Remote deposit capture: Regulated by contract or by Regulation CC?

Over the years, NAFCU‘s Compliance team has been asked if Regulation CC‘s funds availability schedule applies to checks deposited through remote deposit capture (RDC). The process of remotely depositing checks is not new; it has been around since the passing of the 21st Century Act (Check 21) in 2003. Check 21 facilitates the check collection process by permitting a member to scan a check and simply transmit the electronic images and data from the check to the credit union in order to deposit funds. While this technology eliminated the need to provide the original check to the credit union, it also left many credit unions wondering if they had to follow Regulation CC funds availability requirements.

Regulation CC defines a check as a “negotiable demand draft drawn on or payable through or at an office of a bank.” See, 12 C.F.R. § 229.2(k)(1). While checks must originate in paper form, the model Uniform Commercial Code provides that the term “item” or “check” includes transmission of an image pursuant to agreement. See, model U.C.C. § 4-110(a), (c). So it would appear that checks converted to images and remotely deposited may fit the definition. However, these “checks” are not deposited by traditional means like at a branch or an ATM. Rather, the ability of a member to deposit a check through RDC usually resides in the credit union’s mobile banking app. The issue with RDC deposits is that a mobile app deposit does not fit within the strict reading of Regulation CC’s definitions of a “check deposit” referenced throughout the rule. See12 C.F.R. § 229.10(c).

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