What Is the Expedited Funds Availability Act?
Let me explain the Expedited Funds Availability Act (EFAA) directly: it's a law that regulates how long commercial banks can hold deposits before making funds available to you. Congress passed it in 1987 to standardize these hold practices across financial institutions. The EFAA outlines specific hold types based on your account and deposit amount, so you know what to expect.
Key Takeaways
Here's what you need to grasp: the EFAA controls deposit hold periods at banks, with four primary hold types including statutory, large deposit, new account, and exception. Additionally, it requires that insurance checks from in-state banks become available within five business days after deposit.
Understanding the Expedited Funds Availability Act (EFAA)
The EFAA aims to make deposit holds consistent across the board. As a customer, you should know that banks must tell you about their hold policies and any updates. The Federal Reserve enforces this through Regulation CC, ensuring everything runs smoothly.
Hold Types Allowed Under EFAA
Under the EFAA, or Regulation CC, banks can use four hold types on your deposits: statutory, large deposit, new account, and exception. Each has its own rules, and some banks might choose the hold that lets them keep the most funds for the longest time allowed by law. I'll break them down for you next.
Statutory Holds
You can expect statutory holds on nearly any deposit. With this, the bank has to release the first $200 the next business day, the next $600 on the second business day, and the remainder on the third business day after you make the deposit.
Large Deposit Holds
If your total deposits in one business day exceed $5,000, a large deposit hold applies. The rules match statutory holds for the first two days, but on the third day, $4,800 becomes available, and anything left over is released on the seventh business day.
New Account Holds
For accounts under 30 days old, new account holds come into play. These holds end on the ninth business day after the deposit, giving banks more time to verify everything.
Exception Holds
Exception holds kick in for accounts overdrawn often—say, six or more business days in the prior six months, or two days with over $5,000 overdrawn. They're also used if the bank suspects fraud, if a check won't clear, or if it's been returned before for insufficient funds. Rarely, system failures like power outages trigger them. These holds lift on the seventh business day.
Insurance Checks
When it comes to insurance checks from in-state banks, funds must be available by the fifth business day after deposit. For out-of-state banks, it's the seventh business day—straightforward rules to keep things moving.
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