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FE D E R A L R E S E R V E B A N K OF D A L L A S
Station K, Dallas, Texas 7 5 2 2 2

C i r c u l a r No. 84-51
April 10, 1984

TO:

All member banks and o t h e r s concerned in t he Eleventh
Federal Reserve D i s t r i c t

ATTENTION:

Chief Executive O f f i c e r

SUBJECT:

Joint press release and policy statement
the delayed availability of funds

SUMMARY:

Federal r e g u l a t o r s , i n c l u d i n g the Federal Reserve
Board, have i s sue d a j o i n t p o l i c y s t a t e m e n t concerning
the
delayed
a v a i l a b i l i t y o f f unds .
The p o l i c y
s t a t e me n t c a l l s f o r t hos e f i n a n c i a l i n s t i t u t i o n s t h a t
de l a y
a v a i l a b i l i t y to review and d i s c l o s e t h e i r
p o l i c i e s , and to r e f r a i n from imposing unnecessary
de l a ys on a l l checks - - p a r t i c u l a r l y Social S e c u r i t y
and o t h e r government checks.

concerning

The agenc i e s b e l i e v e t h a t v o l u n t a r y i n d u s t r y a c t i o n ,
r a t h e r than mandatory r e q u i r e me n t s , r e p r e s e n t s
a
p o t e n t i a l s o l u t i o n t o many of t h e problems a s s o c i a t e d
with delayed a v a i l a b i l i t y . However, the a genci es w i l l
c o n s i d e r f u r t h e r a c t i o n i f they f i nd t h a t the e f f o r t
t o s ol v e the problem by v o l u n t a r y means i s i n a d e q ua t e .

ATTACHMENTS:

J o i n t pr e s s r e l e a s e and p o l i c y s t a t e me n t as
f o r p u b l i c a t i o n in the Federal R e g i s t e r

MORE INFORMATION:

Legal Department, Extension 6171

ADDITIONAL COPIES:

Publi c A f f a i r s Department, Extension 6289

submitted

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
Banks and others are encouraged to use the follow ing incom ing W A T S numbers in c onta c ting this Bank: 1-800-442-7140
(intrastate) and 1-800-527-9200 (interstate). For c alls placed locally, please use 651 plus the extension referred to above.

Joint News Release

Federal Financial Institutions Regulators

For immediate r e l e a s e

March 22, 1984

Federal r e g u l a t o r s of commercial banks, s a vi ngs banks and s av i n gs and loan
a s s o c i a t i o n s today j o i n t l y c a l l e d upon f i n a n c i a l

i n s t i t u t i o n s t o r e f r a i n from

imposing unneces sary d e l a y s i n making funds a v a i l a b l e t o t h e i r d e p o s i t o r s .
The Federal Home Loan Bank Board, t h e Federal Deposi t I ns ur a nce C o r p o r a t i o n ,
t h e Of f i c e of t h e Compt r ol l er of t h e Currency and t h e Federal Reserve Board made t h e
r e q u e s t in a j o i n t pol i c y s t a t e m e n t .

The p ol i c y s t a t e me n t was i s s u e d t o encourage

banks and s avi ngs and l oans t o v o l u n t a r i l y a m e l i o r a t e t h e problem o f "del ayed
a v a i l a b i l i t y o f funds" which a r i s e s a t i n s t i t u t i o n s t h a t delay t h e a b i l i t y o f custom­
e r s t o withdraw funds d e p o s i t e d by check.

The a genci es s a i d t h e problem i s a r i s i n g

a t an i n c r e a s i n g number of i n s t i t u t i o n s .
The a g e n c i e s ' p o l i c y s t a t e m e n t made s eve r a l s p e c i f i c s u g g e s t i o n s f o r
a d d r e s s i n g t h e problem, which has r e s u l t e d i n l e g i s l a t i o n in
l e g i s l a t i o n i n t h e U.S. Congress.

