Expedited Funds Availability Act (EFAA): What it is, How it Works

The Expedited Funds Availability Act (EFAA) governs how long banks can delay access to deposited funds. Enacted by Congress in 1987 and implemented by the Federal Reserve as Regulation CC, the EFAA standardizes deposit-hold practices and requires banks to disclose their hold policies to customers.

Key takeaways

• The EFAA limits how long banks can place holds on deposited funds and requires disclosure of hold policies.
• Four primary hold types are allowed: statutory, large deposit, new account, and exception holds.
• Special rules apply to insurance checks: funds from in-state insurance checks must be available by the fifth business day, and out-of-state checks by the seventh business day.

How the EFAA works

Banks may place different kinds of holds depending on the deposit amount, account age, account history, and other circumstances. Each hold type has specific maximum timeframes during which the bank may delay making funds available. Banks must notify customers of these policies and any changes.

Hold types and timeframes

Statutory holds

Statutory holds apply to many routine check deposits. Under this hold:
* $200 of the deposit must be available by the next business day.
* An additional $600 must be available by the second business day.
* The remaining funds must be available by the third business day.

Large deposit holds

Applied when total deposits made to the account in one business day exceed $5,000:
* Availability on the first and second business days follows the statutory schedule.
* On the third business day, at least $4,800 must be available.
* Any remaining amount must be made available by the seventh business day.

New account holds

For accounts less than 30 days old, banks may extend the hold period:
* New account holds may delay availability until the ninth business day after deposit.

Exception holds

Exception holds cover specific risk or operational situations, such as:
* Repeated overdrafts (e.g., an account overdrawn six or more business days in the previous six months).
* Large prior overdrafts (e.g., overdrawn two or more business days when negative balances exceeded $5,000).
* Suspicion of fraud or returned checks.
* Branch power outages or computer system failures (in limited circumstances).

Exception holds may be placed for up to seven business days after deposit.

Insurance checks

Checks from insurance companies are treated differently:
* If the check is drawn on an in-state bank, funds must be available by the fifth business day after deposit.
* If drawn on an out-of-state bank, funds must be available by the seventh business day.

Consumer protections and practical tips

• Banks must disclose their funds-availability policies and notify customers of changes.
• If you need funds quickly, consider alternatives such as electronic transfers or asking the bank about immediate availability for certain deposit types.
• For large or unusual deposits, confirm hold policies in advance and plan for the maximum allowable hold periods.

Conclusion

The EFAA (Regulation CC) ensures consistent maximum hold periods for deposits while allowing banks limited flexibility for higher-risk situations. Understanding the four hold types and their timeframes helps consumers plan cash availability and avoid unexpected delays.