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Results of New Industry Survey Reveal a Wide and Varied Approach to Restrictive Endorsements

Thursday, October 17, 2019 (RemoteDepositCapture.com / John Leekley)

Recent changes to RegCC that encourage financial institutions to adopt restrictive endorsement policies for RDC items are having an impact on the industry. Preliminary results reveal trends, challenges and opportunities for the entire industry.
Restrictive endorsements are not new; they’ve been used since the earliest days of checks. Restrictive endorsements have assumed added importance in recent years, however, providing a line of defense against duplicate deposits. Preliminary results of an industry study just completed by RemoteDepositCapture.com suggest restrictive endorsements are helping some financial institutions fend off duplicate deposit losses, but that the jury is still out for many.
 
Duplicate deposits, whether by accident or fraudulent intent, create potential loss scenarios when a check accepted for deposit through the RDC channel subsequently gets cashed or deposited as a paper check. It’s not a serious problem – only about 2 in every 10,000 deposited items are duplicates, according to the 2018 Mobile Deposit Industry Study, conducted by RemoteDepositCapture.com. Nonetheless, on those rare instances when a check accepted as an RDC item is also deposited to another financial institution it creates operational and legal hassles that result in losses to FI, and often times FI customers.
 
Amendments to Federal Reserve Regulation CC – the rule set governing check collections and FI funds availability policies – that took effect in July 2018 assign responsibility for protecting against duplicate deposits to FIs accepting RDC items. The regulation suggests, but does not require, that FIs accepting RDC items require restrictive endorsements to avoid potential duplicate deposit scenarios.
 
As amended, Reg CC requires an FI receiving a check via the RDC channel to indemnify against losses any FI that subsequently receives the original (paper) check after the item had already been paid and settled. The indemnity doesn’t hold, however, if the check carries an appropriate restrictive endorsement.
 
The industry has taken a wide and varied approach to restrictive endorsements. Among the myriad of factors to consider include not just whether to require them, but of which markets, verification processes and technologies used, appropriate wording, what to do if the endorsement does not match what may be required by the FI and much, much more. Every decision made along the way has customer, technology, operations and risk implications.
 
In an effort to ascertain how this regulatory change has played out in the market, RemoteDepositCapture.com surveyed FIs on their restrictive endorsement polices and experiences during the second and third quarters of this year. Over 50 FIs participated in the survey, ranging from small credit unions and community banks to some of the largest FIs in the country.
 
Among the findings: 43% of FIs believe restrictive endorsement policies have helped reduce the risk of duplicate deposits and about 1 in 4 FIs surveyed said they had successfully filed a claim against another FI for a duplicate item after accepting the original (paper) check containing a proper endorsement.
 
Webinar Offers Full Reveal
RemoteDepositCapture.com will present a full reveal of the 2019 Reg CC – Restrictive Endorsement Industry Study findings during a webinar scheduled for November 6, 2019. The webinar will identify and measure FI approaches to restrictive endorsement policies and requirements, validation procedures, perceptions on the risks and benefits, FI experiences applying Reg CC restrictive endorsement provisions to duplicate deposit situations, and more. In addition to the results of the survey, insights gained from dozens of discussions with financial institutions and industry experts will be shared.
 
The hour-long webinar will be presented by John Leekley, Founder and CEO of RemoteDepositCapture.com, beginning at 2:00 pm Eastern on November 6, 2019. Click here to learn more about and register for Results of the 2019 Reg CC – Restrictive Endorsement Industry Study.

 
 
 


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