What does your Mobile Check/Remote Deposit Agreement say? July 1, Reg CC Changed
in Compliance & Regulatory
By: Nicola Foggie, NJCUL Vice President, Compliance and Regulatory Affairs

Effective July 1, new warranty and indemnity rights, liabilities and obligations to Regulation CC (Check Cashing) may impose greater risks for credit unions. The final rule creates a new Remote Deposit Capture Indemnity in Section 229.34(f) that addresses the allocation of liability when a depository institution, such as a credit union, accepts deposit of a check through “remote deposit capture.” Meaning that the depositor (member) sends the credit union electronic information about a check, such as a photographic image, which the credit union then uses to create an electronic check, or substitute check, for collection.

The indemnity is provided by the credit union that accepted a check by remote deposit capture to a financial institution that accepted the original check for deposit in the event the financial institution that accepted the original check incurred a loss because the check had already been paid. There is an exception in the final rule that added an exception to the indemnity which would prevent a bank from making an indemnity claim if it accepted the original check containing a restrictive endorsement inconsistent with the means of deposit, such as “For Mobile Deposit Only.” One step a credit union could take is to talk to your check vendor to inquire about printing checks with a checkbox on the back which states, ”Check here if Mobile Deposit”.  Caution: there has been some question as to whether simply checking that box fulfills the restrictive endorsement requirements under the check cashing regulation.

Credit unions that accept checks by remote deposit capture will want to review the language in your Mobile Check Deposit Agreement, or Remote Deposit Capture Agreement, that requires the credit union’s member to add a specific restrictive endorsement to the check, such as “For Mobile Deposit Only to “insert credit union name” into account #123456789” and to add language for the new check box, which identifies the check as “For Mobile Deposit” to be checked.

Questions? Contact NJCUL’s Nicola Foggie at nfoggie@njcul.org.