Am I correct that if we cash a customer's check drawn on another bank (customer didn't deposit it to his account) and the check is returned to us NSF, we can't use a Reg CC exception hold at the time we resubmit the check to the paying bank a second time? Can we place a non-CC hold on the account balance to cover the amount the customer owes us from the cashed check? I need some help.

So, you're saying that since the check was cashed rather than deposited the first time it was presented to you that it should not be classified as "redposited" the second time it was presented to you?

That's taking the "redeposited" adjective a bit more literally than I would. From my perspective, if a check has been presented for payment and returned for a reason other than "endorsement missing" or "post dated" the exception hold is available to you when the customer deposits the item. The inherent risks to your bank now are exactly the same as if it had been deposited the first time.



As for putting a hold on the customer's account now that the check has been returned, you might be able to, but it will not have anything to do with Regulation CC. My preference would be that you evaluate your "right of offset" under both state law and your account contract and consider simply debiting the account for the amount of the check.

I read this as two unrelated questions. Without all the verbiage, my answer to the first was you are entitled to an exception hold as if this was a redeposited check. To me, the second question read as if the item had not been charged back to the account and you wanted to put a hold on it instead.

So doesn't 229.13(c) play into this situation? A hold wasn't placed on the check when it was first presented for payment (cashed over the counter). Since it was returned to the bank NSF and the bank is now submitting the check for collection a second time, can't we now place an exception hold on the account for the check amount to prevent a loss? I'm confused. Why doesn't Reg CC apply here?

Let me more clearly spell out the situation:

Customer cashes a check drawn on a foreign bank at one of our branches
Check is returned to the bank as NSF
Bank sends the check for collection a second time.

How do we protect ourselves from loss - place a hold on the customers account for the amount of the check (at the time we resubmitted the check)? If so, is this a Reg CC hold?

You are missing a couple of steps:

Customer cashes a check drawn on a foreign bank at one of our branches
Check is returned to the bank as NSF
Bank debits customer account, possibly creating an overdraft
Bank sends the check for collection a second time.
Bank credits customer account only if collection paid.

If the bank wants to try to collect on the check by re-processing it through normal clearings, then I would place an exception hold for doubtful collectability.

Al

To cover yourself, if you're going to re-present through normal channels, you'd really need to use your offset right (if any) and then redeposit the item, placing an exception hold in connection with the redeposit.

If you skip the charge-back and redeposit steps you'd have to use a "reasonable doubt" hold reason, but backdate the start of the hold to the original deposit date. You'd also risk running afoul of the UCC and Reg CC requirements for a notice to your customer that the item was dishonored by the paying bank. Missing that notice can make you responsible for your customer's added losses (if any) for delaying the notice until the check bounces the second time.

"Customer cashes a check drawn on a foreign bank at one of our branches"

What do you mean by foreign?? If it was truly a "foreign" item then Reg CC is out of the picture.

Foreign check - meaning non an on-us check.

So even though we didn't put a hold on the check the first time it was presented (since it was cashed - not deposited), we can now put a CC hold on the account for the amount of the check because the bank is resubmitting it for collection through the normal process? Would we would notify the customer at the time the bank resubmits the item a second time, using that day as the "date of deposit"?

I'm just confused on the applicability of Reg CC in this instance. We are already out the money (gave the customer cash for the check that was returned NSF) and now we're trying to collect the second time. It seems we could just put a hold on whatever funds are available in any of the customer's accounts to cover us if the check comes back NSF a second time.

I've read through this thread a few times now and was there ever a conclusion? From what I can see, since the financial institution didn't require the customer to deposit the item in the first place and cashed it instead, the financial institution ends up being the "holder in due course" and when the item came back, it did not have the right of offset and would be out the money and would need to collect directly from the maker of the check.....