Our deposit staff has decided to place OTC holds on any on-us checks presented for payment. They say it is to protect us as we use a service provider and it sometimes takes up to five days for on-us checks to clear. I can't find anything in Reg CC but did find something in the commentary pertaining to 229.19(e). I don't think we should be following this practice but maybe I am wrong.

I looked at 229 - and found 229.10(c)(1)(vi) which is referencing items that must be "available for withdrawal not later than the business day after the banking day on which the funds are deposited."

It says, "a check deposited in a branch of the depositary bank and drawn on the same or another branch of the same bank if both branches are located in the same state or the same check-processing region."

Unless I'm missing an exception somewhere, I agree with you - the OTC holds shouldn't be placed on on-us items unless they fall under the an exception hold definition.

Whose account are you placing the hold on... the maker of the check or the presenter? Reg CC applies to items "deposited". If the hold is being placed on the funds in the account for the "on-us" individual, in effect reserving funds for payment of the item, Reg CC would not apply but you might have other issues in placing a hold for that time frame for an item presented over the counter.

We are placing holds on the funds of the maker of the items, not the presenter. I am not clear whether Reg CC applies or not.

Oops! I misunderstood. Sorry about that. We routinely place holds on items presented for payment at the teller line, but the hold falls off that night when the work is run through and the items post. I guess now I'm confused about why it takes up to 5 days for your on-us work to post. Does your other work take that long?

We do not clear our on-us items, they are sent to the Fed for processing. That explains the delay. Our OTC holds stay on until the item clears the account.

Why do you send your on-us items to the Fed for processing? Why aren't they deducted immediately from the account they are drawn on, then give the presenter next day availability? I might be misunderstanding something here.

Requests are mine not my employer

Maria, my system works the same way, so I will explain. In most banks with an in-house proof department, any posting that is done over the counter is only a 'memo-post' (spaceholder) which is replaced by a final post after proof completes the work. This is the situation the lglover described.
In banks like mine, and the original poster's, we do not have in house proof, so we use a service bureau to clear checks. All checks, on-us and transit, are sent to them. They also receive our inclearing checks. Each night, they send us a file to post which includes inclearing items as well as the stuff we sent them. To summarize- our OTC items clear like inclearing items from other banks. For that reason, I would say the holds make sense, and Reg CC doesn't apply.
But I do want to offer a suggestion to the original poster. Talk to your core processor/service bureau/whoever abotu gettign you the ability to 'kill' the check at time of presentment. We have this option, and it has saved us from getting burned on countless occasions.

Thanks for the explanation. I have worked in banking about 20 years for 8 different banks and all of those banks had in-house processing so I truly did not realize all banks did not conduct their business this way. What an eye opener.

Thanks for the info.

My understanding is that Reg CC requires next-day availability for on-us checks. You are allowed to add one day for a qualifying exception hold such as repeat overdraft, collectibility, etc. I'm not aware of any additional exceptions to the rule.

Brenda, the reason that I suggest Reg CC does not apply is because the hold is not being placed on the depositor's funds. It is the drawers funds that are being held, ensuring payment of a check for which the depositor has already received credit. Here's an example of the way I interpret this scenario: You and I both have accounts at BOL Bank, and I write you a check for $100.00. You deposit the check into your account, and at that time the hold is placed on MY account. When the check clears, the hold is released and the funds are debited from my account.