We charged off a checking to a customer that had been repeatedly overdrawn. The last instance was actually due to a fee we charged for a garnishment. We then kicked in a daily od fee after a certain number of days. We notified the customer daily and then began our charge off notification to the customer. 15 day warning letter, 30 day warning letter and then the final letter to close and charge off the account. The 15 and 30 day letter were mailed standard delivery and not returned to us by the PO. The 45 day closing letter was mailed certified and not picked up by the customer and returned to us. This was completed over 30 days ago. The negative acct balance is due to our banks overdraft charges disclosed to the customer. Today we received a deposit from this customer through the mail. My question is, can we accept these funds into the account to recover the fees?

If the charge off was all bank fees, the check is Payable to the former account holder, and/or endorsed "for deposit only" I would just return the check to the ex-customer and be done with it. Garnishment fee are normally under $100... just not worth the hassle of opening, un-charging off, depositing, and then closing for such a small amount.

Maybe it's worth it to you. I wouldn't waste my time since I already told the guy it was closed. Now, if he is wanting to pay you back to resolve the charge-off for ChexSystems reasons, I would gladly accept a check payable to the bank.

If the charged off account was receiving a direct deposit from their employer and the bank identifies another opened account with the customer's name on it, what is the bank allowed to do?
To not inconvenience the customer, do they deposit the direct deposit into the opened account and notify the employer?

Not sure how that applies here. If their name is on another account, I would set off against it and I wouldn't have a charge off.

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I might be misunderstanding what your saying but I would NEVER give the employer another account number. We have no business giving out account numbers unless specifically directed to do so by the customer..... or some government agencies

If the account is closed, the contract is now void (unless you have a crafty lawyer who wrote in some legal language that can be enforced in your state that certain provision survive account closing. I've never seen such language that I'd trust.)

Once it's closed and charged off, you can get recoveries directly from the individual, but you can't accept deposits to a non-existent account, whether the deposit is in the form of a check or a direct deposit. Return them account closed.

Are you familiar with the Notification of Change (NOC) process for ACH? because that is updating the originator, in this case possibly an employer, of a valid account number that should be used when the current transaction is sent to a wrong or invalid account.

That said, the NOC should be used with discretion. It is not mandatory.

I believe in resurrection, but not in this context. The account is closed and you have no right to unilaterally raise it form the dead for your own purposes. Treat the deposit accordingly.

Hmmm, where's that enforcement action against the Kentucky thrift that forced people to pay on charged off accounts when they were attempting to cash checks at the drawee bank...can never find stuff when I need it.

Comment: overdrawn deposit accounts are loans and are charged off against the reserve. Any bank I worked at reversed all of our own internal fees prior to charge off so as not to use up the reserve, which was sacred ground. Just food for thought as you strategize.

Good call Happy. I should remove the word never and put rarely.

Do we follow the same guidance on charging off overdrawn checking accounts for business accounts?

We charge off consumer accounts at 60 days. But we don't say in our policy or procedure what we do with business accounts.

The joint guidance issued in 2005 mentions both consumer and small business transaction accounts on page 3.
http://www.ncua.gov/Resources/Documents/LCU2005-03.pdf

Treat them both the same.

The direction to charge off overdrawn accounts is not derived from any concept of consumer protection. It is an attempt to assure the accuracy of the bank's income statement; i.e. if any account has been overdrawn for that period, the money is lost.

Failing to recognize the loss overstates the bank's income dollar for dollar regardless of the account type.

I've never seen an NOC that provides an entirely different account number, nor would I process an NOC in that way. All NOCs I've seen (which are not mandatory) are to correct an account number where perhaps two numbers have been transposed, a digit or two have been chopped off or an extra digit or two have been added.

If the account number given is entirely foreign to the account number I have for that same customer name I would return R03, "no account / unable to locate account". I don't think the originator could truly use an NOC with an entirely different account number without a valid authorization (at least I'd hope not!!).

We do send NOC's as a customer courtesy, but only after we have for instance, closed their deposit account because of fraudulent transactions or some other reason where we are confident the customer agrees to the change. At the time of discussion, we instruct the customer to inform the sender of the new account number as well. The NACHA rules require the Originator to make the change and the RDFI is liable for the NOC information.