Checks generally clear through the Federal Reserve system. There is a rule there, (Section 3.1(f) of Federal Reserve Operating Circular 3, if you were dying to know) which says that checks denied payment two or more times shouldn't go through this system again. For this reason, checks are presented twice. After that, checks can be sent for collection, or presented in person to their drawee banks, or could be converted to an electronic transfer, if proper notification has been given. |
The paying bank would charge any applicable NSF fee when the check is initially sent, and then when it is presented that second time, and possibly on the electronic presentment. The NSF fee ordinarily wouldn't be charged when the check is sent for collection.
Published on BankingQuestions.com 9/25/07