or federal availability and disclosure requirements.

This preemption determination supersedes the determination issued by the Board on August 18, 1988 (53 Fed. Reg. 32,357 (August 24, 1988)).

The New York law and regulation govern the availability of funds in savings accounts and time deposits, as well as accounts as defined in section 229.2(a) of Regulation CC. The New York law continues to apply to deposits to savings accounts and time deposits that are not accounts under Regulation CC. (Note, however, that under section 229.19(e) of Regulation CC, “Holds on Other Funds,” the federal availability schedules may apply to savings, time, and other accounts not defined as accounts under Regulation CC, in certain circumstances.)

The New York law and regulation apply to items deposited to accounts. Part 34.3(e) defines item as “a check, negotiable order of withdrawal or money order deposited into an account.” The Board interprets the definition of item in New York law to be consistent with the definition of check in Regulation CC (§ 229.2(k)).

The provisions of New York law governing the availability of in-state nonlocal items provide for a shorter hold than is provided under Regulation CC, and supersede the federal availability requirements. With the exception of these provisions, the New York regulation does not apply to deposits to accounts covered by Regulation CC.

Temporary schedule. The time periods for the availability of in-state nonlocal checks, contained in part 34.4(a)(2) and (b)(2), are shorter than the seventh-business-day availability required for nonlocal checks under section 229.11(c) of Regulation CC, although they are not necessarily shorter than the schedules for nonlocal checks set forth in section 229.11(c)(2) and appendix B-1 of Regulation CC. Thus, these state schedules supersede the federal schedule to the extent that they apply to an item payable by a New York bank or savings institution that is defined as a nonlocal check under Regulation CC and the applicable state schedule is less than the applicable schedule specified in section 229.11(c) and appendix B-1.

Permanent schedule. The New York schedule for banks supersedes the Regulation CC requirement in the permanent schedule, effective September 1, 1990, that nonlocal checks be made available for withdrawal by the start of the fifth business day following deposit, to the extent that the in-state checks are defined as nonlocal under Regulation CC, and the Regulation CC schedule for nonlocal checks is not shortened under section 229.12(c)(2) and appendix B-2 of Regulation CC. In addition, the New York schedule for savings institutions supersedes the Regulation CC time-period adjustment for withdrawal by cash or similar means in the permanent schedule, to the extent that the in-state checks are defined as nonlocal under Regulation CC, and the Regulation CC schedule for nonlocal checks is not shortened under section 229.12(c)(2) and appendix B-2.

Exceptions to the availability schedules. New York law provides exceptions to the state availability schedules for large deposits, new accounts, repeated overdrafters, doubtful collectibility, foreign items, and emergency conditions (part 34.4). The state exceptions apply only with respect to deposits of in-state nonlocal checks that are subject to the state availability schedule. For these deposits, the depositary bank may invoke a state exception and place a hold on the deposit up to the federal availability-schedule limit for that type of deposit. Once the federal availability-schedule limit is reached, the depositary bank may further extend the hold under any of the federal exceptions that apply to that deposit. Any time a depositary bank invokes an exception to extend a hold beyond the time periods otherwise permitted by law, it must give notice of the extended hold to its customer in accordance with section 229.13(g) of Regulation CC.

The revised New York regulation does not contain funds-availability disclosure requirements applicable to accounts subject to Regulation CC.