Just read the question concerning placing Reg CC holds on cashiers check. You stated you may place an exception hold if you do it correctly. At a seminar recently, they stated you may place a large deposit exception hold on a cashiers check using the next day availability as a base. Therefore, you could place a hold for an extra five or six days depending whether the check is local or not. Is this correct?

I was trying to research the same question about placing exception holds on cashier's checks. What question did you just read?

The question was in the compliance section of the weekly Bankers Online. I have since talked with another compliance officer about this. The feeling is that we can place a large deposit exception hold for any amount over $5000. Comment?

I understood that to be true as well, as long as you give the first $5000 immediate credit. I need to read more on this.

One recent "debate" dealt with proving that the "cashier's check" was really a cashier's check and not a counterfeit. I am among those who believe that if the paying bank cannot/will not verify the check, then you can't prove that the check is a cashier's check, as the face of the check would indicate. Until I am beaten down, I will treat these checks as regular checks and place holds accordingly. We have had WAY too many counterfeit "cashier's checks" to ignore this as a possiblity.

I can print a check and type the words "cashier's check" on the face. That should not alone qualify a piece of paper as a same day item.

Agreed.. with the significant number of counterfeit cashiers checks.. it is better to verify them before deeming them a "true" cashiers check". We have also had instances where we would call to verify and because the routing number and all was correct, the bank that verified would vouche that it was a cashiers check. It is not until the clearing process is completed that the check is then returned counterfeit... Keep an eye out for those too!

Most banks will cooperate and will do so by verifying the payee, the submitter, the amount, the check number and the date issued. If all of these match, document the name of the individual at the paying bank and deem the check as being a cashier's check. Also, verify the color and any background on the check. I've had cases where I needed to fax a copy to the paying bank and have found out that the checks are counterfeit. A lot of work, yes, but if you do this every day and save your bank a potential $5000 loss, it was worth it.

From the standpoint of a teller, that's exactly what should be done, John. However, I am not a teller but a backroom ops guy, so I see the check/transaction AFTER the item has been processed but before the 24 hour deadline has arrived. Our only course of action in this case is a hold. If the check in not-verifiable, a good part of the time, it is also not legitimate. We've JUST started seeing our fair share of "Nigerian" scam checks and our customers are taking losses. This is one way to help both the customers and ourselves.

John, you're not the first to oppose me on this issue and you certainly won't be the last. The bottom line is that the reg seems to be open enough to interpretation to allow our Compliance Officer to make this decision. In my opinion, if it is open to interpretation, we'd be fools not to take the action that best protects both the bank and the customer.

We've been down this trail a few time. I don't really care to debate this topic again, but I have one question. John said:
Rather than expose the bank to the risk of Reg. CC violations, . . .
John: Everything we heard at the ABA's NRCC was "risk-based, risk based". So I ask you - "what risks might these be?" Let's be realistic.

See Reg CC 229.21 - Civil Liability

Actual damages and possible class action suits! This is entirely possible if a real estate closing or securities settlement fails due to an "illegal" hold.

Let's face it ...Reg CC is a pure consumer protection regulation. This does not protect the bank from undo risk when accepting a cashier's check for deposit. Our folks need to be trained on what constitutes a bad check and that Reg CC does not prevent them from questioning and verifying that checks are good. Reg CC does not require that banks become a clearing house for bad checks. We would rather provide good "customer service" and take risks rather than picking up a phone and verifying that a check was issued.

Sorry for the rant ...have just experienced some losses that could have been prevented if folks had been awake instead asleep at the wheel.

Whew ...I feel much better now.

Piror thread including discussion of the effects of an illegal hold.

Just remember, if some banks had not adopted abusive hold policies back in the 1980's there would never have been a need for government intervention. (First, a patchwork of state laws and eventually the Expedited Funds Availability Act and Reg CC.) I remember a neighboring institution that just before Reg CC would place a two-week hold on local payroll checks - just to make sure they wouldn't bounce! A few bad apples can spoil it for everyone.

From a risk-based compliance standpoint, too many banks adopting the "all cashier's checks are fraudulent unless proven otherwise" approach begs for Congressional or FRB intervention. Congress mandated the expedited availability for Cashier's checks as a matter of law and the FRB Reg CC commentary 229.13(e)4 says "a depository bank cannot invoke this exception simply because the check is drawn on a paying bank in a rural area and the depository bank knows it will not have the opportunity to learn of nonpayment of that check before funds must be made available under the availability schedules." I don't see how you can get around these explict indications of Congressional and regulatory intent.

From a risk-based standpoint is the risk of being sued low? Most likely yes - since the cost of bringing a suit is probably far more than the damages. (But a failed R/E close or loss of an interest rate lock due to inability to withdraw funds might qualify - especially since a lawyer is already involved with the transaction.)