Options For Placing Holds On Large Overseas Checks - Mary Beth Guard

Options For Placing Holds On Large Overseas Checks
by Mary Beth Guard, BOL Guru

Question: I have a customer who opens a new account. In ten days he comes back with a check (payable through a bank overseas). My question is can I hold this check, which is also a large check, for 30 days?

Answer: Reg CC applies to a "check" as that term is defined in the Expedited Funds Availability Act ("EFAA"). Check is defined in section 602(7) of the EFAA as a negotiable demand draft drawn on or payable through an office of a depository institution located in the United States, excluding noncash items.

If the item is payable through a foreign bank, it does not meet the definition and the length of time you are permitted to place a hold will be governed by your deposit account agreement -- not Reg CC. If your deposit account agreement is well-written and flexible, it should allow you to place a hold on the foreign item for a time period long enough to protect your interests. It would be wise to inform your customer about how you intend to handle this, so that the customer can plan accordingly. Another option would be to choose to accept it for collection, rather than deposit, and not credit the customer's account until the funds are collected.

The original version appeared in the March 2003 edition of the Oklahoma Bankers Association Compliance Informer.

First published on BankersOnline.com 8/11/03