As a service to the customer, do most banks automatically resubmit (a second time) checks that customers have deposited, but have been returned from the paying bank as NSF? If so, is it a requirement to notify the customer that the check has been returned NSF and the bank has resubmitted it for payment or can the notice wait to see if it comes back NSF the second time? In my circumstance, the customer's account isn't charged back for the item and the customer isn't notified until the check would come back unpaid for the second time. What issues, if any, can this practice cause?

There are notices of dishonored items required by both the Uniform Commercial Code (sections 4-202 and 4-301) and Regulation CC (section 229.33(d)). Unless the bank obtains a waiver of those notices, it could end up liable to its customer for any losses the customer sustains as a result of the delay.

You may also find that your customer has withdrawn the funds if you fail to act when the check comes back the first time. If you don't at least give notice at that point, you could affect your ability to pursue the customer if the item comes back a second time (if there's no waiver obtained).

Consider too, "representing" the item with no notice to the customer may not be a "service." If the customer makes delivery of the goods, performs the service, etc. between the first and second bounce he will say that your failure to give notice was the actual cause of the loss. The law will agree with him.

Thank you both for your responses. This site is such a great resource!