Number of Times an NSF Item Can Be Presented

Answered by:

Question:

If a customer issues payment from their account either by check or ACH, which is returned as NSF, what is the maximum number of times that the item can be represented for payment from the account? By check, ACH and combination of both.

Answer:

The Federal Reserve has a limit on the number of times a paper check can be processed through their system: two. If the check is otherwise eligible for re-presentment via the ACH system as an RCK entry, it must not have been presented more than twice in paper form, or once in paper form and once as an RCK entry, if it's being reinitiated.

If the item was originally presented in ACH form (as a POP, ARC, or BOC (new in March 2007) entry), and was returned for NSF or UCF, it can be re-presented in the original ACH format two more times.

That said, there is no UCC restriction on the number of presentments, and a paper check can always be presented directly (direct collection, for example), even if bounced several times before. The Fed restriction on paper items only applies to checks processed by the Fed (and is often ignored). There is also no real effective policing mechanism in the ACH system to prevent the re-presentment of previously-dishonored ACH debits (other than a complaint by the RDFI and the rules enforcement process, which is after-the-fact).

First published on BankersOnline.com 1/2/07