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#347682 - 04/15/05 08:40 PM Holds on cashiers checks
mmason Offline
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Joined: Nov 2001
Posts: 447
New England
Vent
Our president and board of directors are pushing to make it procedure to put holds on cashiers checks. They had a branch manager call around to local banks to see how they treat them. She reported that they all hold them 1 day for local and 5-10 days for non-local cashiers checks. Of course I've been give a copy of these findings and am being asked why we can't do the same, all our competitors are. I've talked to a couple of them personally and found that it's not so hard and fast but still not compliant. I spoke with a Big bank this morning, for non-local checks they do put holds on them. If you ask they will call to try to verify the check and if they are able to they will waive the hold. I mentioned that's not what the regulation allows and she informed me that each bank is allowed to establish their own procedures. How can they get away with this? Now I have to face the president and board and with a smile say "I know we're losing money and they aren't but we're being compliant." It just fries me!
End of rant.

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#347683 - 04/15/05 08:54 PM Re: Holds on cashiers checks
GreatBlue Offline
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Posts: 2,362
Colorado
Did you talk to the compliance person at Big bank? If so, I'd ask that person to provide a citation showing that "each bank is allowed to establish their own procedures".

I think your response has to be they are doing it because so far they are getting away with it.
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#347684 - 04/15/05 09:13 PM Re: Holds on cashiers checks
rlcarey Offline
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rlcarey
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Posts: 85,059
Galveston, TX
I would be opening accounts and depositing cashier's check to test this on a personal basis -

In the case of a class action--
(A) No minimum recovery shall be applicable to each member of the class; and
(B) The total recovery under this paragraph in any class action or series of class actions arising out of the same failure to comply by the same depositary bank shall not be more than the lesser of $500,000 or 1 percent of the net worth of the bank involved; and
(3) In the case of a successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney's fee as determined by the court.

(b) Class action awards. In determining the amount of any award in any class action, the court shall consider, among other relevant factors--
(1) The amount of any damages awarded;
(2) The frequency and persistence of failures of compliance;
(3) The resources of the bank;
(4) The number of persons adversely affected; and
(5) The extent to which the failure of compliance was intentional.
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#347685 - 04/16/05 12:20 PM Re: Holds on cashiers checks
Elwood P. Dowd Offline
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Next to Harvey
It's frustrating when you have to threaten someone with the effects of noncompliance to get them to do something right. It's not the tack I take anymore, but let's finish the threatening part. Then, we will give them the opportunity to use some common sense.

In addition to 1)regulatory criticism and 2)liability under federal law which rlcarey has illustrated, there are a couple other things:

3) If an illegal hold causes you to bounce a check, that's wrongful dishonor. If you are sued for wrongful dishonor it will be in state court. You won't be sued for violating Regulation CC, but the violation will be conclusive proof that the hold was illegal. Most of the trial will be about the calculation of damages (which are unlimited), because your liability will be established in the first 30 minutes.

4)The unfortunate circumstance where you have a customer who knows the rules. Although they are rare, you may have a customer who realizes that what you are doing violates a federal law. He's going to think (scratch that, he's going to know) your bank is intentionally violating a law that was designed to protect him. He's going to conclude that your bank is dishonest at best. Do you think you will keep his good will and he will keep the story to himself?

Explain to the board that compliance with any banking law is like speeding on the highway or cheating on your income taxes. It involves risk. If you get a speeding ticket, that's the risk you took. However, if you have an accident and hurt someone, that's the risk you took too. If you get audited and the IRS imposes back taxes and penalties that's the risk you took. However, if the IRS levies on your property or files criminal charges that's the risk you took too. Once you set "risk" in motion, it is impossible to control. If your CEO and board can justify the risk, then they can reap the reward (?) of putting illegal holds on cashiers checks. If they want to do it, then leave yourself a paper trail leading back to them and go on to something else.

