PREP Guide - Regulatory Environment - Reg CC: Subpart B and Subpart C

Question 2

Subpart B - Funds Availability: Next Day

What is the general rule for next day availability of funds deposited at a depositary bank?

Answer 2

Funds deposited shall be made available for withdrawal not later than the business day after the banking day of deposit

This applies to cash deposits made in person, electronic payments, and certain check deposits.

Question 3

Subpart B - Funds Availability: Next Day

What types of deposits qualify for next day availability?

Answer 3

• Cash deposits made in person at the depositary bank
• Electronic payments
• Certain check deposits including:
  
  • Check drawn on the Treasury of the United States
  • U.S. Postal Service money order
  • Check drawn on a Federal Reserve bank or Federal Home Loan bank
  • Check drawn by a state or a unit of general local government
  • Cashier’s, certified, or teller’s check

For detailed dollar amounts, refer to the Federal Register.

Question 4

Subpart B - Funds Availability: Next Day

What is the lesser amount for checks deposited at the same depositary bank that are not subject to next-day availability?

Answer 4

The lesser of:
* $225 (or adjusted for inflation every 5 years, rounded to nearest multiple of $25)
* Aggregate amount deposited on one banking day to all accounts by check not subject to next-day availability

Effective July 1, 2025, the amount will be $275.

Question 5

Subpart B - Funds Availability: Next Day

What will impact all depository institutions according to Subpart B?

Answer 5

Adjustments to dollar amounts and changes to related disclosures

These changes will affect institutions of all asset sizes.

Question 6

Subpart B - Funds Availability: Next Day

How often will updates regarding Subpart B be posted?

Answer 6

At least one (1) year before the effective date

This ensures that institutions have time to comply with the new requirements.

Question 7

Subpart B - Funds Availability

What is the maximum time for funds availability after depositing checks in person?

Answer 7

Funds must be available for withdrawal no later than the second business day after deposit.

Question 8

Subpart B - Funds Availability

What type of bank is responsible for making funds available?

Answer 8

Depositary bank.

Question 9

Subpart B - Funds Availability

Fill in the blank: For checks deposited in person, the depositary bank shall make funds available for withdrawal no later than _______.

Answer 9

second business day after the banking day on which checks deposited in person.

Question 10

Subpart B - Funds Availability

True or False: Funds are available for withdrawal immediately after depositing checks in person.

Answer 10

False.

Question 11

Subpart B - Funds Availability: EFA - Extension of Schedule

What is the maximum time frame for a deposit at nonproprietary ATMs to have funds available for withdrawal?

Answer 11

No later than the fifth business day after the banking day on which checks were deposited.

Question 12

Subpart B - Funds Availability: EFA - Extension of Schedule

Which territories are included under the mandated extension of the EFA Act?

Answer 12

American Samoa, The Commonwealth of the Northern Mariana Islands, Guam.

Question 13

Subpart B - Funds Availability: EFA - Extension of Schedule

What do the defined terms ‘state’ and ‘United States’ include according to Reg CC?

Answer 13

They include Hawaii, American Samoa, The Commonwealth of the Northern Mariana Islands, and Guam.

Question 14

Subpart B - Funds Availability: EFA - Extension of Schedule

What is the significance of §229.12(e) of Reg CC?

Answer 14

It lists locations eligible for a one-day extension of the availability schedules.

Question 15

Subpart B - Funds Availability: Non-Proprietary ATMs

Fill in the blank: The depositary bank shall make funds available for withdrawal no later than ______.

Answer 15

fifth business day after the banking day on which checks deposited.

Question 16

Subpart B - Funds Availability

True or False: Reg CC applies only to financial institutions in the continental United States.

Answer 16

False.

Question 17

What does Reg CC Subpart B primarily address?

Answer 17

Funds availability.

Question 18

Subpart B - Funds Availability: Disclosures

What form must disclosures be in according to Reg CC Subpart B?

Answer 18

Clear and conspicuous in writing, in a form that the customer may keep

Question 19

Subpart B - Funds Availability: Disclosures

Disclosures must be in a form that customers may keep, except for where?

