Our external auditor has suggested that we start filling out hold forms when we get notification that a check is being returned. He suggested use of a "Reasonable Cause Hold Notice." The only ones I can find are just like an exception hold notice. Anyone use a different reasonable cause hold notice form?

Thanks for the help.

You only need to fill out a reasonable cause exception hold notice if the bank places such a hold when it gets notification of a check being returned. When you do so, don't forget that the availability date on the hold is but seven business days from the banking day the check was originally deposited, which may already be a few days ago. That hold might not buy you much.

Your auditor could also have advised you to act on the notification of the returning check by (1) notifying your depositor of the impending return and (2) charging your depositor's account for the pending return. You can combine the notice of charge and the notice of the return into a single form.

Then you credit suspense until the check in question actually is received.

In that way you stand a better chance of not having the funds walk out the door before the check shows up.

Click and scroll down to C-13. It's not widely used, but it may be what he's talking about.

Sorry to be so thick headed, but I've gotten myself confused. If we get notification today that a check is being returned we need to send the customer a "reasonable cause" hold notice backdated to the date of original deposit. If the check is returned NSF and we choose to clear for a second time and not charge back to the customer we would then need to send a second "reasonable cause" notice to the customer to extend the hold for 7 days from date of redeposit. Is my thinking correct?

I would go with the second paragraph in John's comment above. Why hassle with an exception notice when you've already been told by the bank that it is being returned? I would let the customer determine if they want to redeposit and then, at that time, create an exception notice on the redeposit.

That's a different question altogether; John's response did not bless that. In candor, it should be the customer's decision to reclear a check, not the bank's. You assume significant risks when you automatically reclear an item without the customer's knowledge or permission.

Back to the first question, you do not backdate the hold notice. You simply use the original banking day of deposit to calculate your hold period.

Thank you.