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Question & Answer
Question: We received a levy today against one of our customer's accounts, and the deposits he made by check yesterday are unavailable today. Do we take the uncollected funds out for the levy as well as the collected funds? We allow him use of the uncollected. Also, our loan department wants to offset. Do they offset against uncollected or just collected?
Answer: Let's start with the easy part. In most instances, you only levy against available funds. For the rest of it - your loan department gets first shot, and they can offset against all - but it's a calculated risk. There is always the chance that some of those deposited items may come back. It was interesting to note that your depositor called you and said he had made those arrangements with your bank because he knew you couldn't levy against uncollected funds, while he still has the use of them. I'd be tempted to watch that account closely! And if it was an IRS levy instead of the one you got, you might have a hard time explaining your arrangement to the Internal Revenue Officer.
Copyright © 2000 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 10, No. 7, 7/00
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