Our bank does not permit mobile deposits; however, we receive returns through Fed Services when another bank has received an electronic image of a check and it is paid before our presentment. Our customer then suffers a loss when their account is debited as a result of the return.

Our presentment of the check presumably breaches the Warranty that the depositor made when the electronic image was deposited.

How do we (the bank of second deposit) process the breach of Warranty and charge back to the bank of first deposit?

To clarify, is the "bank of first deposit" a bank that has accepted the check in a mobile remote deposit capture service? Or is it a bank that took the actual check for deposit and in turn deposited it with your bank?

And, speaking of first and second, I should have first welcomed you as a new contributor to Bankers' Threads!

Thanks for the welcome. Yes, the bank of first deposit accepted the check in a mobile remote deposit capture.

You could attempt a direct (without entry) claim against the mRDC bank and might even be successful if the funds are still there. But if the double-dipper depositor made the second (real check) deposit fraudulently (as opposed to in error), the odds are against there being any funds left. Since the mRDC bank probably submitted its image for payment before you presented your check (or check image), it has a strong argument that it has the better claim to the funds, and it's likely to deny your request. Assuming that's the case, you have no one to pursue other than the individual who defrauded you, your own customer.

The Federal Reserve recognized this problem when it trotted out its second proposed rule to amend Regulation CC. The proposal, which still needs final approval, would say that the bank that accepts mRDC adds risk to the check collection system because it introduces the potential for the check to be deposited two or more times (which isn't possible if the actual check is taken for deposit). And therefore, suggests the proposal, the mRDC bank should assume responsibility for that risk, and would indemnify from loss a bank that takes the actual check for deposit and receives it back as a return item, unpaid.

We'll be watching to see how that proposal fares in the next few months.

Thanks for the response. I had thought this might be the case.

It takes time for regulations to catch up to technology!

I have a similar problem presented to me today.
Someone presented a check on our customer using their Mobile Deposit at another bank, then came into our branch on the same day to cash the check.
There's no way we would have known that check was already deposited through their mobile capture.

Shouldn't the MRDC bank be held liable, they should be the ones taking the risk since they're providing the MRDC product... no?

In such a case, it would be incumbent on your bank to detect that the check had already been paid, and to return the mRDC item unpaid within your midnight deadline. Your reason for return would be "Y" which is the image exchange code for "Duplicate Presentment."

Heya John Thanks for your answer..
Could we have done that even though we technically cashed it after it was run through MRDC?

Good comeback, Kitty. You did say the check was cashed as an on-us item, which would make it a final payment (translated loosely as "you're stuck with it"). So the question that's left is whether you'd be able to return the mRDC item, if it was paid before the paper item was cashed.

I'd say, "No." You are already past the midnight return deadline for the mRDC item. So you're stuck with that one, too.

The best possible result would have been that your system was capable of detecting that the check had already been paid when the teller attempted to cash it. That would require that the teller key in the check number and that the system could detect that the check number had already been cleared.