Consumer banking, or personal banking, provides financial services to individuals. Consumer banking services include services which are provided to individuals, and not individuals as business owners, and may include:
- Credit card services;
- Checking accounts; and
- Savings accounts.
Consumer financial institutions also provide services including:
- Mortgage loans;
- Personal loans; and
- Certificates of deposit (CODs).
Are My Funds in a Bank Always Available?
The Expedited Funds Availability Act (EFAA) imposes a duty on financial institutions to make funds which an individual deposited available for withdrawal within the prescribed time frame which is established by federal regulators. Funds being available for withdrawal means that they were deposited by an individual and are available for all uses which are generally permitted, including:
- Writing checks;
- Electronic payments;
- Cash withdrawals; and
- Fund transfers between accounts.
When Does a Bank Have to Make My Deposit Available for Withdrawal?
Typically, if an individual makes their deposit in-person to an employee of the bank prior to the bank’s business cut-off time, then the funds which were deposited will be available to the individual no later than the next business day.
There are, however, exceptions to the next business day rule. For example, finds may be held longer in cases where:
- The account was opened in the previous 30 days;
- The deposits are in excess of $5,000 in a single day;
- The bank is depositing a check that was returned; and
- There are emergency conditions, including natural disasters or communication failures.
When Does a Bank Have to Acknowledge My Deposit?
The time frames when banks have to acknowledge deposits varies. Typically, a deposit will be recognized on the next business day and not the same day the deposit is made when it is made:
- On a non-business day;
- At the end of a business day; or
- After an established cut-off time, such as 2:00 p.m.
If an individual’s deposit is recognized on the next business day, the funds may not be available until the following day. For example, if an individual makes a deposit at the end of business on a Monday, the bank may acknowledge the deposit on Tuesday and make those funds available on Wednesday.
What is the Difference between a Check and a Note?
Checks are orders on a third party, the bank, to pay a specific sum and are sometimes described as a three-party instrument. The three parties include:
- A drawer;
- A drawee or payor bank; and
- A payee.
Notes are promises by the makers to pay a specific sum and may be described as two-party instruments. The two parties include the maker and the payee. In addition, notes do not represent the paying out of assets.
What are the Different Types of Checks?
There are numerous different types of checks, which include:
- Government checks or warrants;
- Cashier’s checks;
- Teller checks or bank drafts;
- Certified checks;
- Traveler’s checks; and
- Bank money orders and personal money orders.
Government checks or warrants are instruments which are payable on demand and are drawn by the government or on the government, or the Treasurer of the United States. A warrant which is issued by a local or state government or a governmental agency is also treated as checks if it is payable on demand.
Cashier’s checks are bills of exchange or drafts that are drawn by banks on themselves. In many cases, they are purchased by customers of the issuing banks to be used as payment when the check is signed by an authorized representative of the bank. Purchasers are not parties to cashier’s checks unless they are named as payees or they add their own signatures or endorsements to the instruments.
Teller’s checks or bank drafts are drawn by one bank on another bank or are payable at or through a bank. Teller’s checks are equivalent to bank drafts. Another similar term is banker’s checks. These are defined as checks where the drawers are bankers or the duly authorized agents of a bank. Such checks are drawn on funds either in the banks of where the drawer is an officer or agent or in a correspondent bank where their own bank has credit.
Certified checks are checks that are accepted by the banks on which they are drawn. Their acceptance may be made by a bank’s signed agreement to pay the checks as presented or by a writing on the checks which indicates that the checks are certified.
Traveler’s checks are devices which are intended to provide instruments with the marketability of cash as well as the safety of bank drafts. This makes it relatively easy to cash these instruments where the owner or purchaser is unknown to the cashing parties and the purchasers are protected against the loss of the instruments.
Bank money orders and personal money orders, or register checks, are forms of checks which are used and sold by banks, merchants, and others. There are three parties to money orders, including:
- The remitter, or payor;
- The payee; and
- The drawee.
A bank money order is often signed on behalf of an issuing bank. A personal money order typically resembles an ordinary check and is issued with unfilled blanks for:
- The payee’s name;
- The date; and
- The signature of the purchaser.
On a personal money order, only the amount is filled out at the time it is issued.
What is an Overdraft?
Overdrafts occur when banks are presented with checks against an account which totals an amount that is greater than the cash in the account and a check is deposited but not collected from a payor bank. If a bank pays the check that is presented against the account before the checks deposited are collected, it results in an overdraft.
Banks are not required to honor checks which exceed the current collected balance in the account of the depositor. Pursuant to most federal and state laws, banks are permitted to charge service charges on overdraft checks as long as those charges are reasonable.
The reasonableness of the charge is determined by similar service charge rates in the banking industry at the time the overdraft occurred.
What is Check-Kiting and What Do Banks Do About it?
A bank, in some cases, falls victim to a form of fraud known as check-kiting. Check-kiting is a type of fraud wherein a wrongdoer creates a continuous interchange of worthless checks between at least 2 accounts at different banks and involves covering the overdrafts with deposits of checks which create overdrafts at other banks.
Successful check-kiting requires 2 conditions, including:
- A time period of several days in the collection process before the depositary bank can make presentment of the checks to the drawee bank; and
- The willingness of the depositary bank to pay a check which is drawn against uncollected funds.
If a bank at which a check is present for payment discovers that the depositor, as drawer of a check, is engaged in a check-kiting operation, that bank is entitled to return the checks, provided that it provides proper notice of dishonor and returns the checks within the acceptable time limits.
Should I Contact a Lawyer Regarding my Overdraft Problem?
It is essential to contact a financial lawyer with any overdraft issues, questions, or concerns you may have. It is important to examine the bank policies which were provided when you opened your account.
If the issue is not covered by that policy information or is a very serious issue, your attorney can assist you with determining what course to take with your bank and whether you may be eligible to sue them for your losses.