CUNA Regulatory Comment Call

June 1, 2001

Regulatory Study to Enhance Online Delivery of Financial Services


The Federal Reserve plans a review of its regulations to determine if any should be amended or removed in order to facilitate online banking. The Federal Reserve requests comments, which are due on August 20, 2001, to facilitate this effort that is mandated by the Gramm- Leach-Bliley Act (GBL Act) which was the major banking legislation enacted in 1999. The notice requests information on the following topics:

Please send your comments to CUNA by August 3d. Please feel free to fax your responses to CUNA at 202-371-8240; e-mail them to Associate General Counsel Mary Dunn at or to Assistant General Counsel Michelle Profit at; or mail them to Mary or Michelle c/o CUNA’s Regulatory Advocacy Department, 805 15th Street, NW, Suite 300, Washington, DC 20005. For a copy of this proposal, which was published in the Federal Register on May 21,2001, please press here.


The GLB Act requires the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision to conduct a study of banking regulations regarding the online delivery of financial services. These agencies must also report their recommendations on adapting their existing legislation or regulations to online banking and lending.

The Federal Reserve is the primary regulator for many consumer and payment regulations, so the Federal Reserve will be particularly responsive to your comments on those regulations. The Board's consumer protection and payment systems regulations generally apply to credit unions. The regulations that implement consumer protection rules include the Truth in Lending Act (Regulation Z), the Equal Credit Opportunity Act (Regulation B), and the Truth in Savings Act (Regulation DD). Although the National Credit Union Administration issues rules under the Truth in Savings Act, they are generally the same as those issued by the Federal Reserve. The Federal Reserve also implements the Consumer Leasing Act (Regulation M). The regulations that govern payment systems include the Availability of Funds and Collection of Checks (Regulation CC) as well as the Electronic Fund Transfers (Regulation E). The Board also implements the Reserve Requirements of Depository Institutions (Regulation D). CUNA is particularly interested in your views on aspects of these regulations as well as other statutes and supervisory policies.


  1. How do particular laws, regulations, or supervisory policies specifically affect financial institutions and their members' uses of new technologies? Are there any specific Board regulations that unreasonably interfere with the use of online technologies? Are there any supervisory policies that impose unreasonable burdens on a financial institution's design or adaptation of online technologies? Are there any regulations or other supervisory policies regarding risk management that should be clarified or amended to adequately address any particular risks associated with methods of online banking?

  2. The Board's regulations include rules that are governed by geography and time considerations. Should these time and geographic measures remain the same in the regulations or be adapted to suit the online environment? How may particular laws and regulations be modified to accommodate the online delivery of financial products and services under these varying conditions

  3. Are there any inconsistencies between federal and state laws or regulations that impede the electronic provision or use of financial products or services? Are there particular aspects of conducting online banking and lending activities that could benefit from a single set of legal standards that can be applied uniformly nationwide? Are there any state laws or regulations, such as state licensing provisions for banking and other financial products and services, that affect the nationwide provision of financial products or services over the Internet?

  4. Do the Federal Reserve's regulations governing payment transactions, negatively affect the ability of financial institutions to offer certain online financial services? Which regulations, if any, negatively affect the likelihood that an individual or business would choose to obtain financial products or services through the Internet?

  5. For example, the term "banking day" in Regulation CC is defined as that part of any business day on which an office of a credit union is open to the public for carrying on substantially all of its banking functions. Is this definition appropriate in the context of a member that opened an account and performs all banking functions online?

  6. The term "banking day" is used to start the schedule to determine the availability of funds. For example, for certain deposits, credit unions must make funds available for withdrawal not later than the business day after the banking day on which the cash is deposited (for other deposits) it is the second business day after, etc. Should banking days be used to determine when to make funds available when a member opens an account and performs all banking functions online? Should the Federal Reserve leave this regulation the same or amend it for online transactions?

  7. In Regulation CC, under the large-deposit exception, a depositary bank may extend the hold placed on check deposits to the extent that the amount of the aggregate deposit on any banking day exceeds $5,000. Is this use of banking day appropriate for a customer that uses online banking? Should the credit union be able to extend the hold if the limit is exceeded on a day other than the banking day? Should any modification be made? If so, what?

  8. Similarly, standards establishing an account that is chronically overdrawn are linked to the number of banking days it is overdrawn? Should these provisions remain or be changed?

  9. In Regulation CC 229.15(b) The business day funds will be available must be disclosed as "the ______ business day after" the day of deposit or substantially similar language. However, the rules state that the business day of availability is determined by counting the number of business days starting with the business day following the banking day on which the deposit is received. Is this appropriate? If the banking day differs from the day of deposit would it confuse online members? Should the rule be modified, see below? If so, how?

  10. Does the provision in 229.19(5) solve the fact that for online transactions the day of deposit may not be a banking day? This provision states that funds may be considered deposited on the next banking day, in the case of funds that are deposited -- on a day that is not a banking day for the depositary bank. Does this provision eliminate the need to amend Regulation CC disclosures or Regulation CC that use a banking day to count availability and hold schedules?

  11. Section 229.16(c) (2) (ii), states that if notice is not given at the time of the deposit, the depositary bank shall mail or deliver the notice to the customer not later than the first business day following the banking day the deposit is made. Is this appropriate? Should it be changed or not?

  12. In the forward and return collection process, Regulation CC uses the term the banking day on which the check is presented. Would this term be neutral to online transactions? Would presentment have to occur on a banking day, so that the day would be the same for online versus off line transactions?

  13. Regulation CC 229.13(d) provides that there shall be notification to members of nonpayment by midnight of the banking day following the banking day on which it received the returned check or notice, or within a longer reasonable time. Should this provision remain the same or be amended?

  14. Regulation CC requires funds that must be available for withdrawal on a business day to be available at the start of business, which may be as late as 9 a.m. local time of the depository bank. Is this provision appropriate in the context of a member that opened an account and performs all banking functions online? Should Regulation CC be amended or remain the same?

  15. Do any of the Board's regulations or supervisory policies require a banking organization to use or retain written forms, notices, or other records in a manner that hinders its ability to deliver financial products or services over the Internet? How do specific provisions of the E-Sign Act, or any other law, affect financial institutions and their members' ability to use (or facilitate use of) technologies

  16. Do the requirements in Regulation D hinder the development of online banking? Is it impossible for some providers to process your electronic transactions and remain compliant with Regulation D? How could Regulation D be amended to make compliance easier for credit unions and their services providers?

  17. In Regulation E, business day means any day on which the offices of the consumer's financial institution are open to the public for carrying on substantially all of its business functions. Should this definition remain unchanged for online transactions? Business days are used to calculate length of time for reporting lost or stolen cards, investigations, recredits, etc.

Eric Richard • General Counsel • (202) 508-6742 •
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 •
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 •
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 •