Pub. 7 2017-2018 Issue 2

16 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S Regulation CC Meets the Age of Electronic Checks O n an interesting note, while the Federal Reserve Board can put forth unilateral changes relating to check col- lection, they actually can’t change Subpart B, related to funds availability, unless the amendment is issued jointly with the CFPB. Thus, there are no changes to the funds availability portion of the regulation in this rule, which means there is no requirement for a new funds availability policy or any notice that needs to go out to consumers. What this final rule does is update the regulation to spe- cifically include electronic checks and electronic processing. The way Regulation CC reads now, it incorrectly assumes that the checks the banks are receiving and processing are all paper checks. This has left a grey area for banks in trying to deal with electronic checks and electronically created items. The prev- alence of remotely deposited items has led to a plethora of question marks related to which party is liable when some- one deposits a check with their phone and then walks it in to another bank. The final rule seeks to expedite check processing and re- turns and also extends the regular Regulation CC warranties and indemnities to electronic and remotely deposited checks. In addition, the final rule adds necessary definitions to fully incorporate electronic checks into the regulation. Again, it’s important to note that the final rule makes no changes to the funds availability requirements and that this final rule will be effective July 1, 2018. The rule looks at how checks are processed under the “Col- lection of Checks” section. As noted above, the FRB has found that the check clearing process is almost entirely electronic, which necessitated these amendments. The final rule updates a number of definitions as part of the overall update to include electronic checks. This includes updating terms like “routing number” and “MICR” line to en- compass not just traditional paper checks but also information that would be included with an electronic check that never existed in a paper format. BY SILVIA GARCIA MAGGIO, CRCM, ASSOCIATE GENERAL COUNSEL On May 31, the Federal Reserve Board put forth their final rule amending parts A (definitions), C (collection of checks) and D (substitute checks) of Regulation CC.