[TheBank]

Is it permissible to place a hold on funds in a deposit account without a deposit being made in an instance where there are loan issues? The loan is not past due yet, but there is suspected kiting, suspected wire issues, etc… on the related loan account. The hold was placed because the loan side was concerned about getting paid and had a meeting planned with borrower and board to address the wire issues (borrower getting additional loans to pay our loan, etc… and wires are related to his)

The basic question is can we place a hold due to loan issues when the hold is not related to a deposit. And if so, does it have to be a past due loan, or do other loan issues allow as well?

[rcooper]

Answer by Don Blaine and Robin Cooper:

We aren’t certain about the details of the situation, but it sounds like you are wanting to freeze funds in the account. For example, a bank can freeze an account likely for suspected money laundering, tax evasion, fraud, kiting, etc. The Account Agreement likely informs the consumer what the bank may, or can, do in such circumstances.

You might also consider placing a hold when funds are deposited. If the account in question is a transaction account subject to Reg CC, the bank must give availability within the legal guidelines of the bank’s policies, depending on which is best for the consumer, unless there is some trump language in the Account Agreement. If the bank wanted to place an exception hold it could have used the Reasonable Cause to Doubt Collectability but would have had to do so at the point of contact or when it learned that the deposited check was going to be returned. An case by case or exception hold can’t be placed for wire transfers. The bank can however wait and give next day availability when the electronic payment is received (that means the receiving bank has received collected funds).

[Author]

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