Your Rights and Responsibilities: Cheques

Holds on cheques

Your financial institution must inform you of its policies on holds on cheques.

Yes. A bank may apply a "hold" on the funds you deposit by cheque for several reasons, such as the following:

• to make sure that the cheque is drawn on a valid account and that the person or company who wrote the cheque has the money to cover the cheque;
  
  
• to make sure that the person or company who wrote the cheque has not put a "stop payment" order on the cheque (a stop payment order means that, for some reason, the person or company does not want the cheque to be cashed).
  
  

When you deposit a cheque into your account, your bank sends the cheque to the cheque writer's bank to have the money released. Until this happens, the money is not withdrawn from the cheque writer's account. This means that, when you deposit a cheque, your bank cannot be sure that there is enough money in the cheque writer's account (that is, whether the cheque will "clear").

It usually takes a few business days for the bank to ensure that a cheque has passed through the payment system and has been accepted for payment by the receiving bank. However, if a cheque is deposited in an automated banking machine or during extended branch hours (evenings or Saturdays), clearing the cheque will take longer. There may also be additional delays, for example if the cheque is drawn on an account located in another province or country.

Can I have the hold removed?

Depending on your relationship with your financial institution, the institution might release the funds to you before the cheque clears but, if it does this, it is effectively extending credit to you. If there is not enough money in the cheque writer's account, the cheque will be returned to your institution because of non-sufficient funds (NSF). For a cheque to clear and be returned because of NSF takes about five to six days — as long as the financial institution where the cheque writer has an account is located in Canada.

What about cheques drawn on banks outside of Canada?

If the cheque writer or cheque writer's institution is located outside of Canada, the cheque can take much longer to clear. Foreign cheques are often held for 30 days. A bank may choose to mail the cheque back to the institution that issued it and have it replaced by a secured method of payment such as a bank draft. It would then need to wait for that financial institution to mail the cheque back to the bank. If the cheque does not clear — for example, due to non-sufficient funds — the money will be debited from your account.

What is a holds on cheques policy?

When you open an account, the bank must give you a copy, in writing, of its policy on holds on funds deposited by cheque. This policy outlines the length of hold that may apply to the cheques you present for negotiation. Whether a hold will apply to your account(s) is not part of this policy but is decided when you deposit your cheque.

The bank's "hold on funds deposited by cheque" policy may be included with your account agreement, or given to you as a separate document. You can also request a copy of this policy in writing, at any time.

The bank must give you the following information about its hold on funds deposited by cheque policy:

• the maximum amount of time the bank may hold the funds from a cheque that is issued from an account at a financial institution's branch located in Canada;
  
  
• an estimate of the maximum amount of time the bank may hold the funds from a cheque that is issued from an account at a financial institution's branch located outside of Canada;
  
  
• if you receive a regular bank statement in the mail, your bank must send you (or the person you choose to receive this information) a written notice explaining a change in its hold on funds deposited by cheque policy at least 30 days before the change goes into effect;
  
  
• if you carry a passbook, which you present to the bank when you make your transactions, your bank must display a notice in the branch, explaining the change in its hold on funds deposited by cheque policy, for at least 60 days before this change goes into effect.
  
  

If the conditions outlined above have not been met, contact FCAC. We will investigate your situation and take the appropriate compliance measures if we determine that your financial institution is not complying with its legal obligations.

The Canadian Payments Association (CPA) is the organization that developed and operates the system of payments in Canada, through which payments, such as cheques, are exchanged and settled between financial institutions. To learn more about the cheque-clearing process, contact the CPA .