Updates to Reg CC Encourage Faster Check Processing, Include Electronically-Created Items

The Federal Reserve today announced long-awaited changes to certain sections of Regulation CC, which implements the Expedited Funds Availability Act. The changes will update the check collection framework to reflect a system that is now largely electronic-based. The amendments do not address the sections of Regulation CC regarding funds availability schedules or related customer notices.

The final rule modifies the current check return requirements by requiring that all returned checks, both paper and electronic, be returned by 2:00 p.m. on the second business day and eliminating the “forward collection” option. In addition, the rule adds a condition that the depositary bank must have arrangements to accept returned checks electronically in order to make a claim for damages due to a late return.
The final rule also applies the return requirements to electronic images of checks, including images that are not derived from a paper check (i.e., electronically-created items). It also creates new indemnities for losses caused by unauthorized or duplicate electronically-created items. Finally, the rule adds a new indemnity that indemnifies depositary bank that received a deposit of an original paper check if the item is returned unpaid after being deposited using a remote deposit capture service.

In addition to the final rule, the Fed is also seeking comments on proposed amendments to address situations involving a dispute about whether portions of an electronic check have been altered or whether the item is a forgery. In cases where the original paper check is not available, for purposes of determining the burden of proof, it would be assumed that the item has been altered rather than forged. Comments on the proposal are due 60 days after the notice is published in the Federal Register.

The American Bankers Association has long sought updates to Reg CC to promote a more efficient check processing system that reflects the changes in technology that have taken place over the past several years. The association is carefully reviewing the proposed amendments and will provide feedback to the Federal Reserve. For more information, contact ABA’s Nessa Feddis.


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