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March 10, 2005
To: All Member Banks and Others Concerned in the Third Federal Reserve District
Attention: Chief Executive Officer and Chief Financial Officer
Subject: Regulations J and CC; Collection of Checks and Other Items by Federal Reserve Banks and Funds Transfers through Fedwire and Availability of Funds and Collection Of Checks: Proposed Rule
The Board of Governors of the Federal Reserve System has requested public comment on a proposal to amend its Regulation CC to set forth rules governing remotely created checks. 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 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.
The Federal Register notice , published March 4, 2005, is attached.
Date: Comments on the Board’s proposal are due within 60 days from the date of publication in the Federal Register.
For Further Information: Adrianne G. Threatt, Counsel (202/452-3554), or
Joshua H. Kaplan, Attorney, (202/452-2249), Legal Division; or
Jack K. Walton, II, Assistant Director (202/452-2660), or
Joseph P. Baressi, Senior Financial Services Analyst (202/452-3959), Division of Reserve Bank Operations and Payment Systems;
For the hearing impaired only
Telecommunications Device for the Deaf, 202/263-4869.