Stopping A Kite With A Reg CC Hold
Answer by Jim Bedsole, BOL Guru BIO AND CONTACT INFO
Question: I discovered, one day after a teller took a $6,500.00 check for deposit, the check would not be good and the customer was in a kiting loop. I put a Reg CC hold on the check, but was told it was too late since it was not placed the same day the item was deposited, but one day later. I protected $4,200.00 of our funds rather than losing the entire amount. We contacted the customer within 48 hours of his deposit to inform about the hold, as well as mailing him the form. Was I wrong?
Answer: It doesn't sound like it. Reg CC allows you to place an exception hold on a deposit after the date the deposit was made if the facts leading to the hold (in your case, the knowledge that the customer was involved in kiting) become known after the time of deposit. Section 229.13(g) provides the specifics for this and provides that the notice of hold must be provided to the customer no later than the first business day following the day the facts became known to you, or the date the deposit was made, whichever is later.
In your scenario, customer made deposit on business day 1. On business day 2, you learned that the check was not good and the customer was kiting (definitely grounds for a reasonable cause exception hold). You placed the hold that day. On business day 3, you notified the customer of the hold verbally and mailed the hold notice. Sounds to me like a classic textbook example of exactly what 229.13(g)(1) provides for and handled exactly in accordance with the provisions of that section. I assume the only reason you didn't protect the other $2,300 was because those funds were already gone by the time you learned of the kite. Otherwise, you could have protected those funds too.
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