Deposit made in night depository.
Hold placed on deposit next day and mailed to customer
Hold notice provides that if hold not given to customer at time of deposit, bank will refund fees if deposit was good.

Isn't there an out to this for a deposit made through the night depository?

I think so....I need to look first!

From Reg CC:

MISCELLANEOUS—§229.19
When funds are considered deposited

Funds, however, may also be deposited at an unstaffed facility such as a night depository or lock box. Funds deposited at a night depository are considered deposited on the banking day the deposit is removed, and the contents of the deposit are accessible to the depository bank for processing.

The model language requires that we disclose
"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 overdrafts or returned checks that result solely from the additional delay that we are imposing"

When a deposit comes through the night drop and we place a hold, we have no option other than to mail the notice to the customer.

Because the notice was mailed to the customer instead of giving to him at the time he made the deposit does this mean that we have to refund the NSF fees made against the held funds?

The more I think about it, based on CC, the drop in the night drop does not constitute a deposit on the cusomters part, not yet anyways. The drop is not the start of transaction, your opening the night drop is the start of the transaction, IMO.

If they dropped it in the box on Monday afternoon, and you then emptied the box Tuesday morning, and mailed the letter on Tuesday, I think you would be fine, and not responsible for fees incurred.

We call the customer at the time the deposit is processed, just to give a heads-up. That way, the customer knows we made the deposit for them, and a hold is being placed.

After additional research, it appears that Regulation CC doesn't care why a hold notice is mailed to the customer instead of given to him in person. So if a night drop customer requests a refund of NSF & OD fees because his check WAS good and he didn't get the notice when he dropped the deposit into the night drop, we have to honor his request for a refund.

This is applicable as I understand it to case x case holds and Reasonable Cause Exception Holds.

First, I don't think it's applicable to exception holds. Look at comment #3 in the OSC to 229.16(c). The last sentence states: "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."

I agree that it is probably applicable to any case-by-case hold that would be placed, therefore I think you have three options. 1) Apply holds to the statutory limits on all night depository deposited checks and spell this out in your funds availability policy. 2) Only apply exception holds to night depository items, otherwise provide next day availability, and don't bother with case-by-case holds. 3) Continue to apply both case-by-case and exception holds, and accept that if the customer does incur NSF fees as a result of the hold, and the held check does pay, that you will have to refund the NSF fees if requested by the customer.

OMG. There it is in black and white. Jim, thanks so much.