What Is Deferred Availability?
Deferred availability refers to the period between when a check is deposited and funds become available. To avoid fraud that involves cashing bad checks before they are cleared, regulations exist that limit the amount of time until a deposited check has been processed.
- Deferred availability refers to the period between when a check is deposited and funds become available.
- Regulations exist that limit the amount of time in which availability can be deferred.
- Banks can receive extensions to these limits under certain circumstances, such as when the deposit was delayed due to a system failure or power outage.
Understanding Deferred Availability
The rules relating to the processing speed of newly deposited checks are set out in Regulation CC of the Federal Reserve. This regulation is responsible for implementing the standards set out in the Expedited Funds Availability Act (EFAA), which was enacted by Congress in 1987.
Banks were once prohibited from keeping checks on hold for more than two days in the case of local checks, or five days for out-of-town checks. Since 2010, however, these regulations have been further simplified as all checks deposited within the United States are now considered "local checks" for the provision.
The intention behind these regulations was to deter fraud and embezzlement schemes. In many such schemes, the perpetrators exploit the delay between when a check is deposited versus when it is processed and cash is made available by the bank. Regulation CC closes the window of opportunity.
There are exceptions available that allow banks to hold checks for seven days or longer. Banks may defer the availability of deposits made to new accounts for up to nine business days. However, if the holder of the new account has another account at that bank that has been open for more than 30 days, the hold may be voided.
Banks may also defer the availability of large deposits over $5,525. This applies to deposits of a single instrument valued at $5,525 or more as well as aggregate deposits totaling more than $5,525. A bank may defer the availability of the entire deposit until the seventh business day.
Example of Deferred Availability
Suspected fraud can defer the availability of funds or the bank may also do so if the account in question has a history of overdrafts. Regulation CC requires an account to have been overdrawn for at least six business days out of the previous six months or two business days if the overdraft amount was more than $5,525.
Deferred availability of deposited funds also includes situations where the deposit in question is based on an image replacement document (IRD) of a check which was previously rejected or when the deposit took place at a time when the bank was unable to function normally, such as due to a system failure or power outage.
How Do Banks Disclose Their Deferred Availability Policies to Customers?
Regulation CC requires that financial institutions provide customers who have a transaction account with disclosures stating when their funds will be available for withdrawal and many institutions use the model disclosure statements included in Regulation CC.
What Is Next Day Availability?
Types of deposits must be made available on the first business day following the banking day of deposit including cash, electronic payments, U.S. Treasury checks, U.S. Postal Service money orders, Federal Reserve Bank and Federal Home Loan Bank checks, state or local government checks, and cashier's, certified, or teller's checks.
What Is a Redeposited Check?
Redeposited checks are often those that could not be cashed due to an account with insufficient funds and may be held unless the check was returned because an endorsement was missing or because the check was postdated.
The Bottom Line
Deferred availability is the period between when a check is deposited and when funds become available. Regulation CC, implemented by the Federal Reserve, provides guidelines relating to the processing speed of newly deposited checks.