5 Reasons Why the New Reg CC Amendments are Terrible!

5 Reasons Why the New Reg CC Amendments are Terrible!

In this Compliance Clip (video), Adam explains 5 reasons why the new Regulation CC amendments are terrible for financial institutions. Okay, they aren’t really “terrible,” but they definitely aren’t ideal or as good as they could have been. As you will see in this video, there are a number of challenges this new rule creates, so it will be imperative for financial institutions to quickly create a strategy for implementing these rules. Adam concludes by providing a brief overview of a solution to help you easily navigate the challenges associated with this new rule - our new training program on the Regulation CC amendments, which can be found at https://www.compliancecohort.com/video-webinar-regulation-cc-june-2019-amendments


Video Transcript

The following is a transcript of this video.

In this Compliance Clip, I'm gonna discuss five reasons why the new Regulation CC amendments are absolutely terrible. Well, maybe that's a little bit dramatic, but they're definitely less than ideal for financial institutions. So I wanted to discuss why, because I feel it's absolutely imperative for financial institutions like yourself to have a game plan in order to address these changes, which will have  consequences and are very complex when you get beneath the surface. So let me discuss five reasons why these changes are not ideal.

First and foremost, in the new amendments to Regulation CC that go into effect about a year from the time I'm recording this video on July 1, 2020, there is an inflation adjustment that's going to take place. And what this means is the dollar amount thresholds that we use in Regulation CC are going to be bumped up for inflation. On the surface, it doesn't seem that bad, but what's happening is the $200 amount that we have available next day for case-by-case holds is being increased to $225. And that's not even the hard part. The hard part comes into play when we combine a large deposit, special exception hold with the case by case hold because the $5,000 amounts are also being adjusted for inflation. It's gonna be $5,525, add that to the 225, and the numbers get very complex. Extremely complex, it makes things difficult. So that is the number one reason why these changes are not ideal for financial institutions. 

Number two, if that wasn't bad enough, every time there's an inflation adjustment, which is going to occur on a regular basis, we have to notify our customers. This is also going to be a very big change. There's gonna be regular customer notification requirements that make it not ideal for financial institutions.

Number three, I believe that these complex changes, again, it seems simple on the surface, but there's some complexities in there that are going to result in more violations for financial institutions. It is making the job of your tellers much harder. It's not gonna be simple to place a hold. It is actually gonna be very confusing at times, depending on the certain dollar amounts. And it just made a complex regulation even more complex. That's the reason I titled this “Five Reasons Why These Changes are Terrible.” Again, that's a little dramatic, but the truth is the rule was already so complex. I was hoping that they would simplify this, but these changes are making it even more challenging. So that's the third reason. 

Reason number four that this will be more complicated and difficult for financial institutions is some financial institutions are gonna say, “Look, we don't want more violations, so we're just not gonna place holds or we're not gonna place certain types of holds and not maximize our availability.” Well, that's gonna mean that financial institutions are taking on more risk when it comes to their deposits. And from a safety soundness perspective, that is not ideal. 

And the final reason why this is not ideal, which besides the first reason, is probably one of the biggest reasons, I think this rule is terrible from at least an ideal perspective, is that this is only part of the changes that we expect. There are more changes to come, and I understand why the Bureau released these as separate changes, but this is only part one of at least two changes that we're going to see relating to check holds. And in my opinion, that means all the more reason why financial institutions need to grasp these rules because of the complexities and the challenges and really figure out a game plan.

I hope this compliance clip has helped you understand a little bit better what challenges are going to be when it comes to these new amendments to Regulation CC.

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