![]()  Here's an 11-page summary from the Senate Banking Committee. President Obama was supportive. Yesterday, Senator Dodd unveiled his 1,336 page reg reform bill. Reasonable belief as to the insolvency or pending insolvency of the drawer of the check or the drawee bank and that the checks will not be paid also may justify invoking this exception.Īs always, it is a good idea dive into the Regulation and Staff Commentary for additional details. For example, a bank could conclude that a check being deposited is uncollectible based on its reasonable belief that the depositor is engaging in kiting activity. There are reasons that may cause a bank to believe that a check is uncollectible that are based on confidential information. Similarly, if a check being deposited is postdated (future dated), the bank may have a reasonable cause to believe the check is uncollectible, because the check may not be properly payable under U.C.C. 4âÂÂ∴04 a bank has no duty to its customer to pay a check that is more than six months old. a stale check) is a reasonable indication that the check may be uncollectible, because under U.C.C. The fact that a check is deposited more than six months after the date on the check ( i.e. For example, the paying bank may have indicated that payment has been stopped on the check, or that the drawer's account does not currently have sufficient funds to honor the check. The depositary bank may have received information from the paying bank, prior to the presentment of the check, that gives the bank reasonable cause to believe that the check is uncollectible. If a bank received a notice from the paying bank that a check was not paid and is being returned to the depositary bank, the depositary bank could place a hold on the check or extend a hold previously placed on that check, and notify the customer that the bank had received notice that the check is being returned. ![]() And what exactly is "reasonable doubt?" The Fed gives several examples. And if you look at these examples, a trend becomes clear. There is some information about that specific check that raises the reasonable doubt. Some credit may have been hit hard by bogus cashier's checks. It might be tempting to institute a longer hold on all cashier's checks until you can get a handle on the problem. But this guidance prohibits you from doing so. Similarly, a depositary bank cannot invoke the reasonable cause exception based on the race or national origin of the depositor. For example, a depositary bank cannot invoke this exception simply because the check is drawn on a paying bank in a rural area and the depositary bank knows it will not have the opportunity to learn of nonpayment of that check before funds must be made available under the availability schedules. ![]() The regulation provides that the determination that a check is uncollectible shall not be based on a class of checks or persons. That sounds great, right? If your tummy tells you the check might be problematic, you can slap an extended hold on it, right? Not so fast. If the reasonable cause exception is invoked, the bank must include in the notice to its customer, required by ç229.13(g), the reason that the bank believes that the check is uncollectible. When a bank places or extends a hold under this exception, it need not make the first $100 of a deposit available for withdrawal on the next business day, as otherwise would be required by ç229.10(c)(1)(vii). This exception applies to local and nonlocal checks, as well as to checks that would otherwise be made available on the next (or second) business day after the day of deposit under ç229.10(c). In the case of certain check deposits, if the bank has reasonable cause to believe the check is uncollectible, it may extend the time funds must be made available for withdrawal. Regulation CC was created to place limitations on how long financial institutions can hold deposits. The regulation, however, does provide some flexibility for financial institutions to extend holds in a limited number of situations. One of those holds is the "reasonable cause to doubt collectibility" exception. Let's take a look at this hold, shall we?įrom the staff commentary, here's a nice overview of the exception: Editorial warning: Long blog post ahead. Take several sips of coffee now.
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