Answer 19

Locations where employees accept consumer deposits, ATMs, and preprinted deposit slips

Question 20

Subpart B - Funds Availability: Disclosures

What is the requirement for grouping disclosures under Reg CC Subpart B?

Answer 20

Disclosures must be grouped together and not contain unrelated information

Question 21

Subpart B - Funds Availability: Disclosures

How many days before implementing changes to funds-availability policy (when times increase and cause later availability) must written notice be sent?

Answer 21

At least 30 days before

Question 22

Subpart B - Funds Availability: Disclosures

What should happen if a change expedites the availability of funds for the customer?

Answer 22

Notice should be sent no later than 30 days after implementation

Only when availability is sooner than before.

Question 23

Subpart B - Funds Availability: Disclosures

What triggers the notice requirement when it comes to changes in funds-availability policy?

Answer 23

Changes to dollar amounts

Question 24

Subpart B - Funds Availability: Disclosures

Fill in the blank: Depository institutions may provide required notice updates _______.

Answer 24

[electronically, with monthly account statement, etc.]

Question 25

# Subpart B - Funds Availability: Exceptions to next day/two day What are exceptions to next-day or two-day availability under Reg CC Subpart B?

Answer 25

Exceptions may include: * Deposits to new accounts during first 30 days * Large deposits * Certain redeposited checks * Accounts with repeated overdrafts * Reasonable cause to doubt collectability * Emergency conditions

Question 26

# Subpart B - Funds Availability: Exceptions to next day/two day What is the time frame for new account deposits to be considered under exceptions?

Answer 26

During the first 30 days after account established

Question 27

# Subpart B - Funds Availability: Exceptions to next day/two day True or False: Conditions defining large deposits under Reg CC Subpart B exceptions include all deposits made for a clients account in a single banking day.

Answer 27

True ## Footnote May apply to aggregate deposits to all customer accounts

Question 28

# Subpart B - Funds Availability: Exceptions to next day/two day What characterizes an account with repeated overdrafts?

Answer 28

Repeatedly overdrawn for a period of six months * Negative 2 days of $5,525 or more OR * Negative any amount 6 days

Question 29

# Subpart B - Funds Availability: Exceptions to next day/two day What are the criteria for an account to be considered repeatedly overdrawn?

Answer 29

Either: * Six or more banking days with negative balance in six months * Two or more banking days with negative balance of $5,525 or more in six months

Question 30

# Subpart B - Funds Availability: Exceptions to next day/two day What is the updated threshold for negative balances effective July 1, 2025?

Answer 30

$6,725 ## Footnote May not need to know this for the test

Question 31

# Subpart B - Funds Availability: Exceptions to next day/two day What does 'reasonable cause to doubt collectability' refer to?

Answer 31

Facts that would cause a reasonable person to believe check is uncollectible

Question 32

# Subpart B - Funds Availability: Exceptions to next day/two day What are some examples of emergency conditions that may affect funds availability?

Answer 32

Examples include: * Interruption of communications, computers, other equipment * Suspension of payments by another bank * War or other emergency conditions beyond bank’s control

Question 33

# Subpart B - Funds Availability: Exceptions to next day/two day What aspect of funds availability is not addressed in Subpart B?

Answer 33

RDC deposits are governed under agreement(s) with the depository institution: customer, account, and/or RDC agreements

Question 34

What does Subpart C cover?

Answer 34

Collection of Checks including requirements for each bank in the collection process and specific warranties

Question 35

# Subpart C – Collection of Checks Are electronic checks subject to Subpart C?

Answer 35

Yes, electronic checks and electronic returned checks are subject to this subpart as if they were checks or returned checks, unless specified otherwise

Question 36

# Subpart C – Collection of Checks How can a bank satisfy the requirement to provide information in writing?

Answer 36

By providing the information electronically if the receiving bank agrees

Question 37

# Subpart C – Collection of Checks What can a paying bank do if it needs to return a check?

Answer 37

May send a returned check to depositary bank or to any other bank agreeing to handle the returned check

Question 38

# Subpart C – Collection of Checks What happens if a paying bank cannot identify the depositary bank?

Answer 38

May send the returned check to any bank that handled the check for forward collection. ## Footnote Must advise that it is unable to identify the depositary bank

Question 39

# Subpart C – Collection of Checks Do expeditious return requirements apply if the paying bank cannot identify the depositary bank?

