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Hear Ye, Hear Ye! Regulation CC Amendments are finally here

By: Marcy Cauthon, AAP, NCP, EPCOR’s Director Payments and On-Demand Education

After much anticipation, The Federal Reserve Board has amended check collection and return requirements under 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.

EPCOR’s 2018 Payment Systems Update

Find out what you need to know in 2018 to do your job effectively, including recent and upcoming payments and regulatory changes, compliance considerations, and potential impacts on your organization and your customers/members. Topics include faster payments, Reg CC, third-party sender registration, Same Day ACH and much more!

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Here is a summary of the Final Amendments to Check Collection and Return Requirements:

  • Paper and electronic checks must be returned to the Bank of First Deposit (includes credit unions) no later than 2:00 p.m. (previously 4:00 p.m.) on the second business day following the banking day on which the check was presented to the paying bank.
  • The amended rule applies a notice of non-payment requirement to electronic checks, as well as paper checks, and increases the dollar threshold for which notice of non-payment is required to $5,000. The amended rule also affects the delivery time for the notice.
  • Electronic checks are brought within the coverage of Regulation CC. They will be treated the same as paper checks for all purposes unless otherwise noted.
  • The amended rule creates new warranties that will apply to the exchange of electronic checks.
  • New indemnities are created for Electronically Created Items (ECIs), which are check-like items created in electronic form that never existed in paper form.
  • A new indemnity is added to protect a second depositary bank that received a deposit of the paper check that was subsequently returned unpaid because the check had been previously deposited at another depositary bank using a Remote Deposit Capture service.
  • The current same-day settlement rule for paper checks, which requires paying banks to accept for presentment and settle for certain paper checks, was not extended to electronic checks.
  • The amended rule clarifies that when a depositary bank rejects a paper check submitted for deposit, such as through an ATM, and sends a substitute check back to its customer, the depositary bank is deemed to make the warranty and indemnity for substitute checks under Regulation CC.

As with existing rules for paper checks, the parties may, by mutual agreement, vary the effect of the amendments' provisions as they apply to electronic checks and electronic returned checks. The amendments will take effect on July 1, 2018.