Customer A deposits a check into her transaction account at our bank. We placed a case-by-case hold on the deposit and provided notice of the hold but not at the time of the deposit. Our hold notice discloses the language from the model in Appendix C "...we will refund to you any fees for overdrafts or returned checks that result solely from the additional delay that we are imposing." Since Customer A did not receive the hold notice at the time of deposit, A wrote a check on the account to Customer B who deposited the check at his bank (different than our bank). Since Customer A did not have enough collected funds in her account when the check was presented to us, we returned it. Customer B then was charged a lot of overdraft fees by his bank because he had written checks expecting Customer A's check to clear. The deposited check we held on Customer A's account was paid by the paying bank and so we refunded the returned check fee we charged Customer A. However, Customer B is upset about the overdraft fees he incurred from his bank and has asked Customer A to refund those to him. Customer A has asked us to refund Customer B's fees due to our disclosure reading that we will "refund 'any' fees for overdrafts..." I'm unsure from reading 229.16(c)(3) if our bank has an obligation to refund Customer B's fees. Opinions?

You have no obligation to reimburse your customer for fees he reimburses to customer B. Customer B's actions at his bank are totally outside your sphere of control. One could argue that Customer B had no right to draw against A's check until he could reasonably have expected it to clear. So customer A probably had no enforceable obligation to reimburse B anyhow.