Expedited Funds Availability Act (EFAA)
Statutory holds can be placed on almost any deposit; under this type of hold, the bank must make the first $200 of the deposit available on the next business day after the deposit is made, the second $600 available on the second business day after the deposit is made, and the rest on the third business day. The availability rules for the first and second business day after the deposit are the same as for a statutory hold, but on the third business day, the bank must make $4,800 of the deposit available, with any remaining amount made available on the seventh business day after the deposit. In most cases, however, exception holds are used when an account has been overdrawn for at least six business days out of the six months prior to the deposit, or at least two business days if the account has been overdrawn in an amount more than $5,000. The EFAA specifies the types of holds that banks can utilize on a check deposit, depending on the type of account and the amount of the deposit.
What Is the Expedited Funds Availability Act?
The Expedited Funds Availability Act (EFAA) was implemented to regulate the hold periods on deposits made to commercial banks. Enacted by the U.S. Congress in 1987, the EFAA also standardized financial institutions' use of the deposit holds. The EFAA specifies the types of holds that banks can utilize on a check deposit, depending on the type of account and the amount of the deposit.
Understanding the Expedited Funds Availability Act (EFAA)
The Expedited Funds Availability Act (EFAA) intends to standardize the handling of deposit holds. Banks and other financial institutions must inform customers of their policies regarding deposit holds, as well as any changes to the policies. The Federal Reserve has implemented the EFAA as Regulation CC.
Hold Types Allowed Under EFAA
The EFAA, or Regulation CC, allows banks to place four types of holds on deposited funds. These are:
Specific requirements must be met for each type of hold, and some banks will require, as a matter of policy, that funds be held under the hold type that allows the largest amount to be held for the longest period, legally.
Statutory Holds
Statutory holds can be placed on almost any deposit; under this type of hold, the bank must make the first $200 of the deposit available on the next business day after the deposit is made, the second $600 available on the second business day after the deposit is made, and the rest on the third business day.
Large Deposit Holds
Large deposit holds are placed when the total of deposits made in one business day is more than $5,000. The availability rules for the first and second business day after the deposit are the same as for a statutory hold, but on the third business day, the bank must make $4,800 of the deposit available, with any remaining amount made available on the seventh business day after the deposit.
New Account Holds
New account holds are placed on deposits made to accounts that are less than 30 days old. These holds are lifted on the ninth business day after the deposit.
Exception Holds
Exception holds are used for accounts that have been frequently overdrawn, or when banks have reason to suspect that a deposit is legitimate. In rarer cases, they may be used if the bank branch suffers a power outage or a computer system failure. In most cases, however, exception holds are used when an account has been overdrawn for at least six business days out of the six months prior to the deposit, or at least two business days if the account has been overdrawn in an amount more than $5,000. An exception hold may be placed if the bank suspects that the check is fraudulent or won’t clear. It may also be placed on an instrument that has been previously returned for insufficient funds. Exception holds are lifted on the seventh business day after the deposit is made.
Insurance Checks
Funds from insurance checks drawn on in-state banks must be made available on the fifth business day after deposit. If the bank is out of state, the funds must be available by the seventh business day after the deposit.
Related terms:
Account Hold
Account hold is a restriction on the account owner's ability to access funds in the account due to various reasons. read more
Availability Schedule Defined
The term availability schedule refers to the period of time required for the funds from a deposited check to become available to the check recipient. read more
Check Hold
A check hold denotes the maximum number of days that a bank can legally hold the money from a deposited check. read more
Checking Account
A checking account is a deposit account held at a financial institution that allows deposits and withdrawals. Checking accounts are very liquid and can be accessed using checks, automated teller machines, and electronic debits, among other methods. read more
Deferred Availability Defined
In finance, the term deferred availability refers to a delay in the processing of a recently deposited check. read more
Federal Reserve System (FRS)
The Federal Reserve System is the central bank of the United States and provides the nation with a safe, flexible, and stable financial system. read more
Next-Day Funds
In banking, next-day funds are money that becomes available for use on the day following the day it is deposited. read more
Regulation CC
Regulation CC is a federal policy that sets certain standards on the check-clearing process for endorsements and processing of funds. read more
Same-Day Funds
Same-day funds is a term for money that can be transferred or withdrawn the same day that it is deposited into the recipient's bank account. read more
Statutory Reserves
Statutory reserves are state-mandated reserve requirements for insurance companies, intended to make sure they will be able to pay their claims. read more