Jan. 1, 2000: Cash on the Barrelhead A Must?

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Q. We are doing contingency planning for Y2K. Are banks required to make funds available in cash? Or can they insist on only a certain amount of cash and perhaps a cashier's check? --A.Z., Texas

A. ABA's Nessa Feddis, senior federal counsel, says Reg CC requires funds be available for withdrawal "for all uses generally permitted to the customer." It also imposes requirements to make a certain amount of funds available for "cash withdrawal" within specified times.

However, this doesn't mean that the customer can insist on cash withdrawals. The Commentary to Section 229.19(c)(4) makes it clear that banks can limit cash withdrawals. The Commentary notes that banks may limit cash withdrawals at ATMs and Comment 7 states, "Nothing in the regulation is intended to prohibit a bank from limiting the amount of cash that may be withdrawn at a staffed teller station if the bank has a policy limiting the amount of cash that may be withdrawn, and if that policy is applied equally to all customers of the bank, is based on security, operating, or bonding requirements, and is not dependent on the length of time the funds have been in the customer's account." The comment continues that "The regulation, however, does not authorize such policies if they are otherwise prohibited by statutory, regulatory, or common law." This suggests that there may be other state laws imposing requirements, but Nessa Feddis was not aware of any.

Further, L.H. Wilson, in ABA's General Counsel's office, reports that Uniform Commercial Code Section 3310(a) provides in part that "[u]nless otherwise agreed, if a certified check, cashier's check, or teller's check is taken for an obligation, the obligation is discharged to the same extent discharge would result if an amount of money equal to the amount of the instrument were taken in payment of the obligation." Fed staff concurred with ABA and pointed out this is governed by the bank's contract of deposit and that the bank may have already provided for form of payment, certainly something to be checked by the bank.

When Not To Issue A 1098

Q. I remember an opinion from the Internal Revenue Service that says it 0CC regs require a bank to place a loan on non-accrual and apply payments to principal, then IRS does not require a Form 1098, even though the contract says payments are applied first to interest. …