There has been some confusion at my bank about holds based on repeated overdrafts. It is my understanding that this exception hold is based on the number of days overdrawn and not the number of items. For example, in a situation where a customer has only had two overdrafts, but the account remained negative for a total of 6 days in the last 6 months, the bank could utilize this exception hold.
Q Is this correct? May this apply to cashier’s check deposits?
A You are correct—the hold is based on days overdrawn, not the number of items. See §229.13(d) stating:
A depositary bank may consider a customer’s account to be repeatedly overdrawn if—
- On six or more banking days within the preceding six months, the account balance is negative, or the account balance would have become negative if checks or other charges to the account had been paid; or
- On two or more banking days within the preceding six months, the account balance is negative, (or the account balance would have become negative, in the amount of $5,000 or more, if checks or other charges to the account had been paid.) (emphasis added.)
And yes, the bank may apply a repeat overdraft exception hold to a cashier’s check. The customer’s status as a repeated over drafter trumps the check’s status as a next-day availability item.
For more information, contact ABA’s Leslie Callaway.
Please note that this section is not a substitute for professional legal advice.
