Checks that are returned for non sufficient funds (NSF) or what is commonly referred to as a bounced check, are generally sent for payment to the bank the account is drawn on two separate times.  If a bank customer were to review the encoding on the check that is returned NSF they may be able to note that the check was sent through the banking system for payment at two different time periods with the return explanation of non sufficient funds stamped on the check before it was returned to customer’s bank account that the check is drawn on. 

There is no law that establishes how many times a check can be deposited or redeposited but the accepted practice of presenting the check to the account it is drawn on twice is based on Federal Reserve operating policy regarding Federal Reserve Bank services.  Most checks that clear through financial institutions in the U.S. clear through the Federal Reserve System.  The Federal Reserve has a rule that states that checks that are presented and denied payment two or more times should not be sent through the system again.  The two or more times section of the Federal Reserve rule has established the practice that checks are generally always sent for payment twice once the first time is denied and are not sent through again but returned to the account it was drawn on after that time.

The Federal Reserve rules are promulgated under, Federal Reserve Banks Operating Circular No. 3.  Operating Circular 3 applies to the handling of all cash items that the Federal Reserve accepts for forward collection and all returned checks that the Federal Reserve accepts for return.  The circular includes instructions to paying, collecting, returning and depositary banks for handling and paying items received from the Federal Reserve System.  Within the circular, section 3.1(f) sates that a sender should not send to us (the Federal Reserve System) any item if the bank on which the item is drawn has declined to pay the item two or more times.

The paying bank will normally charge an NSF fee to the account holder the first tike payment on the check is denied and may charge a second NSF fee if and when the payment is denied a second time.  The charges for a returned check will be covered under the account holders fee agreement or terms and conditions disclosure with the bank where the account is held.

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