From the Reg. CC Official Staff Commentary:

229.13(e) Reasonable Cause to Doubt Collectability:
5. "If a depositary bank invokes this exception with respect to a particular check and does not provide a written notice to the depositor at the time of deposit, the depositary bank may not assess any overdraft fee (such as an "NSF charge) or charge interest for use of overdraft credit, if the check is paid by the paying bank and these charged would not have occurred had the exception not been invoked. A bank may assess an overdraft fee under these circumstances, however, if it provides notice to the customer, in the notice of exception required by paragraph (g) of this section, that the fee may be subject to refund, and refunds the charges upon request of the customer. The notice must state that the customer may be entitled to a refund of any overdraft fees that are assessed if the check being held is paid, and indicate where such requests for a refund of overdraft fees should be directed."

The way I interpret the above is as follows (keeping in mind that this would only apply on the "reason to doubt collectability" holds):

If we give the customer the hold notice at the time of deposit, then bank may impose an overdraft fee (subject to a refund, requested by the customer, if the item being held is actually paid). If the notice is not provided at the time of deposit (our general practice), then the bank cannot assess an overdraft fee if the item(s) being held are paid by the paying bank.

Other thoughts?

You can assess overdraft charges, you just have to tell them that they are just subject to refund. I have never seen a customer ask for the refund since Reg. CC was passed based on this requirement.