These s u g g e s t i o n s , as s e t

two s t a t e s and proposed
f o r t h in t h e a t t a c h e d

p o l i c y s t a t e m e n t , s u g g e s t a review of p o l i c i e s with t h e o b j e c t i v e of reduci ng d e l a y s
c o n s i s t e n t with pr ude nt b u s i n e s s p r a c t i c e s , d i s c l o s i n g funds a v a i l a b i l i t y p o l i c i e s t o
customers and r e f r a i n i n g from imposing d e l a y s a c r o s s t h e boar d, s p e c i f i c a l l y del ays on
Soci al S e c u r i t y and o t h e r government checks d e p o s i t e d in e s t a b l i s h e d acc o unt s .
The agenc i e s s a i d t hey hope t h e problem can be handled by v ol unt a r y a c t i o n
o f f i n a n c i a l i n s t i t u t i o n s along t h e l i n e s t he y s u g g e s t . But they s a i d they w i l l be
moni t or i n g t h e e f f e c t i v e n e s s o f vo l u n t a r y a c t i o n and conduct i ng consumer s u r v e y s .
The agenc i e s w i l l c o n s i d e r f u r t h e r a c t i o n i f t hey f i n d t h a t t h e e f f o r t t o s o l v e t h e
problem by v o l u n t a r y means i s i n a d e q u a t e .
-

Attachment

0-

COMPTROLLER OF THE CURRENCY
FEDERAL DEPOSIT INSURANCE CORPORATION
FEDERAL H M LOAN BANK BOARD
OE
FEDERAL RESERVE SYSTEM
Delayed A v a i l a b i l i t y of Funds;
Issuance of a Po l i c y Statement

AGENCIES:

Compt r ol l er of t h e

Federal Home Loan Bank Board,
ACTION:
SUM ARY:
M

Currency, Federal Deposi t
and Board of Governors

I ns ur a nce C o r p o r a t i o n ,
of t h e Federal

Reserve System.

I s suance of a p o l i c y s t a t e m e n t .
The a ge nc i e s a r e i s s u i n g t h i s p o l i c y s t a t e me n t t o encourage and

a s s i s t i n d u s t r y e f f o r t s in v o l u n t a r i l y a d d r e s s i n g t h e problems caused by some
f i n a n c i a l i n s t i t u t i o n s when they del ay a d e p o s i t o r ' s a b i l i t y t o withdraw funds
d e p o s i t e d by check - - o f t e n c a l l e d "delayed a v a i l a b i l i t y of funds . "

The p o l i c y

s t a t e me n t c a l l s f o r t h o s e f i n a n c i a l i n s t i t u t i o n s t h a t de l a y a v a i l a b i l i t y t o
review and d i s c l o s e t h e i r p o l i c i e s , and t o r e f r a i n from imposing unnecessary
d e l a ys on a l l c hec ks , p a r t i c u l a r l y on Social S e c u r i t y and o t h e r government
checks.

In reviewing t h e i r a v a i l a b i l i t y p o l i c i e s , i n s t i t u t i o n s a r e asked t o

c o n s i d e r t a k i n g i n t o account f a c t o r s t h a t i n d i c a t e whether a given s i t u a t i o n
p r e s e n t s a r i s k of l o s s and t o provide a means f o r d e p o s i t o r s t o re q ue s t t h a t
an e x c e p t i o n be made t o t h e s t a n d a r d hold p o l i c y .
EFFECTIVE DATE:

March 22, 1984.

FOR FURTHER INFORMATION CONTACT:

William G r a n t , O f f i c e of t h e Compt rol l er

of t h e Currency, (202) 447-1938; Paul S a c h t l e b e n , Federal Deposit Insurance
C o r p o r a t i o n , (202) 389-4761; Richard Tucker, Federal Home Loan Bank Board,
(202) 377-6211; o r Gerald H u r s t , Board of Governors of t h e Federal Reserve
System, (202) 452-3667.

-

SUPPLEMENTARY INFORMATION:

2

(1) G e n e r a l .

-

Delayed a v a i l a b i l i t y - - t h e

p r a c t i c e by some f i n a n c i a l i n s t i t u t i o n s of d e l a yi ng a c u s t o me r ' s
a b i l i t y t o withdraw funds d e p o s i t e d by check f o r s e v e r a l days a f t e r
t h e d a t e of d e p o s i t - - has been an i s s u e of concern f o r s eve r a l y e a r s .
I n t e r e s t in l i m i t i n g or r e s t r i c t i n g t he delayed a v a i l a b i l i t y
p r a c t i c e has i n c r e a s e d r e c e n t l y both a t t h e s t a t e and f e d e r a l l e v e l .
Two s t a t e s , New York and C a l i f o r n i a , have e nac t e d laws a d d r e s s i n g t h e
i s s u e and s eve r a l o t h e r s t a t e s a r e c o n s i d e r i n g l e g i s l a t i o n .

