# Expedited Funds Availability Act (EFAA): What it is, How it Works

> **Definition**
>
> The Expedited Funds Availability Act (EFAA) defines banking deposit hold periods and timeframes when deposited funds are available to customers.

## What Is the Expedited Funds Availability Act?

The Expedited Funds Availability Act (EFAA) was implemented to regulate the hold periods on deposits made to commercial banks. Enacted by the U.S. Congress in 1987, the EFAA also standardized financial institutions' use of the deposit holds. The EFAA specifies the types of holds that banks can utilize on a check deposit, depending on the type of account and the amount of the deposit.

### Key Takeaways

*   The Expedited Funds Availability Act (EFAA) regulates the hold periods that commercial banks can make on deposits.
*   The four main types of deposit hold types are statutory, large deposit, new account, and exception holds.
*   In addition, the EFAA specifies that checks from insurance drawn on in-state banks must be made available five business days after deposit.

## Understanding the Expedited Funds Availability Act (EFAA)

The Expedited Funds Availability Act (EFAA) intends to standardize the handling of deposit holds. Banks and other financial institutions must inform customers of their policies regarding deposit holds, as well as any changes to the policies. The [Federal Reserve](https://www.investopedia.com/terms/f/federalreservebank.asp) has implemented the EFAA as [Regulation CC](https://www.investopedia.com/terms/r/regulation-cc.asp).

## Hold Types Allowed Under EFAA

The EFAA, or Regulation CC, allows banks to place four types of holds on deposited funds. These are:

*   Statutory
*   Large deposit
*   New account
*   Exception

Specific requirements must be met for each type of hold, and some banks will require, as a matter of policy, that funds be held under the hold type that allows the largest amount to be held for the longest period, legally.

## Statutory Holds

[Statutory holds](https://www.investopedia.com/terms/s/statutory-reserves.asp) can be placed on almost any deposit; under this type of hold, the bank must make the first $200 of the deposit available on the next business day after the deposit is made, the second $600 available on the second business day after the deposit is made, and the rest on the third business day.

## Large Deposit Holds

Large deposit holds are placed when the total of deposits made in one business day is more than $5,000. The availability rules for the first and second business day after the deposit are the same as for a statutory hold, but on the third business day, the bank must make $4,800 of the deposit available, with any remaining amount made available on the seventh business day after the deposit.

## New Account Holds

New account holds are placed on deposits made to accounts that are less than 30 days old. These holds are lifted on the ninth business day after the deposit.

## Exception Holds

Exception holds are used for accounts that have been frequently overdrawn, or when banks have reason to suspect that a deposit is legitimate. In rarer cases, they may be used if the bank branch suffers a power outage or a computer system failure. In most cases, however, exception holds are used when an account has been overdrawn for at least six business days out of the six months prior to the deposit, or at least two business days if the account has been overdrawn in an amount more than $5,000. An exception hold may be placed if the bank suspects that the check is fraudulent or won’t clear. It may also be placed on an instrument that has been previously returned for insufficient funds. Exception holds are lifted on the seventh business day after the deposit is made.

## Insurance Checks

Funds from insurance checks drawn on in-state banks must be made available on the fifth business day after deposit. If the bank is out of state, the funds must be available by the seventh business day after the deposit.