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Discussion Boards > Remote Deposit Capture Discussions > Reg. CC -Virtual Endorsements View modes: 
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Peachy - 6/18/2018 4:20:44 PM
   
RE:Reg. CC -Virtual Endorsements
Not to create more panic but I do believe that the restrictive endorsement needs to physically be on the original check in order for you to qualify for the indemnity:  
Based on comments received, however, the Board has added an exception to the indemnity, and associated commentary, which would prevent a bank from making an indemnity claim if it accepted the original check containing a restrictive indorsement inconsistent with the means of deposit, such as “for mobile deposit only.”

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michaelj1987 - 6/18/2018 4:27:17 PM
   
RE:Reg. CC -Virtual Endorsements
Please note, any change to the image--versus the original check--constitutes a breach of the electronic check warranties. The electronic check warranties state:
  • the image accurately reflects the original item;
  • the  data accurately reflects the original items' MICR line; and
  • the no-double debit language.
To put another way, when one changes the image by adding a virtual indorsement (or overlay, depending on what one calls it), one is already in breach of warranty. 
These warranties already exist. The warranties exist in Regulation J, if one clears through the Federal Reserve Bank, and the ECCHO rules, if one uses the predominant, private sector image exchange rules. If one isn't concerned with the fact that the virtual overlay already creates a breach of warranty, there is no need to become concerned with the breach of warranty simply because it moved to Regulation CC. But, that is a question each depositary bank must ask and answer internally.
Additionally, any restrictive indorsement added to the image after capture cannot disclaim an indemnification claim made by a subsequent Depositary bank if it accepts the original, paper item without restrictive indorsement that is inconsistent with the means of deposit.
For an RDC Depositary bank to disclaim any indemnification claim it receives, the restrictive indorsement must be on the original check.
To answer the original question, "how are most financial institutions addressing the restrictive endorsement for Corporate users where virtual endorsement is used?" The answer is: Through the RDC agreement.

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michelefsbwa - 6/18/2018 4:36:19 PM
   
RE:Reg. CC -Virtual Endorsements
We are not making any changes on our end either as our business customers go through an underwriting process to get RDC so we don't believe they are high risk.  The way I interpret the information, the virtual endorsement (which we also use) will not cover you for this change because the endorsement needs to be on the physical item.  Just so you are aware.
 

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Budshoot69 - 6/18/2018 5:09:24 PM
   
RE:Reg. CC -Virtual Endorsements
Virtual Endorsements wouldn't truly count as a restrictive endorsement since the endorsement wouldn't necessarily appear on the second presentment so you would still be liable under the new Reg CC warranty.

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GregM - 6/19/2018 2:46:42 PM
   
RE:Reg. CC -Virtual Endorsements
I agree that the virtual endorsement will not help to limit liability under the new Reg CC rule.  The virtual endorsement functions I know of apply an endorsement to the back of an image -- and if/when the image is printed, the virtual endorsement prints.  The Reg CC changes  and the liability shift are about the original physical check during a duplicate deposit event, not a check copy from image.  My focus is primarily business customers.  For business customers we will be updating our RDC Agreement and possibly adjusting our Risk Monitoring practices.  Hopefully more later as the technology evolves. 

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pvillanova - 6/19/2018 5:01:21 PM
   
RE:Reg. CC -Virtual Endorsements
We are not making any changes at this time. We overlay with the virtual endorsement, and we are well aware that it will not protect us if the original paper is presented for negotiation. We do check for endorsements at the time of the deposit, but we will not require the special endorsement, I cannot see how we would require all of our depositors to comply with that in any event. We will assess as we see anything changing.

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