In a d d i t i o n ,

t h e r e a r e b i l l s pending in both houses of Congress.
The agen c i e s b e l i e v e t h a t t h e p r a c t i c e of del ayi ng a v a i l a b i l i t y
r e s u l t s i n problems f o r d e p o s i t o r s , e s p e c i a l l y when t h e pol i c y i s i n f l e x i b l e
or i s not d i s c l o s e d t o d e p o s i t o r s in an e f f e c t i v e manner.

Institutions

m a i n t a i n t h a t t h e p r a c t i c e of d e l a yi ng a d e p o s i t o r ' s a b i l i t y t o withdraw
funds beyond t h e time i t t a k e s t h e i n s t i t u t i o n t o r e c e i v e p r o v i s i o n a l
c r e d i t f o r t h e check i s j u s t i f i e d t o some e x t e n t because of t h e time
i t t a k e s f o r a check t o be r e t u r n e d t o t h e i n s t i t u t i o n of f i r s t d e p o s i t
i f i t i s not paid by t h e paying i n s t i t u t i o n .

They s t a t e t h a t t he only

way an i n s t i t u t i o n l e a r n s t h a t a d e p o s i t e d check i s being r e t u r n e d unpaid
i s t o r e c e i v e the check back; t h u s , t h e r e i s a r i s k of l o s s .

However,

only about one p e r c e n t of a l l checks a r e r e t u r n e d unpaid and only a very
small p e r c e n t a g e of t h e s e checks r e s u l t in a ct ual l o s s e s t o f i n a n c i a l
institutions.

While i t may be t r u e t h a t t h e frequency of l o s s e s i s small

because of delayed a v a i l a b i l i t y p o l i c i e s and t h a t t h e p o t e n t i a l f o r l o s s e s
i s much l a r g e r , t h e agenci es n e v e r t h e l e s s b e l i e v e t h a t t h e p r a c t i c e of
imposing del ays on a l 1 de p o s i t e d checks wi t hout regard t o whether a p a r t i c u l a r

-

3

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s i t u a t i o n p r e s e n t s a p o t e n t i a l r i s k ( f o r example, t h e d e p o s i t of an unus ual l y
l a r g e personal check i n t o a new a ccount ) does not appear t o be j u s t i f i e d by
t h e r i s k of l o s s .

More s p e c i f i c a l l y , f o r example, t h e r e i s normally no

j u s t i f i c a t i o n f o r d e l a y i n g a v a i l a b i l i t y on a Social S e c u r i t y or o t h e r
government check d e p o s i t e d i n t o an e s t a b l i s h e d account beyond t h e d a t e when
an i n s t i t u t i o n r e c e i v e s c r e d i t f o r

t h e check.

The real r i s k of l o s s in such

cas es r e s u l t s from f r a u d , which t y p i c a l l y would not be d i s c o v e r e d u n t i l long
a f t e r t h e check has c l e a r e d .
The agen c i e s b e l i e v e t h a t v o l u n t a r y i n d u s t r y a c t i o n , r a t h e r than
mandatory r e q u i r e m e n t s , r e p r e s e n t s a p o t e n t i a l s o l u t i o n t o many of t h e problems
caused by delayed a v a i l a b i l i t y , without t h e c o s t s and burdens of a l e g i s l a t i v e
or r e g u l a t o r y approach.

The agenci es a r e , t h e r e f o r e , i s s u i n g a p o l i c y s t a t e me n t

t h a t o u t l i n e s t h e i r concerns and recommending a c t i o n s t o be taken by t h e i n d u s t r y
in t h e hope t h a t i t wi l l encourage
(2) Di s cu s s i on of p o l i c y

and a s s i s t v o l u n t a r y i n d u s t r y a c t i o n .
statement.

The p o l i c y s t a t e me n t c a l l s

on f i n a n c i a l i n s t i t u t i o n s t h a t delay a v a i l a b i l i t y t o t a k e s e v e r a l a c t i o n s .
I n s t i t u t i o n s a r e asked t o review t h e i r p o l i c i e s , c o n s i d e r whether t h e delay
p e r i o d s can be r e duc ed, and d i s c l o s e t h e i r p o l i c i e s t o customers in an
e f f e c t i v e manner.

