For example, since remote deposit capture now more than ever poses a credit risk for the institution, it may decide to only offer its remote deposit capture service to customers who have built a satisfactory history of deposits, or it may impose more restrictive remote capture deposit limits to curtail the potential exposure. Three per page Business Deposit Tickets, Address Stamps All Rights Reserved. ----------------------------- Training - New! The amendments to Reg CC will slightly modify the expeditious return rule for all returned checks, both paper and electronic. Before these Regulation CC changes, liability for a check that was deposited twice (once by mobile deposit at Bank A and once by paper check at Bank B) would fall upon Bank A, leaving them to try to get the money back from the depositing customer. This leaves financial institutions with a decision to make on whether or not to change the endorsement requirements for any mobile check deposits. There are many more important amendments being made to Reg CC (which have not been discussed in this article) to acknowledge the rapidly changing industry, and there are even more proposals being considered. Please keep in mind that the above list is merely a summary of a select few highlights of the Federal Reserve’s amendments to Reg CC. Hint, Hint: Banks Should Accept Electronic Returns These amendments will take effect on July 1, 2018, and they aim to recognize current collection practices. Under the new rule, all returned checks must be returned in an expeditious manner such that the check would normally be received by the depository bank not later than 2:00 p.m. on the second business day following the banking day of presentment. Customer Communication is Key. Stock Office Stamps 2020 Operations Compliance Triage Conference, 2020 Lending Compliance Triage Conference, Community Banks Define Success Through Design, Management information system can improve client retention, Specially Designated Nationals List (SDN). Ink Refills. IRS Address Stamps This site will NOT work properly with Javascript disabled! Education. Effective July 1, 2018, the Federal Reserve Board made amendments to Regulation CC providing clarification on the requirements of mobile deposit endorsements and who has liability in the event of a duplicated check deposit. In general, the “midnight deadline” refers to a state law requirement in the UCC that a paying bank must dishonor a check (if it chooses) no later than midnight of the banking day following the day the check was presented. The Federal Reserve amended Reg CC to create new definitions that address issues not contemplated in 1992 when checks were still confined to paper. Computer Checks on Bottom These amendments, like those discussed already, further nudge the industry to embrace modern technology. When mobile-deposited checks will become subject to the funds availability rules in Reg CC is unknown. Yes, that was when Sir Mix-a-Lot was “back” on the top of the charts, audiences were eating up Silence of the Lambs, and bowl cuts were a thing. The last change affecting mobile-deposited checks created an indemnity by a depositary bank with a mobile deposit in favor of a depositary bank with a deposit of the original paper check when the paper check is returned unpaid because the check was paid in its mobile deposit form. To help accomplish that, the amendments permit electronic returns if the paying bank has an agreement to do so with the receiving bank, whether between themselves or according to a Federal Reserve operating circular, clearinghouse rule, or other interbank agreement. Please help us keep BankersOnline FREE to all banking professionals. It’s changed the way we act, the way we think, and the way we look ahead to an unknown future. For example, if a paying bank is presented with a $100,000 check on Monday morning and decides to dishonor the check, it must typically do so by midnight on Tuesday (hence the name, the “midnight deadline”). The Fed believes this new expeditious return rule will incentivize depository banks to receive electronic returns to preserve their ability to make claims that certain checks were not returned expeditiously. If the paying bank fails to do so, the “midnight deadline” would have passed and the paying bank could find itself liable for the check. Since 1992, Reg CC—which governs funds availability and how financial institutions handle check collection and return processes—has stayed mostly the same. “Refer to Maker” Is No Longer the Easy Way Out. To help decrease the risk to a depository bank that a check will be returned after funds have already been made available for withdrawal, Reg CC generally requires the “expeditious” return of checks. Beginning next year, if a financial institution presents an “electronic check” or an “electronic returned check” and receives settlement, the institution makes the following two new warranties: In the case of an “electronic check” sent for collection, these warranties will flow to the transferee bank, any subsequent collecting bank, the paying bank, and the drawer of the check. Banks can still extend the midnight deadline, though the amendments to Reg CC make some slight tweaks. This indemnity will not apply if the subsequent bank accepted an original check with a restrictive indorsement that is inconsistent with the means of deposit, such as a designation on the check that it is “for mobile deposit only.”. Blank Computer Checks in the Middle Serving businesses and financial institutions since 1956. Advertisers and sponsors are not responsible for site content. In an effort to maintain this flexibility, the Reg CC amendments will allow financial institutions to continue to vary these new warranties by agreement (and other Subpart C provisions of Reg CC as they apply to “electronic checks” and “electronic returned checks”) based on the notion that institutions are in the best position to address and limit these perceived risks and to determine their risk tolerance. Computer Checks in the Middle To learn more about these stamps, visit www.bank-a-count.com/productinfo/preinked-stamps, For more information about Regulation CC: www.federalreserve.gov/newsevents/pressreleases/bcreg20170531a.htm. During its rule making process, the Federal Reserve pondered extensively over how to best address “electronically created items” and whether to amend Reg CC to build new warranties or indemnities into its regulatory framework. At some point in time, it became a common practice for paying banks unsure of the reason(s) for return to simply stamp “Refer to Maker” on returned checks – this was likely the result of permissive commentary under current Reg CC. The last change affecting mobile-deposited checks created an indemnity by a depositary bank with a mobile deposit in favor of a depositary bank with a deposit of the original paper check when the paper check is returned unpaid because the check was paid in its mobile deposit form. BankersOnline.com - For bankers. In the case of an “electronic returned check,” these warranties will flow to the transferee returning bank, any subsequent returning bank, the depository bank, and the owner of a returned check. However, because the Federal Reserve currently has only one check processing site (in Atlanta), this reference to “non-local” checks is a relic of the past (because all checks are processed in the same region as the depository institution). Take note that the regulatory language in Reg CC with respect to “non-local” checks is no longer relevant, and this old language will likely be fixed in the Federal Reserve’s next set of amendments. Document Library A searchable, sortable archive of the documents uploaded to CBANC. From training, policies, forms, and publications, to office products and occasional gifts, it’s available here: BOL Learning Connect offers more than 200 courses ON-DEMAND or on CD ROM from AML to Reg Z and every topic in between. You might be surprised to learn that a large chunk of Reg CC still applies only to paper checks. For your security, you'll be signed out automatically. Although Reg CC itself does not allow the depository institution to assert this new indemnity against the depositor, the institution can allocate that liability to the depositor under a separate written agreement. Typically, the bank that ends up paying the original paper check will bring a UCC claim against the check writer (who then has little redress unless he or she can track down the individual who cashed the check twice). So what can you do to protect yourself from any potential liability issues? New Indemnity for Electronically Created Items Although remote deposit capture is convenient for customers, the service can be a nightmare for a bank. Under the new rule, a paying bank may be liable to a depository bank for failing to return a check expeditiously only if the depository bank has arrangements in place such that the paying bank could return the returned check electronically by commercially reasonable means. In part, a paying bank is currently deemed to have “expeditiously” returned a check if it returns the check to the depository bank in a manner such that the check would normally be received by the depository bank … That change was effective 7/1/2018. In other words, all checks today are considered “local” checks. Endorsement Stamps You've been inactive for a while. Community. With the new regulations in place, financial institutions accepting mobile deposits now may have protection if they use a “restrictive endorsement.”  In other words, if the financial institution accepting a mobile deposit requires an endorsement that prevents duplicate deposits, then they are less likely to have an indemnity claim filed against them by a different financial institution that accepted the duplicate paper check.