I had a concerned individual that banks with another institution nearby give me a call to see if I could help her understand a situation she is involved in with her bank. After getting some of the information, I am stumped on what to tell her and was wondering if any of you out there have any suggestions, or is it a loss that she has to bear?

Here's the info as I know it -
She deposited a check made payable to her for $3,500 in her bank account (Bank A) on 3/19/07. This check was drawn on Bank B, which also happens to be nearby. On 5/10/07, she receives a copy of the check back marked NSF. Why such delay?

After further investigation, she found the following.

She found out from her bank, Bank A, that on 4/16/07 they recevied a case entry from the Fed that this item was lost in transit. Her bank did not reproduce a copy of the check for processing until 5/1/07. She has verified with Bank B that the funds in the account of Bank B (where the check was drawn on) was available at least until 3/27/07. Also, Bank B said they processed this item and returned it to Bank A NSF on 5/9/07.

Now, had the item gone through its normal processing, she would have received her funds due her because the funds were available at that point in time. However due to this item lost in transit, the processing did not occur for quite some time, which at that point the funds were not availabe.

Now........what should her course of action be.......does she have any recourse against the bank? the Fed? for not processing in a timely manner?

Any thoughts are greatly appreciated.

Presentment warranties are covered in Reg. CC, J, and parts of UCC - lots to sort through. FRB Operating Circular 3 - http://www.frbservices.org/OperatingCirculars/pdf/Oc3.pdf has some citations, and there may be some relevant court cases.