Holds on Cashier's Checks & Credit Card Checks
Answer by David Dickinson, Ken Golliher, and John Burnett, BOL Gurus Guru Bio
Question: According to numerous postings, a bank is allowed to place an extended hold on the deposit of a cashier's check as long as the proper notification is given. We were criticized by an examiner because we held funds on a certain type of instrument. We were told we could not hold cashier's checks or credit card checks just because we doubted their collectability. We have had problems with fraudulent cashier's checks. How do we avoid an examiner problem and still protect our bank?
Answer by David Dickinson: You must have a reason (and document it) for doubting the collectability. You can't hold a check because it is a certain type or class (such as a cashier's check). You could contact the paying bank and ask them to verify the check. If they can't, they you have a reasonable cause to doubt the collectability of the check.
Answer by Ken Golliher: Before you place a hold on a check because you are unable to verify it, please go to the trouble of finding a legal citation for your authority.
Answer by John Burnett: If the reason the payor bank cannot verify the check is because it was not issued, or it doesn't recognize it as its own, you'd have reason to doubt collectibility. In fact, you'd be wise to refuse to accept it for deposit altogether.
However, if the payor bank won't verify the check because it simply doesn't verify checks, you know not one iota more about the check's likelihood of being paid than you did before making the phone call, and I don't believe you have the information needed for forming a reasonable belief the check won't be paid.
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