Answer 39

No, expeditious return requirements do not apply in this case

Question 40

# Subpart C – Collection of Checks What must a paying bank do if it determines not to pay a check?

Answer 40

Expeditious manner: Not later than 2:00 p.m. on the 2nd business day following the banking day on which the check was presented ## Footnote Such that check would normally be received by depositary bank

Question 41

# Subpart C – Collection of Checks What must be indicated on the front of a returned check?

Answer 41

That it is a return and the reason for return

Question 42

# Subpart C – Collection of Checks What additional information must be included when returning a substitute check or an electronic returned check?

Answer 42

Information such that it would be retained on any subsequent substitute check

Question 43

# Subpart C – Collection of Checks: Notice In Lieu Of Return What is a Notice In Lieu Of Return?

Answer 43

A notice sent by the paying bank if the check is unavailable for return.

Question 44

# Subpart C – Collection of Checks: Notice In Lieu Of Return What may the paying bank send if the check is unavailable for return?

Answer 44

* Sufficient copy of the front and back of the returned check. * Written notice of nonpayment containing the information

Question 45

# Subpart C – Collection of Checks: Notice In Lieu Of Return What must a sufficient copy or notice clearly state?

Answer 45

It constitutes notice in lieu of return.

Question 46

# Subpart C – Collection of Checks: Notice In Lieu Of Return How is a notice in lieu of return treated in regards to expeditious return requirements?

Answer 46

Treated as a returned check subject to the expeditious return requirements.

Question 47

# Subpart C – Collection of Checks: Notice In Lieu Of Return What is a common term used to refer to a notice in lieu of return?

Answer 47

May be referred to as a 'sorry' document.

Question 48

# Subpart C – Collection of Checks: Notice In Lieu Of Return What does the paying bank warrant when sending a notice in lieu of return?

Answer 48

That the check has not and will not be returned.

Question 49

# Subpart C – Collection of Checks: Reliance on Routing Number When a paying bank needs to return a check can they rely solely on the routing number on the endorsement on the back of the check provided by the depositary bank?

Answer 49

Yes, no further investigation is needed if the routing number is provided by the depositary bank. ## Footnote Simplifies the process for the paying bank

Question 50

# Subpart C – Collection of Checks: Notice of Non-Payment When must a paying bank provide a notice of non-payment?

Answer 50

Must provide notice of nonpayment to depositary bank by 2:00 p.m. (local time) on 2nd business day following the banking day on which check was presented.

Question 51

# Subpart C – Collection of Checks: Notice of Non-Payment By what means may a paying bank provide notice of nonpayment?

Answer 51

By any reasonable means including the returned check, phone, electronic communication as long as it meets the timing requirement.

Question 52

# Subpart C – Collection of Checks: Notice of Non-Payment What information must be included in the notice of nonpayment?

Answer 52

* Information from check's MICR line when check was received by paying bank * Name of the payee(s) * Amount * Date of depositary bank indorsement * Bank name * Routing number * Trace or sequence number associated with depositary bank’s indorsement * Reason for nonpayment

Question 53

# Subpart C – Collection of Checks: Notice of Non-Payment What information is missing from the list below that must be included in the notice of nonpayment? * Information from check's MICR line when check was received by paying bank * Name of the payee(s) * Amount * Date of depositary bank indorsement * Trace or sequence number associated with depositary bank’s indorsement * Reason for nonpayment

Answer 53

* Bank name * Routing number

Question 54

# Subpart C – Collection of Checks: Notice of Non-Payment What is a Notice of Non-Payment?

Answer 54

Requirement for paying banks when they decide not to honor a check of **$5,000 or more** that informs the depositary bank that the check will not be paid, allowing the depositary bank to notify its customer (the depositor) and take appropriate action.

Question 55

# Subpart C – Collection of Checks: Notice of Non-Payment What dollar amount on a check requires a paying bank to provide a Notice of Non-Payment if they decide not to honor that check?

Answer 55

$5,000 or more

Question 56

# Subpart C – Collection of Checks: Notice of Non-Payment True or False: The Date of depositary bank indorsement is not required in a notice of non-payment.

