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Fed Develops New Check Adjustments Process for Remotely Created Checks Reported as Unauthorized

Sunday, October 1, 2006

Late last year, the Federal Reserve Board of Governors amended its Regulation CC to include a definition of a "remotely created check" and create transfer and presentment warranties for these items.

In place of a signature, a remotely created check generally bears the customer's printed name or a statement that the customer authorized the check. Any bank that transfers a remotely created check guarantees that the person on whose account the check is drawn authorized the check, which ultimately shifts liability for an unauthorized remotely created check to the depository bank.

Now the Fed has implemented a new adjustment process for a remotely created check reported as "unauthorized" by the person or entity on which the item is drawn. A paying bank must request the adjustment within 90 calendar days of presentment. Reserve Bank adjustment staff will credit the requesting bank within five business days of receipt of a complete adjustment request, with the customer's written statement asserting under oath that the item was unauthorized.

The Reserve Bank generally will charge the bank of first deposit for the disputed item within 20 business days of receipt of a complete adjustment request. A depository bank that has reason to believe the item in question was, in fact, authorized, should work directly with its depositor or with the paying bank involved in the dispute.