The costs of calling to verify individual cashiers checks deposited to transaction accounts do not outweigh the risks of violating the law.
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#347686 - 04/17/05 04:03 PM Re: Holds on cashiers checks
Pup Offline
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Pedaling along a scenic highwa...
If I can prove that it's a cashier's check, I cannot put a hold on it. But, if I've called the bank and they cannot or will not verify the check as legitimate, I will place a hold in a heartbeat. Without the full disclosure that the document is an authentic cashier's check, it remains simply a piece of paper with the words "cashier's check" printed on its face.

Can you "pick on" one type of check and make it your blanket policy to hold it on every transaction? I don't think so. Can you do your due diligence and respond by protecting your bank's interest? Yes.

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#347687 - 04/18/05 05:58 PM Re: Holds on cashiers checks
Spladoodle Offline
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Posts: 163
The other windy city
So, if you cannot verify it, you do not consider it to fall into the definition of cashier's check for hold purposes..... I like that Pup. I take it you've never had any regulators question it?
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#347688 - 04/19/05 01:12 PM Re: Holds on cashiers checks
Anonymous
Unregistered

If the cashiers check is for a large amount, you are allowed to hold the amount over $5,000.00.

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#347689 - 04/19/05 07:28 PM Re: Holds on cashiers checks
Anonymous
Unregistered

While I endorse the use of exception holds if the drawee bank can not confirm a Cashier's check, I have a problem with the "will not" confirm a cashier's check portion of this post.

Not all banks are willing to confirm over the phone. Reg CC is a consumer protection regulation - mandated by Congress - to protect the "little people" from egregious bank practices. If certain banks (in the name of extra profits and absolute protection from fraudulent checks) hadn't been holding paychecks drawn on the bank across the street for two weeks, we wouldn't have this wonderous regulation!

Keeping in mind the stated Congressional purpose and findings, I doubt that any court is going to equate the unwillingness of another bank to confirm ANY of their Cashier's Checks with REASONABLE cause to doubt collectibility of a specific check.

If other banks want to drive good customers away with poor practices that's fine with me. Just don't bring down the rath of Congress and the Fed on the rest of us!

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#347690 - 04/19/05 07:40 PM Re: Holds on cashiers checks
John Burnett Offline
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Cape Cod
I join you in your concern. Inability to confirm is not, in my understanding, a valid reason for a "reasonable doubt" exception hold.

That said, I understand why some bankers have chosen to ignore that fine point and place holds on unconfirmed cashier's checks rather than risk loss from a fraud. I cannot responsibly advocate such a choice, but I understand it.
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#347691 - 04/19/05 08:11 PM Re: Holds on cashiers checks
Anonymous
Unregistered

I understand the desire not to have fraud losses. However, any bank invoking such holds needs to have a great KYC program. Their program must include detailed reviews to make sure none of their clients are attorneys or know anything about Reg CC!

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#347692 - 04/28/05 02:17 PM Re: Holds on cashiers checks
Anonymous
Unregistered

What if anything can we do as a bank or what are other banks doing to protect ourselves against fraudluent cashiers check. We have had two come back this week as "Counterfiet"...

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#347693 - 04/28/05 02:38 PM Re: Holds on cashiers checks
Anonymous
Unregistered

Not much - once a case by case basis, if you have reason to suspect fraud, you can extend a hold but not across the board. We've hade some major problems w/ these and fake PO Money orders lately.

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#347694 - 04/28/05 05:15 PM Re: Holds on cashiers checks
Anonymous
Unregistered

Quote:

What if anything can we do as a bank or what are other banks doing to protect ourselves against fraudluent cashiers check. We have had two come back this week as "Counterfiet"...




I dont mean to be cynical...but...
Eat the loss from a certain type of check due to fraud (once it comes back as such) and know to hold any of that type/from that company in the future What else can banks do?

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#347695 - 04/28/05 05:22 PM Re: Holds on cashiers checks
Jokerman Offline
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Posts: 12,846
Quote:

know to hold any of that type/from that company in the future




What kind of hold are you talking about?

