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Does my bank have a right to hold the funds I deposited by cheque?
Yes. A financial institution may apply a "hold" on the funds you deposit by cheque for several reasons, including:
If the cheque has to be returned to your financial institution because it can't be paid (because of non-sufficient funds, a closed account, a stop payment, etc.), your financial institution will remove the funds from your account. This can happen even after the maximum hold period on a cheque has expired.
Depending on your relationship with your financial institution, it may release the funds to you before the cheque clears. However, if it does this, it is actually extending credit to you. If there is not enough money in the account of the person who wrote the cheque to cover it, the cheque will be returned to your institution because of non-sufficient funds (NSF). If the cheque writer's financial institution is located in Canada, it normally takes about four or five business days for a cheque to clear and be returned because of non-sufficient funds.
However, if the cheque writer or cheque writer's financial institution is not located in Canada, the cheque can take much longer to clear. If it doesn't clear—for example, due to non-sufficient funds—and you have spent those funds, you will have to pay the money back, and possibly some interest and/or "chargeback" fees.
When you open an account, a federally regulated financial institution must provide you with a written copy of its policy on holds on funds deposited by cheque. The financial institution may provide a copy of the policy to you electronically if you consent to receive required information in electronic format rather than as paper documents. This policy outlines the length of time that cheques that you deposit may be held. Whether a hold applies to your account(s) is not part of this policy. That is decided when you deposit your cheque.
The policy on holding funds deposited by cheque may be included in your account agreement, or may be provided to you as a separate document.
The financial institution must give you the following information about its policy on holding funds deposited by cheque:
You can request a copy of your financial institution’s policy on holding funds deposited by cheque. Your financial institution must give it to you in writing, or electronically if you agree to receive information in this format.
From time to time, the financial institution may change its policy on holding funds deposited by cheque. If it does, it must let you know what these changes are before applying them to your account.
If these conditions are not respected, you should make use of your financial institution's complaint-handling process and contact FCAC. We can investigate to determine whether your financial institution has complied with its legal obligations.
Federal financial consumer protection legislation requires all federally regulated financial institutions to have a complaint-handling process in place to help resolve disputes between consumers and their financial institutions. This process includes a third-party dispute-resolution body.
You are financially responsible for any cheques deposited or cashed both before and after the hold period. Instead of using cheques, you may want to consider arranging to have deposits made to your account electronically. This will ensure that the funds deposited are not held and are immediately available.
The Canadian Payments Association (CPA) is the organization that developed and operates the Canadian payments system through which payments, such as cheques, are exchanged and settled between financial institutions. To find out more about the cheque-clearing process, contact the CPA at the link listed below.
|Accounts||Holds on cheques|
|Cheques||Holds on cheques|