Reg CC & Credit Card Checks

Question: Are checks drawn from a credit card (Visa/MasterCard) under the same Reg CC return deadline requirements as a regular bank check?

Answer: Unfortunately, checks drawn on a credit card account are just treated as regular, ordinary checks under Reg CC. In the Reg CC Commentary, under 229.2(k)(9), it says:"The definition of check includes a check that a bank may supply to a customer as a means of accessing a credit line without the use of a credit card." That is exactly what a credit card convenience check is, and there are no special provisions in Reg CC for handling them differently.

These checks are different in that if they are stolen and fraudulently negotiated, they are treated as forged signatures. They become the problem of the credit card companies. The problems arise when the checks are written by the legitimate card holder, and the credit card company bounces them for being over-limit. It can take as long as two to three weeks for the item to be returned to the negotiating financial institution, and now there is a "is-it-a-late-return-or-not" problem.

I've talked to financial institutions that, when they see that it's a credit card check, place out-of-state extended holds on these items (11 days) - and some banks that pay no attention to them whatsoever, except to charge them back to the customer's account whether or not the bank has cashed the check or accepted it for deposit! I think the length of time it takes to return a credit card check that is bounced for over-limit, the economy, and the savvy of our customers are going to create a bigger problem with these items this year.

Copyright © 2001 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 11, No. 12, 12/01