Offset rights when cashed check bounces

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Question:

Per bank policy, we have always stated that if we cash a check for a customer (it is never deposited into their account) and the check is returned, we cannot offset their account for the returned check. We (the bank) have always thought this was a regulation, but cannot find it anywhere. Is a bank permitted (or not) to debit the customer's account when a cashed item is returned?

Answer:

Unless State law addressed it, the charge back would likely be actuated through a common law right of offset. Likely, you would also want to address it in your depositor's agreement. For example, Well Fargo has this in theirs: "If an item you deposited or cashed is returned to us unpaid, we can deduct the amount from any account you have with us. "