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#347696 - 04/28/05 05:58 PM Re: Holds on cashiers checks
Anonymous
Unregistered

Quote:

Quote:

know to hold any of that type/from that company in the future




What kind of hold are you talking about?




Reasonable doubt for collection...due to past experience with the same types of checks coming back as fraudulant

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#347697 - 04/28/05 06:29 PM Re: Holds on cashiers checks
Jokerman Offline
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Posts: 12,846
Quote:

Quote:

Quote:

know to hold any of that type/from that company in the future




What kind of hold are you talking about?




Reasonable doubt for collection...due to past experience with the same types of checks coming back as fraudulant




I'd be interested to know what your examiners say about this practice.

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#347698 - 04/28/05 06:39 PM Re: Holds on cashiers checks
Elwood P. Dowd Offline
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Next to Harvey
Anonymous #356988

They have not left you with any ambiguity on this issue:

(e) Reasonable cause to doubt collectibility--(1) In general. Sections 229.10(c) and 229.12 do not apply to a check deposited in an account at a depositary bank if the depositary bank has reasonable cause to believe that the check is uncollectible from the paying bank. Reasonable cause to believe a check is uncollectible requires the existence of facts that would cause a well-grounded belief in the mind of a reasonable person. Such belief shall not be based on the fact that the check is of a particular class or is deposited by a particular class of persons. 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.

Moreover, this isn't just any check, but one of the few that is entitled to special availability. You simply do not have any argument that your actions are reasonable.

If you do it, know 1) it's a clear violation of the regulation and 2) that it may be criticized by your regulators, or worse yet, make your bank liable for wrongful dishonor.
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#347699 - 04/29/05 02:04 PM Re: Holds on cashiers checks
John Burnett Offline
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John Burnett
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Cape Cod
At the risk of overstating the obvious, the best defense against a questionable cashier's check or postal money order is a refusal to accept it for deposit. It is true that collection fees are sometimes onerous, but you truly have to decide whether your customer's deposit of the check might put the bank (and your customer) at risk.

The "class of check or persons" wording is only applicable to the reasonable cause to doubt collectibility exception hold. It does not apply to a decision not to accept a check for deposit.

And if the check isn't deposited, you won't have a hold in place, so the wrongful dishonor monster can't rise up out of the swamp.
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#347700 - 05/26/05 02:36 PM Re: Holds on cashiers checks
etm614 Offline
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etm614
Joined: Jan 2003
Posts: 695
Massachusetts
Sorry to ask a stupid question - but what is the full disclosure that would prove that it's an authentic cashier's check? I'm having a hard time convincing tellers that just because it says cashier's check on it doesn't mean that it is one.

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#347701 - 05/26/05 05:08 PM Re: Holds on cashiers checks
John Burnett Offline
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John Burnett
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Posts: 40,086
Cape Cod
For the purposes of Regulation CC, a cashier's check is a check that is--
  1. Drawn on a bank;
  2. Signed by an officer or employee of the bank on behalf of the bank as drawer;
  3. A direct obligation of the bank; and
  4. Provided to a customer of the bank or acquired from the bank for remittance purposes.


But the only way to know that the purported cashier's check you hold is authentic is to contact the issuing bank and verify it with them.
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#347702 - 11/21/05 12:44 PM Re: Holds on cashiers checks
Elwood P. Dowd Offline
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Elwood P. Dowd
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Next to Harvey
Quote:

I'm having a hard time convincing tellers that just because it says cashier's check on it doesn't mean that it is one.




