Expedited Funds Availability Act (EFAA)

What is the Expedited Funds Availability Act (EFAA)?

The Expedited Funds Availability Act (EFAA) is a United States law that requires banks to make deposits and checks available within a standardized period. The law was enacted in 1987 to control the holding periods on the funds deposited in customers’ accounts in commercial banks.

Expedited Funds Availability Act (EFAA) Explained

The Expedited Funds Availability Act (EFAA) was adopted to govern the availability of funds from customers’ accounts and the use of hold periods by financial institutions. As per the legislation, deposits to commercial banks can be accessed on specific days, depending on the deposit size and the time duration elapsed since the account opening.

Depending on the deposit size and the account type, the EFAA decides the kind of holding that banks may use on check deposits. The Federal Reserve enforced the EFAA, which is also called the Regulation CC.

All account holders must be informed of holding policies and of any change in the policies by their respective financial institutions. The holding policies are made available in writing on the opening of new accounts or when requested by clients. The accounts on which interests are paid receive earnings from the time the deposits are made to banks, regardless of the holding period.

Expedited Funds Availability Act (EFAA) and Types of Holds

The Expedited Funds Availability Act (EFAA) offers four types of holds that any financial institution can choose from and place on a check deposit. Although it is legal to set any type of holding on deposits, bank policy may indicate that the holding type placed on deposits offers the highest amount of money for the longest period that can be applied legally. The following are the types of holdings provided by the EFAA:

1. Statutory Hold

Statutory holds are individual state-mandated reserve obligations for insurance companies. As per law, insurers must keep a portion of assets in the form of easily obtainable securities for quick repayment of claims. A statutory hold can be placed on any deposit type. However, no other hold should’ve been set on the same deposit at that time. The bank must make the following payments:

• $200 on the next working day after making a deposit
• $600 on the second working day after the deposit is filed
• Balance amount on the third workday

2. New Account Hold

The Expedited Funds Availability Act states that if the account owner previously opened an account at the depository bank, another account will not be considered new for at least 30 calendar days after the creation of the existing account.

It implies that an account is considered new for the first 30 days of its creation, and a new account hold is set on deposits of the accounts. The new account hold is removed on the ninth working day following the deposit.

3. Large Deposit Hold

A large deposit hold is placed if deposits of more than $5,000 are made in one business day. The rules of funds availability for the first two days are the same as those for statutory holds. However, for the third day, the bank must make available $4,800 with any balance amount made accessible on the seventh workday following the deposit.

4. Exception Hold

Financial institutions use it to hold funds in accounts when they become suspicious of an illegal deposit or when the account’s been frequently overdrawn. Exception hold can also be used when a system failure or power outage occurs in a bank premise. Generally, an exception hold is placed on an account if more than $5,000 is withdrawn for at least six consecutive working days.

Additional Resources

CFI offers the Commercial Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful:

• Bank Reserves
• Demand Deposit
• Federal Reserve
• Monetary Aggregates
• See all economics resources