We have a customer who has written 3 checks and we have sent those checks back as NSF. The problem is, the other bank has sent those checks through multiple times (today makes the 8th times they have been presented to us) and every time we have sent them back as NSF. From what I have researched, the Federal Reserve Circular #3 states
3.0 Items We Do Not Handle as Cash Items
3.1 A sender should not send to us any item, and we do not undertake to handle an item as a cash item, if:
a) The bank on which the item is drawn has declined to pay the item two or more times. For purposes of this subparagraph 3.1(a) only, the term “the item” means a check; any substitute check, electronic check, or ACH entry derived from that check; and any photocopy in lieu of that check
Am I correct that the other bank should not have presented it for payment more than 2 times? What should we do at this point?