Ask your tellers, "If I wrote '3 pound pig' on a piece of paper, would that make it a 3 pound pig?" Yes, I have done that and, while they think me an idiot, they also get the point. I readily accepted the terms of the trade.
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#347703 - 11/21/05 06:38 PM Re: Holds on cashiers checks
Oursisnottoreasonwhy Offline
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Oursisnottoreasonwhy
Joined: Nov 2004
Posts: 506
Central Illinois
Appendix E to Part 229--Commentary

. 229.2(i) Cashier's Check

1. The regulation adds to the second item in the Act's definition of cashier's check the phrase, "on behalf of the bank as drawer," TO CLARIFY THAT THE TERM CASHIER'S CHECK IS INTENDED TO COVER ONLY CHECKS THAT A BANK DRAWS ON ITSELF. The definition of cashier's check includes checks provided to a customer of the bank in connection with customer deposit account activity, such as account disbursements and interest payments. The definition also includes checks acquired from a bank by noncustomers for remittance purposes, such as certain loan disbursement checks. Cashier's checks provided to customers or others are often labeled as "cashier's check," "officer's check," or "official check." The definition excludes checks that a bank draws on itself for other purposes, such as to pay employees and vendors, and checks issued by the bank in connection with a payment service, such as a payroll or a bill-paying service. Cashier's checks generally are sold by banks to substitute the bank's credit for the customer's credit and thereby enhance the collectibility of the checks. A check issued in connection with a payment service generally is provided as a convenience to the customer rather than as a guarantee of the check's collectibility. In addition, such checks are often more difficult to distinguish from other types of checks than are cashier's checks as defined by this regulation.

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#347704 - 11/21/05 07:46 PM Re: Holds on cashiers checks
John Burnett Offline
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John Burnett
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Cape Cod
What point are you making, ILLBANKER?
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#347705 - 11/21/05 08:38 PM Re: Holds on cashiers checks
Anonymous
Unregistered

That the ONLY items deemed to be Cashiers Checks are those Cashiers Checks drawn on itself.

All other Cashiers Checks (those drawn on other banks) are either local on non-local items for hold purposes.

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#347706 - 11/21/05 08:47 PM Re: Holds on cashiers checks
Elwood P. Dowd Offline
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Quote:

All other Cashiers Checks (those drawn on other banks) are either local on non-local items for hold purposes.




No, not even close.
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#347707 - 11/21/05 10:50 PM Re: Holds on cashiers checks
RVFlyboy Offline
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RVFlyboy
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Posts: 5,992
Soaring over Georgia
Quote:

That the ONLY items deemed to be Cashiers Checks are those Cashiers Checks drawn on itself.

All other Cashiers Checks (those drawn on other banks) are either local on non-local items for hold purposes.



Man, I am amazed at the amount of bad information out there about what Reg CC means. As Ken says, this is WRONG, WRONG, WRONG! This comment is meant to differentiate a check a bank draws on itself from a check drawn on some other bank. But once it is a cashiers check (by virtue of being drawn by a bank on itself) it is a cashiers check whereever it may be deposited or negotiated.
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#347708 - 11/22/05 02:18 PM Re: Holds on cashiers checks
Anonymous
Unregistered

Then why do the regulators make this distinction in the commentary betweeen Cashiers Checks drawn on other banks and Cashiers Checks a bank draws on itself?

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#347709 - 11/22/05 02:24 PM Re: Holds on cashiers checks
Elwood P. Dowd Offline
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They don't, you are misreading it.

They are saying that not all of the items that a bank may draw on itself are cashiers checks for the purposes of next day availability; e.g.

Quote:

The definition excludes checks that a bank draws on itself for other purposes, such as to pay employees and vendors, and checks issued by the bank in connection with a payment service, such as a payroll or a bill-paying service.




Please review your interpretation with your regulatory agency.
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#347710 - 12/01/05 05:25 AM Re: Holds on cashiers checks
Pup Offline
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Pup
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Posts: 5,045
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After 8 months and an exam, we've taken VERY FEW losses on counterfeit cashier's checks and have also not been fined for holding "cashier's checks" during the time when we are trying to verify them. Even banks that don't verify checks have fraud investigators whom can be reached eventually. As far as backlash from the customer base, an explanation of the losses that US customers have sustained because holds had not been placed on cashier's checks, and other checks, which turned out to be countefeit, have always turned out well.

Has anyone else seen the words "cashier's check" printed on Versa check stock? I have one that I use in my Orientation training and that one check, I believe, backs up my thought that just because it says "Cashier's Check" doesn't mean it is one.

