Don't look for check-hold times to be reduced soon |
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"We should never assume there's float, but all the technology and legal developments are making it harder for consumers to manage their bank accounts," Fox says.
Karen Johnson, of Squaw Valley, Calif., expressed
frustration with two banks that delayed the availability of inheritance
money given to her two daughters. Johnson's mother-in-law left $20,000
to each of her adult granddaughters. Johnson and her husband deposited
the $40,000 check from New York Life Insurance Co. into their credit
union account in Clovis, Calif. The check cleared within a few days
and the Johnsons requested two cashier's checks for $20,000 each.
The Johnsons decided to meet their daughters, who
live in Salinas and Coalinga, about halfway, in Hanford, to give
them their checks. The daughters deposited the checks in Hanford's
branches of their respective banks -- Union Bank and Wells Fargo.
Johnson says Union Bank told them $5,000 would be available in three to four business days and the remainder in approximately 15 business days. Wells Fargo, she says, made $5,000 available within one business day and the rest in about 14 days.
"It was a real shocker," Johnson recalls.
"We thought cashier's checks were better than that. This was
the safest and fastest way to deliver the money to our daughters."
Hold times vary
While neither bank would address the specific complaint, Joanne Curran, spokeswoman for Union Bank, said the maximum hold in this situation is 10 business days, which could, she said, account for two weeks.
"There's some discretion on the part of the officer who is at the bank and there's some determination involved in how long the account has been opened," she says. "In general, we would hold funds that large for 10 business days."
Wells Fargo spokeswoman Julia Tunis similarly noted
that the bank's check-cashing policy depends on a number of factors,
including the customer's historical account activity and the size
of the check being cashed.
While cashier's checks often have a reputation among the public of being as good as cash, the "special alerts" section of the FDIC Web site is filled with warnings about counterfeit cashier's checks.
Nevertheless, it's not hard to understand Johnson's
frustration. The checks were large and, therefore, subject to an
extra long hold. But they were local checks because they were drawn
on and payable at institutions in the same Federal Reserve check-processing
region.
Reduced holds, increased fraud?
Financial institutions are concerned that reducing check-hold times when the majority of checks are still transported by common carrier will result in increased fraud, says American Bankers Association spokesman John Hall.
"The majority of fraud comes from personal accounts -- forged signatures, etc.," Hall says. "Check fraud costs the industry $677 million every year and the attempts are rising. Banks catch about 88 percent of attempts, but the fraudsters keep coming up with new schemes. We're all for Check 21 to be implemented faster.
"In two years this will be a moot point. Everyone will be using Check 21 and the Fed will be shortening the time banks have to make funds available. (At that point) it will reduce fraud because they'll be able to tell faster whether a check is good."
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