HOUSE 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

Majority Report:     The substitute bill be substituted therefor and the substitute bill do pass.  (14)

     Signed by Representatives Lux, Chair; Zellinsky, Vice Chair; Betrozoff, Chandler, Crane, Day, Dellwo, Ferguson, P. King, Meyers, Niemi, Nutley, Silver and Winsley.

House Staff:John Conniff (786-7119)

AS PASSED HOUSE MARCH 12, 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:  a check drawn on the bank to which a deposit is made - one day; a check drawn on a local financial institution - two days; a check drawn on a nonlocal institution - three days; a check drawn on any other financial institution in the United States - six days; and any check on a local, state or federal government entity - one day.  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 exempted from the schedule for making funds available according to the following guidelines:  where the financial institution has good and sufficient reason to doubt the check's collectibility - as many days as is the institution's policy; where the account is new - after six business days or earlier according to the institution's policy; and where the check is for more than $2,500 - according to the institution's policy, but at least $2,500 must be made available according to the schedule established by statute if the customer requests such amount.  Checks drawn on institutions outside the country may be made available according to the institution's policy.

The required time periods for fund 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 fund 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 fund 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 fund availability requirements of this act.

Fiscal Note:    Not Requested.

House Committee ‑ Testified For:     Stan Enebo, American Association of Retired Persons; Lane Nothman and Joni Charbaneau, WashPirg; Don Heyrich, Student; and Jacqueline Kettman.

House Committee - Testified Against: Keith Hopper, Washington Bankers Association; and Jim Byrne, Washington Credit Union League.

House Committee - Testimony For:     Financial institutions often prevent customers from withdrawing money from an account for a long period of time when a check is deposited to the account and the check is not from the same financial institution.  Financial institution policies vary widely and are not adequately disclosed.  Many consumers are harmed by these practices and studies indicate that lengthy holding periods on checks deposited to accounts are unnecessary.

House Committee - Testimony Against: Most financial institutions do make funds available quickly.  Most financial institutions also pay interest on the deposit from the moment the check is deposited.  This act may result in financial institutions losing more money from bad checks deposited to an account.