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#152876 - 01/23/04 02:20 PM
Re: Reg CC - Other Exception Reasons
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10K Club
Joined: Sep 2002
Posts: 13,965
TN
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Bad Examples: Out of State Check; Credit Card Check
Good Examples (I think): Alterations on Check; Suspect Kiting (although we use 'We have Confidential Information that indicates the check may not be paid';
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#152878 - 01/23/04 02:32 PM
Re: Reg CC - Other Exception Reasons
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Joined: Jul 2001
Posts: 83,226
Galveston, TX
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Actually, I have found few acceptable "other" reasons. Most "other" reasons invoked by branch personnel do not turn out to be valid and just result in violations. I have gone so far as to removed the other line from the hold forms for that reason.
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#152879 - 01/23/04 02:33 PM
Re: Reg CC - Other Exception Reasons
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10K Club
Joined: Sep 2002
Posts: 13,965
TN
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That's not listed as an exception reason and wouldn't fly with the examiners. You are only allowed to use what the regulation states for exception holds. If it doesn't fall into one of those categories, then you can use a case by case hold if you institution does those.
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#152881 - 01/23/04 02:53 PM
Re: Reg CC - Other Exception Reasons
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10K Club
Joined: Sep 2002
Posts: 13,965
TN
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The only thing we use that line for is 'new' account. We reserve the right to hold checks during the initial 30 day period, but only use it periodically and not across the board.
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#152882 - 01/23/04 03:00 PM
Re: Reg CC - Other Exception Reasons
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10K Club
Joined: Jul 2001
Posts: 83,226
Galveston, TX
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Skittles - and technically, you are not even required to provide a notice for a new account hold.
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#152887 - 01/23/04 04:17 PM
Re: Reg CC - Other Exception Reasons
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Diamond Poster
Joined: Feb 2003
Posts: 2,362
Colorado
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Omega, "Reasonable cause to doubt collectibility" is one of the standard exception reasons under 229.13, but if you use it, you are required to indicate the underlying reason.
"The reason for the bank's belief that the check is uncollectible shall be included in the notice required under paragraph (g) of this section."
So, "reasonable cause to doubt collectibility" alone is not enough. Model C-13 gives the following possible reasons for a "reasonable cause" hold:
--We received notice that the check is being returned unpaid. --We have confidential information that indicates that the check may not be paid. --The check is drawn on an account with repeated overdrafts. --We are unable to verify the endorsement of a joint payee. --Some information on the check is not consistent with other information on the check. --There are erasures or other apparent alterations on the check. --The routing number of the paying bank is not a current routing number. --The check is postdated or has a stale date. --Information from the paying bank indicates that the check may not be paid. --We have been notified that the check has been lost or damaged in collection. --Other:
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#152889 - 01/23/04 05:16 PM
Re: Reg CC - Other Exception Reasons
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Joined: Aug 2001
Posts: 21,939
Next to Harvey
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I love it that Sundawg is applying a common sense evaluation to a model form. I am doubly impressed that someone before him has clearly deleted a couple of the "acceptable" reasons. In my opinion, C-13 is one of the worst model forms out there for leading contact personnel into lousy decisions:
*Like rlcarey, I have never seen an acceptable reason under "other" except when banks use the form for holds on savings accounts and just write in "savings account" as the reason for what would otherwise appear to be an illegal hold. Most reasons written on the line next to "other" are clear violations.
*Large dollar deposit hold on a cashiers check because the bank is concerned about the check's authenticity. O.K., you just agreed to lose $5,000 if you happen to be right about the cashiers check. (The exception hold is the wrong risk management tool for a large cashiers check of questionable lineage.)
*Unable to verify endorsement of a joint payee - The drawee bank can kick a check back for forged endorsement for up to three years after payment. What good is an eleven day hold?
*Erasures or apparent alterations - The drawee bank can kick a check back as "altered" up to one year after payment. What good is an eleven day hold?
*The routing number is not a current routing number? Then why is the bank sending the check through the clearing system?
*The check is drawn on an account with repeated overdrafts? How would a depositary bank know this unless it's an "on-us" check? (The fact that several identical checks have been returned NSF does not indicate the drawer's account is frequently overdrawn, it may indicate exactly the opposite - the drawee bank has no intention of ever allowing this customer to be overdrawn.)
Gosh I feel better! Please poke any holes you care to in my thought processes, but, either way, it's a lousy form.
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#152891 - 01/23/04 06:49 PM
Re: Reg CC - Other Exception Reasons
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Diamond Poster
Joined: Aug 2003
Posts: 1,357
A Grant Wood painting.
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We have had little reason to do holds. In my recent kite example, the "customer" was in an office talking to an officer about how kiting is illeagal. Although I don't have it in writing-she understood our concern when I handed the hold to her.
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#152893 - 01/24/04 08:28 PM
Re: Reg CC - Other Exception Reasons
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Joined: Aug 2001
Posts: 21,939
Next to Harvey
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Sundawg, I agree, changing "other" to the only legitimate reason you think could possibly be used makes sense.
JacFSB, I agree with you too. There would be absolutely no legal problem using the "6 or more overdrafts" reason; if your contact personnel think the way the reg thinks they will not be misled. My point is only the obvious: 6 NSF checks is not the same as 6 overdrafts and a person who thinks literally is going to say, "How would I know if a person who banks somewhere else is frequently overdrawn?"
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#152894 - 02/09/04 08:41 PM
Re: Reg CC - Other Exception Reasons
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Anonymous
Unregistered
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Are you sure that reason (L) is a valid reason for placing a hold for uncollected funds?? We have been advised by our attorneys that unless you place a hold at the time of accepting the deposit, you have missed your opportunity to place a Reg CC hold. Once notification has been received of a deposited item being returned, the only course of action is to charge back the item. ??
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#152895 - 02/09/04 09:03 PM
Re: Reg CC - Other Exception Reasons
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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Reason (L) on the form in question is a subset of "reasonable cause to doubt collectibility." It merely states the reaonable cause. It's perfectly acceptable to place a hold after the fact if you only become aware of the problem after the customer has left the bank.
I happen to be in the camp that would debit the account, rather than place a hold.
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