I have an odd twist to the mobile capture deposit. We had a customer who paid his employee with a check in September of 2012. His employee deposited his check thru mobile capture to his bank in September of 2012. In May of 2013, the employee's son found the check and cashed it. How do we get our customer's money for him? Does he go to the employee and get it from him, since it's his son that took the check? Do we do an adjustment to the September bank, since it was mobile capture? But wait....Now here's the twist....Our bank sold that checking account to another bank a few weeks before it got cashed by the son. Now What? HELP!!! Please

Now that I have thought it out, we will have to do the adjustment, because both checks (Sept and May) came in our cash letters. Our Core Processor, is stripping off the sold accounts inclearing file, and sending it right to the other Bank. So since both cash letters are ours, we need to do the adjustment to the bank where the check was first depositted by Mobile Capture in September, then give the money over to the Bank we sold the account to. Does that sound right?

If the check was cashed by the employee's son, wouldn't that make it a forged endorsement issue before anything else? Seems that the bank that cashed it would have a warranty issue. If the item was paid once, it should not have been charged to the customer again, and it seems your first course should be to make the deposit customer whole. Does your system recognize duplicate items or is it an issue of 2 different banks having deposit records from varying times?

If it came in inclearings (assuming somehow it's not a forged endorsement case), was it cashed at a 3rd party check casher and just deposited through normal channels? If that's the case, an adjustment could be appropriate. Fed allows you to make the adjustment against either bank, but it always feels wrong to me to charge the bank that deposited it earlier.

The check was endorsed on the back by the employee, and he deposited it with Mobile Capture. His son took the check and since it already had the Dad's endorsement on it, there is no forged endorsement. I'm looking at this as a Mobile Banking issue, and their warranties.....
(Mobile Capture = Scary)...hahaha

So was it cashed at one of your banks? It would seem no, since you said it came in your inclearings. If it came from another bank, and you can adjust either item if you go the PAID route with Fed, why not adjust the second bank and let them go after the son? I know the world of check returns is not fair, but I hate the idea of adjusting the only person who rightfully should have cashed it. (I know, simple endorsement, found check, blah blah blah, I still hate the idea).

If I'm bank #2, and I take a paper check for deposit, how do I know that it had already been deposited thru Mobile Capture somewhere else? I get that the son was wrong in what he did, but I'm still thinking about the Mobile Capture aspect of this.

How do they know the check is also not stolen or forged. It is the risk and cost of doing business and knowing your customer.

You say you sold this account. Hook line and sinker? Who is responsible for losses according to the sales contract for things that happened prior to the sale.

Is this even your problem?

You don't! That's why I hope we stay out of the world of mobile capture for as long as possible. But again, if you can adjust either bank, and the second bank is where the ill-gotten gains went, why not adjust the bank that came last? Admittedly, as I said, we do not do mobile capture and I have no idea what is in your agreement. I'm sure it stipulates that the RDC customer is responsible for safekeeping of the checks to prevent this exact problem. Usually, you just end up with the same customer getting credit twice, and it's an easier fix. Maybe it's just my bitterness at fraudsters that makes me stick to adjusting the bank that came second. I'll step out and see if someone else has a more "legalese" answer than me.

I would have to check the agreement, but since they both came in our inclearings, only we can do the adjustment back to FED, and I think that is what the agreement says...

RRichmond, You have made me shift my thinking....I was too focused on the Mobile Capture aspect of this, but in reality, if I adjust the second bank, they'll charge it back to the son, upstanding citizen that he is....lol

I guess....forget the twist....in the world of Remote Capture and Mobile Capture.....who is the liable bank? Bank A who took it thru Remote/Mobile Capture, or Bank B, who took it over the counter as a paper check? Or either one, take your pick?

You can adjust either bank. It's your choice. It's all about how you fill out the adjustment - just learned that little tidbit yesterday in a Fed webinar, actually. We don't do many PAID adjustments involving 2 different banks, but now I know how to choose which one gets the adjustment!

There is only one way to handle this and that is first come first serve. The bank that presents the check regardless if in paper or image form after the original has been paid is the one that is out.

