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Reg CC's 24 Hour Rule
John Burnett, BOL Guru
Guru Bios
Question: I was under the impression that Reg CC was revised concerning the unauthorized remotely created checks so the depositary bank would be responsible. However, the larger institutions such as [Name Withheld] and [Name Withheld] are still refusing repayment under the 24 hour return rule. How else can the banks collect on these items if the banks are not following the regulation?
Answer: I'll start my answer with a question: How are you returning the items? If you are sending them back as normal returns, those banks are correct to refuse payment, because your returns are late.
The regulation change gives you a claim against the depositary bank under their warranty that the item was authorized by your depositor. There are two ways for you to send these items back if you've missed the midnight deadline:
- If the items were handled by the Fed on their way to your bank, you may take advantage of the Fed's adjusting entry service. You have 90 days from the cash letter date to get that item processed. That will require that you obtain a statement under oath from your customer that the check was not authorized. Consult the Federal Reserve Financial Services Check Adjustments Quick Reference Guide for details.
- If the Fed didn't touch the item on its way to you, you'll need to use a claim "without entry" to try to collect on the warranty, unless any clearinghouse that you belong to has a service that's like the Fed's.
If you run into an institution that fails to acknowledge your "without entry" claim, arguing that it's a late return, remind them of the Reg CC change. If that fails, refer the matter to your attorney.
First published on BankersOnline.com 9/25/06
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