Frequently Asked Questions

Q: Is my bank obligated to notify me if my account is overdrawn?
Q: Can a bank pay checks in any order it chooses?
Q: Is there a maximum fee a bank can charge its customers for non-sufficient funds?
Q: Can a bank close my account without giving a reason?
Q: What is the maximum length of time a bank can hold funds I deposit?
Q: How and when is a bank required to provide this Notice of Funds Availability?
Q: Someone drafted my account for a purchase I did not authorize. How can I have the item reversed?
Q: A merchant converted my check to a bank draft. Can they do this?
Q: Does a debit card protect me from overdrawing my account?
Q: When I use my debit card the bank immediately puts a hold on the account even though the actual charge does not hit the account until days later. Can the bank do this?
Q: What are my rights regarding unauthorized automatic teller machine transactions and Debit Card transactions?
Q: Can a bank charge a non-account holder a fee to cash a check that is drawn on that bank?
Q: Does the bank have the right to remove funds from a personal account without authorization or notification in order to bring a loan current?
Q: Is a bank obligated to accept a power of attorney?

Is my bank obligated to notify me if my account is overdrawn?

There is no requirement that the bank notify a customer that the account is overdrawn. You may not know your account was overdrawn until you receive your monthly statement. The disclosure agreement will give the obligations of the bank for all areas of the deposit relationship, and the agreement may be silent with respect to a notification requirement for overdrafts.


Can a bank pay checks in any order it chooses?

Banks have a right to establish their own policy concerning the order in which they process checks. If smaller checks are paid first, there are fewer overdrafts and fewer charges; however mortgage and rent checks may be returned. Some banks feel that if larger items are paid first, then the most important items are not returned. Payment order should be noted in the deposit contract customers receive when they open their account.


Is there a maximum fee a bank can charge its customers for non-sufficient funds?

There is no maximum amount a bank can charge its customer for non-sufficient funds fees. The amount that your bank can charge is set out in your new account agreement.

“Bad check” fees charged by a business to a customer for a payment by check that “bounces” are different from NSF fees charged by bank.

Is there a limit on how many times a bank can run an insufficient check through for payment and collect an NSF fee?

There is no Federal or State Law prohibiting the number of times a bank can return a check. The National Automated Clearing House Association (NACHA) Operating Rules prohibit the originating bank from re-presenting an electronic check entry no more than twice after the first return of a paper item, and no more than once after the second return of a paper item.


Can a bank close my account without giving a reason?

If the bank discloses this in the new account brochure at the time your account is opened, it is legal for a bank to close your account for any reason at any time without any notification to you.

What is the maximum length of time a bank can hold funds I deposit?

The 1987 federal “Expedited Funds Availability Act” [Regulation CC (12 CFR 229)]
sets forth the maximum number of business days that funds may be held for collection. Exceptions are permitted in special circumstances; however, the customer must be notified at the time the deposit is made as to the reason for and the length of time of the hold period. Examples of special circumstances which could result in a longer hold period include: new accounts, large deposits, re-deposited checks, history of repeated overdrafts, and doubts as to the collectibility of the deposited item. A reasonable period of time is defined as one additional business day for “on-us” checks, five additional business for local checks, and six additional days for non-local checks.


How and when is a bank required to provide this Notice of Funds Availability?

The funds availability notice must specifically state the availability periods for the various types of deposits that may be made to consumer accounts. The notice should be posted in a place where consumers making deposits are likely to see it before making their deposits, including ATMs. This notice is not required at drive-through teller windows or at night depository locations. The regulation [Regulation CC (12 CFR 229)] requires that the notice of funds availability be on the front of all preprinted deposit slips. The notice only needs to state that deposits may not be available for immediate withdrawal, and the notice does not have to be included on counter deposit slips and special deposit slips.


Someone drafted my account for a purchase I did not authorize. How can I have the item reversed?

You must notify your bank within 48 hours of discovering a draft that you did not authorize, in order to limit your liability to $50.00. This is called a timely notice and enables maximum time for the bank to stop any other unauthorized drafts. If you wait longer than 48 hours, your liability could go as high as $500.00.

Federal Reserve Regulation E (12 CFR 205) governs disputes with electronic fund transfers (EFT) and automated clearinghouse items (ACH). The bank is obligated to accept the ACH item if it has a good account number. In order to challenge the charge, you must request a dispute resolution form. The bank is then obligated to request that the originating bank research authorization for the charge. Your reimbursement depends upon the originating bank obtaining their record of the proper authorization.

A merchant converted my check to a bank draft. Can they do this?

Yes, however the merchant or creditor converting the check into an Automated Clearing House debit must give you notice that the information on your check will be used to electronically debit the payment from your account. This notice can be given in several different ways. For example, the notice may be in writing on your monthly statement, or posted at the cash register. 

Does a debit card protect me from overdrawing my account?

Generally, debit cards are not set up to reject a purchase that will overdraw your account. Although credit cards have a feature by which the transaction is rejected if the purchase brings your balance over your credit limit, there is no such feature for most banks which issue debit cards.


When I use my debit card the bank immediately puts a hold on the account even though the actual charge does not hit the account until days later. Can the bank do this?

Debit cards are processed through the VISA network. At the time of use, the bank is notified electronically of the amount. Most banks will place a hold on these funds until the merchant presents the item. Until the bank receives the actual ticket, your account will have a current ledger balance and a smaller available balance. The current ledger balance will exceed the available balance until the merchant presents the item to the bank. Should an item be presented on your account that makes the available balance negative, the bank may charge a fee to return the item or overdraw. The disclosure agreement will explain the method of posting debit card transactions.


What are my rights regarding unauthorized automatic teller machine transactions and Debit Card transactions?

Federal Reserve Regulation E (12 CFR 205) limits the customer’s liability on consumer accounts for unauthorized ATM or debit card transactions to the first $50 withdrawn. If however, someone whom the customer supplied the card and personal identification number to performs the transactions, then the transactions are generally considered to have been authorized. The customer is responsible for notifying the bank immediately (within 48 hours of discovery) when unauthorized transactions are discovered, which initiates an investigation by the bank. If you wait more than the first 48 hours after you discover the unauthorized transaction, your liability can increase up to $500.00.


Can a bank charge a non-account holder a fee to cash a check that is drawn on that bank?

Regulations require a bank pay checks at par when transmitted through a cash letter. However, cashing a check is not paying a check that has been transmitted through a cash letter. Therefore, a bank is allowed to charge non-customers a fee to cash a check.

Does the bank have the right to remove funds from a personal account without authorization or notification in order to bring a loan current?

This is known as the right of setoff. If you have a personal account and a loan or another deposit account at the same financial institution, and you are delinquent in your loan payments or the account is overdrawn, the bank generally has a right to access your personal account without notification to you to bring the note current or the account positive. This is usually addressed in the loan agreement and/or depository contract.


Is a bank obligated to accept a power of attorney?

Banks may accept a power of attorney prepared by the customer or the customer’s attorney, or may require its customer to utilize its own power of attorney form. More and more companies in the financial sector; insurance, brokerage and such, are not accepting a power of attorney prepared outside the institution.