Deferred Availability

Deferred availability refers to a delay in the availability of funds to the holder of a commercial bank account upon depositing a check as his or her bank awaits payment from the paying bank. Regulation CC, the Federal Reserve’s implementation of the Expedited Funds Availability Act (EFAA), requires banks to limit the hold to no more than two days for local checks and no more than five days for out-of-town checks. As of February 2010, however, all United States checks are considered local checks, because the entire country is now considered one check-processing region. Regulations allowing a delay in the availability of funds were created to deter fraud and embezzlement schemes that involve cashing bad checks before they are cleared, but also to standardize hold periods and regulate the use of deposit holds by banks.

While the standard, statutory hold period is two days for most deposits, there are exceptions to this availability schedule in which availability may be deferred for seven days or longer. For example, banks may defer the availability of deposits made to new accounts for up to nine business days. However, if the holder of the new account has another account at that bank that has been open for more than 30 days, the new account hold may not be placed.

Banks may also defer the availability of large deposits in excess of $5,000. This applies to deposits of a single instrument valued at $5,000 or more, as well as aggregate deposits totaling more than $5,000. A bank may defer the availability of the entire deposit until the seventh business day.

Frequently, banks use deferred availability as a means of fraud prevention. If a bank suspects a check or other instrument may be fraudulent, it can defer the availability of funds until the seventh business day. It may also do so if the account has a history of overdrafts. Regulation CC requires an account to have been overdrawn for at least six business days out of the previous six months, or two business days if the overdraft amount was more than $5,000. Banks may also defer the availability of funds deposited from an image replacement document (IRD) of a previously  dishonored item. Deferred availability may also occur in the event of system failure or a power outage, which can slow the processing of a deposited instrument.