Answer 56

False

Question 57

# Subpart C – Collection of Checks: Notice of Non-Payment True or False: The reason for non-payment is required on a notice of non-payment.

Answer 57

True

Question 59

# Subpart C – Collection of Checks: Warranties and Indemnities What does each bank warrant when transferring or presenting an electronic check?

Answer 59

Each bank warrants that: * Electronic image accurately represents all information on front and back of original check at time of truncation * Electronic information includes an accurate record of all MICR line information required for substitute check and amount of the check * No person will be charged for an electronic check or electronic returned check in a way that leads to double payment.

Question 60

# Subpart C – Collection of Checks: Warranties and Indemnities What is the no double-debit warranty?

Answer 60

It is a warranty that ensures no person will be asked to make payment based on a check it has already paid.

Question 61

# Subpart C – Collection of Checks: Warranties and Indemnities To whom do the warranties extend if the transfer is for collection or presentment?

Answer 61

Warranties extend to: * Transferee bank * Any subsequent collecting bank * Paying bank * Drawer

Question 62

# Subpart C – Collection of Checks: Warranties and Indemnities To whom do the warranties extend if the transfer is for return?

Answer 62

Warranties extend to: * Transferee returning bank * Any subsequent returning bank * Depositary bank * Owner

Question 63

# Subpart C – Collection of Checks: Warranties and Indemnities Fill in the blank: Each bank that transfers or presents an electronic check warrants that the electronic image accurately represents all information on the _______ and _______ of the original check at time of truncation.

Answer 63

[front] and [back]

Question 64

# Subpart C – Collection of Checks: Warranties and Indemnities True or False: The warranties provided by banks only apply to the original check.

Answer 64

False

Question 65

# Subpart C – Collection of Checks: Warranties and Indemnities What information must the electronic record include for it to be valid?

Answer 65

An accurate record of all MICR line information required for substitute check and amount of the check.

Question 66

# Subpart C – Collection of Checks: Warranties RCCs What does the bank that transfers or presents a remotely created check warrant?

Answer 66

The bank warrants to the transferee bank, any subsequent collecting bank, and the paying bank that the person on whose account the check is drawn: * Authorized issuance of the check * In amount stated on check and to payee stated on check ## Footnote This warranty ensures that the check is valid and can be processed without issues.

Question 67

# Subpart C – Collection of Checks: Warranties RCCs What can the warranting bank do if the paying bank asserts a claim for breach of warranty?

Answer 67

The warranting bank may defend by proving the paying bank’s customer is precluded from asserting the claim under UCC §4–406. ## Footnote UCC §4–406 outlines the customer's duty to discover and report unauthorized signatures or alterations.

Question 68

# Subpart C – Collection of Checks: Warranties RCCs Fill in the blank: The bank that transfers or presents a remotely created check warrants that the check is in the amount stated on the check and to the _______.

Answer 68

[payee stated on check]

Question 69

# Subpart C – Collection of Checks: Warranties RCCs True or False: The paying bank can assert a claim for breach of warranty without any limitations.

Answer 69

False ## Footnote The paying bank's ability to assert a claim is subject to the provisions of UCC §4–406.

Question 70

# Subpart C – Collection of Checks: Warranties RCCs What section of the UCC outlines the customer's duty to discover and report unauthorized signatures or alterations?

Answer 70

UCC §4–406 ## Footnote This section is crucial for understanding the responsibilities of customers regarding unauthorized checks.

Question 71

# Subpart C – Collection of Checks: Warranties RCCs UCC §4–406

Answer 71

CUSTOMER's DUTY TO DISCOVER AND REPORT UNAUTHORIZED SIGNATURE OR ALTERATION

Question 72

# Subpart C – Collection of Checks: UCC §4–406 What is a bank's responsibility regarding account statements?

Answer 72

Banks must provide a statement of account showing items paid and sufficient details for identification. ## Footnote Details include item number, amount, and payment date.

Question 73

# Subpart C – Collection of Checks: UCC §4–406 For how long must banks retain items or make legible copies available?

Answer 73

Up to seven years.

Question 74

# Subpart C – Collection of Checks: UCC §4–406 What is the customer's duty regarding unauthorized payments?

Answer 74

Customers must promptly review the statement or items for unauthorized payments.

