"Check 21" Question

Factual Questions
1

I recently had a client give me a check as a retainer fee. I sent it in to my bank by mail on 12/15/2004 (I use Netbank, which is based in Georgia; my client and I are in NY).

On 12/22/2004, it was listed in my online account balance as being deposited.

On 12/24/2004, my client called me to tell me that one of HIS big clients had put their project on hold, and so he would have to suspend our work together (fine) and ask for the retainer back (not fine, as I had already completed a significant portion of the work). I told him I didn’t think that was going to happen, but I’d try to get in touch with my business partner and get back to him. It was Christmas Eve and both my partner and I were traveling out of state for a week, so I didn’t end up getting back to the client.

On 01/04/2005, my business partner logs onto our account and sees that, on 12/28/2004, we have a “MISC. CHARGE WITHDRAWAL” for the exact same amount as the client’s retainer check. I call my bank, and learn that the client stopped payment on the check.

Now, we’re sending past due notices, considering legal action vs. the client, etc. But the thing that still bugs me is the fact that the money was in our account, and then it was taken out. The bank told me that they put a 5-day hold on all out-of-state checks (which is always going to happen, as I don’t do business with anyone in Georgia).

But wasn’t “Check 21” supposed to eliminate this sort of delay? Wasn’t the money supposed to be transfered immediately? I mean, he didn’t put the STOP on the check while it was still in the mail–it had been deposited 2 days earlier!

What’s the dope?

2

First, I would suggest that you will get the best dope for your situation from your own bank.

“Check 21” doesn’t say banks have to clear checks faster, it just facilitates the use of electronic transmission of check data to allow clearing faster than paper checks. Doesn’t require it.

When you make a deposit, the bank will generally show the deposit on your account but hold funds until the check clears. In your case, a deposit on 12/22 could still take several days to clear. In an interest-bearing account the bank will usually credit interest from the deposit date rather than the date it actually clears, but might not allow you to draw against those funds until it clears. A stop-payment that hit 12/28 is only about 4 business days after the deposit (due to the weekend & Christmas holiday), within the 5-day hold your bank puts on our-of-state checks.

3

If you have online acccess to your account information you will find that it indicates Amount on Deposit, and Amount Available.
The difference is to allow for clearance and the eventuallity of a stop payment or insufficient funds, etc.
I suspect that you will have to file claim in court for work already done.