Can we place a reasonable cause hold when a customer deposits a check and comes into the bank the next day to request a cashier’s check or wire transfer from the deposited funds? Would such a hold be permissible under Regulation CC?

Whether you have reasonable cause to doubt the collectability of a customer’s deposited checks and to place a hold on those funds is a highly fact-specific question.

“Reasonable cause” requires facts that would cause a well-grounded belief in the mind of a reasonable person. There is no bright-line rule for what constitutes reasonable cause. Therefore, you must assess each transaction on a case-by-case basis in order to make this determination.

We were unable to find an example of a bank having reasonable cause for a hold simply because a customer deposited funds one day and requested a cashier’s check the next day. However, if a customer has a history of suspicious activity or gives you additional reasons to doubt the collectability of the deposited funds, you may have reasonable cause to place a hold on those funds at the time the customer requests the cashier’s check.

If you do place a hold on deposited funds, you must provide the customer with written notice as soon as practicable, but not later than one business day after discovering the facts that established reasonable cause for the hold.

For resources related to our guidance, please see:

Regulation CC, 12 CFR 229.13(e) (“Sections 229.10(c) and 229.12 do not apply to a check deposited in an account at a depositary bank if the depositary bank has reasonable cause to believe that the check is uncollectible from the paying bank. Reasonable cause to believe a check is uncollectible requires the existence of facts that would cause a well-grounded belief in the mind of a reasonable person. Such belief shall not be based on the fact that the check is of a particular class or is deposited by a particular class of persons.”)

Official Interpretations, Regulation CC, 12 CFR 229, Paragraph 13(e), Comment 2(d) (“There are reasons that may cause a bank to believe that a check is uncollectible that are based on confidential information. 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. 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.”)

Official Interpretations, Regulation CC, 12 CFR 229, Paragraph 13(g), Comment 1(c) (“For deposits made in person to an employee of the depositary bank, the notice generally must be given to the person making the deposit, i.e., the “depositor”, at the time of deposit.”)

Official Interpretations, Regulation CC, 12 CFR 229, Paragraph 13(g), Comment 1(d) (“Notice to the customer also may be provided at a later time, if the facts upon which the determination to invoke the exception do not become known to the depositary bank until after notice would otherwise have to be given. In these cases, the bank must mail the notice to the customer as soon as practicable, but not later than the business day following the day the facts become known. A bank is deemed to have knowledge when the facts are brought to the attention of the person or persons in the bank responsible for making the determination, or when the facts would have been brought to their attention if the bank had exercised due diligence.”)