We have a large items check that we redeposited, but placed a hold on because it was returned and we have reason to believe it will be returned again. Does an exception hold notice need to go to the customers from our accounting division where they redeposited the item?

Would the answer be the same if the hold was not placed at the time of redeposit, but instead at a different period in the life of the transaction.

I'm going to read between the lines in your question and assume the following:

First, that the bank placed an exception hold on the check under §229.13(c) when it was redeposited, apparently by the bank's accounting department and not by the customer. If that's the case, the hold notice should have been delivered to the customer that day. The notice would have served two purposes, by the way. First, to notify the customer of the hold, and secondly, to provide the required notice under the UCC of a dishonored check. The UCC notice may have been waived by your customer in your deposit agreement, but the Reg. CC hold notice could not have been waived.

Second, I assume you have now obtained some additional information that the check is likely on its way back to you a second time. You could certainly place another exception hold now (under §229.13(e)) based on a reasonable cause to doubt collectibility. But why bother, when a prudent course at this time (assuming you've actually received notice of nonpayment from the payor bank) might be to simply charge the check back to your depositor's account, and avoid Regulation CC altogether.

For the record, if you slipped and failed to provide the hold notice the first time you held the funds, you can't cure the violation. You can only learn from it.

If a hold was placed on the item when it was initially deposited, it may (certainly should) still be in place when the item was returned. Make sure you delete the initial hold when you place your exception hold for the redeposit. Otherwise, you will have two active holds for the same item.

Also, you have a hold harmless agreement with the customer giving you the right to redeposit the item without returning it to the customer - correct?

Doesn't this statement lead you to believe that the redeposit portion of Reg CC only applies when the customer redeposit and not when the bank redeposits.

(12 CFR 229.13 (c))
You may delay availability on checks that are returned unpaid and redeposited by a customer, including next-day checks. This exception applies to all types of redeposited items except two:
· Checks returned for missing endorsements, if the endorsement has since been obtained
· Checks returned because they were postdated, if they are no longer postdated
As with the large dollar exception, you can place an extended hold on the amount of a redeposited check for a reasonable period of time. This is defined in the regulation as one additional business day for on-us checks, five additional days for local checks, and six for nonlocal checks, unless a longer period is supported by additional facts.
Notice to Customer. As with the large dollar exception, there are separate notice requirements for consumer and nonconsumer accounts. Consumer customers must be notified each time the redeposited check exception is applied to their account. For nonconsumer accounts, banks have the option of providing either the same type of notice as for consumer accounts or a one-time notice. You can use the one-time notice only if you apply the exception as a matter of policy (in most cases), and not on a case-by-case basis.

I'm not certain where you found that wording, Anonymous, but here is the actual wording of §229.13(c), from the Federal Reserve Board, with the operative words emphasized:

(c) Redeposited checks. Sections 229.10(c) and 229.12 do not apply to a check that has been returned unpaid and redeposited by the customer or the depositary bank. This exception does not apply—
(1) to a check that has been returned due to a missing indorsement and redeposited after the missing indorsement has been obtained, if the reason for return indication on the check states that it was returned due to a missing indorsement; or
(2) to a check that has been returned because it was postdated, if the reason for return indicated on the check states that it was returned because it was postdated, and if the check is no longer postdated when redeposited.

The right reference tools always makes the difference.
Thank!

Diff poster
What UCC notice are you speaking of John?

Notice of dishonor under 4-202.