DEFINITION of Regulation CC

Regulation CC is one of the banking regulations set forth by the Federal Reserve. Regulation CC implements the Expedited Funds Availability Act of 1987. This act sets certain standards for endorsements on checks that are paid by banks and other depository institutions.


Regulation CC is designed to require financial institutions to correctly process endorsed checks. The rules pertaining to endorsements are intended to correctly identify the endorsing bank. Unpaid checks are also required to be immediately returned to the paying bank.

Congress instituted the Expedited Funds Availability Act of 1987 because of concerns regarding the length of time holds were placed on checks by banks after costumers deposited them. The act created a maximum hold period for checks. Regulation CC put into effect the disclosure and funds-availability provisions of the legislation.

Ways that Regulation CC Changed the Check-Clearing System in the United States

Financial institutions are required under Regulation CC to provide account holding customers with disclosures that indicate when deposited funds will be available for withdrawal.

As part of the policies to regulate the check-clearing system, the Board of Governors of the Federal Reserve adopted rules to hasten the return of unpaid checks.

Check-return rules and same-day settlement rules are outlined and implemented under Regulation CC. The intent of those rules is to reduce risks to depository banks regarding the availability of funds for withdrawal after checks are deposited. The check-return rule better ensures that banks can discover whether or not the checks were returned as unpaid. The same-day settlement decreases the disparity between private sector banks and reserve banks when checks are presented for payment.

Other rules and policies implemented under Regulation CC include the Check Clearing for the 21st Century Act. This legislation was created by Congress as a means to improve efficiency in the payment system. The act reduced certain legal impediments to electronic check processing. The act allowed for the creation of a substitute for paper checks in electronic check processing as a legal equivalent for original checks.

The act lets banks send checks electronically instead of requiring them in paper form when processing funds with banks they have agreements in place with. This also lets banks send substitute checks to banks they do not have electronic processing agreements with.

The enactment of this act under Regulation CC has allowed check collection among banks in the United States to become predominantly electronic-based. This has also given banks the ability to offer their customers other types of electronic-based services.