DepositsDisclosure of Delayed Availability Policy

Section § 1420

Explanation

This section defines key terms related to financial institutions and deposit accounts. A 'depository institution' includes a variety of insured banks, credit unions, and savings banks as defined by specific federal acts. These must either be insured or eligible to apply for insurance under applicable U.S. laws.

'Deposit account' refers to accounts at these institutions, where account holders can make withdrawals and transfers, and it includes types like savings, demand, and share accounts but excludes time deposits.

As used in this article:
(a)CA Financial Code § 1420(a) “Depository institution” means any of the following:
(1)CA Financial Code § 1420(a)(1) Any insured bank as defined in Section 3 of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1811 et seq.) or any bank which is eligible to make application to become an insured bank under Section 5 of the act.
(2)CA Financial Code § 1420(a)(2) A mutual savings bank as defined in Section 3 of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1811 et seq.) or any bank which is eligible to make application to become an insured bank under Section 5 of the act.
(3)CA Financial Code § 1420(a)(3) A savings bank as defined in Section 3 of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1811 et seq.) or any bank which is eligible to make application to become an insured bank under Section 5 of the act.
(4)CA Financial Code § 1420(a)(4) An insured credit union as defined in Section 101 of the Federal Credit Union Act (12 U.S.C. Sec. 1751 et seq.) or any credit union which is eligible to make application to become an insured credit union pursuant to Section 201 of that act.
(5)CA Financial Code § 1420(a)(5) Any member as defined in Section 2 of the Federal Home Loan Bank Act (12 U. S.C. Sec. 1421 et seq.).
(6)CA Financial Code § 1420(a)(6) Any insured institution as defined in Section 401 of the National Housing Act (12 U.S.C. Sec. 1701 et seq.) or any institution which is eligible to make application to become an insured institution under Section 403 of that act.
(b)CA Financial Code § 1420(b) “Deposit account” means an account in a depository institution on which the account holder is permitted to make withdrawals from time to time in person by negotiable or transferable instrument, payment orders of withdrawal, telephone transfers, or other similar items for the purpose of making payments or transfers to third persons or others. The term includes demand deposits, negotiable order of withdrawal draft accounts, savings deposits subject to automatic transfers, share draft accounts, and all savings deposits and share accounts, other than time deposits.
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Section § 1421

Explanation

Before you open a bank account, the bank must give you written information about when you can take out money that you deposit by check. This is their general policy on funds availability. Additionally, banks are required to provide customers with items like preprinted deposit slips or ATM envelopes that have a clear summary of this policy. If you deposit a check that can't be immediately withdrawn, the bank has to let you know exactly when you'll be able to access those funds.

(a)CA Financial Code § 1421(a) Prior to opening a deposit account a depository institution shall provide a written disclosure to the potential customer of its general policy with respect to when a customer may withdraw funds deposited by check or similar instrument into the customer’s deposit account.
(b)CA Financial Code § 1421(b) A depository institution shall furnish its customers preprinted deposit slips, envelopes for automatic teller machine deposits, or other individual notice bearing a conspicuous summary statement of its general policy with respect to when a customer may withdraw funds deposited by check or similar instrument into the customer’s deposit account; and, in the case of a particular deposit by check or similar instrument into a deposit account for which funds may not be immediately available for withdrawal, provide specific notice of the time the customer may withdraw such funds.
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Section § 1422

Explanation

This law states that when calculating interest or dividends on accounts that earn interest, banks must start the calculation as soon as they receive provisional credit for a check or similar deposit. They can't delay this process. However, if a check is deposited and then bounces, the bank doesn't have to pay interest on those funds.

For the purposes of computing the amount of interest or dividends payable with respect to an interest-bearing deposit account, a depository institution shall not delay beginning to compute interest on funds deposited by check or similar instrument to such an account beyond the date on which that depository institution receives provisional credit for the check or similar instrument. However, the payment of interest with respect to funds deposited by check or similar instrument which is returned unpaid shall not be required.
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Section § 1423

Explanation

This law states that if a bank or similar institution doesn't follow the rules set out in this legal section, it has to pay for any actual damages its mistake caused. For an individual, the court can add an extra amount that varies between $50 and $500. In a group lawsuit, the total amount is limited to $500,000 or 1% of the bank's net worth, whichever is less. If you win such a lawsuit, the bank also has to cover legal costs and attorney fees.

