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Hold notice for pending chargebacks?
Answer by Ken Golliher and John Burnett, BOL Gurus
Guru BIOS
Question: When we get notified of a large dollar return, we put a hold on those funds in the customers' account. Are we required to send a Notice of Hold form for this type of hold? Is a phone call to the customer sufficient?
Answer by Ken Gollier: Your hold is based on a "reasonable cause to doubt collectibility" and the customer is entitled to written notice of the hold under Regulation CC.
Answer by John Burnett: Once you have received the large item return advice, the UCC (3-503) also requires you to advise your customer (the depositor) of the impending return by midnight of the next business day. This notice can be oral or written, and the Reg. CC hold notice, if sufficiently descriptive, can suffice for the UCC notification.
You can also avoid Regulation CC altogether by simply charging back the check pending your receipt of it rather than placing a hold. Here again, you need to give your customer the UCC 3-503 notice, which can be the advice of charge (with or without the check) with enough description to identify the check.
First published on BankersOnline.com 4/4/05
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