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#2152297 - 11/03/17 05:26 PM RDC for Consumers
Lele Offline
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Community Bank - We are tentatively looking at offering RDC to consumers. We currently offer only to our commercial customers with very few problems. I am aware of the risks we faced when starting this for the commercial customers but what are the additional risks we would face for consumers? What kind of disclosures would we give them? TIA.
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#2152322 - 11/03/17 08:00 PM Re: RDC for Consumers Lele
John Burnett Offline
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Some observations -- The most efficient way to deploy RDC to consumers is probably via a mobile app. Clearly, you won't expect a consumer to have the sort of equipment a merchant has.

With Mobile RDC, or mRDC, you have a less sophisticated customer who is less likely to have any reasonable method for securely storing original checks. In addition, unless the depositary bank (your bank) imposes AND ENFORCES a requirement that each mRDC check is indorsed "For mobile deposit to YOUR BANK NAME" followed by the consumer's signature, there is a significantly higher likelihood that a check will be deposited more than once. Enforcement will require that the check image be submitted for deposit and reviewed by the bank or its service provider to verify that indorsement is there and the image is legible, before accepting the deposit. [I get two text messages from my bank when I mRDC. The first confirms receipt of the item; the second, the acceptance of the item.]

If you have any mRDC customer for whom you receive a charged-back image for duplicate presentment, you should revoke the customer's mRDC access first and ask questions later. Your customer could simply be careless or s/he could be trying to "game" the system for fun and profit.

RDC and mRDC items are likely to get pulled under the funds availability rules of Reg CC within the next year. So I recommend that you provide mRDC deposit availability matching what you currently do for real checks.
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#2152342 - 11/04/17 02:41 PM Re: RDC for Consumers Lele
Elwood P. Dowd Offline
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Quote:
"For mobile deposit to YOUR BANK NAME"


That's the lynchpin. Some check printers already had language in place, but I will suggest:
* to be acceptable, the language must be exactly as John wrote it and
* your contract should shift liability for a second presentment of the same item to the depositor if the depositor fails to use the required language.

I can already see the posts from bankers who learn about this change the hard way... frown
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#2152371 - 11/06/17 03:29 PM Re: RDC for Consumers Lele
Monster Offline
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Good point on the contract language, I think I missed that when I last edited ours. I thought I read in the rule that it wasn't required to have the bank name listed? Or did I misunderstand?

"Based on comments received, the Board has added an exception to the indemnity that would prevent an indemnified bank from making an indemnity claim if it accepted an original check containing a restrictive indorsement that is inconsistent with the means of deposit such as "for mobile deposit only".

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#2152428 - 11/06/17 09:03 PM Re: RDC for Consumers Lele
John Burnett Offline
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The new indemnity provision under Reg CC (new section 229.34(f)) that runs from a RDC accepting depositary institution in favor of a depositary that accepts the paper check for deposit includes an prohibition on a claim under the indemnity if the original check, at the time deposited to the depositary accepting the paper check, bore "a restrictive indorsement inconsistent with the means of deposit." To be restrictive, an indorsement must name the transferee (UCC 3-206). The legend currently preprinted on most recently checks in the indorsement area reads "[ ]Check here after mobile or remote deposit" or "[ ]Check here if mobile deposit." It appears to be an attempt by check printers to create a reminder for the payee that uses the check box that the check was previously deposited. It does not meet the requirement in 229.34(f)(3) for a restrictive indorsement.

The type of restrictive indorsement that would protect an RDC or mRDC accepting depositary bank is "Pay to [name of bank] for deposit only," or "Pay to order of [name of bank]" or "For mobile deposit to [name of bank]," each followed by the payee's signature. The fact that the paper check is being given to XYZ Bank for deposit after it is already indorsed to a different bank is the red flag for the depositary bank receiving the paper check for deposit.

Also see Commentary in Appendix E to revised 229.34(f), paragraph 2 (examples), subparagraph b.
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#2152459 - 11/07/17 11:03 AM Re: RDC for Consumers John Burnett
Elwood P. Dowd Offline
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If the remotely deposited check did not include the name of the bank in the restrictive endorsement, it could be remotely deposited in more than one bank, completely blowing the new safeguard out of the water.
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#2152509 - 11/07/17 05:00 PM Re: RDC for Consumers Lele
John Burnett Offline
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Unfortunately, the Fed, when it composed the prefatory text that accompanied the amendments to publication, provided a poor -- make that incorrect -- example. The paragraph in question, which appeared on page 27555 of the 6/15/17 Federal Register, reads:
Quote:

The Board believes that the indemnity places appropriate incentives on the parties best positioned to prevent multiple deposits of the same item and has adopted the proposed indemnity. Based on comments received, the Board has added an exception to the indemnity that would prevent an indemnified bank from making an indemnity claim if it accepted an original check containing a restrictive indorsement that is inconsistent with the means of deposit, such as “for mobile deposit only.”


