October 8, 1998 98-R-1214

FROM: Helga Niesz, Principal Analyst

RE: Hold Periods for Certified or Bank Checks

You have been advised that banks are holding cashier's, certified, and bank checks that a customer deposits into an account for at least a day. You asked whether a statute or regulation controls this practice and what the limits are.

Federal law, which preempts state law on the subject, sets check hold periods. Connecticut's statute simply requires banks in the state to comply with federal rules (CGS § 36a-302).

Federal regulations require banks to make funds deposited in an account by cashier's, certified, or teller's checks available for withdrawal not later than the business day after the banking day on which the deposit takes place, the same as for cash deposits, but only if certain conditions are met. The deposit must be made in person to the payee's own account and, if the bank requires it, with a special deposit slip or envelope (12 CFR 229.10(c) (v)). If the bank requires a special deposit slip and the customer does not use it, the bank can treat it like a regular personal check, which must be available on the second business day after deposit for local checks and the fifth business day for nonlocal checks. Banks can also hold checks beyond this time for (1) new accounts, (2) aggregate amounts over $5,000 deposited in any one day, and (3) other limited special conditions. On the other hand, banks can have a policy of holding the check for less time than the federal maximum. In fact, some banks make the checks you asked about available immediately.

The regulations define “cashier's check” as a check that is drawn on a bank, signed by a bank officer or employee on behalf of the bank as drawer, a direct obligation of the bank, and provided to a customer of the bank or acquired from the bank for remittance purposes. This is also informally known as a “bank check” at some banks (12 CFR 229.2 (i)). A “certified check” is one where the bank on which it is drawn certifies on the check by the signature of a bank officer or other authorized employee that:

1. the drawer's signature on the check is genuine and the bank has set aside funds that are equal to the check amount to pay the check, or

2. the bank will pay the check upon presentment (12 CFR 229.2 (j)).

A “teller's check” is a check provided to a bank's customer or acquired from a bank for remittance purposes, that is drawn by the bank, and drawn on another bank or payable through or at a bank (12 CFR 229.2 (gg)).

The enclosed OLR Report No. 98-R-0996 provides additional information on hold periods for some other types of checks.

HN:tjo