What changed between these versions
A substantive restructuring and expansion. v2 removes specific provisions for striking certain check types from expedited availability, replacing them with a new framework allowing temporary holds during material fraud losses. It also significantly expands the details for fraud exceptions for checks and wire transfers, adding specific delayed availability periods and additional notice requirements. Furthermore, v2 introduces new sections mandating a study on funds availability and setting rulemaking deadlines.
Overview
Extensive changes throughout the bill, including significant restructuring and new sections. · v2 restructures the approach to check availability, expands the scope and procedural details of fraud exceptions for checks and wire transfers, and adds new mandates for studies and rulemaking.
The most significant change is the complete overhaul of Section 2, which in v1 aimed to permanently remove specific check types from expedited availability, but in v2 establishes a new, temporary mechanism for delaying funds for certain checks during times of material fraud losses. Additionally, v2 significantly expands the fraud exceptions for both checks and wire transfers (Sections 3 and 4), introducing specific initial and extended hold periods and additional notice provisions that were not present in v1. Finally, v2 adds new sections mandating a study on funds availability and setting a delayed effective date tied to rulemaking.
Major additions
This new subsection establishes a framework for the Board and the Director of the Bureau of Consumer Financial Protection to determine if certain classes of checks (specifically those previously described in 603(a)(2)(A) and (F)) should have funds available to the same extent as local checks. This determination can only be made if the Treasury or depository institutions are experiencing material losses from fraud related to those checks, and the application of this rule is temporary, not exceeding one year.
This creates a new, flexible mechanism for temporarily adjusting funds availability for specific check types in response to fraud, rather than permanently removing them from expedited availability as v1 proposed. It provides a tool for regulators to respond to evolving fraud risks while considering consumer impact.
Subparagraph (B) mandates that regulations for the check fraud exception prescribe initial (up to 10 days) and extended (up to 45 days) hold periods, allowing for different timelines based on dollar amounts and other criteria. Subparagraph (C) permits regulations to provide for additional notifications to relevant parties beyond existing requirements.
These additions provide specific procedural details and timelines for implementing the check fraud exception, which were absent in v1. This gives depository institutions clearer guidance on how to apply holds and communicate with customers, potentially standardizing the process and offering more transparency.
Paragraph (2) (new) mandates that regulations for the wire transfer fraud exception prescribe initial (up to 10 days) and extended (up to 45 days) hold periods, allowing for different timelines based on dollar amounts and other criteria. Paragraph (3) (new) permits regulations to provide for additional notifications to relevant parties beyond what is otherwise required.
Similar to the check fraud exception, these additions provide specific procedural details and timelines for implementing the wire transfer fraud exception, which were absent in v1. This aims to standardize the application of holds and improve communication regarding potentially fraudulent wire transfers.
This new section mandates the Comptroller General of the United States to conduct a study on various aspects of funds availability, fraud safeguards, actual hold periods by depository institutions, investigation times for nonpayment, appropriateness of current time periods/amount limits, and administrative/legislative reform options to mitigate payment fraud. A report on these findings must be submitted to Congress within nine months of the effective date of the implementing rules.
This introduces a new oversight and analytical function, providing Congress with data and recommendations to further refine policies related to funds availability and fraud prevention. It indicates a commitment to ongoing evaluation of the Act's effectiveness and potential future reforms.
This new section requires the Board and CFPB Director to adopt final rules implementing the amendments made by section 3(a)(3) and section 4 within one year of enactment. It also specifies that these amendments will take effect 60 days after the rules are adopted.
This provides a clear timeline for regulatory action and implementation, ensuring that the new fraud exceptions and related provisions are put into practice in a timely manner. The delayed effective date allows for proper regulatory development and industry preparation.
Deletions
V1 proposed to amend Section 603(a)(2) by striking subparagraphs (A) and (F), which would have removed certain government and official checks from expedited availability. It also proposed to redesignate other subparagraphs and make a consequential cross-reference change in Section 604(a)(1)(D). Additionally, v1 proposed to strike paragraph (1) and the heading to paragraph (2) in Section 603(d).
The deletion of these provisions means that the permanent removal of specific check types from expedited availability, as envisioned in v1, does not proceed. Instead, v2 introduces a more flexible, temporary mechanism for addressing fraud risks related to these check types, which is a significant shift in legislative approach. The deletion of the specific change to 603(d) also means that the Board's authority regarding availability schedules is modified differently in v2.
Modifications
This change provides the Board and CFPB Director with greater flexibility in setting or adjusting funds availability schedules, removing a prescriptive requirement to make them as short and equal as possible. This could allow for more nuanced responses to market conditions or fraud risks.
