SENATE BILL REPORT

SHB 622

BYHouse Committee on Financial Institutions & Insurance (originally sponsored by Representatives Lux, Chandler, Crane, Winsley, Day, Dellwo, Todd, Valle, Sayan, Basich, R. King, Pruitt, Unsoeld and Betrozoff)

Requiring financial institutions to reduce delay between check deposits and fund availability.

House Committe on Financial Institutions & Insurance

Senate Committee on Financial Institutions

Senate Hearing Date(s):March 27, 1987; March 31, 1987

Majority Report:     Do pass as amended.

     Signed by Senators Moore, Chairman; Bender, Vice Chairman; Fleming, McDermott, Metcalf.

Senate Staff:Stephanie Yates (786-7416)

                April 2, 1987

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS, MARCH 31, 1987

BACKGROUND:

When a bank customer deposits a check to his or her bank account, the funds which the check represents may or may not be immediately available for use by the customer.  Several factors are attributable to a bank's policy of delaying availability of customer funds.  Among these factors are the amount of the check, the type of check (e.g., personal or government), the place of business of the bank upon which the check is drawn, and the customer's account history (e.g., new account or past problems).

Congress is currently considering legislation to require depository institutions to speed the availability of customer funds by imposing limits on the time an institution can hold a deposit.  Eight states have adopted legislation requiring expedited availability of customer deposits:  California, Connecticut, Illinois, Massachusetts, Missouri, New York, Rhode Island and Wisconsin.

SUMMARY:

Financial institutions must permit customers to withdraw funds after a deposit has been made according to the following schedule:  one business day for a check drawn on the bank to which a deposit is made; two business days for a check drawn on a local financial institution; three business days for a check drawn on a nonlocal, in-state, institution; six business days for a check drawn on any other financial institution in the United States; and, one business day for any check drawn on a local, state or federal government entity.  If a financial institution is not open for business on the day funds must be made available, the financial institution must make the funds available on the next business day.

Financial institutions are exempt from the schedule for making funds available according to the following:  if the financial institution has good and sufficient reason to doubt the collectibility of the check, the financial institution may make funds available according to its own policy; if the account is new, the financial institution must make funds available not later than the sixth business day ; and if the check is for more than $2,500, at least $2,500 must be made available according to the schedule established, the remainder may be made available according to the policy of the institution.  Checks drawn on institutions outside the country may be made available according to the institution's policy.

The required time periods for funds availability do not affect the right of a financial institution to apply customer funds to obligations of the customer.

Financial institutions must disclose both internal and statutory requirements for funds availability.  This disclosure must be provided before a customer opens an account, must be provided to existing account holders within three months of the effective date of the act, and must be posted in a conspicuous manner at every branch and at every automated teller machine whether or not the machine is located within a branch of the institution.  In addition, deposit slips or envelopes must contain a notice that a deposit may not be immediately available for withdrawal.

Financial institutions may make funds available sooner than is required by statute, but failure to make funds available within the statutory guidelines constitutes a violation of the Consumer Protection Act.

The Supervisor of Banking and Supervisor of Savings and Loans are required to publish a quarterly report showing which federal institutions have failed to comply with the statutory requirements, the funds availability policy of such institutions, and the reason why the supervisor was unable to force the federal institution to comply.

The Uniform Commercial Code is amended to conform with the funds availability requirements of this act.

SUMMARY OF PROPOSED SENATE AMENDMENT:

For checks drawn on financial institutions located outside of Washington, but within the United States, the six-day time period for funds availability applies only to checks drawn on financial institutions located in the continental United States.

An exception to the time periods for funds availability is modified to require a financial institution to make available, within the specified time periods, $5,000 of the total of the aggregate number of checks deposited to a single account in a single business day. 

The notice provision is modified to require a financial institution to mail notice of the time periods and exceptions only to customers with depository accounts. 

The notice provision is modified to require posting at all automatic teller machines of time periods, exceptions, and a referral to the customer's depository institution for that institution's policies regarding the exceptions to the time periods for funds availability. 

A provision is added to require a financial institution to make funds from a draft available not later than ten days from the date of presentment.

Fiscal Note:    none requested

Senate Committee - Testified:   Representative Eugene Lux; Lane Nothman and Joni Charboneau, WashPIRG; Keith Hopper, Washington Bankers Association; Stan Enebo, AARP; Don Heyrich, student, The Evergreen State College; Jacqueline Kettman, Olympia resident