They got the "restrictive indorsement" part right, but failed with the example. A restrictive indorsement, by UCC definition, identifies the transferee or next holder of the check, and, as Ken explained, "for mobile deposit only" doesn't give anyone a hint that the check was deposited earlier via RDC or mRDC. I gave valid examples of restrictive indorsements in my earlier post.
Last edited by John Burnett; 11/07/17 05:02 PM.
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#2167619 - 03/12/18 03:29 PM Re: RDC for Consumers Lele
Compliance504 Offline
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accepted an original check containing a restrictive indorsement that is inconsistent with the means of deposit

Dumb question....can someone clarify the red text for me please...what does this mean?

Must the restrictive indorsement include the means of deposit such as "mobile" or "remote" deposit to qualify....OR is any true restrictive indorsement acceptable....

I'm sorry John, I know you have listed all types of restrictive endorsements acceptable...but I'm confused by "with the means of deposit"

Please verify for me that any restrictive endorsement will be ok....and that it does not have contain "mobile" or "remote" in it....

Thank you

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#2167622 - 03/12/18 03:35 PM Re: RDC for Consumers Lele
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It means that if the check contains a endorsement of "For mobile deposit to [name of bank]", then any other bank, if presented with the physical item for deposit, is on notice that the attempt to deposit the physical check is inconsistent "with the means of deposit".
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#2167636 - 03/12/18 04:12 PM Re: RDC for Consumers Lele
Compliance504 Offline
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Yes, I do understand that, Randy....I need to know whether or not we need to require our RDC customers to include the term "remote" in their restrictive indorsement....is just "for deposit only to our bank" sufficient....or must it be "for remote deposit only to our bank"

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#2167704 - 03/12/18 08:25 PM Re: RDC for Consumers Lele
bcompliance Offline
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The "remote" portion would help your employees catch someone depositing via the app and then taking the check to the branch.
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#2167705 - 03/12/18 08:30 PM Re: RDC for Consumers Lele
Monster Offline
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Is anyone considering extending this to your RDC business customers as a requirement, and not only focusing on mobile deposits from consumers?

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#2167753 - 03/13/18 01:22 PM Re: RDC for Consumers Lele
Compliance504 Offline
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Currently we only offer RDC to commercial customers...in our agreement we do require a restrictive endorsement but only "deposit only to bank" we do not specifically require "remote deposit only to bank"....I'm just trying to find out if we need to update our agreement to include "remote" or is what we have sufficient.

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#2167761 - 03/13/18 01:39 PM Re: RDC for Consumers Lele
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Since you vet your commercial RDC customers at least annually and the chances of them actually trying to deposit checks that they have run through RDC should really not happen, I don't think it is as big an issue as when you open remote deposit to the general consumer customer.
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#2167786 - 03/13/18 02:46 PM Re: RDC for Consumers Lele
Monster Offline
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Thank you Randy. That's the way I was thinking but wanted to be sure I wasn't the exception.

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#2167821 - 03/13/18 03:45 PM Re: RDC for Consumers Lele
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Thank you Randy...

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#2167954 - 03/13/18 08:43 PM Re: RDC for Consumers Lele
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When depositing a check through Mobile deposit, is anyone requiring their customers to write anything specific on the face of the check in addition to the restrictive endorsement on the back of the check? And if so, what do you require on the front?

We are just getting ready to roll out Mobile deposit. I know what we are going to require as endorsement on the back of the check, but I'm wondering if we should require something brief written on the face of the check too. What is to stop someone from taking a pic of the front of one check and then the back of a different check, and then taking the first check to be physically deposited?

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#2167956 - 03/13/18 08:46 PM Re: RDC for Consumers Lele
BrianC Offline
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What is to stop someone from making a photocopy of the front of the check and using that for the mobile deposit with whatever language you require and then taking the physical check to be cashed?

In other words, banks are on notice that they accept more risk in offering mobile deposits and as such should make appropriate risk based decisions for those customers they will provide the service what limits they will set.
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#2169939 - 03/23/18 06:49 PM Re: RDC for Consumers Lele
John Burnett Offline
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In my earlier post I said this:
Quote:


They got the "restrictive indorsement" part right, but failed with the example. A restrictive indorsement, by UCC definition, identifies the transferee or next holder of the check, and, as Ken explained, "for mobile deposit only" doesn't give anyone a hint that the check was deposited earlier via RDC or mRDC. I gave valid examples of restrictive indorsements in my earlier post.


That was incorrect. I must have been wearing my head backwards.

