We cashed a check for a customer. It is being returned to us due to fraud, can we place a hold on the customer's account for the amount of the check (disclosed in our deposit agreement)? If so, what type of hold notice do we provide? Since the check wasn't deposited it wouldn't fall under Reg CC would it?

Reg CC allows the bank to place a hold when a customer cashes a check against their account...but that isn't your situation here. Place a hold for the amount of the check being returned for fraud. Once you recieve notice of an item being returned, you can place a hold for those funds to protect the bank....and it is outside of Reg CC.

What kind of notification are we required to provide the customer with?