Return Item Calls
Question: We recently had a large item returned to us which overdrew our customers's account. We had put the maximum hold on the deposit, and if the returning bank had called us to let us know it was coming back, we could have grabbed the money, anticipating the return. But they never called us, and the check got back to us the day after our customer took out the funds. According to our calculations, because the item was over $2,500, and taking into consideration the times involved of presentment and return, they were required to call us. Is there any liability there that we could go after the other bank for not calling us?
Answer: Most interesting question! I've run into bankers in the U.S. who tell me they've never made a return item call - they didn't know they were supposed to! Section 229.33 - Notice of nonpayment: Regulation CC, says in (a) - Requirement. If a paying bank determines not to pay a check in the amount of $2,500 or more, it shall provide notice of nonpayment such that the notice is received by the depositary bank by 4:00 p.m. (local time) on the second business day following the banking day on which the check was presented to the paying bank. ... Notice may be provided by any reasonable means, including the returned check, a writing (including a copy of the check), telephone, Fedwire, telex, or other form of telegraph. Then Section 229.38 says: (a) Standard of care; liability; measure of damages. A bank shall exercise ordinary care and act in good faith in complying with the requirements of this subpart. A bank that fails to exercise ordinary care or act in good faith under this subpart may be liable to the depositary bank, the depositary bank's customer, the owner of the check or another party to the check.
So CC says you must call. But what happens if the bank does not call? Well, after going on for some time in additional sections of 229.38 about what damages you can collect, you finally come down to the bad news - (g) Jurisdiction. - Any action under this subpart may be brought in any United States district court, or in any other court of competent jurisdiction, and shall be brought within one year after the date of the occurrence of the violation involved.
You can "go after" the other bank - through the court. Considering attorney's fees, unless the loss is big enough to warrant it, you may just want to continue trying to get the money out of your customer
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Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 3, 4/05
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