A "special" indorsement identifies the transferee. A "restrictive" indorsement restricts (as the name implies) what the transferee can do with it. Examples of restrictive indorsement include indorsements with "deposit only," "for mobile deposit," "For deposit to a/c 999999999," etc.

If a teller gets a deposit with a check that's indorsed "Mobile deposit only [signature of payee]" that is a restrictive indorsement that's incompatible with the deposit method. It puts the teller on notice that the check may have been deposited previously using mRDC. An alert teller armed with appropriate training would reject the deposit.

Starting July 1, the bank that truncates a check because it accepts a deposit of an electronic image or other electronic information related to an original check does not receive the actual check, receives compensation for the electronic or substitute check related to the original check. and does not receive a return of the check unpaid will indemnify a bank that accepts for deposit the original check, for losses incurred by that depositary bank if the loss is due to the check having already been paid.

But the depositary bank taking the original check can't make an indemnity claim if the original check it accepted for deposit bore a restrictive indorsement inconsistent with the means of deposit.

Message: Start enforcing a restrictive indorsement standard that includes the wording "For mobile deposit to (your bank name here)" for your mRDC customers, at least for larger items. And train tellers to watch for those words in any deposit made in person or via an ATM.
My bank put eyeballs on any mRDC check of $500 or more. Checks for lesser amounts are accepted without vetting.

As Ken pointed out earlier, including your bank name in the required indorsement helps protect other mRDC-accepting banks.
Last edited by John Burnett; 05/03/18 06:43 PM. Reason: missing "not"
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#2169976 - 03/23/18 08:29 PM Re: RDC for Consumers Lele
Susielou Offline
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On the back of the checks we order for our customers, there is a box you can check that says "check here if mobile deposit". Would that and their name be a sufficient endorsement for mobile?

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#2169980 - 03/23/18 08:45 PM Re: RDC for Consumers Lele
rlcarey Online
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How many people deposit their own checks or checks drawn your bank? If you want a restrictive endorsement, I would spell out the specific requirements in your RDC agreement.
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#2170120 - 03/26/18 06:26 PM Re: RDC for Consumers Susielou
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I believe the check printers started putting that on some checks before the rule was announced. It looks more like a "reminder" for the check payee --- Hmmm. That little box is checked, so I must have deposited this check before.

I'd stick with the letter of the regulation and start enforcing a true restrictive/special indorsement in the format described earlier: "For mobile deposit only to [you bank's name here], Signature."

On the other hand, I do suggest that you train tellers to watch for that check box. If it's checked on a check being deposited OTC, there's something wrong, and the teller ought to be trained not to take the check for deposit.
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#2176573 - 05/03/18 06:52 PM Re: RDC for Consumers Lele
John Burnett Offline
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Adding this just to point out that, if your bank accepts an mRDC image deposit with no restrictive indorsement , but the little check box next to "mobile deposited" is checked and the depositor has provided a blank indorsement (refresher: that's a signature-only indorsement) and the depositor takes the same check to another bank and deposits the original paper check in an account there, and the paying bank bounces the paper-deposited check because it's already been paid, the second bank will have an indemnity claim against your bank, and that stupid little check box, which isn't a restrictive indorsement, won't protect your bank from having to indemnify the other depositary bank.
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#2177323 - 05/09/18 01:14 PM Re: RDC for Consumers John Burnett
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Originally Posted By John Burnett
The type of restrictive indorsement that would protect an RDC or mRDC accepting depositary bank is "Pay to [name of bank] for deposit only," or "Pay to order of [name of bank]" or "For mobile deposit to [name of bank]," each followed by the payee's signature.


We're having a space issue with our vendor for it to be able to "read" the endorsement; there is a limited number of characters to enable this function. I feel like we would be able to abbreviate the bank name without a problem, but was hoping you experts could weigh in. Using Bank of America as an example - "For mobile deposit only at BOA". Wouldn't it still be first come first serve if the depositor deposited the same check via mobile deposit to another bank with "BOA" as its initials? I feel like it would hold up for a secondary in-person deposit at a different BOA, if it still said mobile, but not sure if that's a dumb thought.

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#2177330 - 05/09/18 01:35 PM Re: RDC for Consumers Lele
John Burnett Offline
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Try shortening it to something like "Mobile deposit only at XXXX"

Just to add info on what's happening in this mobile deposit space:
My bank uses Harland Clarke. I just got a new order of checks. There is the familiar box and "Check Here if Mobile Deposit"

There is also a fraud-deterrent that includes in light gray halftones the MICR characters for my bank's routing number and my account number, and the check number, plus the first line of the name & address. It's HC's solution to prevent scams that use a phony check reverse to convince the mRDC bank that the mobile deposit conforms to the bank's specs.
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