Reg. CC, in definitions of a check (229.2(k))and in the commentary for same, clearly excludes checks credit card checks from coverage of Reg. CC. Those checks do not clear normally and the issuing creditor can return them, sometimes a month later, because they exceeded the customer's credit line or the line was closed. They are in fact subject to a credit decision. For this reason we want to have a policy of not accepting those checks for cash or deposit. I have heard a PA Bank was violated for this practice because of the section forbidding discrimination against a class of checks (229.13(e)(1)). We will use some judgement in our decisions but generally do not want the exposure to loss these checks have caused us. Is such a policy possible?

If you are talking about the definition under point 8 of 229.2(k), that refers to credit card sales drafts used by merchants or banks as a result of cash advances, not items used to transfer credit balances. Also, 229.13(e)(1) is telling us that our belief that a check is uncollectible shall not be based on the fact that the check is of a particular class. This is talking about the placement of holds for the "reasonable cause to doubt to collectibility". Regulation CC contains rules regarding the duty of banks to make funds deposited into accounts available for withdrawal, including availability schedules, disclosures, etc. Neither it nor any other regulation that I know of requires banks to deposit or otherwise negotiate checks just because they are presented to the bank. The PA bank you mention was probably cited not because the hold was placed, but rather, the reason they used to place the "reasonable cause" hold was that it was a certain type of check.

[This message has been edited by De Vonne (edited 03-28-2001).]

There is a good discussion of this topic on The Money Page Forum at:
http://www.moneypage.com/forum.htm

Just do a "search" on "credit card checks" and it should come up. We now look at the acccount history and usually can come up with another reason for doubting collectibility. For example: Previous deposits were returned unpaid. Repeated overdrafts. Confidential information indicates that the check may not be paid. Etc., etc. Basing the hold only on the "class of check" is what the regulators may cite as a violation of Reg. CC.

DeVonne
Point 8 is in the commentary and I believe it says a credit card check is not a check under CC.

In the Reg. at (k)(1) it states it must be payable at or through a bank. A credit card check is payable at or through a credit card company or finance company office. The payable at bank is just not the last point of return and it is impossible for the issuing company to follow the timing requirements of CC for returned checks.

I believe we can make the case they do not meet the definition of check in CC. If so, nothing else in CC matters with those items. We can send them forward for collection, refuse to accept them, or accept them with a hold longer than provided by CC.

If they are checks by definition then anything we do could be discriminatory. Eleven days is not enough of a hold for those items.

I'm arguing that banks treat those items like checks (Under CC) when they don't have to. At the least we should be granted greater leeway in handling those items.

First, let me say that I'd rather have a root canal than work with CC for to long. I am asking here, not answering.

I have seen this discussion before, but never the point that these were not checks, as defined by the regs.

Are you saying that if a credit card issued by a bank, isn't really payable through that bank and doesn't qualify?

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

I think that you may have misinterpreted 229.2(k). It states that the definition of a check includes a check that a bank may supply to a customer as a means of accessing a credit line without the use of a credit card. (Last sentence.)

I agree with Andy -- I've heard much on this subject -- but never that these types of checks were not covered by Reg CC. In my opinion they clearly are. If we are uncomfortable with our customer, we require them to take the funds as a cash advance. By doing it this way we are assured that the funds are available.

Dolly Nugent
VP/Compliance & CRA Officer
Citizens Business Bank

There is an excellent article in the July/August 1997 issue of ABA Bank Compliance magazine entitled "Credit Card Access Checks" by a lawyer named Linda Throne. In it, she firmly states that credit card access checks are checks within the meaning of the term under Reg CC.

I have heard many reports of banks being cited for violations of Reg CC when they have had a policy of automatically delaying availability on credit card access checks, or when they have had a blanket policy of applying a "reasonable cause to doubt collectibility" hold on all credit card access checks.

I'm with Andy. I'd rather have a root canal than spend much time with Reg CC. This issue, however, is one that does have a clear answer.

P.S. If you look at one of these items, you will see that they are indeed drawn on a bank.

Since this topic is dear to everyone's heart, including mine, let me ask this; the definition of bank checks is something I've had a difficult time explaining to the tellers here. If the item does not say "cashiers check" or something of this nature, the tellers are getting confused. I've been taking the position that it doesn't have to say "cashiers check" to be a bank check and thus, next day availability must apply. Any opinions?

By the way Bisch, Dolly's method of requiring the customer take a cash advance is effective. You could also send the item for collection.

I have heard that some promotions offer lower interest or fees when using the check vs a traditional cash advance. You could have some resistance from a customer. Just an FYI.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

DeVonne,

You are correct that a check may be considered a cashier's check even if it is not apparent on the face of the item. If the check is drawn by a bank and signed by a bank officer more than likely it should be treated as a next-day item. The regulation provides a definition that I have givien to our associates. It states that a cashier's check is --

1) Drawn on a bank
2) Signed by an officer or employee of the bank as drawer
3) A direct obligation of the bank
4) Provided to a custom of the bank or acquired from a bank for remittance purposes.

I did training one year where I collected copies of next-day items that met this definition. I showed my Operations Officers copies of these checks and they were quite surprised.

I also tell them that if they aren't sure -- call the bank and ask.

Dolly Nugent
VP/Compliance Officer
Citizens Business Bank

Don't forget to look at the Commentary to Section 229.2(k)#8 which says "the definition of a check includes a check that a bank may supply to a customer as a means of accessing a credit line without the use of a credit card." I bet the PA bank was cited because it used the Reasonable Cause to Doubt Collectibility exception because it was a credit card check. This exception can't be used for a "class" of checks. If you have concerns about the check, I would suggest placing a case-by-case hold or finding another exception reason. You can always refuse the deposit if you have enough concerns.

Concerning the cashier's check, I'm noticing some tax refund checks with "Cashier's Check" typed at the top. It shows the bank's name at the top left as well as the bottom right close to the signature. However, beneath the amount of the check it says (Processed by Jackson Hewitt). There is a 1-888 number to call for check verification. My question is this a cashier's check subject to next day availability? Thanks.