Account Hold

What Is an Account Hold?

An account hold is a restriction on an account owner's ability to access funds in the account due to various reasons. When a bank places an account on hold, it usually does so to protect itself from potential loss, but it also may have the interest of the customer in mind. For instance, a bank may put a hold on an account if they detect unusual activity that may be due to suspected fraud or identity theft.

An account hold may last only a day or two, but it could also be much longer in duration depending on the reason for the hold. In longer instances, an account hold may be referred to as an account freeze.

Understanding Account Holds

There are several reasons for an account hold. A deposit of a particularly large check, an out-of-state check, or a foreign check may cause an account to be placed on hold, though the hold would be limited to the check amount. The customer would have to wait for the check to clear before having access to the funds. Note that new accounts, however, are typically subject to holds on entire initial deposits. If funds were pledged as collateral for a loan, there would be a hold.

An order by a court or a Federal or state tax authority would also result in a hold. If the bank needs to conduct an investigation of suspicious activity in an account, it may decide to exercise its right to temporarily block the customer's use of funds. If a customer reports being a victim of identity theft, to protect the customer the bank would make sure the account could not be accessed. For instance, a sudden and suspicious exorbitant withdrawal or transfer to an overseas account may indicate an account has been compromised.

Accounts may also be put on hold if the owner passes away and an heir or administrator to the decedent’s estate has yet to be named. If an individual is found to be complicit in certain crimes, their accounts may be frozen.

Special Considerations

The length of the hold depends on the reason. In the case of a large or unfamiliar source check, the hold can be one or several days. The check drawn on the U.S. Treasury would clear the next day, but a check drawn on a bank outside the country may require a number of days to clear. The Expedited Funds Availability Act (EFAA) of the Federal Reserve Board's Regulation CC addresses the issue of delayed availability of funds by banks.

All banks must disclose their funds-availability policies to their customers. In a situation where a tax lien is involved, the customer must first resolve its debt to the tax authority before the account hold is lifted. Similarly, when a customer pledges a bank account as collateral for a loan, either the loan must be paid off, or the bank account has to be removed as collateral before the customer can resume accessing funds in the account.