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Federal Reserve Clarifies Liability for Checks Deposited Remotely

BY: APA Staff | 09/13/18

The Federal Reserve Board (the Board) clarifies that the bank accepting a check deposit through Remote Deposit Capture (RDC) must make restitution to another bank that subsequently accepts a paper version of the same check, though an exception will apply.

In June 2017, the Board issued a final rule on its most recent amendment to Regulation CC, which implements the Expedited Funds Availability Act of 1987 (EFA) and the Check Clearing for the 21st Century Act of 2003 (Check 21). The final rule became effective July 1, 2018.

The EFA encouraged same-day settlement of deposited checks. Check 21 promoted the automation of the banking industry and allowed financial institutions (e.g., banks, credit unions) to negotiate electronic facsimiles of paper checks. In recent years, this has led to the widespread use of RDC, through which people can deposit checks into their bank accounts using applications on a mobile device (mRDC). RDC has been called the most important development the U.S. banking industry has seen in years.

The final rule provides a warranty for those writing paper checks, saying no person “will be asked to make payment based on a check it has already paid.”

To address concerns that banks might be held responsible whenever a check holder used RDC and subsequently cashed the paper check, the Board added this provision: any bank accepting an RDC deposit would not be responsible if the paper check were subsequently deposited if the check carried a restrictive endorsement such as “For Mobile Deposit Only.”

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