Banking | Checks with Insufficient Funds

March 25th 2020

The growing spread of COVID-19 and the resulting economic situation has led to a significant increase in the number of uncovered checks and accordingly, the number of restricted accounts.

On March 22, 2020 the Israeli government approved emergency regulations, providing that banks will not restrict accounts because of uncovered checks due to insufficient funds.  Below is a synopsis of the new regulations.

Generally, under Checks Without Cover Law-1981, a bank account and its owners are restricted if, for a period of one year, ten or more checks were not honored due to insufficient funds in the underlying account. Such restrictions may last up to a year.

The new regulations provide that the Supervisor of Banks may use its authority to suspend a restriction on accounts from the time of declaration of the Coronavirus emergency, while considering the types of customers and types of accounts. The Supervisor's authority to prevent a bank account from being restricted has also been extended, to up to 110 days instead of the 90 days set by law.

Given the entry of the new regulations into force, we recommend caution in accepting checks from an entity or individual whose financial strength is unclear, as the ability to examine the likelihood of the check being rejected (by checking the web site of the Bank of Israel, for example), is significantly impaired by the application of the regulations set out above.

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