Question & Answer

Question: I know that there have been numerous articles about Reg CC in BANKERS' HOTLINE over the past year and that there have been many changes going into effect as well. Maybe it's normal, then, that I am confused.

I thought the Competitive Equality Banking Act of 1987 and the resulting regulation (Reg CC) came about because it was felt that financial institutions were not making customers' money available to them quickly enough. I thought Reg CC was supposed to limit the number and kinds of holds a bank could put on a customer's account.

The financial institution I work for recently told us that Reg CC allows us to put holds on accounts. Not just on deposits to new accounts, but on any deposit to any account we feel we want to place a hold on, so long as the customer is told the hold is going on. Am I crazy or does this seem in conflict with funds availability?

Answer: The Expedited Funds Availability Act, (EFAA), which is Title VI of the Competitive Equality Banking Act, was passed by Congress in response to complaints of deposited funds being held for unreasonable periods by financial institutions before making them available.

And the new accounts portion of the EFAA is difficult to understand, which is why it has gotten a lot of press. (See article on page 5.)

Perhaps just as difficult to understand are the allowable holds on deposits into established accounts. I promise you we will go "in-depth" on that issue in the very near future. There is not enough space here! But to answer your question, you can put holds on some deposited items, if all the facts are in place (not a next-day-availability item, payee is the account holder, deposit made at a teller's window, local or non-local hold according to your disclosure, exception notice given, etc., etc.) And remember, EFAA and Reg CC do not have any affect at all on savings accounts. Those holds on deposits can be whatever your institution chooses.

It's not quite as easy as "...put holds on... any accounts we feel we want to place a hold on." All the conditions have to be right first.

Copyright © 1991 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 2, No. 5, 6/91