Account Hold

An account hold is a restriction on the account owner's ability to access funds in the account due to various reasons. When a bank places an account on hold, it usually does so to protect itself from potential loss, but it also may have the interest of the customer in mind. An account hold can last only a day or two, but could be much longer depending on the reason for the hold.

There are several reasons for an account hold. A deposit of a particularly large check, an out-of-state check, or foreign check may cause an account to be placed on hold, though the hold would be limited to the check amount. The customer would have to wait for the check to clear before having access to the funds. (New accounts, however, are typically subject to holds on entire initial deposits.) If funds were pledged as collateral for a loan, there would be a hold. An order by a court or a Federal or state tax authority would also result in a hold. If the bank needs to conduct an investigation of suspicious activity in an account, it may decide to exercise its right to temporarily block the customer's use of funds. If a customer reports that he or she was a victim of identity theft, to protect the customer the bank would make sure the account could not be accessed.

The length of the hold depends on the reason. In the case of a large or unfamiliar source check, the hold can be one or several days. The check drawn on the U.S. Treasury would clear the next day, but a check drawn on a bank outside the country may require a number of days to clear. The Expedited Funds Availability Act (EFAA) of the Federal Reserve Board's Regulation CC addresses the issue of delayed availability of funds by banks. All banks must disclose their funds-availability policies to their customers. In a situation where a tax lien is involved, the customer must first resolve its debt to the tax authority before the account hold is lifted. Similarly, when a customer pledges a bank account as collateral for a loan, either the loan must be paid off, or the bank account has to be removed as collateral before the customer can resume accessing funds in the account.