What Is Regulation CC and How It Works

What Is Regulation CC and How It Works

Regulation CC, based on the Expedited Funds Availability Act of 1987, establishes guidelines for banks to ensure the timely availability of deposited funds to account holders. It addresses the issue of extended hold times faced by customers after depositing checks and introduces maximum hold times. Additionally, the Check Clearing for the 21st Century Act, implemented under Regulation CC, promotes electronic-based check collection among U.S. banks.


Regulation CC, established by the Federal Reserve, incorporates two key acts: the Expedited Funds Availability Act (EFAA) of 1987 and the Check Clearing for the 21st Century Act (Check 21). These acts lay down precise guidelines to ensure the prompt availability of customer deposits in transaction accounts and were implemented to address lengthy hold times that banks used to impose on deposited checks.

Regulation CC, designed to ensure efficient processing of deposited checks, requires financial institutions to promptly handle these transactions and promptly return unpaid checks to the paying bank. It was implemented in response to concerns raised by Congress regarding the extended hold times imposed by banks on deposited checks.

To address this issue, the Expedited Funds Availability Act of 1987 was enacted, setting a maximum hold period for checks. Regulation CC effectively enforces the disclosure and funds availability provisions of this legislation. As part of these requirements, financial institutions are obligated to provide account-holding customers with clear disclosures indicating when deposited funds will be available for withdrawal, empowering them to make informed decisions about their finances.

How Does Regulation CC Work?

To regulate the check-clearing system, the Board of Governors of the Federal Reserve implemented rules aimed at expediting the return of unpaid checks. Under Regulation CC, two important rules, namely the check-return rule and same-day settlement rule, were introduced.

These rules are designed to minimize risks for depository banks concerning the availability of funds for withdrawal after checks are deposited. The check-return rule facilitates banks in promptly determining whether checks were returned as unpaid. On the other hand, same-day settlement reduces discrepancies between private sector banks and reserve banks when checks are presented for payment. These rules contribute to a more efficient and streamlined check-clearing process.

Regulation CC Requirements

Regulation CC encompasses various rules and policies aimed at improving efficiency and streamlining processes in the banking industry. One notable component of Regulation CC is the Check 21, which addresses the transition from paper-based to electronic-based check processing. This act allows for the use of electronic substitutes for paper checks, providing legal equivalence and facilitating faster and more convenient transactions between banks.

By implementing Check 21 under Regulation CC, banks have been able to embrace electronic check processing and reduce reliance on physical checks. This transition has not only improved the speed and efficiency of check collection among banks but has also paved the way for the development and offering of other electronic-based banking services to customers.

How Does This Protect Me?

Regulation CC is a set of guidelines that determine the availability of deposited funds in bank accounts. It ensures that customers have timely access to their funds and requires banks to disclose the availability schedule to account holders.

Under Regulation CC, specific rules are in place for different types of deposits, such as cash and checks. These rules outline the timeframe within which funds must be made available for withdrawal. Banks are obligated to inform their customers about the availability schedule, providing transparency and clarity regarding when deposited funds can be accessed.

Advancing Bank Check Processing

The Check 21 Act brought about a significant change in how banks handle checks, allowing them to utilize electronic transmission instead of relying solely on paper checks. Banks can electronically send checks to other banks with established agreements, eliminating the need for physical checks. In cases where agreements are absent, banks have the option to send substitute checks, which are newly introduced paper instrument equivalent to traditional checks.

These system improvements have revolutionized the nation's interbank check-collection processes, leading to a near-complete transition to electronic methods. Consequently, reserve banks have been able to streamline their operations by reducing the number of paper-check processing offices from 45 in 2003 to a single office by 2010. This transformation has greatly enhanced efficiency and effectiveness in check processing across the banking system.

Check Collection and Settlement Process

In the process of collecting checks through the Federal Reserve Banks, the accounts of institutions collecting funds are credited for the deposited amount, while the accounts of institutions making payments are debited for the value of checks to be paid. This ensures a seamless transfer of funds between banks.

Thanks to streamlined procedures, the majority of checks are collected and settled within a single business day. This expedited process allows for quicker availability of funds and enhances the overall efficiency of the check collection system.


Regulation CC has improved banking services by establishing guidelines for the availability of funds in transaction accounts. Banks are now required to disclose the specific times when holds on funds are released to customers. Additionally, the regulation has streamlined check processing in the banking system, reducing errors, expediting the process, and significantly decreasing the number of check-processing offices across the country.

Regulation CC