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Legal Memorandum: Bank's Liability under EFA

Issue: Can a bank that specializes in providing services to lawyers be held liable for verifying a fraudulent check had passed through a trust account under the Expedited Funds Availablity Act?

Area of Law: Banking & Finance Law, UCC & Secured Transactions
Keywords: General rule of one-day holds; Expedited Funds Availability Act (EFA or the Act),
Jurisdiction: Federal
Cited Cases: 901 N.E.2d 576
Cited Statutes: 12 U.S.C. §§ 4001-4010, § 4002(a)(2), § 4002(a)(2)(F); 12 C.F.R. § 229.13(b); 12 U.S.C. § 4003(b), § 4003(f), § 4003(f)(A), § 4004, § 4003(f)(D), § 4006(e); 12 C.F.R. § 229.19(f); 12 U.S.C. § 4010; 12 U.S.C. § 4003(c); 12 C.F.R. § 229.13(e)
Date: 04/01/2009

The federal Expedited Funds Availability Act (EFA or the Act), 12 U.S.C. §§ 4001-4010, was enacted to standardize the hold periods commercial banks put on deposits.  Under the EFA and regulations promulgated thereunder, check funds that are deposited in a bank must “be available for withdrawal not later than the business day after the business day on which such funds are deposited in [certain cases].”  Id. § 4002(a)(2).  Such cases include cases of

a cashier’s check, certified check, teller’s check, or depository check which –

       (i) is deposited in a receiving depository institution which is staffed by individuals employed by such institution;

       (ii) is deposited with a special deposit slip which indicates it is a cashier’s check, certified check, teller’s check, or depository check, as the case may be; and

       (iii) is endorsed only by the person to whom it was issued.

Id., § 4002(a)(2)(F).  Where a check at issue is a certified check; presumably the other elements of § 4002(a)(2)(F) apply such that, barring an exception, the funds would have had to be available to the lawyer in […]

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