I n s t i t u t i o n s are a l s o asked t o r e f r a i n from imposing

unneces sary del ays on a l l checks, p a r t i c u l a r l y del ays on government checks
d e p o s i t e d i n t o e s t a b l i s h e d accounts beyond t h e time r e q u i r e d f o r t h e i n s t i t u t i o n s
t o r e c e i v e c r e d i t f o r t h e checks.

In reviewing t h e i r p o l i c i e s , i n s t i t u t i o n s

a r e asked t o c o n s i d e r v a r i o u s f a c t o r s t h a t might i n d i c a t e whether a r i s k of
l o s s e x i s t s in a given s i t u a t i o n t h a t j u s t i f i e s a del ay i n a v a i l a b i l i t y and t o
pr ovi de d e p o s i t o r s with a means f o r r e q u e s t i n g t h a t an e x c e p t i o n be made from
t h e s t a n d a r d hold p o l i c i e s .

-

4

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The a c t i o n s recommended a r e based on t h e a g e n c i e s ' b e l i e f t n a t ,
alt hough i t i s a p p r o p r i a t e t o del ay a v a i l a b i l i t y in some s p e c i f i c s i t u a t i o n s ,
i t i s not ne ce s sa r y f o r f i n a n c i a l i n s t i t u t i o n s t o delay a v a i l a b i l i t y on a l l
d e p o s i t e d checks.

By p o i n t i n g out s p e c i f i c a c t i o n s t h a t i n s t i t u t i o n s can

t a k e , t h e a genci es hope t h a t t h e p o l i c y s t a t e me n t wi l l be a b a s i s f o r i nd u s t r y
action.

As t h e s t a t e me n t i n d i c a t e s , t h e a genci es plan t o monitor developments

i n t h e a r e a t o det ermi ne whether f u r t h e r s t e p s a r e needed.
★

★

★

★

★

JOINT POLICY STATEMENT O DELAYED AVAILABILITY OF FUNDS
N
The Comptroll er of t h e Currency, Federal Deposit I ns ur a nce Corpora­
t i o n , Federal Home Loan Bank Board, and Federal Reserve Board a r e i s s u i n g t h i s
p o l i c y s t at eme n t r e g a r d i n g t h e p r a c t i c e by f i n a n c i a l

i n s t i t u t i o n s of del a yi ng

a d e p o s i t o r ' s a b i l i t y t o withdraw funds d e p o s i t e d by check - - o f t e n c a l l e d
"delayed a v a i l a b i l i t y of f u n d s . "

The agenci es are concerned about t h e problems

t h i s p r a c t i c e causes f o r d e p o s i t o r s and b e l i e v e t h a t vol u n t a r y a c t i o n on t h e
p a r t of a l l f i n a n c i a l i n s t i t u t i o n s t o reduce t h e s e problems would be t h e most
e f f i c i e n t , l e a s t c o s t l y , and l e a s t burdensome s o l u t i o n .
An i n c r e a s i n g number of f i n a n c i a l i n s t i t u t i o n s delay a d e p o s i t o r ' s
a b i l i t y t o withdraw funds in or de r t o reduce t h e i r r i s k of l o s s i f a de p o s i t e d
check i s r e t u r n e d unpai d.

However, f i n a n c i a l i n s t i t u t i o n s need not impose

such d e l a ys on every d e p o s i t e d check in o r d e r t o reduce t h e r i s k .
some delayed a v a i l a b i l i t y p o l i c i e s may be i n e q u i t a b l e .

In f a c t ,

The a genci es b e l i e v e

t h a t t h e r e a r e a c t i o n s t h a t f i n a n c i a l i n s t i t u t i o n s can t a k e now t o e l i m i n a t e
some of t h e problems.

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5

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The a genci es b e l i e v e t h a t f i n a n c i a l

i n s t i t u t i o n s t h a t del ay a v a i l ­

a b i l i t y s houl d:
(1)

Review t h e i r p o l i c i e s and c o n s i d e r reducing t h e de l a y p e r i o d s t o
t h e e x t e n t p o s s i b l e , c o n s i s t e n t with prudent b u s i n e s s p r a c t i c e s .

