I'm reviewing an account where the wrong exception hold was disclosed to the customer. The account was incorrectly identified as a repeat overdrafter account and repeat overdrafter holds were used on check deposits where the reason to doubt collectability should have been used.......this account had some chargebacks and the check deposits being held were the same kinds of checks being charged back.....however, since the account was coded as repeat overdrafter they opted to disclose repeat overdrafter as the reason for the exception hold.....

The customer did incur some NSF fees as a result of the holds....would you refund these fees? The customer was told the funds were being held on an exception basis...just the wrong exception reason......OR would you just document that the issue was identified and training was administered to reduce the likelihood of it happening in the future?

The regulation only talks about refunding fees when the notice was not given to the customer at the time the deposit was made and the check was ultimately paid. When was the hold notice given? Were the checks on which the hold was placed returned?

You need to do some training. You also need to get rid of this customer...

Thank you Elwood....yes training is in progress....

The checks were paid.....Would you refund based on the wrong exception begin used....OR just document that training has been done......

If the notice was given at the time of deposit, I would not refund the fees. Whether the hold was for "reasonable cause to doubt collectability" or "repeated overdrafter" the amount and duration of the hold would have been the same; i.e. no harm, no foul. If the hold notice was not given at the time the deposit was made, the customer is entitled to a refund without regard to whether the correct reason was given for the hold.

Note the language on the model hold notice:

[If you did not receive this notice at the time you made the deposit and the check you deposited is paid, we will refund to you any fees for overdrafts or returned checks that result solely from the additional delay that we are imposing. To obtain a refund of such fees, (description of procedure for obtaining refund).]

Refunds are not automatic. Read your notice. It should indicate what the customer has to do to get a refund...

Thanks....the hold notice was given at the time of deposit....just the wrong exception reason was given.....

So no refunding the fees.....but training definitely!!!!

Thanks Elwood!!!