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UCC - Only Rerun NSF Item Twice
Answer by Randy Carey and John Burnett, BOL Gurus
Guru Bios
Question: Does it state anywhere in the UCC guidelines that we can only rerun a NSF item two times?
Answer by Randy Carey: There is no such guidelines in the uniform version of the UCC.
Answer by John Burnett: The Federal Reserve's Operating Circular #3 states that banks using the Fed to clear items should not send them any item that has already been dishonored two or more times. The purpose of that rule is probably to prevent the endorsements from more than two routes through the system to make each other totally illegible.
Banks that use other methods of check collection (such as using upstream correspondents or clearinghouses) may find variations on the theme of restricting the trips through the system in those arrangements. Any check can still be presented to the paying bank directly any number of times.
First published on BankersOnline.com 3/27/06
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