The FDIC has adopted a final rule extending the Transaction Account Guarantee (TAG) program for six months, from July 1, 2010 through December 31, 2010. Under the TAG program, customers of participating insured depository institutions are provided full coverage on qualifying transaction accounts.
FDIC Chairman Sheila Bair said: “While I believe that the TAG program has proven to be critical to ensuring our financial system’s stability, it was established as a temporary program. Ultimately, it should be up to Congress to determine our insurance limits. Adoption of this final rule allows the opportunity for Congress to conclude its current deliberations relative to this program.”
The final rule, adopted after a public comment period, is almost identical to the interim rule adopted on April 13, 2010. The rule requires that interest rates on qualifying NOW accounts offered by banks participating in the program be reduced to 0.25 percent from 0.5 percent. It requires TAG assessment reporting based on average daily account balances but makes no changes to the assessment rates for participating institutions. The rule also provides for an additional extension of the program, without further rulemaking, for a period of time not to exceed December 31, 2011.
See the FDIC chapter of The Gold Book for further details on the TAG program and FDIC coverage in general.
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New Federal Reserve rules provide important protections for the purchase and use of gift cards. The final rules under Regulation E that implement the Credit CARD Act of 2009, restrict the fees and expiration dates applicable to gift cards and apply to gift cards sold on or after August 22, 2010.
Content on this topic has been added to The Gold Book.
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Last month the IOLA Fund amended 21 NYCRR Section 7000.9(b)(1) to revise one of the IOLA interest rate options. Institutions may pay the greater of 60% of the Federal Funds Rate or 1% on IOLA’s. This is a change to one of the interest rate options an institution may choose for paying interest on IOLA’s, which are NOW accounts. The 1% is a floor rate.
This rate change is effective April 7, 2010. Go to www.IOLA.org, go to recent news on the right and go to the bottom and click on trustees regulations. There you will be able to pull up the 13 page regulation and find section 7000.9(a) and (b). The rates you may offer on IOLAs can be either under (a) or (b), your choice.
See the IOLA section of The Gold Book for updated material.
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The Federal Financial Institutions Examination Council (FFIEC) today released the revised Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual. The revised manual reflects the ongoing commitment of the federal and state banking agencies to provide current and consistent guidance on risk-based policies, procedures, and processes for banking organizations to comply with the Bank Secrecy Act and safeguard operations from money laundering and terrorist financing. The 2010 version further clarifies supervisory expectations since the August 24, 2007, update. The revisions again draw upon comment from the banking industry and examination staff.
The Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, and State Liaison Committee revised the manual in collaboration with the Financial Crimes Enforcement Network, the administrator of the Bank Secrecy Act, and the Office of Foreign Assets Control.
Revisions were made throughout the manual. The sections of the manual with more significant updates are again noted in the table of contents.
The manual is located on the FFIEC BSA/AML InfoBase at: http://www.ffiec.gov/bsa_aml_infobase/default.htm. Banks and credit unions should direct questions about the manual to their primary federal regulator.
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On April 13, 2010, the FDIC adopted an interim final rule extending the Transaction Account Guarantee (TAG) program through December 31, 2010 for institutions participating in the program. Institutions that wish to opt out of the TAG extension must submit a request to opt out on or before April 30, 201o.
The FDIC Board of Directors has the authority to grant an additional 12-month extension of the program, through December 31, 2011, without further rulemaking, if it determines that continuing economic difficulties warrant such extension.
The maximum interest rate limit for NOW accounts guaranteed under the TAG program will be 0.25 percent, effective July 1, 2010.
Financial institutions currently participating in the TAG program should review its disclosures and modify them as necessary to ensure that they will be accurate after June 30, 2010.
This topic is further addressed in the Standard Maximum Deposit Insurance section of The Gold Book.
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The final rule will enable consumers to limit the costs of overdraft services by providing consumers a choice regarding their institution’s payment of overdrafts for ATM and one time debit card transactions. Consumers will also be provided a clear disclosure of the fees and terms associated with the institution’s overdraft service.