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#347711 - 12/01/05 11:29 AM Re: Holds on cashiers checks
Elwood P. Dowd Offline
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Next to Harvey
You are to be congratulated on your good fortune to date, but placing holds on cashier's checks until the bank verifies their validity is a patent violation of federal law. There is no risk of being fined. The actual risks are outlined in great detail in prior posts in this thread.

I occasionally drive too fast. I've gotten my share of tickets, but never had an accident. However, my anecdotal experience does not put me in a position to even suggest that others following the same course will have the same result. So, I am careful not to do that.

Prior thread

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#347712 - 12/01/05 01:51 PM Re: Holds on cashiers checks
John Burnett Offline
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Cape Cod
When it comes to cashier's checks, here are your permissible choices:
  • Accept the check for deposit and provide next day availability. This choice will be fine if the check is valid and legitimately negotiated. Cautious bankers will make this choice only if they are comfortable with their customer relationship and don't have any reason to doubt the validity of the check (lottery scam, Web auction scams, alterations, etc.)

  • Accept the check for deposit and apply an exception hold for repeat overdrafts (in the unlikely event that your depositor is in this select group).

  • Accept the check for deposit and apply a "reasonable cause" exception hold. This only works if you have information that would cause a reasonable person to form a well-grounded belief that the check won't be paid. That belief can't be based on a "class" of checks (all cashier's checks, because we've had a spike in cashier's check fraud). It has to be a set of facts concerning the check in question (the drawee bank tells you it's probably a counterfeit, or hasn't issued the check in question), or facts surrounding the transaction (the customer's actions or conversation lead you to believe the check is part of a scam). Since the holds in these cases normally only run 7 or 11 days, this option is not always the wisest choice, particularly if you suspect fraud.

  • Accept the check and place an exception hold on the amount over $5,000. The reason for the hold might be that the check is being deposited to a new account, or that it's part of a large check deposit (over $5,000). This exception reason has always bothered me. Isn't losing $5,000 to a check fraud only marginally more acceptable than losing the full amount of the check?

  • Accept the check only for collection. Sure, this involves extra work and costs. But it provides the only guarantee of good funds once the deposit is finally made (if it is).
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#347713 - 12/02/05 05:05 AM Re: Holds on cashiers checks
GoCowboys Offline
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GoCowboys
Joined: Aug 2003
Posts: 94
Texas
My sister just sold her house. She got a check from the title company, drawn on a local bank. She went to the local bank and got cash for part of the check and a cashier's check for the rest.

She then deposited the cashier's check into her account at the credit union. They put a hold on it until the local bank faxed them something stating that the cashier's check was good. They said they do this because they have had a lot of "cashier's check fraud."

If I'm reading the rest of this thread right, the credit union violated federal law.

Did I miss something?
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#347714 - 12/02/05 02:13 PM Re: Holds on cashiers checks
John Burnett Offline
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Although I sympathize with the credit union's concerns about bogus cashier's checks, if the facts are as you have presented them, they appear to have violated the law.
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#347715 - 12/02/05 02:16 PM Re: Holds on cashiers checks
Elwood P. Dowd Offline
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...if the cashiers check was deposited to a transaction account. The law limiting holds on cashiers checks does not apply to any type of a savings account, including a MMDA.

In any case, requiring a fax from the drawee bank wins my "over the top" award for the day.

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#347716 - 12/02/05 03:21 PM Re: Holds on cashiers checks
GoCowboys Offline
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GoCowboys
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Posts: 94
Texas
I just called my sister, and the hold was released. I assume this is because they received the fax.

We will know better next time, though.
Last edited by GoCowboys; 12/02/05 03:27 PM.
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#347717 - 12/05/05 04:13 PM Re: Holds on cashiers checks
Oursisnottoreasonwhy Offline
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Oursisnottoreasonwhy
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Central Illinois
I would like to thank Magicbanker and Ken Pegasus for setting me straight. Sometimes when you read these regulations you read what you want it to say instead of what it really means.

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