CUNA, NAFCU Suggest Remote Check Proposal Amendments

WASHINGTON-CUNA and NAFCU recommend nips and tucks to the Federal Reserve Board’s proposal regarding remotely created checks under Regulation CC. In its comment letter responding to the Fed’s proposal, CUNA requested room to expand on the definition of a remotely created check. CUNA agreed with the Fed’s proposed definition, which included consumer and business accounts, but wanted to add credit accounts and payable through accounts. Additionally, CUNA Assistant General Counsel Lilly Thomas wrote in the letter, “The proposed definition of a remotely created check states that it is created by the payee. CUNA understands that remotely created checks are not only created by the payee, but by other third parties as well, and believes that the definition should include all checks not created by the paying financial institution.” For its part, NAFCU suggested the Fed’s proposed definition of a remotely created check more closely mirror that in the Uniform Commercial Code, using language like: “a check that is drawn on a customer account at a bank, is created by the payee, and does not bear a hand written signature purporting to be the signature of the drawer.” CUNA also opposed the extension of the midnight deadline for returning unauthorized remotely created checks to 60 days. “CUNA believes this will harm the consumer, while not providing additional benefit to credit unions,” Thomas stated. NAFCU also disagreed with the extension. While it would create consistency with the Automated Clearing House rules, it also provides “unscrupulous customers with nearly two months of additional time to abscond with funds,” the trade association wrote, which “makes little sense.” CUNA and NAFCU favored placing the liability for a remotely created check with the paying financial institution, because it would be in the best position to monitor for fraud concerning the remotely created checks. Finally, the two groups did not approve of the Fed’s proposal using a MICR line identifier on remotely created checks at this time. NAFCU wrote, “a person depositing an unauthorized check would be unlikely to comply with a rule requiring the digits” and may not do it correctly.