OK, I will try to explain this as accurately as possible as it could get confusing. Sometimes we have reason to believe an account has kiting involved.

We place an exception hold on the item with the a reason to "doubt collectability of funds". If we do not resolve the item, we (at expiration of the exception hold) place a 30 day hold on the account. Thus we exceed any Reg. CC hold period, and sometimes do the hold for more then the dollar item ($100,000). Is this allowable?

(4) For the purposes of this section, a “reasonable period” is an extension of up to one business day for checks described in §229.10(c)(1)(vi), five business days for checks described in §229.12(b) (1) through (4), and six business days for checks described in §229.12(c) (1) and (2) or §229.12(f). A longer extension may be reasonable, but the bank has the burden of so establishing.

What constitues "reasonable" for longer extensions?

In todays world, on a large item (>$2,500), if you don't have notice in 7 to 11 days that it is being returned - it's not coming back. 30 days - IMHO - it not even lose to being reasonable. If you believe the customer is kiting - close the account and forget the holds beyond the Reg CC timeframes.

This is essentially what is happening. However, we are not doing it within the Reg. CC timeframe. We put the hold on the item, then later close the account. Should we be closing the account closer to the limit of the exception hold.

For example, on an 11 day item, if we have not recieved credit for the item close the account at ten days?

I have found exactly what I need. The commentary to Reg. CC specifically states that an exception hold can be used for suspected kiting. Thus the maximum hold period "must" (as the commentary states at the beginning) be limited to the hold periods established by Reg. CC.