I am often asked how long an institution is allowed to return a check. The answer is simple, 24 hours, which is based on UCC and Regulation CC. However, I often get a heavy sigh from folks that are dealing with counterfeit, forged or altered items. They believe that the return timeframe should be longer. Well, I agree, but check laws were written so long ago and these old timeframes still apply in today’s environment. I would also agree that most account holders will not know within 24 hours if a check is counterfeit, forged or altered. Most won’t know until their statement cuts and even then, they might not notice it right away.
An institution may obtain an affidavit of counterfeit, forged or altered items and they may work directly with the other institution to recover the funds. Again, institutions must deal directly with one another. The Federal Reserve does not get in the middle of these situations.
I know some institutions use the returns process to get the item back to the Bank of First Deposit (BOFD), but technically, the BOFD could come back and say it was untimely. Some take the items back, others do not. Just know that they have the right to say the return was untimely. Untimely returns are handled through the Federal Reserve Bank adjustment process.