Answer:
Answer by Linda Westfall:
The regulation found at section 229.13(g)(i)(D) states the notice should show "the reason the exception was invoked". This would indicate that only one reason should be shown.
When using the reasonable cause exception, the reg states you should provide "The reason for the bank's belief that the check is uncollectible". One of the most common situations for using the reasonable cause is when you call the paying bank and they state the check will not clear at this time. In that case you would state the reason as "reasonable cause to doubt collectability, information from the paying bank indicates the check may not be paid."
In the commentary to Reg CC it states "There are reasons that may cause a bank to believe that a check is uncollectible that are based on confidential information. For example, a bank could conclude that a check being deposited is ncollectible based on its reasonable belief that the depositor isengaging in kiting activity. Reasonable belief as to the insolvency orpending insolvency of the drawer of the check or the drawee bank andthat the checks will not be paid also may justify invoking thisexception. In these cases, the bank may indicate, as the reason it isinvoking the exception, that the bank has confidential information thatindicates that the check might not be paid."
Answer:
Answer by Lucy Griffin:
I read the regulation slightly differently in that it does not say that you may not give more than one reason. However, the regulation does presume that you have one reason or that one reason is overriding. Most important, each exception hold that you can choose to place can have different hold periods. Therefore, you should give the reason that pertains to the hold you chose to place. Unlike Regulation B, you are not required to give all reasons if you happen to have more than one.
For example, a check for $8,000 with doubtful collectability could be subject to two different exception holds. Regulation CC allows you to chose the hold that is most favorable to the bank. In this case, the large check hold will not provide the bank with the protection that the uncollectability hold would. Therefore, you are placing the hold under that reason even though another could apply.
First published on BankersOnline.com 5/06/02
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