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EFT Check Collection
Answer by John Burnett, BOL Guru
Guru Bio

Question:  A business who is a customer of the bank has entered into an agreement with the bank to collect bad checks. The bank initiates an EFT to collect the check and reimburse the business. At the same time the check is collected the bank initiates a fee to the consumer's account for the bad check and the bank keeps the fee. From what I understand, the bank is sending the fee on its own behalf. Wouldn't the bank be responsible for giving a notice under the new Reg E effective Jan 1, 2007 to the customer in this instance?

Answer:  The bank has no opportunity to provide such a notice. The business does, along with the notice it is required to give (under NACHA rules) concerning the collection of the check via the ACH. Even if the bank is retaining the entire fee, it can only assess it as the agent of the merchant. Make the merchant post the notice.

First published on 3/05/07

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