Federal Reserve Board Seeks Additional Comment On Electronic Returned Checks Processing

Payment Systems Federal Reserve

On December 12, the Federal Reserve Board issued a revised proposed rule that would, among other things, encourage depositary banks to receive, and paying banks to send, returned checks electronically. The revised proposal is intended to address comments the Board received in response to a 2011 proposal to amend subparts C and D of Regulation CC. The Board is now seeking comment on two alternative frameworks for return requirements. Under the first, the expeditious-return requirement currently imposed on paying and returning banks for returned checks would be eliminated; a paying bank returning a check would be required to provide the depositary bank with a notice of nonpayment of the check—regardless of the amount of the check being returned—only if the paying bank sends the returned check in paper form. Under the second, the current expeditious-return requirement—using the current two-day test—would be retained for checks being returned to a depositary bank electronically via another bank, but the notice-of-nonpayment requirement would be eliminated. The Board is proposing to retain, without change, the current same-day settlement rule for paper checks. In addition, the Board is also requesting comment on applying Regulation CC’s existing check warranties to checks that are collected electronically and on new warranties and indemnities related to checks collected electronically and to electronically-created items. Comments are due by May 2, 2014.