Lender has a bad loan. Wants to capture funds that might be deposited into a checking account. Asks operations to place a long-term hold on the account for say, the balance of the loan.

Is it a Reg CC violation to place this type of hold?

Normally you either have to exercise the right of offset or not. You can't just hold the funds. Depending on the type of loan you may only get one shot at a cure - then you are done. I would call your attorney.