Question 75

# Subpart C – Collection of Checks: UCC §4–406 What must customers do if they discover unauthorized payments?

Answer 75

Notify the bank promptly.

Question 76

# Subpart C – Collection of Checks: UCC §4–406 What are the consequences of failing to notify the bank about unauthorized signatures?

Answer 76

Customers lose the right to contest unauthorized signatures or alterations.

Question 77

# Subpart C – Collection of Checks: UCC §4–406 True or False: Customers can contest unauthorized payments if they fail to notify the bank.

Answer 77

False.

Question 78

# Subpart C – Collection of Checks: UCC §4–406 What happens if a customer fails to report unauthorized payments within a reasonable time?

Answer 78

They may lose the right to contest subsequent unauthorized payments by the same wrongdoer.

Question 79

# Subpart C – Collection of Checks: UCC §4–406 What is the maximum time customers have to review their statements?

Answer 79

Up to 30 days.

Question 80

# Subpart C – Collection of Checks: UCC §4–406 What may happen if a bank fails to exercise ordinary care?

Answer 80

Liability may be allocated between the customer and the bank.

Question 81

# Subpart C – Collection of Checks: UCC §4–406 Can a customer assert claims if the bank acted without good faith?

Answer 81

Yes.

Question 82

# Subpart C – Collection of Checks: UCC §4–406 Within what time frame must customers report unauthorized signatures or alterations?

Answer 82

Within one year of receiving their statement or items.

Question 83

# Subpart C – Collection of Checks: UCC §4–406 Failure to report unauthorized signatures within one year results in what consequence?

Answer 83

Bars any claims against the bank.

Question 84

# Subpart C – Collection of Checks: Settlement Warranties What must banks guarantee regarding the Settlement Amount?

Answer 84

The total value of checks must match the settlement amount they demand ## Footnote This ensures that the bank is accountable for the accuracy of the transaction amount.

Question 85

# Subpart C – Collection of Checks: Settlement Warranties What must accompany the checks in relation to the Settlement Amount?

Answer 85

Accompanying information must precisely reflect the total value of checks or returned checks transferred ## Footnote This ensures transparency and accuracy in the transaction.

Question 86

# Subpart C – Collection of Checks: Settlement Warranties What does the Encoding Warranty ensure?

Answer 86

Banks ensure that any information encoded after the check's issuance is accurate ## Footnote This includes data encoded on substitute checks.

Question 87

# Subpart C – Collection of Checks: Settlement Warranties True or False: The Encoding Warranty applies only to original checks.

Answer 87

False ## Footnote It also applies to substitute checks.

Question 88

# Subpart C – Collection of Checks: Settlement Warranties What right does a bank have if it settles for an amount greater than the checks' total value?

Answer 88

It has the right to offset the excess amount against future settlements ## Footnote This allows the bank to recover excess payments in subsequent transactions.

Question 89

# Subpart C – Collection of Checks: Returned Check Warranties What is the midnight deadline for returning a check according to the UCC?

Answer 89

The check must be returned within the Uniform Commercial Code (UCC) midnight deadline.

Question 90

# Subpart C – Collection of Checks: Returned Check Warranties What is one responsibility of the paying bank regarding returned checks?

Answer 90

The paying bank is authorized to return the check.

Question 91

# Subpart C – Collection of Checks: Returned Check Warranties What warranty must the paying bank ensure about the check?

Answer 91

The check was not materially altered.

Question 92

# Subpart C – Collection of Checks: Returned Check Warranties True or False: A notice of nonpayment can be sent even if the check is not physically returned.

Answer 92

True

Question 93

# Subpart C – Collection of Checks: Returned Check Warranties What is a requirement for the check in cases of notice in lieu of return?

Answer 93

The check has not and will not be physically returned.

Question 94

# Subpart C – Collection of Checks: Returned Check Warranties What must the paying bank guarantee about the check regarding the UCC midnight deadline?

Answer 94

The check is returned (or will be returned) within the UCC midnight deadline.

Question 95

# Subpart C – Collection of Checks: Returned Check Warranties What authorization must the paying bank have to send a notice of nonpayment?

