Good afternoon. My team and I are reviewing our procedures for funds held due to the reason of Doubt of Collectability. More specifically, we seek to use verbiage that allows us to share a general reason we doubt collectability of the item (to comply with Reg CC) without alerting a potential fraudster.

Do any of you have a few examples of canned language that you input on the hold form sent to your customers?

Do any of you omit inputting a reason when you suspect the customer may be the fraudster and not the victim?

Any information you provide would be extremely helpful in assisting us develop best practices.

The model Regulation CC notice in Appendix C is the best option. I never recommend deviating from what is given us as freelance disclosures are the stuff enforcement actions are made of.

https://www.bankersonline.com/regulations/12-229-appc#C-13

The most "general reason" on here is "We have confidential information that indicates that the check may not be paid."

If you're going to use that to avoid telling someone you think they're committing a crime, you best have strong documentation on the bank copy of that notice substantiating your reasons.

Operationally, I would ask, "If we suspect our customer is a fraudster, why would we accept the check for deposit at all?"

Note also that, if you use the "confidential information" option, you must annotate a retained copy of the hold notice with the details of that "confidential information."

And don't forget that, if your bank calls the paying bank for check verification, and the paying bank its policy is not to provide verification information, you know nothing more or less about the check or the likelihood it will be paid than you did before placing the call. So you can't use the paying bank's refusal as "the existence of facts that would cause a well-grounded belief in the mind of a reasonable person" that the check is uncollectible.

I agree with John and Brian, especially Brian's comment about why you would accept the check at all. Keep in mind that you do have three alternatives to accepting the check for deposit into a transaction account where Reg CC will apply: 1) not accepting the check, 2) require that the check be placed in a savings account where you could hold the funds for a longer period as Reg CC doesn't apply (unless state law prohibits it or you have disclosed differently), or 3) send the check for collection.

Thanks for your response Brian. The majority of the time we see fraudulent items, it is our customers being victims of a scam, not them trying to defraud the Bank. However, it can be a little tricky as by the time our Fraud Control Team flags an item that appears to be fraud, the deposit has already been accepted by a branch or ATM so we do not have the option of rejecting it, and we usually had not gotten a hold of the customer to understand where they got the item by then. We are concerned that by placing a Doubt of Collectibility hold using the reason of "Other" and providing a rational of "Address spelled incorrectly on check and font inconsistent throughout item" would tip them off in the event they did intentionally deposit a fraudulent item. Have you encountered any issues like this at your institution?

Thanks John, that's a great point about the Confidential Information reason. Being unable to verify the check with the issuing bank has become the norm and we never use the "existence of facts" rationale. The difficult part of navigating this is that in many cases, we've accepted the check already and our Fraud Control Team can see its fraud right away, but the hold reason does not fit into any of the reasons provided. We've got a 98% success rate of items coming back once we place a Doubt of Collectability hold but still want to ensure we are in compliance with the regulation by giving a specific reason.

Thanks for your response Adam. Unfortunately, once the Fraud Control Team sees the item, it is after it was accepted for deposit (via Mobile, ATM, or teller). We continually train our branch staff but unfortunately we continue to see these items slip through, especially via the mobile banking and ATM avenues.

Well, mobile deposits (images through mobile RDC) aren't subject to Reg CC hold rules at this time, so that may be a way out for you for some of these.

I would think the hold itself would be enough to tip a true scammer off regardless of the reason provided. If you're going to do an exception hold you have to have a valid reason. I would use the model form as others have suggested and choose a reason that best fits your situation and stay away from the "Other" reason.