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Hold on checks cashed at other institutions

Question: Can a bank put a hold on a customer's account for a check he cashes drawn on another bank? We have a clause in our terms and conditions that says we can charge back any cashed out items against the account. But can we put a hold on the cashed item and bounce checks that have been written against the account that come through the work?

Answer: Good question about Regulation CC - proving there are still questions about that regulation. If a customer deposits a local check and the bank gives him cash for it, the bank can place a hold on a corresponding amount of money in the customer's account up to the terms of the reg.

For instance, let's say you write me a check for $200 drawn on your bank. I take it to my bank and they give me $200 cash. If my bank's hold schedule corresponds to the normal Reg CC availability schedule and your check is local, they would have to make the first $100 available tomorrow (i.e., the next day) anyway, so my bank couldn't impose a hold beyond that on the first $100. They could place a hold on the remaining part of the deposit for the length of time a local check can be held. Here's what the Commentary to 229.19(e) says, in part:

3. These restrictions also apply to holds placed on funds in a customer's account (as defined in Sec. 229.2(a)) if a customer cashes a check at a bank (other than a check drawn on that bank) over the counter. The regulation does not prohibit holds that may be placed on other funds of the customer for checks cashed over the counter, to the extent that the transaction does not involve a deposit to an account.

A bank may not, however, place a hold on any account when an ``on us'' check is cashed over the counter. ``On us'' checks are considered finally paid when cashed (see U.C.C. 4-215(a)(1)). When a customer cashes a check over the counter and the bank places a hold on an account of the customer, the bank must give whatever notice would have been required under Secs. 229.13 or 229.16 had the check been deposited in the account.

In the Commentary, where it talks about the model notices, I did find this. See the last two sentences:
1. Model Notices C-12 through C-21 generally. Models C-12 through C- 21 provide models for the various notices required by the regulation. A bank that cashes a check and places a hold on funds in an account of the customer (see Sec. 229.19(e)) should modify the model hold notice accordingly. For example, the bank could replace the word ``deposit'' with the word ``transaction'' and could add the phrase ``or cashed'' after the word ``deposited.''

Bottom line, if you declare it in your disclosure, and give notice, yes, you can.

Copyright © 2003 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 13, No. 7, 10/03

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