Answer 95

Authorized to send the notice of nonpayment.

Question 96

# Subpart C – Collection of Checks: Returned Check Warranties What must the paying bank ensure about the check when sending a notice of nonpayment?

Answer 96

The check has not been materially altered.

Question 97

# Subpart C – Collection of Checks: Returned Check Warranties What type of money orders are excluded from Returned check/ notice of non-payment warranties?

Answer 97

- U.S. Postal Service money orders. - Checks drawn on US Treasury - Govt. checks that are not drawn on a bank

Question 98

# SubpartC – Collection of Checks: Remote deposit capture (RDC) Indemnity What is indemnity in the context of Remote Deposit Capture (RDC)?

Answer 98

Indemnity is provided by a depositary bank that accepts deposit of an electronic image or other electronic information related to the original check.

Question 99

# SubpartC – Collection of Checks: Remote deposit capture (RDC) Indemnity What type of bank is considered a truncating bank?

Answer 99

A truncating bank is one that accepts deposit of an electronic image or other electronic information related to the original check and does not receive the original check.

Question 100

# SubpartC – Collection of Checks: Remote deposit capture (RDC) Indemnity What must a depositary bank receive to provide indemnity?

Answer 100

Settlement or other consideration for an electronic check or substitute check related to the original check.

Question 101

# SubpartC – Collection of Checks: Remote deposit capture (RDC) Indemnity Can a depositary bank that does not receive a return of the check unpaid provide indemnity?

Answer 101

Yes, it can provide indemnity.

Question 102

# SubpartC – Collection of Checks: Remote deposit capture (RDC) Indemnity Who receives indemnity from the depositary bank?

Answer 102

The depositary bank that accepted the original check.

Question 103

# SubpartC – Collection of Checks: Remote deposit capture (RDC) Indemnity Under what condition does a depositary bank incur a loss?

Answer 103

If the loss is due to the check having already been paid.

Question 104

# SubpartC – Collection of Checks: Remote deposit capture (RDC) Indemnity What is a requirement for the original check regarding restrictive indorsement?

Answer 104

The original check must not have a restrictive indorsement that is inconsistent with the means of deposit.

Question 105

# SubpartC – Collection of Checks: Remote deposit capture (RDC) Indemnity Fill in the blank: A paper deposit bank may not make an indemnity claim if the original check it accepted for deposit bore a _______ inconsistent with the means of deposit.

Answer 105

restrictive indorsement

Question 106

# SubpartC – Collection of Checks: Indemnity for ECI What is indemnity in the context of electronically-created items (ECI)?

Answer 106

Indemnity is provided by each bank that transfers or presents an ECI and receives a settlement or consideration for it. ## Footnote This indemnity protects against specific losses related to ECIs.

Question 107

# SubpartC – Collection of Checks: Indemnity for ECI Who receives indemnity in the case of ECI transactions?

Answer 107

Indemnity is provided to: * Transferee bank(s) * Any subsequent collecting bank * The paying bank * Any subsequent returning bank ## Footnote These parties are protected against losses due to issues with the ECI.

Question 108

# SubpartC – Collection of Checks: Indemnity for ECI What type of losses does the indemnity for ECI cover?

Answer 108

Indemnity covers losses that result from the following facts: * Electronic image or electronic information is not derived from a paper check * Person on whose account the ECI is drawn did not authorize the issuance of the item in the amount or to payee stated on the item * Person receives a transfer, presentment, or return of, or otherwise is charged for an ECI based on an item or check it has already paid. ## Footnote These points highlight the specific situations where indemnity applies.

Question 109

# SubpartC – Collection of Checks: Indemnity for ECI True or False: Indemnity for ECI applies only to the paying bank.

Answer 109

False ## Footnote Indemnity applies to multiple banks involved in the ECI transaction, not just the paying bank.

Question 110

# SubpartC – Collection of Checks: Indemnity for ECI Fill in the blank: Indemnity is provided by each bank that transfers or presents an ECI and receives a _______.

Answer 110

settlement or consideration ## Footnote This highlights the financial transaction aspect of the ECI process.

Question 111

If a tree didn't die,

Answer 111

it's an ECI (Electronically Created Item)