banking: an overview
Banks and bank accounts are regulated by both state and federal statutory law. Bank accounts may be established by national and state chartered banks and savings associations. All are regulated by the law under which they were established.
Until the early 1980’s interest rates on bank accounts were regulated and controlled by the national government. A ceiling existed on interest rates for savings accounts. Interest payments on demand deposit accounts were generally prohibited. Banks were also prohibited from offering money market accounts. The Depository Institutions Deregulation Act of 1980 (DIDRA) (http://thomas.loc.gov/cgi-bin/bdquery/z?d096:HR04986:@@@L|TOM:/bss/d096query.html|)eliminated the interest rate controls on savings accounts. The restrictions on checking and money market accounts were lifted nationwide by the DIDRA (by the authorization of NOW and Super NOW checking accounts) and the Garn-St Germain Depository Institutions Act (http://thomas.loc.gov/cgi-bin/bdquery/z?d097:HR06267:|TOM:/bss/d097query.html|).
The operation of checking accounts is governed by state law supplemented by some federal law. Article 4 of the Uniform Commercial Code (http://www.law.cornell.edu/ucc/4/), which has been adopted at least in part in every state, “defines rights between parties with respect to bank deposits and collections.” Part 1 of the Article contains general provisions and definitions. Part 2 governs the actions of the first bank to accept the check (depository bank) and other banks that handle the check but are not responsible for its final payment (collecting banks). Part 3 governs the actions of the bank that is responsible for the payment of the check (payor bank). Part 4 governs the relationship between a payor bank and its customers. Part 5 governs documentary drafts. These are checks or other types of drafts that will only be honored if certain papers are first presented to the payor of the draft.
If a check passes through the federal reserve system (as the majority of checks do) Regulation J of the Federal Reserve comes into effect. Regulation CC governs extensively the availability of funds in a depositor’s account and the process involving checks dishonored due to non-payment. The Expedited Funds Availability Act (http://www.law.cornell.edu/usc-cgi/get_external.cgi?type=pubL&target=100-86) limits the time that a depository bank can delay before making the amount of a deposited check available for withdrawal. The act is elaborated by Subpart B of regulation CC.
Checks are negotiable instruments. As such, sections of Article 3 of the Uniform Commercial Code govern the relationship between parties who receive and transfer checks. See also Negotiable instruments. Also bearing on banking activities are Articles 4A, 5, and 8 of the Uniform Commercial Code (which deal with funds transfers, letters of credit, and securities.
The banking crisis of the 1930’s led to the development of federal insurance for deposits administered by the Federal Deposit Insurance Corporation. Funding for the program comes from premiums paid by member institutions. The bank accounts of individuals at institutions which are insured are protected for up to an aggregated total of $100,000.
Title 12 of the Code of Federal Regulations (http://www.law.cornell.edu/cfr/cfr.php?title=12), which is divided into chapters, provides federal agency regulations that concern banks and banking.