Expedited Funds Availability Act
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The Expedited Funds Availability Act (EFA or EFAA) was enacted in 1987 by the United States Congress for the purpose of standardizing hold periods on deposits made to commercial banks and to regulate institutions' use of deposit holds. It is also referred to as Regulation CC or Reg CC, after the Federal Reserve regulation that implements the act. The law is codified in Title 12, Chapter 40 of the US Code and Title 12, Part 229 of the Code of Federal Regulations.
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[edit] Disclosure
Financial institutions must disclose their hold policies to all account holders, and make the policy available in written form upon request by any customer. It must also be provided at the time of opening of all new accounts.
Additional disclosures are required on deposit slips, at ATMs, and when the policy is changed in any way.
[edit] Types of Holds
Regulation CC stipulates four types of holds that a bank may place on a check deposit at its discretion. Each has its own qualifications and it is legal for the bank to place any type where the requirements are met, although bank policy may instruct that the type of hold placed be the one that holds the most funds the longest that can be applied legally.
Furthermore, each type of hold has varying availability schedules based on whether the check is local or non-local. This status is determined by the federal reserve bank referenced by the routing number. In all federal reserve districts, save Kansas City and St. Louis, the check must be drawn from the same federal reserve district as the depository institution. In banks in either the Kansas City or St. Louis districts, either is considered local.
| Hold Type | Necessary Requirements | Local Availability | Non-Local Availability | |||||
|---|---|---|---|---|---|---|---|---|
| Statutory | No other hold applies, can be placed almost anytime. | $100 1st Business Day Following Deposit, Remainder 2nd Business Day | $100 1st Business Day Following Deposit, 5th Business Day | |||||
| Large Deposit | Aggregate total of checks deposited into one account on one business day is greater than $5000.00. | $100 1st Business Day Following Deposit, $4900 2nd Business Day, Remainder 5th Business Day | $100 1st Business Day Following Deposit, $4900 5th Business Day, Remainder 9th Business Day | |||||
| New Account | The account being deposited into has been open for less than 30 days. | 9th Business Day | 9th Business Day | |||||
| Exception |
|
7th Business Day | 11th Business Day |
There are a few exceptions to these guidelines that are important to note. If an account owner is depositing into an account that does not qualify for the exception hold but also owns another account that does qualify, then the Exception NSF Hold can be placed. In the same manner, if an account owner is depositing into an account that has been open for less than 30 days but owns another account that has been open greater than 30 days, the New Account Hold cannot be legally placed.
There are certain items that present less risk to financial institutions and thus are subject to expedited availability under the stipulations of Regulation CC. The following items must have the first $5000 available for the Statutory, Large Deposit and New Account Hold by the first business day following the deposit:
- Cashier's checks*, Certified Checks, or Teller's Checks**;
- Postal money orders;
- US Treasury checks;
- Federal Reserve Home Loan checks;
- Any check issued by a state, city, county, or other municipality;
- Any check drawn from another account at the depository institution.
For each of these items, the item must be presented for deposit into the payee's account for it to receive expedited fund availability. When one of these checks is presented for deposit into a third party account, it loses its preferential treatment.
*Regulation CC defines a Cashier's Check only as a check that is issued by a bank, drawn on that same bank, is a direct liability of the bank, and signed by one or more officers of that bank. "Official Checks" or "Bank Checks" do not always qualify as Cashier's Checks as defined by Regulation CC.
**A Teller's Check may only be issued by a Federal Credit Union and must meet the above requirements for a Cashier's Check with the exception that it must be drawn off that credit union's depository account at a federal bank.
[edit] Payment of interest
According to the regulation, interest-bearing accounts shall receive earnings from funds from the time they are collected by the depositary institution, regardless of hold lengths.
[edit] Enforcement
Under the act, enforcement is divided by the type of institution, respective to each type's mandated oversight authority:
- For national banks, and federal branches and agencies of foreign banks, the act is enforced by the Office of the Comptroller of the Currency;
- For members of the Federal Reserve System who are not national banks, and for offices, branches, and agencies of foreign banks located in the United States (who are not federal branches and agencies of foreign banks), the provisions are enforced by the Board of Governors of the Federal Reserve;
- In the case of banks insured by the Federal Deposit Insurance Corporation who are not members of the Federal Reserve System, and insured state branches of foreign banks, enforcement falls to the Board of Directors of the FDIC;
- The Director of the Office of Thrift Supervision is responsible for enforcing the provisions of the act in the case of savings associations whose deposits are insured by the FDIC;
- Federal credit unions or credit unions insured by the National Credit Union Share Insurance Fund are subject to enforcement of the act by the National Credit Union Administration Board.
Awards for damages are limited under the regulation, including not more than $1000 in addition to actual damages for individual actions, and not more than the lesser of $500,000 or 1% of the net worth of the bank, in addition to actual damages, for class actions.
[edit] See also
- check clearing
- Check Clearing for the 21st Century Act (Check 21 Act)
- automated check clearing
