Reg CC & Remote Deposit Capture Posted by Association of Vermont Credit Unions on 12:08 PM

In his blog this week, Henry Meier, General Counsel for the New York Credit Union Association, reminds credit unions that a new warranty by credit unions became effective in Regulation CC on July 1, 2018.

The change to Reg CC clarifies that the obligations of financial institutions which send and receive checks via Remote Deposit Capture have expanded.  Depository institutions offering Remote Deposit Capture must now warrant that the original check will not also be deposited by the accountholder. By way of example in the updated commentary for Regulation CC:

1. Depositary Bank A offers its customers a Remote Deposit Capture service that permits customers to take pictures of the front and back of their checks and send the image to the bank for deposit. 
2. Depositary Bank A accepts an image of the check from its customer and sends an electronic check for collection to Paying Bank. Paying Bank, in turn, pays the check. 
3. Depositary Bank A receives settlement for the check. 
4. The same customer who sent Depositary Bank A the electronic image of the check then deposits the original check in Depositary Bank B. There is no restrictive indorsement on the check. 
5. Depositary Bank B sends the original check (or a substitute check or electronic check) for collection and makes funds from the deposited check available to its customer. 
6. The customer withdraws the funds. 
7. Paying Bank returns the check to Depositary Bank B indicating that the check already had been paid.
8. Depositary Bank B may be unable to charge back funds from its customer’s account. 
9. Depositary Bank B may make an indemnity claim against Depositary Bank A for the amount of the funds Depositary Bank B is unable to recover from its customer.

Institutions are now also making warranties regarding the quality of electronic check images. See this ABA Business Law Journal article for suggested changes you may want to make to your account agreement.

Read Henry Meier's full article on his blog.