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#100293 - 07/24/03 02:36 PM Return Item Notification
Anonymous
Unregistered

What is the requirement concerning timing of return item notification?

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Operations Compliance
#100294 - 07/25/03 02:17 PM Re: Return Item Notification
Anonymous
Unregistered

I'm doing some similar research. Section 229.33(a) and the Commentary provides the timing requirements for a paying bank if the item is in the amount of $2,500 or more. 229.33(d)provides the timing for the depositary bank to send notice to its customer.

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#100295 - 07/25/03 02:25 PM Re: Return Item Notification
Jan94 Offline
Platinum Poster
Joined: Mar 2001
Posts: 828
USA
On the notice to the customer from the depositary bank, would anyone have any information on what specific items this notice should contain? Section 229.33 is clear on the payor's notice to the depositary bank, but I'm not clear on what the depositary's bank notice should contain and would appreciate any help.

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#100296 - 07/25/03 02:54 PM Re: Return Item Notification
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
UCC §3-503(b). . ."is sufficient if it reasonably identifies the instrument and indicates that the instrument has been dishonored or has not been paid or accepted."

The notice could be as brutally simple as returning the check to the customer. Or, if you don't want to or cannot return the check (perhaps you're reentering it under your deposit agreement), include the amount, the maker's name if you can make it out and something like "NSF, Payment stopped," etc. You don't need to identify much else, IMO.
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#100297 - 07/25/03 03:48 PM Re: Return Item Notification
Al Miller Offline
Diamond Poster
Al Miller
Joined: Oct 2000
Posts: 2,416
Pleasanton CA USA
Don't forget that almost all of the UCC can be "varied by agreement." While the notice is required by the UCC, our Deposit Agreement says:

Waiver of Notification of Redeposited Checks (Business Customers Only)
Upon written request by an authorized signer, we will automatically redeposit checks returned unpaid due to insufficient funds. You have a right to be notified whenever a check you deposit is returned unpaid. To simplify collection of these items, you give up this right to notification for those items we redeposit. If these items are returned unpaid a second time, you will receive standard notification. We may place a hold on any item so redeposited. You will be notified of any such hold. A fee will be addessed for this service (See ANALYSIS ACTIVITY CHARGES).

The written request is a simple form:

Company authorizes Bank, at its discretion, to attempt to reclear deposited items that are returned for any reason (other than account closed). Company waives its right to notice of nonpayment for any items that Bank attempts to reclear in this fashion and agrees to hold Bank harmless for any loss that may arise from the lack of such notice. Bank's election to reprocess any returned item(s) shall not be deemed a waiver of its right to place a hold (or an extended hold) on any funds in question or to charge Company's account at any time for a returned item. Company acknowledges that Bank may impose a fee for each return of a deposited item.
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Al Miller, CRCM
Opinions expressed are my own and not necessarily shared by my employer.

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#100298 - 07/25/03 03:50 PM Re: Return Item Notification
Jan94 Offline
Platinum Poster
Joined: Mar 2001
Posts: 828
USA
Our operations area is working on a notice to the customer. I've been reading a reference manual on Reg CC published by WG&L, author is Robert E. Braun. He indicates that if the depositary bank sends a notice of nonpayment its notice should contain the name of the drawer of the item (i.e. the person or entity on whose account the check is drawn), the dollar amount, the date of the item, and the date of deposit. The operations area tells me that their vendor that produces the notice does not have the date of the item as an available field. So I'm just wanting to make sure that this is not a "required" field. If it is, then there is a programming issue with the vendor. If this is just an author's "interpretation", then I think we'll go with what we have. Thoughts?




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#100299 - 07/25/03 04:06 PM Re: Return Item Notification
Flsh224 Offline
New Poster
Flsh224
Joined: Jul 2003
Posts: 5
Illinois
Is there a requirement to send notice to a owner of an account you return the check on for unauthorized signature? My situation is a executor of a deceased customers account signed a check after delivering all the proper documents to the bank and then had that check returned for unauthorized signature, but they never received notice until they received something from the payee. This did not happen at my bank, it is our standard practice to send notices out the same day checks are sent back. Thanks for the help.

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#100300 - 07/25/03 04:57 PM Re: Return Item Notification
Elwood P. Dowd Offline
10K Club
Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
ARose, unfortunately, I agree with you, 12 CFR 229.33(d) is not all that clear, it just says “send notice to its customer of the facts…” Yet the commentary to that paragraph (d) analogizes the notice to the one required under the UCC, perhaps suggesting that a notice sufficient under the UCC would be sufficient here, which is undoubtedly why John sent you in that direction. The author you reference is providing his judgment as to how much of the information provided to the depositary bank in paragraph (b) is really relevant to the customer under paragraph (d). Personally, I think his judgment is reasonable. However, I do not think the "date of the item" is essential to the consumer's understanding of what is happening.

If the check is less than $2,500, the timing and content requirements for notice under the UCC apply. If the check is $2,500 or more, the timing and content requirements for both the UCC and Regulation CC apply. As the Regulation CC requirements are much more specific, generally compliance with the Regulation CC is adequate for both; i.e. if you comply with Regulation CC on large dollar returns, you have probably provided the same information only more quickly than is necessary under the UCC.

As Al notes, you can modify UCC requirements by agreement. Generally, the same observation applies to the requirements of Subsection C of Regulation CC; i.e. the portion of the regulation which includes 12 CFR 229.33. However, once the check is above $2,500 my opinion would be that an “agreement” not to send the notice would defeat the purpose of the regulation, protecting the consumer; I would not rely on contractual language to eliminate the requirement that the customer receive notice of large dollar returns.

Flsh224, there is no exclusion from sending the notice based on the reason for return.
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