When deciding how much to award in a class action, the court looks at things like how often the bank ignored the rules, their resources, and whether the mistakes were intentional. The bank isn't held liable if the mistake was unintentional and due to a genuine error, like a clerical or programming mistake. However, legal misjudgments don't count as bona fide errors.

You need to file any lawsuit within a year of the violation happening. Also, if the bank was following a Federal Reserve rule, even if that rule is later changed or invalidated, the bank isn't liable for complying in good faith.

Except as otherwise provided in this section, any depository institution which fails to comply with any requirement imposed pursuant to this article shall be liable to the aggrieved party in an amount equal to the sum of any actual damage sustained by the person as a result of the failure; and, in the case of an individual action an additional amount as the court may allow, except that the amount shall not be less than fifty dollars ($50) or greater than five hundred dollars ($500); or, in the case of a class action, such amount as the court may allow, except that as to each member of the class no minimum recovery shall be applicable, and the total recovery in any class action or series of class actions arising out of the same failure to comply by the same depository institution shall not be more than the lesser of five hundred thousand dollars ($500,000) or 1 percent of the net worth of the depository institution; and, in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney’s fee as determined by the court.
In determining the amount of award in any class action, the court shall consider, among other relevant factors, the amount of any actual damages awarded, the frequency and persistence of failures of compliance, the resources of the depository institution, the number of persons adversely affected, and the extent to which the failure of compliance was intentional.
A depository institution may not be held liable in any action brought under this section for a violation of this article if the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. Examples of a bona fide error include, but are not limited to, clerical, calculation, computer malfunction and programming, and printing errors. An error of legal judgment with respect to a person’s obligations under this article shall not constitute a bona fide error.
Any action under this section may be brought in any court of competent jurisdiction, within one year from the date of the occurrence of the violation.
No provision of this section imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule, regulation, or interpretation thereof by the Federal Reserve Board or in conformity with any interpretation or approval by an official or employee of the Federal Reserve System duly authorized by the board to issue interpretations or approvals under such procedures as the board may prescribe therefor, notwithstanding that after any act or omission has occurred, the rule, regulation, interpretation, or approval is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.
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Section § 1424

Explanation

This law requires a commissioner to set rules about how long a bank can wait before allowing a customer to withdraw money from a deposit. The goal is to ensure that customers can access their deposited funds within a reasonable time.

The commissioner shall issue administrative regulations to define a reasonable time for permitting customers to draw on items received for deposit in the customer’s account. It is the public policy of this state to provide retail banking customers with the right to withdraw against items deposited with any depository institution located in this state within a reasonable period of time.
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Section § 1425

Explanation

This section requires the commissioner to create and regularly review rules about how long a bank can hold a deposited item before a customer can use those funds. This time frame should be reasonable and based on actual time it takes to process and transport the item between the banks involved, using the quickest available methods.

Pursuant to Section 1424, the commissioner shall promulgate regulations which shall be reviewed annually to establish a reasonable period of time within which a depository institution must permit a customer to draw as a matter of right on an item which has been received for deposit in the customer’s account.
In determining what constitutes a reasonable period of time the commissioner shall consider the following factors:
(a)CA Financial Code § 1425(a) The actual time for processing and transport between the depository and payer institutions.
(b)CA Financial Code § 1425(b) The fastest air transport time between depository and payer institutions to be used for purposes of setting the reasonable time for transport.
(c)CA Financial Code § 1425(c) The most expeditious route and means for processing of returned items.
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Section § 1426

Explanation

This law allows the commissioner to collect information from banks and other institutions where money is kept, in order to create the rules needed by another section of the law.

The commissioner is authorized to gather from depository institutions such information as may be necessary for the formulation and promulgation of the regulations required by Section 1424.
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Section § 1427

Explanation

This law requires the first set of regulations under this article to be issued by July 1, 1984.

The first regulations issued pursuant to this article shall be issued on or before July 1, 1984.
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Section § 1428

Explanation

This law allows the commissioner to create regulations that change how long a bank must hold onto deposited items before allowing withdrawals. This can happen if it's determined that current rules could lead to risky or harmful financial practices within the bank.

The commissioner is authorized to issue regulations which provide for a different period of time for withdrawal as a matter of right against deposited items, if there has been a determination that the application of the regulations adopted pursuant to this article would result in unsafe or unsound practices by a depository institution subject to the regulatory jurisdiction of the commissioner.
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Section § 1429

Explanation

This law explains when you can expect funds from certain types of checks to be available in your bank account. Specifically, if you deposit a cashier's, certified, teller's, or depository check and meet certain conditions, the funds should be available by the second business day after you make the deposit. Conditions include having the check endorsed properly, depositing it at a staffed bank, using a special deposit slip, having been a customer for at least 60 days, and the check being $5,000 or less.

