Topic: Regulation CC
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For how long can we hold an incoming wire from a receiving bank before sending it back due to incorrect information, no account number found, closed account, etc.?
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The Uniform Commercial Code (UCC) requires your bank to accept or reject incoming wire transfers by “the next funds transfer business day of the bank following the payment date of the order.” After that time, the wire transfer is deemed accepted, and your bank will be responsible for paying your customer the wired funds —…
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At a recent seminar, we were told that electronic deposits are subject to next-day availability, as with cash deposits and wire transfers. Our bank’s person-to-person (transfers between customers and recipients at other banks) and bank-to-bank transfers (transfers to an account held by the same customer at another bank) are processed as ACH debit transfers, and we place a one-day hold on such transfers before making the funds available to our customers. Are these electronic payments that would be subject to next-day availability?
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ACH Debit Transfers No, ACH debit transfers are not “electronic payments” for purposes of Regulation CC’s next-day availability requirements. In Regulation CC, an “electronic payment” includes ACH credit transfers, but not debit transfers. As explained in the Official Interpretations to Regulation CC, because an ACH debit transfer is more like a check than an ACH…
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Our commercial customer issued a paycheck to an employee. The employee deposited the item via remote deposit and then took the item to a check cashing business. We returned that deposit attempt as a duplicate item. The check casher is sending collection letters to our customer asserting that our customer is responsible for paying the item, citing 810 ILCS 5/3-302 and 720 ILCS 5/17-1A. Isn’t the employee responsible for the check casher’s loss?
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Based on the facts as described, we believe the check casher is the holder in due course of the original check and is correct in demanding payment from your customer. In addition, the check casher also has the right to demand payment from your customer’s employee. Under the rules of the UCC, both would be…
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One of our customers signed an affidavit of forgery relating to four checks that were drawn on her account (we believe this is related to elder abuse by her son). We paid two of the checks and returned two NSF. We are going to refund the two checks that were paid. Can we return these checks? The midnight deadline already has passed. Does Rule 9 apply?
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No, we do not believe that you may return the checks after the midnight deadline. Generally, your bank must return a check, including a forged check, by midnight on the next banking day after receiving the check, as required by the Uniform Commercial Code (UCC) (with certain limited extensions permitted under Regulation CC). In this…
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We have a customer that is a pension trust fund for a labor union. This customer issued a number of checks throughout this year to an individual who died more than two years ago. We have already paid the checks, which were cashed at a Walmart and a credit union by someone who must have forged the deceased payee’s endorsement. What can we do? We can’t have the payee fill out a fraudulent endorsement. Can we return the checks? The customer is not disputing the payments, but has asked for our assistance.
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No, we do not believe that you may return the checks. Generally, your bank must return a check, including a forged check, by midnight on the next banking day after receiving the check, as required by the Uniform Commercial Code (UCC) (with certain limited extensions permitted under Regulation CC). In this case, where several weeks…
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Two months ago, we learned that several forged checks had been drawn on a customer’s account (the depository bank alerted us that the checks were suspicious). We received the police report regarding the theft of the customer’s checkbook a few days later. Once we learned of the forgeries, we returned four checks to the depository bank. That bank has since sent those checks back to us stating that our return was untimely; we had returned the checks about three weeks after receiving them. How long do we have to return items once we are notified of a forgery?
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Generally, your bank must return a check, including a forged check, by midnight on the next banking day after receiving the check, as required by the Uniform Commercial Code (UCC). Regulation CC layers on additional requirements and exceptions to the UCC midnight deadline, which are designed to encourage banks to use expeditious means to return checks.…
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What is the procedure to return an unauthorized remotely created check (RCC) drawn on a business customer’s account that is processed through the check collection system as a substitute check (not as an ACH transaction)? What return code should we use? Should we have the customer sign an affidavit? Do Rule 8 and Rule 9 apply to us?
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The procedure for returning an RCC processed through the check collection system is no different than for returning any other unauthorized check. If you discover that an RCC was unauthorized before the midnight deadline has passed (midnight on the next banking day following the banking day on which the check is presented), your bank may…
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One of our customers just notified us that several counterfeit checks have been drawn on her checking account, starting over six months ago, with the most recent check paid about a month ago. We have copies of the checks, which state “signature not required” and that “customer authorization was obtained using Quick Pay Office Pro.” Are we liable for paying these checks? Our account agreement requires customers to report unauthorized checks within 60 days.
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Based on the facts provided, we believe these checks are remotely created checks (defined in Regulation CC as a check “that does not bear a signature applied, or purported to be applied, by the person on whose account the check is drawn”). We do not believe that your bank should be liable for the unauthorized…
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We recently started offering remote deposit capture (RDC) for consumer accounts through mobile phones. A customer recently deposited a check using our RDC phone app. Three days later, the check was cashed at a currency exchange (we don’t know if it was our customer who cashed the check or someone else), and the currency exchange’s deposit of the check was returned. The currency exchange is demanding that we reimburse it under the Check 21 Act warranty provisions and as a “holder in due course” under the Uniform Commercial Code. Are we required to reimburse the currency exchange?
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No, we do not believe that your bank is required to reimburse the currency exchange under these circumstances. There have been two attempts to deposit this check. First, your customer deposited the check using your bank’s mobile app, and your bank successfully obtained payment from the paying bank (the bank on which the check was…
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We had a customer who wrote a check to a company for a large amount, and the check was deposited and cleared yesterday; however, while the check was made out to the company, an individual signed the check. Can we ask the depositing bank to guarantee the endorsement? If so, what is our deadline for making that request?
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Typically, if your bank suspects that an endorsement is forged or is otherwise unauthorized, you must send notice of dishonor to the depositing bank by the midnight deadline established in the Uniform Commercial Code. You also must return the check in an “expeditious manner” to the depositing bank using the two-day/four-day test established in Regulation…