The Georgia Department of Banking and Finance recently released their May 2017 bulletin which contains a new interpretation on financial institutions’ responsibility when cashing checks for non-customers.  The DBF’s announcement does not appear to be based on any new rulemaking.   The bulletin states,

“Financial institutions are still responsible for the verification of a person’s identity when processing a transaction, such as cashing checks. The institution should verify the identity of the person receiving the proceeds and obtain and retain a record of the name and address, the type of identification reviewed, the number of the identification document (e.g., driver’s license), and the person’s taxpayer identification number (e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of issuance. Verification of the identity of an individual who indicates that he or she is an alien or is not a resident of the United States may be made by passport, alien identification card, or other official document evidencing nationality or residence (e.g., a foreign driver’s license with identification of home address).”

This commentary would require many institutions to increase the documentation currently obtained for non-customer check cashing.  However, the bulletin states institutions should establish limits and utilize a risk-based approach to the category of checks the institution will accept.  Although acknowledging that certain checks pose less of a risk, it is unclear whether the bulletin’s identification procedures will be an agency expectation of all non-customer check cashing procedures or will be risk-based depending on the check cashing services offered by the bank. 

At this time, it is our recommendation that institutions consider implementing these verification procedures for non-customer check cashing for items other than on-us, payroll, or government checks.  Institutions may also want to consider applying the verification procedures when cashing on-us, payroll, or government checks above a determined dollar threshold. 


To read the DBF’s bulletin. Click here. 

In recent weeks, many of our clients have had questions concerning Visa’s Account Updater (VAU) and MasterCard’s Automatic Billing Updater (ABU) requirements.  These programs will automatically pull card number and expiration date updates to account-on-file merchants.  The idea is that reoccurring payments will not be disrupted when events requiring card changes occur such as card expiration, product upgrade, lost or theft occurs, etc. 
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Visa and MasterCard have mandated that the service is mandatory for card issuers, but cardholders may individually opt out of this service.  Although Visa and MasterCard do not require notification of the service or the ability to opt-out, it is our opinion that existing cardholders are notified of the service activation and the opt-out ability.  Additionally, account opening documentation should be updated to describe the service and opt-out to new cardholders.  While this service will most likely be a benefit to customers in most instances, situations may arise when cardholders do not want this information to carry forward.  We believe it is important to notify cardholders of their option to forego this service. 

Visa has made a slight change to its zero liability wording which increases the standard of care required by cardholders to meet the zero liability exception.  The previous standard stated that a cardholder would not be liable for any transactions made by a lost or stolen Visa card unless the cardholder had been grossly negligent or engaged in fraud.  In the new zero liability statement, Visa has changed the wording from grossly negligent to negligent.  Although Visa does not define the difference between grossly negligent and negligent, it is clearly less beneficial to the customer.
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For banks using Visa debit and credit cards, it is recommended that existing customers are notified of the change in terms.  It is also recommended that banks update any disclosures that may contain the zero liability language such as the EFT initial disclosure, cardholder agreement, and account terms and conditions. 

By Kyle Davis, CRCM, CAMS  

​The Federal Reserve Board announced final amendments to the check collection and return provisions in Regulation CC (Availability of Funds and Collection of Checks) and also requested further public comment on an additional proposed amendment to Regulation CC's liability provisions.

Effective July 1, 2018, the final rule modifies the current check collection and return requirements to reflect the virtually all-electronic check collection and return environment and to encourage all depositary banks to receive, and paying banks to send, returned checks electronically. The Board has retained, without change, the current same-day settlement rule for paper checks.

The Board is also applying Regulation CC’s existing check warranties under subpart C to checks that are collected electronically.  The change will bring remote deposit capture checks and mobile deposit checks under the purview of Regulation CC.  Additionally, the final rule provides clarity for instances where a check is deposited via both paper and electronic form.   The rule states unless the paper check includes a restrictive indorsement, such as for mobile deposit only, the depository institution that receives the paper check is provided indemnity. 

In response to comments received, the Board is also requesting comment on proposed language amending Regulation CC's existing liability provisions to include a presumption that a substitute or electronic check was altered instead of forged in certain cases of doubt. Comments on the proposed amendments are requested within 60 days of publication in the Federal Register, which is expected shortly.

The FRB release can be found here.