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When is a Bank Liable for not putting a hold on a check that resulted in a huge overdraft?

Minneapolis, MN |

Say a customer with 16 dollars in his acct deposits a 2000 dollar check, spends some before the check clears and then the check bounces putting the customer in the negative almost 2000 dollars. The bank says he is liable for the funds... Does the bank have ant responsibility to the money because REG CC governed by the FDIC wasnt followed.


First of all a hold should have been placed on the check bc it was from out of state and a large amount. A hold should have also been placed because the customer didnt have.matching funds to deposit the check - ie he didnt have 2000 in his acct to cover the check if it bounced.


Because the teller didnt do her job the check wasnt held. A proper hold would have made 100 dollars available first day so when the checked bounced the cust would have only b

*Customer would only be in the negative 100 dollars and not 2000 dollars.

Attorney Answers 3

Posted

Unfortunately, the depositor of the check is probably liable. Generally, a bank issues is customers a provisional credit for a deposited check. In other words, the never actually represent to you that the check has cleared, there is a hold on the check, but you are being provisionally credited for the funds. As the account holder, you are supposed to be on notice that the check may bounce, or be fake, etc. There are a number of ongoing scams out there like this, people offering to hire you, put checks in your account for them, and write them a check against your account, with some even showing what appears to be a cashier's check (that is fake). But in those cases, the customer who writes the check is still liable.

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3 comments

Asker

Posted

So this provisional credit acted like a hold since one was never put on?? Would the situation be different if the check was never signed and it was stamped by the bank? I dont get how the bank isnt semi at fault considering their employee didnt do their job by following protocal... goverened by the FDIC.

Josh Friedman

Josh Friedman

Posted

There was always a hold, the provisional credit is something a bank provides as a courtesy to its customers. Look at your account when you deposit a check, there is always a provisional credit when the first receive a deposited check, then when the check clears, the provisional credit is removed, and the check amount is deposited. A bank is required to proceed in good faith, but there would have had to be some very obvious defect in the check. Especially since the presenter of the check also believed it to be valid (who is also required to proceed in good faith). I'm assuming, since you are so determined to pursue action against the bank, that the original drafter of the check in question is insolvent. I understand this is not the answer you are seeking. Obviously bouncing a check is a humiliating experience, especially when you don't think its your fault. But I seriously doubt there would be a claim against the bank.

Asker

Posted

Yes he is insolvent, I am not determinted to persure anyone, I am just trying to make sure I understand the COMPLETE situation and make sure that there are no options left unturned when it comes to how to fix this debt when the person doesnt have the money to pay it back. His joint account with his wife of whom he is seperated from is also frozen. He doesnt use the account, but alas his name is on it, so they froze it to ensure those funds in the other account would be paid back. SO it looks like unless the bank is willing to work some payment plan out with him there is no solution legally.

Posted

Reg CC repeatedly uses the language of maximum time periods of unavailability: ". . . shall make funds deposited in an account by a check available for withdrawal not later than . . . ." If an institution wants to make the funds available earlier, it is not prohibited from doing so by banking regulations.

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7 comments

Asker

Posted

Reg CC I am curious about is making sure that banks comply with the conditions on which a hold would be placed. It doesnt matter that the teller broke regulation and let a check go unheld that should have been because of a provionsal credit? IS this what I am understanding? I work at a bank so I know the conditions of which I hold a check and realize not all banks have the same clear cut rules- However If I did this transaction at my bank I would have been fired on the spot. He didnt have matching funds, it was out of state, and it bounced. I just want to make sure I COMPLETELY understand what the laws are.

Jeremy Judson Cobb

Jeremy Judson Cobb

Posted

Then you should pay a lawyer to educate you.

Asker

Posted

That was actually pretty offensive. I hold a masters degree its just not in banking law.

Jeremy Judson Cobb

Jeremy Judson Cobb

Posted

You find paying a lawyer offensive?

Jeremy Judson Cobb

Jeremy Judson Cobb

Posted

Do you work for free?

Asker

Posted

Not at all

Asker

Posted

I just asked for a clarification to a question. Telling someone they need to be educated is a poor choice of words.

Posted

This is a repeat post.

Twin Cities & St. Cloud, Minnesota licensed attorney, Tricia Dwyer, Esq.: Phone 612-296-9666. CIVIL LAW, FAMILY LAW, CRIMINAL LAW, LAW, Rule 114 Qualified Neutral, Minnesota Supreme Court Roster Mediator, Tricia Dwyer, Esq. & Associates PLLC, Phone: 612.296-9666 - EVERY DAY OF THE YEAR until 8 p.m. daily. See www.dwyerlawfirm.net

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