My parents just discovered today that when my mother deposited her paycheck (she works for BOCES, her check comes directly from the state of NY), the bank put a hold on it, which meant that they didn’t actually have the money for up to 30 days. No one at the bank mentioned anything about any holding time on paychecks to either of them, all they were told is that the transaction would go through on the next business day. They only found out about this hold time when their checks started bouncing, on an account that the bank had told them would have the money by then.
Can the bank do that? Are they allowed to hold deposits that long without bothering to mention to the account holder that they’re doing it? Do my parents have any recourse in this, beyond calling everyone who got one of the checks and trying to settle both the fact that they bounced the check and the fact that the bank still hasn’t actually put the money in the account, two weeks later?
The appropriate Federal Regs arein the Code of Federal Regulations:
CHAPTER II–FEDERAL RESERVE SYSTEM
PART 229–AVAILABILITY OF FUNDS AND COLLECTION OF CHECKS (REGULATION CC)
The colloquial name for this part of the rules is “Reg. CC” if you happenned to be sitting in a room full of bank compliance officers. Those are the kinds of people required to understand this stuff.
The following link takes you to a web site providing an Index to Reg. CC’s assorted rules: http://www.federalreserve.gov/Regulations/title12/sec229/12cfr229_01.htm
By the way, based on my reading of the PDF version of the 2nd-to-last paragraph of 229.13, a 30-day hold is unprecedented under any circumstances barring something EXTREMELY askew. This check being from a known financial criminal… part of a Nigerian scam… that would count. 7 day holds are not uncalled-for. 30 day holds are bizarre.
In any case, they pretty-much should have told your parents that this deposit would have been held, either in person or by mail.
Were I your mother, I would immediately contact the bank and politely but firmly inform me that they have had a technical foul-up, and that in order for them to retain me as a customer they will need to not only restore access to said funds, but also make me whole by providing me with credits for any and all bounced check fees assessed against me by various merchants. Your mother has been injured by the financial institution, and must remember this during the call.
This approach will work with most bankers who are interested in retaining you as a customer. If your mom is a bad customer and the banker is not interested in customer service, you may have more trouble.
Don’t be afraid to ask to speak to someone else if the first person you speak to lacks the authority to honor your requests. The 1st and 2nd-line staff at many banks are frequently undertrained, underpaid and somewhat scared of losing their jobs. When I’ve had tricky situations in finance, I’ve often discovered that the singular person at the branch able to straighten things out is the branch manager. Occasionally I’ve needed to have branch management reach out to the bank’s operation center for assistance when my problems have been particularly odd.
If the bank believes it has some legitimate reason for a hold of this length and quantity, please post back here. I’ll be most interested to find out the reason they cite.
Except in an “unusual” case it is very odd, and probably prohibited by Reg. CC, for a bank to hold a check issued by a local government. I say “probably prohibited” because I am not familiar with the agency in question (BOCES).
An unusual case, as defined by Reg. CC could be:
a new account (90 days or less, IIRC. Any check can be held for any, or no, reason)
a “mishandled” account (many NSF’s, overdrafts, etc.)
the bank has reason to believe the check will not be honored (known financial problems with the issuer, fraud, etc.)
The bank does not have to tell the depositor of a hold at the time of deposit. That decision can be made later (usually within 24 hours). In the case of a delayed decision to hold the funds the customer must be notified by mail.
Reg. CC offers some good protections to the consumer. Unfortunately, it is so large and cumbersome that few people really understand it, even inside the banking industry. That can leave the average Joe pretty much out in the cold when it comes to looking out for his own interests.