Legal Definitions - DFA

DFA stands for Delayed Funds Availability.

Delayed Funds Availability refers to the practice where a financial institution, such as a bank or credit union, holds funds from a deposit for a specific period before making them fully accessible to the account holder. This delay allows the institution time to verify that the deposited check or other payment instrument is valid and that the funds have successfully cleared from the payer's bank. It is a standard procedure designed to mitigate risks for financial institutions.

• Example 1: Large Check Deposit into a New Account

  Imagine David, who recently opened a new checking account, deposits a personal check for $7,500 from an individual he met online. Because David is a new customer and the deposit is a significant amount, his bank might place a hold on the funds for several business days. During this period, David would not be able to withdraw or spend the full $7,500, even though the deposit appears on his account statement. The bank is using Delayed Funds Availability to ensure the check clears and the funds are genuinely transferred before making them available to David.

• Example 2: Weekend ATM Deposit

  Consider Maria, who deposits her weekly paycheck into an automated teller machine (ATM) on a Friday evening. Even though her paycheck is from a reputable employer, the bank's policy for ATM deposits, especially those made outside of regular business hours or on weekends, might mean the funds are not immediately available. The bank might process the deposit on the next business day (Monday) and then apply a further delay before the funds are fully accessible for withdrawal or electronic payments. This waiting period before the funds are spendable is an instance of Delayed Funds Availability.