(2)

D i s c l o s e t h e i r p o l i c i e s t o d e p o s i t o r s in an e f f e c t i v e manner a t
t h e time an account i s opened and, when p r a c t i c a l , a t t h e time
a check i s d e p o s i t e d t h a t w i l l be s u b j e c t t o a delay in a v a i l ­
ability.
I n s t i t u t i o n s might a l s o a l e r t d e p o s i t o r s t o ot he r
ways of t r a n s f e r r i n g funds t h a t do not invol ve c h e c k s , such as
through wire t r a n s f e r s or d i r e c t d e p o s i t through an automated
c l e a r i n g house.

(3)

Re f r a i n from imposing unnecessary del ays on a l l c h e c k s ,
p a r t i c u l a r l y delays on Social S e c u r i t y and o t h e r government
checks d e p o s i t e d i n t o e s t a b l i s h e d account s beyond t h e time
r e q u i r e d t o r e c e i v e c r e d i t f o r t h e checks. (A d e l a y beyond
t h i s time i s g e n e r a l l y i n a p p r o p r i a t e s i n c e t h e real r i s k i s
t h a t of f r a u d , which o r d i n a r i l y wi l l not be d i s c o v e r e d u n t i l
long a f t e r t h e check has c l e a r e d . )

In reviewing t h e i r p o l i c i e s , i n s t i t u t i o n s should t a k e i n t o account
f a c t o r s t h a t i n d i c a t e whether a given s i t u a t i o n p r e s e n t s a r i s k of l o s s t h a t
j u s t i f i e s a de l a y in a v a i l a b i l i t y .

These f a c t o r s may i n c l u d e , f o r example,

t he l e n g t h of time t h e account has been m a i n t a i n e d , p a s t e xpe r i e nc e with t h e
d e p o s i t o r , t h e i d e n t i t y of t h e d rawer , t h e type of check, and t h e l o c a t i o n of
t h e payor d e p o s i t o r y i n s t i t u t i o n .

In a d d i t i o n , i n s t i t u t i o n s should c on s i d e r

p r o v i d i n g , as p a r t of t h e i r p o l i c y , a means for d e p o s i t o r s t o r e q u e s t t h a t an
e x c e p t i o n be made from t h e s t a n d a r d delay p r a c t i c e and inform d e p o s i t o r s of
this possibility.
The a genci es hope t h a t t h e problems caused by delayed a v a i l a b i l i t y
p o l i c i e s can be a ddress ed by v o l u n t a r y i n d u s t r y a c t i o n , and urge t r a d e groups
and i n d i v i d u a l i n s t i t u t i o n s t o a c t .

The agenci es w i l l be mon i t or i ng t h e e f f e c ­

t i v e n e s s of t h e s e v o l u n t a r y e f f o r t s t o determine t h e e x t e n t t o which d i s c l o s u r e
i s being made and t h e n a t u r e of s p e c i f i c delayed a v a i l a b i l i t y p o l i c i e s .

Consumer

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6

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surveys w i l l a l s o be conducted t o d e t e r mi ne t h e l e ve l of consumer awareness of
de l a yed a v a i l a b i l i t y p o l i c i e s and t h e e x t e n t of consumer problems.
I f i t appears t h a t v o l u n t a r y a c t i o n i s i na d e qua t e t o addr ess t h e
delayed a v a i l a b i l i t y i s s u e , t he a g e n c i e s w i l l c o n s i d e r f u r t h e r a c t i o n t o deal
with t h e p r a c t i c e and t he problems i t c a u s e s .
Dated:

March 22, 1984

By o r d e r of the Of f i c e of t he C o mp t r o l l e r of t he Currency.

John F. Downey
Chief National Bank Examinei
By o r d e r of t h e Federal Deposit I ns ur a nce C o r p o r a t i o n .

^boyy l e 1 . R&oinson
i o 1e l Rooi ns
Executive S e c r e t a r y
By or de r of t he Federal Home Loan Bank Board.

T J . Finn
.
S e c r e t a r y t o t he Board
By o r d e r of t h e Board of Governors of t h e Federal Reserve System.

William W Wiles
.
S e c r e t a r y of t h e Board


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102