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Request for Comment on Proposed Rule Governing Remotely Created Checks - Regulation CC
March 8, 2005
|Circular No. 11688|
To All Depository Institutions and Others
The Federal Reserve Board requested public comment on proposed amendments to Regulation CC to set forth rules governing remotely created checks and create transfer and presentment warranties for such checks.
Remotely created checks typically are created when the holder of a checking account authorizes a payee to draw a check on that account but does not actually sign the check. In place of the signature of the account-holder, the remotely created check generally bears a statement that the customer authorized the check or bears the customer’s printed or typed name. Remotely created checks can be useful payment devices. For example, a debtor can authorize a credit card company to create a remotely created check by telephone. This may enable the debtor to pay the credit card bill in a timely manner and avoid late charges. However, remotely created checks are vulnerable to fraud because they do not bear a signature or other readily verifiable indication that payment has been authorized.
In order to help reduce the potential for fraud, the proposed amendments to Regulation CC would create transfer and presentment warranties under which the depositary bank would warrant that the remotely created check that it is transferring or presenting to the paying bank is authorized by the person on whose account the check is drawn. The proposed warranties would apply only to banks and would ultimately shift liability for losses attributable to an unauthorized remotely created check from the paying bank to the depositary bank. These amendments would not affect the rights of checking account customers, as they are already not liable for unauthorized checks drawn on their accounts.
Comments on the proposed rule are requested by May 3, 2005.
Details on how to submit comments are available in the Federal Register notice.
Joshua H. Kaplan
Jack K. Walton
Joseph P. Baressi