I had a customer ask to redeposit a NSF check that was charged back to his account. One of the tellers informed me that we are not supposed to redeposit the check (or automatically re-present). The reasoning given was something to the effect of missing documents/images thru the Fed. I work mostly with loans, but am assistant Compliance Officer. Has there been a ruling on this that I missed and can we force the customer to contact the person and request another check after just one NSF return?

Per Federal Reserve Operating Circular #3, a check can be presented through the clearing system twice. After that it no longer meets the definition of a cash item.

Automatic representment is not the same thing as a customer redepositing an item.

Thanks for the response. In an email from one of the tellers it states that if we get a check back NSF, that we will not be representing it, nor will we let the customer redeposit the check. It also states that the Fed is telling us that when the check is either represented or redeposited, it is a duplicate check because of matching check numbers and we are not getting appropriate credit for the check. Is there some information that I am not aware of regarding this? I am trying to clear up some confusion.

Are they re-depositing an IRD or a copy of the item?

The customer had the original check that was sent with a chargeback notice.

If in fact the original check was returned, then you should be able to re-deposit it without it showing as a duplicate item.

So perhaps there is something in our processing that is causing confusion with the Fed and this was a decision made in operations and not an official ruling by the Fed?

I think your teller is confused. In my previous life, I managed the check processing area and we dealt with returns (and the Fed directly) as well as represented NSF checks. Yes, you got credit for the original item BUT that credit was taken away when the check got returned to your institution as NSF. In turn you took the customer's credit away. So you're all set there.

When the customer brings it back (and it has only been presented the one time), you CAN and SHOULD accept it one more time. Once again, the check will go through processing and be sent to the Fed. You will get credit for it. It is not a duplicate, as your original credit was already taken away by the Fed. If that check happens to bounce one more time, once again you'll get it back AND once again the Fed will take your credit away. However, this time it has been processed twice and cannot be renegotiated.

Thank you very much for the information. Could we be opening ourselves up to problems by not representing or redepositing checks if the customer asks us to?

There could be a reason that Fed could be getting involved and saying the item was a duplicate, but they should be exception and not an everyday occurrence.

1. If the check was ever reported as missing in process. This could have generated a photo and the original could show up again the processing stream. This might make it appear to be a duplcate item.

2. If the check was ever converted to an image, and then someone re-deposited the original check again (ie such as with a remote deposit customer who sent the image file in, then inadvertently ran the original check as well). Once you convert the paper to an image, you can't use the paper again. If the item is subsequently returned it will be returned as an IRD.

My gut reaction is that at one time you may have actually had an image and an original out there and someone over-reacted and said, well then, we're just not going to allow this anymore. I suggest you allow customers to re-deposit items and that if you get adjustments back from Fed on them, that you try and track back to where/what the problem actually is.

I completely agree with Georgia Plum. Her examples also make sense. It's true - those should be RARE instances when a redeposited check is rejected as a duplicate.

The incident that put this into motion had to do with getting two notices, within a week, of returned checks being lost at the Fed 2 months prior that were being represented.

To summarize: None of your respondents (me first) can tell you what the problem is from this distance. In addition, you are taking advice from a teller that either 1) doesn't know what the problem is or 2) cannot explain it.

Get the check. Call the Fed.

We had a situation recently where a customer scanned in a check and the fed debited us for it. it was reported as a non cash item by the paying bank. we debited our customer and had them deposit the original check OTC. The original check was returned (this BTW was a cashier's check). Our customer called the issuing bank and they stated it was already paid (from the original scanned deposit). I submitted an ERR case through the fed and got the credit back. Why a bank would report an item NCI and then pay it anyway is beyond me. The problem with the item was the printing (payee, amount...) was faint and hard to read which is a common occurrence for this particular's banks checks.

Observation: The industry is struggling with how to prevent duplicate payments when checks can take on multiple forms. Theoretically at least (and I'm sure it's happened) a shady business customer with RDC and ACH check conversion access could get paid multiple times -- by paper check, by image deposit and by ACH conversion. Couple that with images created by banks and their processors and a Federal Reserve check processing system that's been radically downsized and mistakes in handling cash letters at various points in the overall system, and there are bound to be problems.

Then attempts to ferret out multiple payments by comparing historic data images with current items in-process may not be perfected, and the "ghost" of a check's previous trek through the system may cause the problem you've described.

The sooner we morph into a checkless society, the sooner this problem will disappear (and, of course, be replaced by other challenges).

Thanks John, I agree!

Please also realize that if the Fed is, in fact, telling you it is a duplicate transaction, they are doing so only on information from the paying bank. FRB does not keep track of items deposited for the purpose of notifying a depository bank that an item is a duplicate. They process too many checks/check images to do this; that is what their adjustment process is for.

Also, if it has been returned twice as a check, you can convert it to an ACH payment for 1 additional presentment. There is also nothing that stops your customer from going to the paying bank daily with check in hand asking if the funds are available to cash the check.