Reg CC - Other Exception Reasons

Omega, it does and that's why I can't imagine needing the 'other' box. I'll introduce the new and improved form at my Reg CC training classes in the beginning of Feb.

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:

Right now, my form contains the following:
A. An emergency, such as failure of communications or computer equipment.
B. Your account is a new account, open less than 30 days, and your have had no other checking accounts with us in the last 30 days.
C. The checks you deposited on today's business have exceeded $5,000
D. You have repeatedly overdrawn your account in the past six months
E. A check you have deposited was previously unpaid
F. We have confidential information that indicates that a check you have deposited might not be paid
G. We are unable to verify the endorsement of a joint payee
H. Some information on a check you have deposited is not consistent with other information on the check
I. There are erasures or other apparent alterations on a check you have deposited
J. A check you have deposited is postdated or has a stale date
K. Information from the paying bank indicates that a check you have deposited may not be paid.
L. We received notice that a check you have deposited is being returned unpaid
M. We have been notified that a check you have deposited has been lost or damaged in collection
N. Other

We list the policy at the top and an explanation of New Account at the bottom. Is 'other' really necessary?

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.

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.

Why not lose the 'other' line and substitute for 'non-transaction account' or 'savings account'. It seems that's the only reason people use Other anyway. That would seemingly eliminate the "No Recourse" label that one teller has decided is OK. Don't ask, I don't know where she got that. That's one of the reasons I'm doing CC training next month.

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?"

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. ??

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.

Commercial Customer files bankruptcy, no NSF's & not an "overdrafter" per CC. Can we use an exception hold for reasonable cause because of the bankruptcy alone?

Bankruptcy filed by the Depositor? I'm not sure that would throw the collection of a deposited check into doubt.

Bankruptcy filed by the maker of the check? Then I would say you have a very reasonable belief that the check may not be paid.