Topic: Regulation CC
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Our business customer had multiple checks drawn on their account that were forgeries. The customer noticed the forged checks and notified us within four days, and we returned the checks four days after paying them. We received a claim of late return from the depository bank for one of the checks. Is there anything we can do? Are we liable or can we debit our customer?
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We believe your bank likely is liable for the check since you returned it after the midnight deadline. Your bank would have a defense to liability for the check only if the depository bank breached a presentment warranty to your bank or your customer’s negligence substantially contributed to the making of the forged check. Under…
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Our customer deposited a check on Wednesday. After 6:00 p.m. on Friday, when our bank was already closed, we received a fax from the paying bank stating that it would be returning the check. Is this considered a late return?
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Yes, we believe that the paying bank returned the check late and that your bank has a claim of late return against the paying bank. Under the Federal Reserve’s rules, a paying bank “may send . . . a returned check that a Reserve Bank did not handle for forward collection only if it sends…
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Our customer paid a vendor, but the vendor claims they never received payment. Although the check cleared our customer’s account, the endorsement on the back of the check does not appear to match the name of the payee (the vendor). We have an affidavit from the vendor and a copy of the front and back of the check. Is sending a “without entry” claim to the depository bank the best course of action? Do you have an example of a “without entry” claim that we can send to the depository bank? Should we reference the depository bank’s warranty of the item’s authorization under Regulation CC and ask that they honor the warranty by remitting a cashier’s check?
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We do not recommend sending a “without entry” claim under Section 229.34(d) of Regulation CC, which concerns returned check warranties. However, we believe your bank may have a claim against the depository bank for breach of its presentment warranties under the Illinois Uniform Commercial Code (UCC). We recommend sending notice of the breach of warranty…
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We recently updated our deposit account terms and conditions. We are trying to avoid having to send our customers the entire document or a separate change in terms notice. Can we post the updated terms and conditions on our website with changes highlighted and include a message in our customer’s statements saying they can visit our website for the updated terms and conditions? The message also would say that customers can request a printed copy.
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It is unlikely that you will be able to fulfill your notice requirements by posting updated terms and conditions on your website if your updated deposit account terms affect any of the notice requirements under Regulation CC, Regulation E, Regulation DD, or Regulation P. These regulations do allow electronic disclosure if certain requirements are met,…
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Can we place a hold on ACH deposits if we suspect there is fraud?
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We believe that you may be able to place a hold on deposited funds made by ACH debit transfers, subject to the terms of your agreement with the other financial institution, while your ability to place a hold on deposited funds made by ACH credit transfers would be limited to one day. However, we also…
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We learned that one of our customers had three fraudulent checks drawn on his account after we alerted him that he had overdrawn his account. We believe that the checks are counterfeits and the fraudster forged our customer’s signature on them. The checks all were deposited at different banks. We returned the checks to the Federal Reserve four days after we paid them and received a claim of late return for one of them shortly after. The Federal Reserve says we have twenty days to respond to the claim. What is our best option for responding to the claim of late return?
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We believe your bank likely is liable for the check since you returned it after the midnight deadline. Your bank would have a defense to liability for the check only if the depository bank breached a presentment warranty to your bank or your customer’s negligence substantially contributed to the making of the forged check. Under…
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Are there any laws or regulations we must follow with respect to funds availability for mobile deposits? We are aware that Regulation CC is not applicable.
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We are not aware of any law or regulation applicable to funds availability for mobile deposits. Therefore, we believe that the funds availability for your customers’ mobile deposits would be governed by your account agreements and possibly your electronic presentment agreements with other banks. You are correct that Regulation CC’s funds availability provisions are not…
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Are we still required to use magnetic ink when printing the magnetic ink character recognition (MICR) line on our checks?
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Yes, we believe that the MICR line still must be printed in magnetic ink in order for a check to be treated and processed as a check, under both Regulation CC and standards for check printing promulgated by the Accredited Standards Committee (ASC). For purposes of Regulation CC, a check that does not include a…
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A customer submitted a check for deposit that was returned for insufficient funds. Per our policy, we automatically submitted the check a second time and it was again returned for insufficient funds. The customer went to the police to make a claim against the payor and was told they have no recourse under the criminal code since the check was resubmitted for payment within seven days of the first return. According to the police we would need to submit the check for payment again for the customer to have a case, but we believe Regulation CC prohibits a third submission. Are they correct?
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We believe that you may be able to submit the check for payment a third time as discussed in more detail below, either by submitting it for payment through the ACH system or by sending it as a collection item directly to the paying bank. The police are partially correct, since one method of proving…
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How long are we required to keep “Notice of Delayed Availability” forms when we put a hold on a customer deposit?
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We believe that you must retain a record of these notices for no less than two years. Regulation CC requires banks to give customers written notice whenever they invoke an exception to the availability schedules (other than the new account exception) and extend the time when funds will be available for withdrawal. Regulation CC also…