If the total deposit exceeds $5,000, only the first $5,000 is assured to this timeline. However, banks can delay availability if there are concerns about the check being uncollectible, such as potential fraud or bankruptcy of the check's source. In such cases, the bank must notify you by the end of the next business day. The law also defines important terms like 'account', 'business day', and types of checks. It does not override any existing federal rules unless those are suspended or changed.

(a)CA Financial Code § 1429(a) Funds deposited in an account at a depository institution shall be available on the second business day after the business day on which those funds are deposited in the case of a cashier’s check, certified check, teller’s check, or depository check subject to the following:
(1)CA Financial Code § 1429(a)(1) The check is endorsed only by the person to whom it was issued.
(2)CA Financial Code § 1429(a)(2) The check is deposited in a receiving depository institution that is staffed by individuals employed by that institution.
(3)CA Financial Code § 1429(a)(3) The check is deposited with a special deposit slip that indicates it is a cashier’s check, certified check, teller’s check, or depository check, as the case may be.
(4)CA Financial Code § 1429(a)(4) The check is deposited into an account in the name of a customer that has maintained any account with the receiving depository institution for a period of 60 days or more.
(5)CA Financial Code § 1429(a)(5) The face amount of the check is for five thousand dollars ($5,000) or less.
In the case of funds deposited on any business day in an account at a depository institution by depository checks, the aggregate amount of which exceeds five thousand dollars ($5,000), this subdivision shall apply only with respect to the first five thousand dollars ($5,000) of the aggregate amount.
(b)CA Financial Code § 1429(b) Subdivision (a) does not apply to a depository check if the receiving depository institution reasonably believes that the check is uncollectible from the originating depository institution. For purposes of this subdivision, “reasonable cause to believe” requires the existence of facts that would cause a well-grounded belief in the mind of a reasonable person. These reasons shall include, but not be limited to, a belief that (1) the drawer or drawee of the depository check has been, or will imminently be, the subject of an order for relief in bankruptcy or placed in receivership or (2) the depository check may be involved in a fraud or in a scheme commonly known as “kiting.” In these situations, the depository institution electing to proceed under this subdivision shall so notify the drawer and drawee no later than the close of the next business day following deposit of the depository check.
(c)CA Financial Code § 1429(c) For purposes of this section, the following terms have the following meanings:
(1)CA Financial Code § 1429(c)(1) “Account” means any demand deposit account and any other similar transaction account at a depository institution.
(2)CA Financial Code § 1429(c)(2) “Business day” means any day other than a Saturday, Sunday, or legal holiday.
(3)CA Financial Code § 1429(c)(3) “Cashier’s check” means any check that is subject to the following:
(A)CA Financial Code § 1429(c)(3)(A) The check is drawn on a depository institution.
(B)CA Financial Code § 1429(c)(3)(B) The check is signed by an officer or employee of the depository institution.
(C)CA Financial Code § 1429(c)(3)(C) The check is a direct obligation of the depository institution.
(4)CA Financial Code § 1429(c)(4) “Certified check” means any check with respect to which a depository institution certifies the following:
(A)CA Financial Code § 1429(c)(4)(A) That the signature on the check is genuine.
(B)CA Financial Code § 1429(c)(4)(B) The depository institution has set aside funds that are equal to the amount of the check and will be used only to pay that check.
(5)CA Financial Code § 1429(c)(5) “Depository check” means any cashier’s check, certified check, teller’s check, and any other functionally equivalent instrument, as determined by the Board of Governors of the Federal Reserve System or the commissioner.
(6)CA Financial Code § 1429(c)(6) “Depository institution” has the meaning given in clauses (i) to (vi), inclusive, of Section 19(b)(1)(A) of the Federal Reserve Act.
(7)CA Financial Code § 1429(c)(7) “Teller’s check” means any check issued by a depository institution and drawn on another depository institution.
(d)CA Financial Code § 1429(d) Except for the specific circumstances and checks described in this section, this section is not intended to restrict or preempt the regulatory authority of the commissioner.
(e)CA Financial Code § 1429(e) In the event of a suspension or modification of any similar provisions in the federal Expedited Funds Availability Act, the effect of this section shall be similarly suspended or modified.
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