Returning Largest Chk-Can we charge OD on others

IMHO - Your bank is headed for a class action lawsuit that they are not going to be able to win. I would recommend contacting an knowledgable attorney regarding this practice.

IMHO - the determination of whether an item is chargeable as an NSF item is how your contract with the customer indicates you pay items -- in this case high to low and I assume also that an NSF fee is disclosed as a per item charge. Then the fee is for items that are posted against insufficient funds. In the above example, all three items are NSF exception items which carry a fee. That determination has been meet in accordance with the account contract. Some banks then further determine how much that fee is depending on whether it is paid or returned; however, most charge the same. Don't confuse the trigger for the fee with what action you take after you have the exception item in hand.
Randy's point is well taken regarding wrongful dishonor, but you can (and should) charge for the two lower amount items because the fee is for exception handling, not because the account balance has been now modified and the two remaining exception items somehow dissappear.
With all this said, I'm not in favor of high to low processing given check number order is far easier to explain and justify to customers.

I'm going to run counter to the tradition in my left-leaning commonwealth and argue that the fee, if properly disclosed, is legal and justifiable based on the deposit contract. I agree with the logic in Strategery's post, including the suggestion that check order posting is the easiest to explain.

That said, I also agree that assessing NSF fees on paid items in a high-to-low posting environment is an easy target for potential "unfair and deceptive practice" charges and potential legislation. And I don't think the "we think paying largest items first protects the customer better" argument stands up to the laugh test. Let's just admit that high-to-low brings better fee income, and it's (currently) legal.

Original Poster Here -- I am glad to report that we will not implement this practice. Thanks to all for your responses.

Edge... did this discussion have an impact on your decision?

This idea came from the CFO. (He is currently out of the bank for surgery.) When I brought the info from this discussion to the CEO, he had already decided against it. He did seem pleased that most of the comments supported his decision.

This thread is about 4 years old & was curious what the current thinking is on charging fees on the original scenario presented. (1) Customer balance is $100. (2) Incoming checks of $200, $30, & $25. (3) We return the $200 check and charge account $27 return fee. Leaves balance of $73. (4) We pay $30 and $25 check. Leaves a balance of $18. (5) Can the bank charge an OD fee on the $30 & $25 check? (6) Currently, we post largest to smallest.

Current opinions?

Whether the $30 and $25 post before or after the $200 attempts to post, sufficient funds are in the account to pay those smaller items. I don't see how you can charge an od/nsf fee for either of these items.

Given the increasingly hostile attitude toward ODP as indicated by wave after wave of regulation. I think my prior reference is an understatement.

The practice is blatantly dishonest...

Thanks for the update & confirmation. We agree & will not be charging.

But from what I read here and on BankingQuestions.com, it's something that some bankers persist in doing. They are probably cut from the same cloth as the bankers that started the whole abusive overdraft protection practice that got all bankers tarred with the same regulatory brush.

I'm surprised they haven't been sued for wrongful dishonor.

Since the scenario describes the smaller checks being paid, I don't see where wrongful dishonor would apply.

Of course, if they had been returned (and I'm sure that somewhere, it has hapened), then I would agree with you.