When multiple items overdraw an account do you honor your posting sequence or do you allow the client to choose which items to pay? (Assuming they cover the items selected with a deposit.)

We honor the posting sequence.

That is my stance on the issue but in the past the bank has allowed the customer to choose the items to cover. Is there any rule or is it just a best practice? I know it's not a regulatory issue but it is an operations issue and I'm struggling with an explanation.

Thanks!

First of all, it would be an operational nightmare to allow all customers to choose their own posting sequence on an ad-hoc basis. Secondly, could it be interpreted as a UDAP violation if not offered to other customers?

I agree, that's a recipe for an operational nightmare. Don't go there.

I agree with you both. I have always honored the posting sequence. However, trying to explain that to legacy staff who have "always done it in the past" is a challenge without direct information supporting the reason behind the decision.

I know there can be an issue with not applying the exception to all clients but I'm told they have allowed all of the clients to choose items to pay that they can cover. I would also say that we could possibly get into a he said she said situation with a client that could lead to a potential liability issue.

"That's the way we've always done it" is the brand generally found on the worst possible banking decisions. My favorite response was, "Well, that's not the way we're doing it from now on."

The customer authorized all of the payments and letting him decide which ones to send back is the equivalent of allowing a stop payment without a fee or a written instruction. My apologies, but this is truly a ridiculous practice.