Slow and Steady Wins the Race – Funds Availability Exceptions

In the beloved fairytale of the tortoise and the hare, we learn a life lesson that those who are slow and steady in their approach to life, that-is-to-say constant in their progression and improvement, oftentimes win the race.

Did anyone else find this to be hogwash? 

In today’s environment, it isn’t slow and steady wins the race, it is get the job done, get it done right, and get it done now. Gone are the days of waiting. If I don’t know the answer, the internet does. If my wife is undecided about where to eat dinner, 10 thousand strangers are willing to give their input about good food nearby. While every bookie would have won their bet on the hare, if he didn’t throw the race for a nap, there is another lesson to be learned from the tortoise. That is, there are exceptions to the rule and sometimes those exceptions are going to make people unhappy.

When I worked as a teller for a bank, occasionally a customer would come in and deposit a check. Upon completion of their deposit, a friendly little box would cheerfully chirp, notifying me that their check was placed on hold. It was then my privilege to notify the customer they wouldn’t have access to the funds they just deposited for a certain number of days. More often than not, the disgruntled customer would leave without cash in hand. As a teller, I always wondered why the bank would put holds on checks. The answer is simple – it is for the customers and the bank’s security and well-being. Because with the never-ending obligation to get things done now, also comes a swarm of Nigerian Princes, expired extended warranties, and free cruise line vacations.

So what hold exceptions are available? In order to minimize the risk to the bank and their customer’s customers, Regulation CC has provided six different exceptions that allow banks to extend deposit hold periods.

  1. Checks deposited into a new account (open for 30 days or less);
  2. Aggregated check deposits over $5,525 in one day (only the amount over $5,525);
  3. Redeposited check (returned unpaid and redeposited by the customer or the bank);
  4. Check deposits to accounts that have been repeatedly overdrawn (within the past 6 months);
  5. Check deposits where the bank reasonably doubts collectability; and
  6. Emergency conditions (war, equipment failure, etc…).

For reference see § 229.13:

After the time of deposit, or no later than the first business day following the day the facts become known to the bank which causes the hold to be placed, the bank must provide a written notice to the customer of the hold being placed. The notice must contain a number code that identifies the customer’s account (does not need more then 4 numbers), the date of the deposit, the amount being delayed, the reason for the exception, and the time period when the funds will be made available.

Regulation CC provides that the bank may use one of these exceptions to extend the availability schedule by a reasonable period of time. Reasonable is left to the bank to determine, however, a check subject to an exception hold would generally be available no later than the seventh business day after deposit. If the bank wants to extend the hold beyond that, they should be able to establish a reasonable purpose to do so.

While life in the fast lane may be fun, the prudent course is for the bank to be conservative and exercise its Reg CC rights as needed to protect the bank and its customers.