WASHINGTON (5/2/14)--Proposed changes to remote deposit capture (RDC) standards could increase risks for all financial institutions that offer that product, and alternative approaches to addressing the issue must be considered, the Credit Union National Association said in a letter to the Federal Reserve.
RDC transactions allow credit union members and bank customers to transmit scanned share drafts or checks to their financial institutions from remote locations.
The Fed is considering changes that would allow a depository institution that accepts an original check to recover directly from the financial institution that permitted the check to be deposited through RDC when there has been duplicate presentment.
The Fed has also proposed new indemnity rules relating to RDC to cover institutions that receive deposit of an original paper check returned unpaid, because it was previously deposited (and paid) using RDC.
CUNA supports the intent behind the proposal--to improve the check-clearing process and to account for a shift toward fully electronic checks, Assistant General Counsel Dennis Tsang wrote. However, he added, the board should also minimize the impact the proposed changes could have on smaller institutions.
Credit unions, the CUNA letter noted, have concerns that the Fed's proposed changes would increase risks for institutions offering RDC. Also, financial institutions offering RDC generally have taken steps already to reduce the risk of duplicate presentments and the likelihood that other institutions will deposit the paper check again after they have honored it.
The CUNA letter also called on the Fed to:
- Consider whether the proposed indemnity could be applied only to paper checks that have not been restrictively endorsed;
- Further assess and research the likely operational impacts that a pair of proposed alternative RDC approaches could create;
- Limit changes to Reg CC that would maintain an expedited check-return process;
- Address and limit any increased risks that applying Check-21-like warranties to electronic images and electronic information could create for financial institutions;
- Clarify the indemnities and warranties in Reg CC that should apply to electronically created items; and
- Provide appropriate flexibility for financial institutions to vary certain terms by agreement, and also address risk management regarding the unique attributes and risks associated with electronically created items.
In addition, CUNA called for a delayed effective date of at least one year to provide adequate time for credit unions and others to implement any changes.
CUNA also encouraged the Fed and Consumer Financial Protection Bureau to work closely with credit unions on check and other payments issues, and to solicit comments on the impact to credit unions during the rulemaking processes.
For the full comment letter, use the resource link.