I agree. Under both Reg CC and the UCC in your state you are required to give your depositor notice of the fact that you were informed that the item is coming back, within one banking day of being so informed. You best option is to combine the information required in that notice with a notice of charge-back to the account. The debit to the account can be offset with a credit to whatever suspense account your bank uses for such things. Then, when the item actually appears in your inbound return items, you can debit the suspense account to remove the amount from suspense, offsetting it with a credit to the Fed or your correspondent (whichever charged you for the item).
As noted by Randy and Ken, you avoid the whole Reg CC hold process, and you can ensure that, if the item takes a bit longer than expected to show up, you won't be releasing funds from a hold and risking their withdrawal by your customer.
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John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8