Unless of course the paying bank does not return that item before their midnight deadline, then the paying bank is out. There are no "later" adjustments possible.

Why would this not qualify for a fed adjustment with the PAID item type? I'm not aware of a midnight deadline for that, you're not adjusting through return channels but through Fed.

RRichmond.....I'm glad you asked that, cause I was thinking the same thing....

Well, I admit that I have been out of check processing for about 30 years and I am aware that there are extended timeframes to return remotely created checks. However, I was not aware that a paying bank had any more than the midnight deadline to return a check that has been presented twice, regardless of how it is presented. I very well could be wrong, but I sure would like to see something in the regulations or the UCC that addresses that. If that is not the case, then any check you present for payment through any sort of image capture could come back for months.

Well, I couldn't find my way around the UCC to save my life, but here's what the Check 21 Act says:

Substitute Check Warranties [Section 229.52]
Duplicative payment warranty [Section 229.52 (a) (2)]
The reconverting bank also warrants that no depositary bank, drawee, drawer, or indorser will be asked to make a payment based on a check it already has paid. A “check” includes any of the following items: a substitute check, the original check, or a paper or electronic representation of the substitute check or the original check.


And this is from the Fed reference guide:

Paid Item (PAID) – Request for credit for an item that is being refused either because it is the original (or the legal equivalent, i.e. a substitute check or image received in an ANSI X9.37 cash/return letter) or a photocopy and the other has already paid. If you discover a PAID you can submit an adjustment request, for either item (first or second presentment/return) to the Federal Reserve that processed that item.

Reporting Time Frame Federal Reserve Bank Action

Within three calendar months of the cash/return letter date. Same day entry - provided requirements are met.*
After three calendar months, but within six calendar months of the cash/return letter date. Same day acknowledgement - Provided requirements are met.*
After six calendar months, but within one calendar year of the cash/return letter date. Same day acknowledgement - Provided requirements are met.* No entry.


And, yes, that means any item could come back for months. As you mentioned above, that's comparabale to the risk for any other return.

I just found this Banker's Online Thread from back in January that addresses this same thing......

http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=1798407

So basically, the January thread says the same thing I just did.

Check out the FRServices' Check Adjustment Quick Reference Guide for the PAID investigation type: http://frbservices.org/operations/checkadjustments/paid.html

"Paid Item (PAID) – Request for credit for an item that is being refused either because it is the original (or the legal equivalent, i.e. a substitute check or image received in an ANSI X9.37 cash/return letter) or a photocopy and the other has already paid.

"If you discover a PAID you can submit an adjustment request, for either item (first or second presentment/return) to the Federal Reserve that processed that item.

"Note: The request will be handled based on the item reported as PAID (information provided in the Item ID or Research Information fields) in accordance with the reporting time frame in which the request is received."

Of course this only works if the item being challenged cleared through the Fed.

Technically it's not a return of the item (a return is still limited to the midnight deadline). It is an adjustment, but the end result is that you get your money back.

The time limit is 3 calendar months from the cash letter of the item (the time limits are changing according to information on the site).

So, Laura, assuming the second presentment was in the last 3 months, and you received the item from Fed, do a PAID adjustment, credit your customer (or GL if duplicates suspend) and call it a day. If you enter adjustments on FedLine, enter the second (later) item's info in the "Item ID" section and the first (earlier) item's info in the comments section. That will ensure that the bank that presented second gets the adjustment.

Whew!

LOL....Thanks RRichmond....WHEW is right....I think we came to the same conclusion...lol.

We did have a situation at the beginning of the month, where our customer's employee had been doing mobile capture with his paycheck then 'someone' was cashing them at the currency exchange on the same day. Of course our customer didn't notice that the checks were being paid twice since January(and only with the one employee) until June. We did FED adjustments back to BANK 1 on all of them, and received credits for them all. We did that based on the Mobility or CK 21 warranties, or our intepretation of them. I guess, based on this thread, we get to pick which one, and in this case, I'm going to pick the most recent one.

Thanks for all the liveley discussions, and answers. I appreciate them all.