Expedited Funds Availability/Check-Holds Page: 3 of 6
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CRS-3
In general, if a check is not subject to "next day availability" the clearing schedule
(except for the first $100) depends on whether the check is local or nonlocal. If the
account holder's institution is in the same check processing region as the paying
institution,4 the check is local. Funds deposited by local checks must be made available
for withdrawal by the second business day and alternatively, funds from nonlocal checks
must be made available by the fifth business day.
Regulation CC also permits financial institutions to impose "exception" holds for
certain types of deposits or accounts. Included in the exception category are large deposits
(greater than $5,000), redeposited checks, deposits to accounts repeatedly overdrawn,
when the institution has a reasonable cause to doubt the collectibility of the check,
emergency conditions, and new accounts (open less than 30 days). In general, the
extended period of time for on-us checks is one additional business day (for a total of two
days), for local checks five additional business days (for a total of seven days), and for
nonlocal checks six additional business days (for a total of eleven days). However, the
financial institution shall make $400 of the deposited funds available by 5:00 pm on the
business day on which the funds would have cleared if the exception had not been
imposed. The $400 is in addition to the first $100.
Regulation CC requires financial institutions to provide customers with a written
disclosure of their funds availability policies prior to opening a transaction account. If the
availability terms on an existing account are changed, the account holder must be
provided with a new disclosure 30 days in advance unless the change expedites the
availability of funds, in which case, notice may be given no later than 30 days after
implementation. In addition, notices must be posted in each location where employees
accept deposits and at all ATMs. The customer must be notified when an exception hold
is placed on a deposit. Model disclosure statements are provided.
The regulation contains provisions to speed up the check-return process in an effort
to ensure that institutions are advised when a check is being returned before the deposited
funds are made available. Options and methods are addressed in Subpart C of Regulation
CC. In general, institutions are encouraged to use the most efficient path to route the
return and to provide for the automated processing of returned checks. Finally, the Board
of Governors of the Federal Reserve is directed by Section 603 (d) (1) of the EFAA to
make reductions in the hold time periods established in Regulation CC as warranted by
improvements in the check clearing system.
Issues Raised By Check 21
The Check Clearing for the 21St Century Act (P.L. 108-100),commonly referred to
as Check 21, was enacted on October 28, 2003, to foster innovation in the payments
system and enhance its efficiency by facilitating the use of electronic check processing.
4 Party responsible for making the payment of the amount written on a check.
s For more information, see CRS Report RL32668, Electronic Banking: The Implementation of
the Check 21 Act, by Walter W. Eubanks and CRS Report RS22525, Electronic Banking: The
Post-Check 21 Payments System, by Walter W. Eubanks.
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Smale, Pauline. Expedited Funds Availability/Check-Holds, report, October 10, 2008; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc817046/m1/3/: accessed April 24, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.