Topic: Regulation CC
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We have a potential business customer that would like to set up a deposit account and line of credit. The company sells point of sale (POS) solutions for businesses, by providing equipment for processing POS transactions (they use a third-party vendor to process the transactions). They employ several salespeople in many different states to sell this equipment, and they want to deposit checks by having salespeople take pictures of their checks on their phones and send them to the business owner, who would use our consumer mobile remote deposit capture (RDC) system to deposit the checks, rather than our business RDC system. What are the risks of allowing a customer to use RDC to deposit copies of checks? Does the restrictive endorsement “for mobile banking deposit only” provide sufficient protections?
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Based on the information provided, it is likely that this customer’s deposit methods will increase the risk of fraud. However, it may be possible to reduce the risk of fraud by requiring the customer’s salespeople to apply a restrictive endorsement on the checks before forwarding photos of the checks to the customer’s owner for deposit.…
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We recently changed our cutoff time for deposits made into our ATMs from 2:00 to 6:00 p.m. Are we required to send disclosures of the change to our impacted customers within thirty days of the change taking effect?
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We believe that notice is required of an extended ATM deposit cutoff time, assuming that the change in the cutoff time will result in expedited availability of deposited funds. Regulation CC requires notification to customers of a change that expedites the availability of funds no later than thirty days after implementation of the change. If…
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Are we required to print the MICR line on checks? Some of our printers do not offer this capability.
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We believe that a magnetic ink character recognition (MICR) line is required in order for a check to be treated and processed as check, under both Regulation CC and standards for check printing promulgated by the Accredited Standards Committee (ASC). A check that does not include a MICR line is a “noncash item” for purposes…
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We have a business customer that acts as a payment processor for other companies. They create remotely created checks and deposit them with our bank via remote deposit capture at their place of business. Recently, the number of returned items has increased massively, and we wish to terminate the relationship. We would like to determine the best time to terminate the relationship. What are the timeframes in which we would be liable as the depositing bank for returns through cash letters, adjustments with entry, and incoming collection claims without entry?
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In our view, your bank could be liable for unauthorized remotely-created checks (RCCs) for at least one year from the date of the account closing (or freezing). If your bank terminated or froze the customer’s account today, paying banks would have one year from today to bring claims for violations of the RCC warranties in…
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Our Bank is considering changing the way checks deposited via mobile Remote Deposit Capture (RDC) are reviewed. Currently, if a check is deposited via mobile RDC, it is either accepted or declined, and all deposits are accepted until 6:00 p.m. The deposits are processed as electronic checks and are available for withdrawal the following day. Under the new process, checks will be reviewed by bank staff periodically throughout the day until 5:00 p.m. Any checks that are deposited after 5:00 p.m. will be put into a “suspended” status and will not be reviewed or deposited into the customer’s account until the following business day. Will this new process be compliant with Regulation CC?
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Regulation CC’s availability of fund provisions are not currently applicable to electronic checks. Therefore, we believe that your bank’s policies regarding availability of funds for mobile deposits processed as electronic checks will be governed by your account agreements, which should be updated to reflect the earlier deposit cutoff time of 5:00 p.m. The Federal Reserve…
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One of our commercial customers had several forged checks drawn on their account. One check was written on June 8. The check cleared our bank on June 13. The customer received a statement showing the check on June 30, and they notified us that the check was fraudulent on July 10. We returned the check to the depository bank (a credit union) on that day. The credit union submitted a late return claim to the Fed, which initially credited the credit union but reversed the credit after we submitted documentation. The credit union claims that we made a late return under Section 4-302 of the Uniform Commercial Code (UCC).
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We believe that the credit union is correct that the check was a late return under the Uniform Commercial Code (UCC), because your bank returned the check after the midnight deadline. As we understand the Fed’s process for late returns, it would have revoked its credit to the credit union if it could not obtain…
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Do the Regulation CC amendments that take effect July 1, 2018, require any new language in our customer disclosures?
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No, the amendments to Regulation CC taking effect July 1, 2018, do not require any new customer disclosures. The amendments primarily address check collection and returns — they do not change the provisions regarding funds availability or the funds availability disclosures. However, the amendments establish new definitions, warranties, and indemnities that your bank may wish…
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Is there an Illinois law that limits holds on items deposited to a savings account? Do you have any guidance on the hold form that should be used?
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No, we are not aware of any Illinois law or rule that would limit holds placed on items deposited into savings accounts. Additionally, because Regulation CC does not apply to savings accounts, we are not aware of any federal requirements for placing holds on items deposited into savings accounts. Any notice obligations would depend on…
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A new customer wants to deposit a cashier’s check for $7,500. We cannot verify that the check is valid, and the account was opened within the last ninety days, with no other account activity after the initial deposit. What can we do to ensure that the funds won’t be spent before the check clears?
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Based on the size of this check, your institution may wish to impose a large item hold. Regulation CC permits banks to place a large item hold on deposits that exceed $5,000 in one banking day. In other words, your bank must make the first $5,000 available for withdrawal according to your availability policy, but…
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We were told that a bank was written up by a regulator for not having a sign on its night drop indicating when deposits will be posted. Is there any federal or Illinois law that require such signage at a night drop?
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No, neither Illinois nor federal law requires your bank to have a sign at your night drop depository regarding payment posting. Regulation CC does require banks to conspicuously post a notice setting forth the time periods for the availability of funds deposited in a consumer account — but only at places where bank employees receive…