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Adopted Regulations
Summary of Changes to Part 32 of the General Regulations of the Banking Board


August 6, 1999

TO THE INDIVIDUAL OR INSTITUTION ADDRESSED:

RE: Final Amendments to Part 32 of the General Regulations of the Banking Board, adding a new Section 32.4 -- (Required Disclosures).

At its August 5, 1999 meeting, the Banking Board adopted the attached amendment to Part 32 of the General Regulations of the Banking Board. It becomes effective upon publication in the State Register.

The amendment provides that a banking institution must inform a depositor of the order in which items that are drawn against an account are paid. By way of illustration, a bank may pay the largest check first, or the smallest check first, or the bank may pay the checks in the order they are received or the bank may pay the checks according to check numbers. There is no one clearly superior order of payment. If the smallest checks are paid first, then fewer checks will presumably bounce. However, it may be more important to consumers to have the larger checks paid first since such checks may represent mortgage payments or similar items involving sizable late charges if not paid by their due dates. Informed consumers will be able to shop around for the type of account that best suits their needs.

The disclosure must be given when the account is opened and again if the policy changes. For those accounts already in existence, the disclosure must be given within one hundred and twenty days of the effective date of this amendment, that is, by December 24, 1999. The Department believes that by ensuring that depositors know the order in which items are paid, it will have acted to reduce the instances of any unintended effects on consumers. With this better information, consumers should be able to avoid

writing checks against insufficient or uncollected funds or to mitigate the financial affects of such improper banking behavior.

No comments were received relative to this amendment.

The Notice of Adoption is to be published in the August 25, 1999 issue of the State Register.

Very truly yours,

John A. Joyce, Esq.
Secretary of the Banking Board

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