[rcooper]

A question we received:
Management recently met about the review process for holds and the deposit operations manager asked did we have to keep copies of the actual notices given to customer. Unless it was a requirement of the regulation, they do not think that we need to require the teller to keep a copy of their hold notices. They are currently scanning them to a shared file.
Most of the notices are produced through the teller system now except on some occasions if they have to send a manual one by the next day.

I know for every exam we have had in the past and for any of our outsourced audits a copy of the hold notice was requested for review.

All the banks that I know to ask and any record retention schedules that I have seen show that we should keep notices for at least 2 years.

I researched the reg and found below. It seems to say that we only have to keep actual copy of notice for the reasonable cause notices. Is there anywhere else that I am missing that also discusses retention of the actual hold notice.

We won’t be able to prove that they gave the customer a notice. But as stated below I can prove that the process is set to do that. And for the few that they use the manual forms, if they don’t type the description on the system correctly, I can’t prove that it was given to the customer correctly.
We had a compliance exam in December, and they asked for the hold notices and the proof on the system when released.

I would greatly appreciate your thoughts on this.

g) Record retention.
(1) A bank shall retain evidence of compliance with the requirements imposed by this subpart for not less than two years. Records may be stored by use of microfiche, microfilm, magnetic tape, or other methods capable of accurately retaining and reproducing information.
(2) If a bank has actual notice that it is being investigated, or is subject to an enforcement proceeding by an agency charged with monitoring that bank’s compliance with the EFA Act and this subpart, or has been served with notice of an action filed under this section, it shall retain the records pertaining to the action or proceeding pending final disposition of the matter, unless an earlier time is allowed by order of the agency or court.
Official Interpretation
G. 229.21(g) Record Retention
1. Banks must keep records to show compliance with the requirements of this subpart for at least two years. This record retention period is extended in the case of civil actions and enforcement proceedings. Generally, a bank is not required to retain records showing that it actually has given disclosures or notices required by this subpart to each customer, but it must retain evidence demonstrating that its procedures reasonably ensure the customers’ receipt of the required disclosures and notices. A bank must, however, retain a copy of each notice provided pursuant to its use of the reasonable cause exception under §229.13(g) as well as a brief description of the facts giving rise to the availability of that exception.
Thank you for any advice.

Topic

[rcooper]

You’re correct that Reg CC commentary 229.21(g) indicates that you are required to keep copies of the notice for reasonable cause to doubt collectability exception holds and that for other hold notices your proof would be your procedures/processes/training, etc. There is also a specific record retention requirement in 229.13(g)(5) and its commentary “reasonable cause” exception holds. And you’ll see this reflected in the interagency exam procedures (see Reg CC checklist beginning on p. 29); the “reasonable cause” portion has a question asking if copies of notices were retained for two years. You don’t see that specific question in the other sections of the checklist. With that said, examiners may still want to look at records to see if you applied and released holds appropriately, so if you have been providing the hold notices and you change that process you might have to look up check information and provide reports with hold information so they can validate accuracy:

g) Record retention.
(1) A bank shall retain evidence of compliance with the requirements imposed by this subpart for not less than two years. Records may be stored by use of microfiche, microfilm, magnetic tape, or other methods capable of accurately retaining and reproducing information.

So I would consider whether your current process of retaining the hold notices makes that process easier than having to look up information for examiners to validate the accuracy of your holds? Since examiners are accustomed to looking at your notices, I’d want to have a discussion with them to see what alternative information they would request, if any, and determine if you are able to produce that and with what effort. Also, if you think there are areas that may be of concern (manual hold forms) if you change your process, that would need to be worked through to ensure compliance is documented before a change is made.

[rcooper]

FYI – I talked to deposit guru this morning and she said she’s never seen a bank not keep copies of all the hold notices. That is my experience as well. Seems most banks do keep them all and this is what examiners are accustomed to. Another reason that you may want to talk with your examiners and prevent them from being surprised at their next visit. You might also talk with your external audit team if you use one, to find out what they see at other institutuions and how those instition’s examiners approach Reg CC without copies.

[pcorder]

We retain our hold notices for a period of 5 years, even though the Reg says 2. They are imaged to the applicable account. Examiners ask us for copies of hold notices that were placed during a specific time frame, while performing our consumer compliance exam. They review the notices to determine if the proper hold was placed, and when funds were released. Thanks.

[amcgarvey]

We also retain all of our hold notices here as well for at least 5 years. The examiners and auditors definitely want to see those when they come in and want to make sure we are doing Reg CC correct.

[jholzknecht]

Interesting that two institutions have adopted a five retention period instead of the two years mandated by the rule. One is regulated the Federal Reserve Board, the other by the National Credit Union Administration.

[Author]

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