FORT LAUDERDALE, Fla. (11/17/15)--While remote deposit capture has changed the way many consumers can deposit checks, it comes with a number of risks for credit unions and other financial institutions. John Curtis, senior vice president of education and training for the Western Payments Alliance spoke about the evolution of remote deposit capture at the CUNA/National Association of State Credit Union Supervisors Bank Secrecy Act (BSA) Conference Monday.
Curtis said that while many people tend to think checks are "going extinct," a 2013 Federal Reserve Payment Study found that 18.3 billion check payments were made in 2012, only a 9.2% reduction since 2009.
The Check Clearing for the 21st Century Act, otherwise known as Check 21 and enacted back in 2003, does not cover remote deposit, but it paved the way, according to Curtis. It defines requirements for financial institutions for "substitute checks," in the absence of the actual check.
Check 21 allows image replacement documents (IRDs) to hold up in a court of law, but there are no hard and fast regulations for remote deposit capture. The Fed's Regulation CC, which covers the availability of funds and collection of checks, is often used for guidance.
Curtis said software that does anomalous transaction detecting can help credit unions see that kind of a red flag.
He also suggested credit unions require physical endorsement of checks, that says "for mobile deposit only" and that includes the depository institution. This will prevent most checks from being double debited, and if that does occur, any institution not listed in the endorsement will be the one held liable for any losses.
Curtis recommends institutions inform consumers that the deposit has been received, and tell them the date the funds will be available. Then they should write "Deposited" on the front of the check, place it in a secure area for five days and then destroy the check.