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Duplicate Deposits: No Show-Stopper, But Demands Attention

Wednesday, October 12, 2016 (RemoteDepositCapture.com / Patti Murphy)

Duplicate deposits are not a problem created by remote deposit capture. RDC is amplifying the problem, however.
 
“Duplicates existed years ago, but they were very rare,” explained Charlie Brinza, Senior Solutions Engineer at VSoft Corporation. They tended to be created inside the banking system and were easily remedied. That changed with the Check 21 Act, which led to wide-scale adoption of check truncation and image exchange, along with the introduction of substitute checks and eventually RDC source documents. “We no longer at the financial institution level have control of the paper; the customer does,” said Brinza. As RDC adoption grows, more duplicates are inevitable.
 
The potential consequences of duplicate deposits can be substantial and include operational costs, lost funds, issues with exchange partners, customer inconvenience (and possible departure), and lawsuits.
 
The Check 21 Act (and its implementing rule set, Regulation CC), Federal Reserve Regulation J and ECCHO rules all state that a when a financial institution truncates a check and presents the image for collection to another FI it warrants to the receiving FI that it will not be asked to make a payment based on an item that it already has paid (in electronic or paper form). However, there are no warranties given with respect to the original (paper) check, explained Phyllis Meyerson, Executive Vice President at ECCHO. Nor do rules or check law address claims between two FIs that accept remotely deposited (imaged) checks created from the same originals.
 
The Federal Reserve Board proposed amending Reg CC to address duplicate deposits. That proposal, which has been under consideration for 3 years, would require an FI accepting an imaged check deposit to indemnify any FI that subsequently accepts and pays the original (paper) check for losses sustained if the check is returned because it already had been paid.
 
While the banking system has not been awash with duplicate deposits, the potential exists, and the consequences can be costly. “The scenarios are unlimited,” said Meyerson. And, she added, “There’s no magic bullet available that helps us figure this out.”
 
Insights, Strategies for Dealing with Duplicates
Meyerson and Brinza co-presented Dealing with Duplicates last month at the RDC Summit 2016. Meyerson is a foremost authority on the implications of and legal approaches to dealing with duplicate deposits. Brinza has more than 30 years of experience in bank operations, consulting and solutions engineering. Their session provided an in depth look at legal and operational issues raised by duplicate deposits in an RDC environment, as well as steps FIs can take to minimize that risk and not collide with customer service.
 
Meyerson and Brinza illustrated numerous examples of and strategies for action. Key topics detailed include:
 
  • Causes of duplicates, accidental and deliberate.
  • Legal considerations, including warranty and Holder in Due Course considerations.
  • Operational costs and considerations for addressing duplicates.
  • Customer costs.
  • Preventing and identifying duplicates at the FI level.
  • Proposed Reg CC amendments.
 
Dealing with Duplicates, a 2-hour presentation that helped kick off the RDC Summit, has been optimized for Web viewing and is now available in the RemoteDepositCapture.com Webinar Library. Click here to view this insightful, educational presentation.

 
 


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