Opt-In. The final rule requires consumers to opt in, or affirmatively consent, to the institutions’ overdraft service for ATM and one time debit card transactions, before overdraft fees may be assessed on the account. The rule also provides consumers an ongoing right to revoke consent.
Consumers Covered. The opt-in right applies to all consumers, including existing account holders.
Conditioning the Opt-In. The final rule prohibits financial institutions from tying the overdraft payment of overdrafts for check and other transactions to the consumer opting into the overdraft service for ATM and one time debit card transactions.
Same Account Terms, Conditions and Features. The final rule requires institutions to provide consumers who do not opt in with the same account terms, conditions and features, including price, as provided to consumers who do opt in.
Mandatory Compliance Date. The mandatory compliance date is July 1, 2010.
The Gold Book has been updated for these new rules. See Bounce Protection and Reg E notice requirements for additional details and requirements.
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The Federal Reserve Banks has completed the reduction in paper check processing infrastructure that was begun in late 2003. With the discontinuation of paper check processing at the Atlanta office on Friday, Feb. 26, 2010, all paper check processing is now handled at the Cleveland office. The Atlanta office serves as the Reserve Banks’ processing location for electronic check processing.
“The movement to a single paper check processing site is recognition of the industry’s success in moving to more efficient electronic solutions for clearing checks,” said Patrick K. Barron, first vice president of the Federal Reserve Bank of Atlanta and Retail Payments Office director. “The changes we have implemented to our paper check infrastructure position us well to continue to meet the needs of the nation’s payments system. At the same time, they have been difficult for our organization as we have been required to reduce our staff.”
Since late 2003, the Reserve Banks have reduced the number of locations where paper checks are processed from 45 offices to a single site in Cleveland. These changes were made in response to the significant rate of adoption of Check 21-enabled services as well as the shift away from the use of paper checks and toward the much greater use of electronic payments.
The implementation of the Check Clearing for the 21st Century Act in October, 2004, significantly reduced the number of check items collected in paper form throughout the industry. At the time Check 21 went into effect, 100 percent of the items processed by the Reserve Banks were in paper form. Today, almost 99 percent are processed as images. As one of the nation’s largest inter-bank processors of electronic check transactions, the Federal Reserve will continue to play an important role in the evolution of the nation’s payments system.
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The Federal Reserve Board has approved amendments to Appendix A of Regulation CC that reflect the restructuring of the Federal Reserve Banks’ check-processing operations.
Appendix A provides a routing symbol guide that helps depository institutions determine the maximum permissible hold periods for most deposited checks.
On February 27, 2010, the Reserve Banks will transfer the check-processing operations of the head office of the Federal Reserve Bank of Atlanta to the head office of the Federal Reserve Bank of Cleveland. To ensure that the information in Appendix A accurately describes the structure of check-processing operations within the Federal Reserve System, the final rule deletes the reference in Appendix A to the Atlanta head office and reassigns the routing numbers listed thereunder to the Cleveland head office.
To coincide with the effective date of the underlying check processing changes, the amendments are effective February 27, 2010. At that time, there will only be a single check-processing region for purposes of Regulation CC and there will no longer be any checks that are nonlocal.
Funds availability is discussed in-depth in The Gold Book.
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The Federal Reserve Board recently announced the annual indexing of the reserve requirement exemption amount and of the low reserve tranche for 2010. These amounts are used in the calculation of reserve requirements of depository institutions. The Board also announced the annual indexing of the nonexempt deposit cutoff level and the reduced reporting limit that will be used to determine deposit reporting panels effective 2010.
See sub-chapter Reserve Requirements for updated information.
The Federal Reserve Board announced final rules prohibiting institutions from charging fees for overdrafts on ATM and one-time debit card transactions.
The final rules will enable consumers to limit the costs of overdraft services by providing consumers a choice regarding their institution’s payment of overdrafts for ATM and one-time debit card transactions. Financial institutions will be required to provide a clear disclosure of the fees and terms associated with the institutions’ overdraft service.
Consumers may opt in or affirmatively consent, to the institution’s overdraft service for ATM and one-time debit card transactions, before overdraft fees may be assessed on the account. The rule also provides consumers an ongoing right to revoke consent.
For further information, including the mandatory compliance date, click here.