Before
V1 proposed to strike paragraph (1) and the heading to paragraph (2) of 603(d), which dealt with the Board's authority to adjust availability schedules. The exact operative impact of v1's proposed change was to alter the Board's mandate regarding availability.
After
V2 modifies 603(d) by changing 'shall' to 'may' and striking 'to as short a time as possible and equal'. This changes the Board's mandate regarding availability schedules from a requirement to make them as short as possible and equal to a discretionary power.
This modification allows depository institutions to apply the collectability exception to a broader range of funds availability requirements, specifically including the general availability rules for cash and electronic payments, and certain government checks, potentially increasing the instances where funds can be held due to uncollectibility concerns.
Before
V1 changed the heading of 604(c)(1) from 'In general' to 'Collectability' for the existing 'reasonable cause to believe uncollectible' exception.
After
V2 also changes the heading to 'Collectability' but additionally expands the scope of this exception by inserting 'and paragraphs (1) and (3) of subsection (a) of this section' into the provisions that the collectability exception can override.
This modification broadens the applicability of the new check fraud exception, allowing depository institutions to delay funds availability for a wider range of deposits, including cash, electronic payments, and certain government checks, if there is reasonable suspicion of fraud. This provides more tools for institutions to combat fraud across different deposit types.
Before
V1 introduced a new fraud exception, stating that subsections 603(a)(2), (b), (c), and (e) shall not apply if a receiving depository institution has reasonable suspicion of fraud.
After
V2 retains the fraud exception but expands its scope by adding 'and paragraphs (1) and (3) of subsection (a) of this section' to the list of provisions that shall not apply.
This modification broadens the applicability of the new wire transfer fraud exception, allowing depository institutions to delay funds availability for wire transfers under a wider set of circumstances, specifically including the general availability rules for certain electronic payments, if there is reasonable suspicion of fraud. This enhances institutions' ability to prevent fraud in wire transactions.
Before
V1 introduced a new wire transfer fraud exception, stating that section 603(a)(1)(B) shall not apply with respect to funds received by a depository institution by wire transfer if the receiving depository institution has reasonable suspicion of fraud.
After
V2 retains the wire transfer fraud exception but expands its scope by adding 'and subsection (a)(1)(B) of this section' to the list of provisions that shall not apply.
This ensures that the notice requirements for delayed funds availability are explicitly extended to the new fraud exceptions for checks (604(c)(2)) and wire transfers (604(h)), ensuring that depositors are informed when these new exceptions are invoked. This increases transparency for consumers regarding funds holds.
Before
V1 did not explicitly modify this provision. The original Act would have referenced 'subsection (d) or (e)' for notice requirements.
After
V2 amends this provision to strike 'subsection (d) or (e)' and insert 'subsection (c)(2), (d), (e) or (h)'.
Scope
Fundamental restructuring — Changes are scattered throughout the bill, affecting multiple sections of the Expedited Funds Availability Act and adding entirely new provisions. — Yes, v2 represents a meaningful change in policy direction by shifting from a permanent removal of certain checks from expedited availability to a temporary, fraud-loss-contingent delay mechanism, and by adding detailed procedural requirements for fraud holds. — The changes significantly interact with and modify existing provisions of the Expedited Funds Availability Act, particularly concerning funds availability schedules and exceptions. The new rulemaking and study provisions also add new mandates that interact with the overall regulatory framework.
Impact analysis
Depository Institutions
Gain (increased tools and flexibility)
Gain new, more flexible tools to combat fraud for certain checks and wire transfers. They are given explicit authority to delay funds based on reasonable suspicion of fraud, with defined hold periods. They also gain discretion in setting availability schedules and expanded applicability for existing exceptions.
Consumers/Depositors
Procedural change (potential for delays), with some protective measures (notice, overdraft fee waiver)
May experience longer hold times for certain checks and wire transfers if reasonable suspicion of fraud exists, or if the Board/CFPB invokes temporary delays for specific check classes due to material fraud losses. However, they also gain more explicit notice requirements for these holds and protection against overdraft fees if proper notice isn't given for wire transfer holds.
Treasury of the United States
Procedural change (explicit consideration of fraud losses)
The new 603(g) framework specifically considers whether the Treasury is experiencing material losses from fraud related to certain checks when making determinations about funds availability.
Board of Governors of the Federal Reserve System and Director of the Bureau of Consumer Financial Protection
Gain (increased authority and responsibility)
Gain new joint authority and mandates. They are required to prescribe regulations for the new fraud exceptions, determine when temporary availability rules apply for certain checks, and are given more discretion in setting availability schedules. They also have a deadline for rulemaking.
Comptroller General of the United States
Procedural change (new mandate)
Mandated to conduct a study on funds availability and fraud, and to report findings to Congress.