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Changes to Reg CC effective July 1, 2018

Last year, the Federal Reserve Board announced final amendments to the check collection and return provisions in Regulation CC (Availability of Funds and Collection of Checks) to facilitate the financial industry’s ongoing transition to a fully electronic check collection and return process.

On July 1, 2018, the anticipated updates to Reg CC go into effect. Corporate One has been receiving inquiries as to how these changes will affect share draft, returns, and remote deposit processing. Below are answers to some of the most commonly asked questions:

Question: The deadline for presenting returns to the depository institution will change from 4:00 p.m. to 2:00 p.m. on the second business day from the date that they were presented for payment at the payee institution. Will Corporate One be changing their deadline times for receiving daily share draft returns to accommodate this change?

Answer: This deadline change will not affect any of Corporate One’s current processes or deadlines that we have with our member credit unions. Currently, the deadline to provide your share draft returns to us is 2:00 p.m. local credit union time on the next business date from the date the items were presented for payment at your institution.

With the rule changes, the new deadline requires the items to be received by the depository institution by 2:00 p.m. instead of 4:00 p.m. on the following business date – the second business date from presentment. We have ensured that all exchange partners involved in the returns process are prepared to meet the required deadline.

In addition, this deadline will only apply to those depository institutions that receive their return chargebacks electronically. If any depository institution continues to receive return items as paper items, then the deadline will not apply. Corporate One already meets the new deadline for member credit unions that utilize our Deposit Returns product as we currently provide access to your return chargebacks by 2:00 p.m. daily.

Question: Is it true that the return reason “Refer To Maker” may no longer be used?

Answer: The Federal Reserve proposed that the return reason “Refer To Maker” be removed as a valid return reason. There were reports that this return reason was being used as a “catch all” for many items that should have been returned utilizing other valid reason codes. It was determined that “Refer To Maker” could still be a valid reason in some cases, so the Fed has allowed it to remain as a valid code. The valid return reason codes that Corporate One has available are:

  • Altered/Fictitious
  • NSF
  • Unauthorized
  • Stop Payment
  • No Account Found
  • Account Closed
  • Uncollected Funds
  • Refer to Maker
  • Forgery

The use of the “Refer To Maker” reason code should only be used in certain circumstances. If you have any questions as to which code should be used for certain return items, feel free to contact us and we can assist.

Question: Will large dollar return notifications still be required for returned checks?

Answer: Yes. Per the new regulations, large dollar notifications for returned checks will still be required, but the dollar limit for the notifications will change. Currently, a notification of return should be sent for any item $2,500 and above. On July 1, the minimum amount will change to $5,000 and above. Corporate One will still file these notifications on behalf of our member credit unions as we currently do.

Question: How will the Reg CC rule changes affect the current issues regarding duplicates of mobile deposited and paper deposited items?

Answer: The issues of duplicates resulting from mobile deposited items and paper deposited items have been in the forefront of adjustment processing. Currently, there are no regulations governing who is responsible for presenting a duplicate item. Some say that the institution in possession of the paper item should be the beneficiary of the funds while the institution that accepted and processed the mobile deposit should accept the loss. Others still rely on the practice of “first presenter” and “second presenter” when deciding who to adjust.

The amendments to Reg CC address these issues and will now regulate the industry and its practices. But, there will be certain stipulations that must be met to comply with the new regulations. Restrictive indorsements indicating that an item has been mobile deposited, or lack thereof, will play a key role in determining which depositing institution is responsible. If an institution negotiates an item that bears any indication that it has already been processed as a mobile deposit (i.e. a restrictive endorsement), it may be the institution that negotiated the paper item that must bear the loss.

In addition, the institution in possession of the paper item still must prove a loss and not that they merely choose to not charge back their depositor. There will be a new adjustment avenue that will allow institutions in possession of paper deposited items to file a claim against the mobile depositing institution. Since this will be a new process, it will probably require some trial and error as it is implemented. Corporate One is prepared to assist our member credit unions in filing or responding to these new claims as they occur.

As always, Corporate One is ready to assist our member credit unions with any questions or issues that result from these changes to Reg CC. As various situations arise, we are here to help explain, educate, and work through any questions or issues you may have. If you have any questions, please contact us at 866/MyCorp1.