To: All Member Banks and Others Concerned in the Third Federal Reserve District

Attention: Chief Executive Officer and Chief Compliance Officer

Subject: Regulations CC and J: Collection of checks and other items, funds transfers through Fedwire, and availability of funds: final rule


The Board of Governors of the Federal Reserve System has approved amendments to its Regulation CC that define “remotely created checks” and create transfer and presentment warranties to shift liability for an unauthorized remotely created check to the institution where it is first deposited.

In place of a signature, a 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 amendments to Regulation CC create transfer and presentment warranties under which any bank that transfers or presents a remotely created check would warrant that the check is authorized by the person on whose account the check is drawn. The warranties would apply only to banks and would ultimately shift liability for losses attributable to an unauthorized remotely created check to the depositary bank. These amendments would not affect the rights of checking account customers, as they are not liable for unauthorized checks drawn on their accounts.             

The Board is also adopting conforming cross-references to the new warranties in Regulation J.  

See the Federal Register , published November 28, 2005.

Date: The amendments are effective on July 1, 2006.

Additional Information:

Adrianne G. Threatt, Counsel (202/452-3554), or Joshua H. Kaplan, Attorney, (202/452-2249), Legal Division; or Jack K. Walton, II, Associate Director (202/452-2660), or Joseph P. Baressi, Senior Financial Services Analyst (202/452-3959), Division of Reserve Bank Operations and Payment Systems; for users of Telecommunication Devices for the Deaf (TDD) only, contact 202/263-4869.