Same Day Settlement for Electronic Checks
- Also, the proposal would retain, without change, Reg CC’s current same-day settlement rule for paper checks. Section 229.36(f) of Reg CC currently
requires a paying financial institution to provide same-day settlement for checks presented in accordance with reasonable delivery requirements established
by the paying financial institution and presented at a location designated by the paying institution by 8 a.m. (local time of the paying institution) on a
business day. The Fed no longer believes it is necessary to specify terms for electronic same-day settlement in Reg CC because almost all financial
institutions currently use electronic check presentment and the terms of electronic presentment can be determined by agreement. The 2011 proposal would
have incorporated electronic same-day settlement provisions into Reg CC.
Electronic Checks and Returns under Reg CC
- Also, under the proposal, electronic checks and electronic returned checks that financial institutions exchange by agreement would be subject to the
check collection and return provisions under Reg CC, unless otherwise agreed by the sending and receiving institutions. Currently, the check collection and
return provisions related to acceptance of returned checks, presentment, and warranties do not apply to electronic images of checks (electronic images) or
to electronic information related to checks, because collection and return of electronic checks is governed by agreements between financial institutions.
The proposal would apply Check-21-like warranties to electronic images and electronic information.
Electronically Created Items (Items Not Derived from Paper Checks)
- Electronically-created items are electronic images that resemble images of the fronts and backs of paper checks but that were created electronically and not from, for example, scanning a paper check to create the electronic image. Electronically-created items may also be referred to as “electronic
payment orders” or “EPOs.” The proposal would also require a financial institution sending an electronically-created item to indemnify subsequent
transferees for losses caused by the fact the item was not derived from a paper check.
The proposal would add indemnities related to electronically-created items, rather than to expand existing § 229.34 warranties to those items. Proposed §
229.34(b) would provide that a financial institution that transfers an electronic image or electronic information not derived from a paper check (i.e., an
electronically-created item) indemnifies each transferee financial institution, any subsequent collecting financial institution, the paying financial
institution, and any subsequent returning financial institution against any loss, claim, or damage that results from the fact that the image or information
was not derived from a paper check. An electronically-created item cannot be used to create a substitute check that meets the legal requirements of the
Check 21 Act and Reg CC because an electronically-created item is not derived from a paper check. The indemnity in proposed § 229.34(b) would protect a
financial institution that receives an electronically-created item, creates a substitute check from it, and incurs losses because the substitute check it
created was not the legal equivalent of the original check.
– The proposed effective date is six months following publication of a final rule.
Questions to Consider Regarding the Proposal