Who Pays a Bounced Check Fee?
A bounced check occurs when a check or electronic payment is presented for payment and the account does not contain enough funds in the account to cover it. Banks charge fees to process these items, whether they cover the check and overdraw the account or return the item to the payee. The bank determines the amount of this fee, and includes a fee schedule in the terms and conditions the consumer received when opening his or her checking account.
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Bank Fees
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The person holding the account on which the request was drawn (electronic or paper draft) will be charged a fee, whether the bank covers the payment through an overdraft protection program or returns the item unpaid. This fee is called an overdraft fee or insufficient funds fee.
Amount of Fee
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The amount the account holder must pay differs from bank to bank, and is disclosed at the time of account opening. A bank can change fee amounts, as long as it notifies account holders and sends them copies of the new terms of service. Federal and some state banking laws limit the amount of fees banks can charge.
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Merchant Fee
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The account holder may also be charged a fee by the accepting entity, especially if it is a retail establishment. This amount is generally limited by law, and is separate from bank fees.
Merchant Liability
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The accepting party may be charged a fee for accepting a payment that has been returned for insufficient funds. This amount is determined by the accepting party's bank and is disclosed in the terms of service at the time of opening the account.
Multiple Fees
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Depending on the process by which a bank posts items to an account, an account holder may be charged multiple overdraft fees if a check posts before electronic debits. Even though the funds were initially available for the electronic transactions, they may not post to the account ledger until after a check has overdrawn the account, causing multiple charges to the account holder.
Bank Procedures
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Banks also include in a customer's terms of service the process and timing for posting deposits and drafts and the time of day that the books are closed. Before an overdraft fee can be charged, the bank must apply all deposits posted on the date the draft was posted, even if the draft came in hours before the deposit. Bank customers have the right to challenge the application of overdraft or insufficient funds fees, especially on the issue of timing.
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