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#2244315 - 10/20/20 03:53 PM Reg CC hold & Chargeback of item
AT Offline
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Joined: Nov 2012
Posts: 15
Would appreciate thoughts on the below scenario:

Reg CC exception hold is placed at the time of deposit. On business day 3, and we receive notice that the item is being returned and go ahead and debit funds from the account. Is bank required to release the exception hold on the account when the funds are debited or can the bank allow the exception hold to remain in place and drop off when it expires on 7th business day after date of deposit?


In my opinion - yes, we would need to release the hold when we debit the funds from the customer's account.

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#2244316 - 10/20/20 03:55 PM Re: Reg CC hold & Chargeback of item AT
BrianC Online
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BrianC
Joined: Nov 2004
Posts: 6,694
Illinois
The purpose of the hold is to prevent the customer from using the proceeds of the check that you are holding. Since those funds are no longer in the account, yes the hold must be released.

Your alternative is to leave the hold on and not debit the account until the check is returned, but then there is the risk of the hold expiring prior to the check being returned.
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#2244338 - 10/20/20 07:33 PM Re: Reg CC hold & Chargeback of item AT
John Burnett Offline
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John Burnett
Joined: Oct 2000
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Cape Cod
Completely agree with Brian. Put those funds in suspense until the check is actually charged back. Leaving the hold on the account after pulling the funds has the effect of denying access to funds your depositor has a right to access under Reg CC, and could result in a suit for wrongful dishonor (if a check is bounced because the hold is still on the account). That can result in a loss much larger than the amount of the check that's wrongfully bounced.
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