New warranty and indemnity rights, liabilities and obligations under Regulation CC became effective July 1. The Federal Reserve’s final rule creates a new Remote Deposit Capture Indemnity to address the allocation of liability when a depositary institution accepts deposit of a check through remote deposit capture.
Remote deposit capture is when a member sends the credit union electronic information about a check, such as a photographic image, which the credit union uses to create an electronic check or substitute check for collection.
The indemnity would be provided by a 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.
The final rule also adds an exception to the indemnity which would prevent a financial institution from making an indemnity claim if it accepted the original check containing a restrictive indorsement inconsistent with the means of deposit, such as “for mobile deposit only.”
The Federal Reserve board believed that providing this exception could reduce accidental double deposits and could provide incentives for financial institutions that receive remote deposit capture deposits to take steps to minimize intentionally fraudulent deposits.
Generally, the terms and conditions for use of a credit union’s Mobile deposit service, or remote deposit capture service by its member, is contained in an agreement provided by the credit union for use through the credit union’s online banking application.
For example, a common practice is for an institution to require the endorsement of the full signature of the payee, in addition to the restrictive endorsement “For eDeposit only at ABC Credit Union” on all items, and the credit union reserves the right to reject all items that are not endorsed as required.
Credit unions accepting checks by remote deposit capture, may want to review the language in its Mobile Check Deposit Agreement or Remote Deposit Capture Agreement, if the language isn’t already there, that requires the credit union’s member to add a specific restrictive indorsement to the check such as “For Mobile Deposit Only, at ABC FCU into account #123456789, and also require a new check box available on checks identifying the check as “For Mobile Deposit” to be checked.
The above specific restrictive endorsement should help reduce indemnity claims against such credit unions.