I know that you cannot place a reas cause hold on insurance or credit card checks simply due to class of checks, but I am need of some backup to prove this point.

Didn't one of the agencies issue a letter in the past year specifically addressing this issue? I have checked OTS/FRB/FDIC/OCC sites with no luck. If anyone knows where I can find this I would appreciate it!

This is in Reg CC - 229.13(e)(1)- "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."

My general guidance on this is to consider the factors one normally would when determining if a hold will be placed: sufficient balance in account, customer is and has been in good standing,how long account has been opened etc. etc. and then decide. The other option is to call the card issuer or send the item for collection.

Beyond what is stated in the reg, I am not aware of any other written guidance from the regulators. This is a very common issue so if someone has something, please do share it.
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This does not reflect the formal opinion of my employer.

I attended a seminar recently where a well-respected deposit compliance trainer indicated it would be appropriate to use "unable to verify funds" if you try to obtain verification and can't get through to the card issuer. I haven't discussed this with a regulator, but it makes sense to me. We rarely get through when we try to use the 800 numbers to verify a credit card check.

We have noticed that we can generally utilize the repeat overdraft hold for individuals presenting credit card convenience checks. I would like to seem some guidance from our regulators acknowledging this category of check represents a higher risk and automatically allowing an exception or safeguard hold. However, since this is consumer protection and not bank protection, I doubt we'll see that happen.

Thank you everyone for your input. It seems the distinction here is if the bank actually attempts to verify funds, is unsuccessful, and documents their attempt, is it acceptable to use the "Unable to Verify Funds" reason. Simply using this reason every time a customer deposits a credit card check without attempting to verify is not acceptable.

Another "Reasonable Cause" question: is checking a box on a hold notice that says "Confidential information indicates that the check may not clear" rather than specifically stating that the "Paying bank indicates that check not clear" acceptable? After reading the Commentary, it seems that you should only use the "Confidential" notice if there truly is a confidential reason such as check kiting or payee is insolvent or on the verge of insolvency.

[This message has been edited by SLC (edited 11-01-2001).]

That's right - only use "Confidential Information" reasonable cause exception when there truly is information reasonably leading to your concern that would be inappropriate to share with the customer. Remember, you must document on the BANK's copy of the hold notice what the nature of that confidential information was.

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Jim Bedsole, CRCM, CBA, CFSA

Opinions expressed are my own, and do not necessarily reflect those of my employer.

I contacted our consultant and our regulator concerning this same issue a while back. Thier response was that a credit card check, if accepted as a regular deposited item, must be treated the same as any check, local or non-local, i.e. "a check is a check, is a check, is a check". When I audit, I look at support documentation to ensure the "Reasonable cause" hold is valid. This is what the regulator recommended - thatis if we were going to use use a reasonable cause hold we should have documentation to support the reason given. We have taken the approach that the account's performance history will dictate whether we hold or not. Typically, these items are deposited by customers with somewhat of a problematic account performance. Using "unable to verify funds" sounds reasonable, however, I would like to see a regulator post an opinion on this.