Please clarify: The restriction of charging overdraft and returned check fees are applicable if the safeguard exception hold is the 'reasonable cause to doubt collectability ' exception and you do not supply the notice until after the deposit is made, unless you include on your notice that the customer is entitled to a refund. Thus the hold notice we issue is a combination of the Exception Hold Notice and Reasonable Cause Hold Notice and we include this statment. You are required to refund these fees, but only for those holds that are reasonable cause. You do not have to refund these fees for large deposits, redeposited checks and repeated overdrafts but this statement to the customer about refunds implies that we will. Currently we process a refund for both types of exceptions but we are being question if we are incorrect in our procedures and we should not refund for these specific items. I don't know how to qualify this.

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The restriction of charging overdraft and returned check fees are applicable if the safeguard exception hold is the 'reasonable cause to doubt collectability ' exception

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I'm not sure where you picked that up? The refund provisions apply anytime you invoke a case-by-case hold and do not provide a notice at the time of deposit.

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I'm not sure where you picked that up? The refund provisions apply anytime you invoke a case-by-case hold and do not provide a notice at the time of deposit.

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That was what I thought at first too. But then I looked at the Reg and the commentary to 229.13(e)- which is the reasanable cause section- comment 5 is the only place that I can specifically find a reference to not charging fees. The same language does not appear in the sections for the other hold reasons. It is interesting though, because the model forms in the Regulation contain the notice about the fees being refunded, even on hold forms that use other reasons. I don't know the answer here, but I do think it is food for thought. Outside of the notice on the model forms, where is the requirement to refund any fees if the hold notice is not given at the time of deposit for other types of exception holds?

Try 229.16(c)(3).

But that's for case-by-case holds, not exception holds.

If you are a case-by-case bank, this would include exception holds.

So, for the sake of argument what if I am not a case-by-case bank (which of course is not the case here, and not only that, every bank I have worked for has always returned any overdraft fees on an exception hold that is subsequently paid, so I'm really just playing devil's advocate here). I have always thought that the requirement to return fees has been hidden in the reg, so I think it's interesting to discuss the implications of that.

My understanding is that, if the check is returned NSF or whatever, fees do not have to be refunded....regardless of the timing of the hold.

Agreed. But the issue in question is if an exception hold is placed, overdraft fees are assessed, and then the check that was deposited is subsequently paid.

This is what the Commentary says:

3. Overdraft and returned check fees. If a depositary bank delays or extends the time when funds from a deposited check are available for withdrawal on a case-by-case basis and does not provide a written notice to its depositor at the time of deposit, the depositary bank may not assess any overdraft or returned check fees (such as an insufficient funds charge) or charge interest for use of an overdraft line of credit, if the deposited check is paid by the paying bank and these fees would not have occurred had the additional case-by-case delay not been imposed. A bank may assess an overdraft or returned check fee under these circumstances, however, if it provides notice to the customer in the notice required by paragraph (c)(2) of this section that the fee may be subject to refund, and refunds the fee upon the request of the customer when required to do so. The notice must state that the customer may be entitled to a refund of any overdraft or returned check fees that are assessed if the deposited check is paid, and indicate where such requests for a refund of overdraft fees should be directed. Paragraph (c)(3) applies when a bank provides a case-by-case notice in accordance with paragraph (c)(2) and does not apply if the bank has provided an exception hold notice in accordance with § 229.13.

So it would appear that if you are a "Case-by-Case" bank and invoke a 2 day (local) or 5 day (non-local) hold on a deposit, and do not give the customer the notice at the time of deposit, then you must either automatically refund any OD/NSF fees, or provide a notice letting the customer know they are entitled to the refund.

It would appear that this requirement does not apply to the longer exception based holds. However, from a customer service standpoint, I would be hard pressed to explain why we could make an after-the-fact decision to place a longer hold and hold the customer liable for any OD/NSF fees.

Good one, Bonnie. I believe that it is mandatory to have the wording on the hold form. Ours is like this:

If you did not receive this notice at the time you made the deposit, and the check you deposited is paid, we will refund to you any fees for overdraft or returned checks that result solely from the additional delay that we are imposing. To obtain a refund of such fees, please contact the bookkeeping department at ..... or ...... during normal business hours.

Does the refund clause apply to deposits not made in person (such as a night deposit) for which a hold is placed and a notice mailed when the deposit is processed? I know this is acceptable timing for the notice, but the OD fee refund section is seemingly silent on the issue.

I read the "silence" on the issue to mean that it does apply regardless of how the deposit is received.

That's how I read it, too. Thanks.