The other depositary bank must have taken the physical (paper) check for deposit
That’s why Alogent and our technology partners work to keep our technology ahead of the regulatory curve. 6. , Director, Product Management, Staying ahead of the curve is always the best solution. Mobile remote deposit capture, and specifically, the …
Looking for effective, convenient training on a particular subject. Even with all this, don’t get so caught up in endorsement issues that you neglect other types of risk. Most RDC systems provide mitigation tools that help analyze the overall fraud potential for each deposit.
If your contract is written correctly, and if you actively verify your depositors’ compliance through RDC reviews, you should be adequately protected from the risk introduced by the new Reg CC indemnity. Most mRDC vendors offer such functionality, and, if done right, it increases an FI’s protection against claims based on the new Reg CC indemnity. If your FI is the initial recipient of an item deposited via traditional commercial RDC or consumer mobile RDC (mRDC), should that same paper item later be presented for deposit at another FI, and should that FI sustain a loss due to the item already being paid, you must make the other FI whole, including reimbursement of reasonable expenses for collection. Result: Bravo Bank can claim indemnity, because Alpha Bank did not obtain the restrictive endorsement.
By relying on layered mitigation methods and intelligently dealing with endorsements, banks and credit unions should be able to sustain RDC programs with minimal loss and, perhaps more importantly, minimal disruption for their RDC and mRDC users.
Cameron Marks After July 1, however, a Reg CC change allows you to protect yourself by making sure to obtain a “restrictive endorsement,” such as. To clarify how restrictive endorsement will help under the new regulation, here are two examples: Scenario 1: Back of check is endorsed with “for mobile deposit only at Alpha Bank”. The final rule creates a new Remote Deposit Capture (RDC) Indemnity in Section 229.34(f) to address the allocation of liability when a depositary institution, such as a credit union, accepts check deposits through “remote deposit capture.” (If yours aren’t, they should be!) We have a customer which is a business offering check cashing and it makes deposits via remote deposit … "Staying ahead of the curve is always the best solution. Staying ahead of the curve is always the best solution. Result: Bravo Bank cannot claim indemnity, because Alpha Bank obtained the restrictive endorsement. RDC has become an essential banking innovation, by putting the ability to deposit checks in the hands of any business or consumer. And a 2016 Guardian Analytics research survey found that a “whopping” 72% of all fraud involving mobile banking apps were attributable to mRDC and fraudulent checks. 5. However, if the check was restrictively indorsed "Remote Deposit only" when taken for deposit by the other depositary bank, it would have been on notice that the check is likely to have been deposited already, and it would not have a right to make the indemnity claim.
The Impact of the New Reg CC Indemnity on RDC Services. Many mobile banking vendors now embed FI-defined endorsement instructions in their mobile apps.
To eliminate the risk associated with the new indemnity, some auditors are pushing digital services teams to implement a solution that guaranties items are appropriately endorsed. Use a scanner that applies an ink jet endorsement. So these conditions would have to exist before your bank could be responsible to indemnify another bank under the Reg CC provision in question: 1. Fortunately, this indemnity goes away if, at the time the other FI accepts the item, it is already endorsed in a manner inconsistent with its presentment as a paper item. And ink jet modules can fail for a variety of reasons.
From bankers. FIs should also prepare effective materials to explain the new process so they can wage a proactive campaign prior to enabling automated validation and help irritated consumers understand why their deposit was delayed or denied once validation is deployed.
Because there are more moving parts, scanners with ink jet endorsement are more likely to break than scanners without it, leading to more service calls from frustrated users, which is bad news for both the client and the FI’s support teams.
Since the business is in control of paper items during the entire RDC life cycle, FIs can use this contract to hold the business liable for losses due to negligent or fraudulent behavior by its employees. According to the most recent AFP study of payments fraud, 75% of organizations dealt with check fraud in 2016—up from 71% in 2015.
by Genilee S. Parente Alogent incorporated this, Enterprise Content & Information Management. Still, users often misunderstand or simply ignore these instructions.
", A Lending Audit Doesn’t Have to Be Painful. Check is deposited via RDC to Alpha Bank, which receives a paid settlement, as in Scenario.
Four years ago, our partner Mitek® introduced a proactive solution that directly supports this new Reg CC change.
Intuitive product designs and…. Reg. When the other depositary bank gets the check back unpaid, it can't recover some or all of the check amount from its depositor, and thus sustains a loss. Manually endorsing checks is cumbersome, and stamps and ink pads introduce their own difficulties.
RDC was initially developed as a convenience for a business that received checks to deposit the checks electronically (typically using a scanner provided by its bank), and was made possible by Regulation CC, which implements the Expedited Funds Availability Act of 1987 (“EFA Act”) and the Check Clearing for the 21st Century Act of 2003 (“Check 21 Act”). A banking day is any business day (up to the bank's cut-off hour) when your institution is open for substantially all of its banking …
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Ask how we can help your financial institution overcome productivity, growth and financial challenges. If your bank receives those checks in image form via RDC, and your business customer fails to secure one of the checks and it is later deposited in paper form at another bank, your bank indemnifies the other depositary bank if the paying bank returns the check unpaid to the other depositary bank because it was previously paid and that bank is unable to recover from its depositor. In addition, banks and credit unions can opt to require commercial RDC users to physically endorse every deposited item, but there are customer experience implications. It can also negatively impact support teams, since they must review, analyze, and decision items automated systems can’t confirm. 7. Unfortunately, because virtual endorsement is applied only to the check image, not the paper item, it does not protect the FI against subsequent redeposits of scanned items.
Users won’t respond well to posting delays or rejected items, and they may have real problems depositing failed mRDC items at the teller line with “for mobile deposit only” scrawled on the back.
And, because consumers deposit far fewer checks, they are more willing to do so. The consumer environment is a different story. Advertisers and sponsors are not responsible for site content.
That’s why Alogent and our technology partners work to keep our technology ahead of the regulatory curve. Scenario 2: Back of check not endorsed with a restrictive endorsement. Most FIs are focused on how the new indemnity will impact consumer mobile solutions, and rightly so—preventing losses from malicious duplicates is substantially more difficult for mRDC than for traditional corporate RDC.
4. A new bundle of Reg CC changes on July 1, 2018 will, among other things, affect FIs’ responsibility for checks accepted by remote deposit capture (RDC). Accordingly, banks and credit unions should review their commercial RDC agreements to confirm they have appropriate language in place.
Technology and regulations both march forward to provide efficiency and convenience—but not necessarily on the same timetable. As of July 1, Reg CC will provide a new indemnity designed to protect financial institutions (FIs) that receive malicious duplicate presentment of paper items previously deposited at another bank or credit union via remote deposit capture (RDC).