I did a quick search and didn't see this come up so I apologize if this has already been addressed recently. Scenario: Individual deposits a check via remote capture at at their financial institution. The next day they take the orginal check to a check cashing company and cash it. The original item is returned to the check cashing company because it posts as a "duplicate." Is the check cashing company a holder in due course? I think, yes? If so, how do we help our customers, primarily commercial, as the makers, with protecting themselves, i.e. an insurance company issues said check and they may not be in much better of a position to collect from the payee than the check casher.

Holder in due course status won't help the check casher in this case. The issuer of the check has already paid it, and won't be required to pay it more than once. The check casher's only recourse is to identify the thief and pursue him/her for the funds.

Thank you so much for your response! So, let's say both items come in on the same day. Logically, you would know that the remote deposit item was transacted first, should a bank pay that item and return the cashed item? Or the opposite since the individual would have agreed not to present the original in the remote deposit agreement with their bank?

Fundamental to the UCC is a provision in most states that you can pay items in any order, which suggests you can, on a given day, decide which items will be returned if you run into one of these multi-channel presentment problems. My tendancy would be to bounce the RDC item if you are able to determine which one it is. It is more likely to be the right selection of "bag holder" if there are innocent third parties involved (such as the check casher in your initial scenario). It goes back to the the account of the probably fraudster.

This is the type of situation the Fed illustrated in its most recent revision to its proposed Reg CC amendments (it's anyone's guess when we're going to see a final rule). One of the options in the proposal is to create an indemnity scheme protecting the bank accepting the paper item for deposit when, through mistake or fraud, the same item has previously been deposited via RDC one or more times. If the bank taking the paper item for deposit gets it back unpaid (because it was previously paid via the RDC deposit channel), the paper-accepting depositary bank would have an indemnity claim against any bank that took the item via RDC, got credit for it and didn't get it back unpaid.

The Fed's theory in proposing the indemnity is that the bank deploying RDC services introduced the risk of error or fraud resulting in multiple presentments, and that bank (or those banks) should build the added risk into their business model for RDC. Put more simply, it would be a case of "You made this bed, now you can lie in it."