Why are the chase bank “glitch” criminals getting negative money in their account as opposed to the extra money just being removed?
In: Economics
Normally when you deposit a check, the funds are not available for withdrawal right away. The amount of time before it’s available is based on a schedule set by Regulation CC. If the check is returned for whatever reason, this hold will ensure the funds are still in the account for the bank to reverse the deposit.
However, that is assuming the hold is still in place when the item is returned. The “glitch” here is that the ATMs weren’t placing the requisite holds. This allowed customers with no money in their account to deposit large checks, knowing they would not be honored, and then pulling all the money out before the items are returned. When the items are returned, Chase has no option but to bring the accounts negative.
Fun fact: When the funds are available in the account, this does not mean the item has “cleared”. The only time your bank will know whether the item has cleared is when it doesn’t. The assumption is the hold period allowed by Reg CC *should* be enough time for the other bank to refuse payment, but that’s not a guarantee. The purpose of Reg CC is to find that happy balance between customers not being negatively impacted by a hold and the bank having enough time to assure the item is paid.
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