Offering E-Deposits - Compliance Issues?

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Question:

We are thinking about offering E-deposits to customers. The customer would go into the home banking application, enter the amount of the deposit and the check information then physically mail us the paper check. The customer would receive immediate availability on deposits up to a specific limit. Once checks are received (within 5 days) we verify the check information and process the checks normally, but do not post the funds. If the checks are not received in time, we can extend the time requirements. What type of transaction is this considered and which regulation does it follow? Reg D, DD, E or Z? Do we have to provide special disclosures and if so, which ones?

Answer:

The common application I am familiar with is one where a check is scanned and taken for deposit and in that case, immediate credit is given by the bank I am familiar with. Reg CC is basically ignored and Check 21 is the key requirement the bank will address in processing. Reg E could come into play if there was a discrepancy with the depositor. In the scenario you described, I don't see applicability of any requirements. I tell you I will be making a deposit and you give me immediate credit. You trust that I'll send you that check and that upon receipt and inspection you will process it. I see security concerns if you feel the check may be altered or counterfeit. Here Reg CC would come into play. If you don't receive the deposit and you reverse it, the deposit agreement may come into play and a deposit reversal fee disclosed under Reg DD may be charged. Otherwise, this is simply a matter of you giving credit based on a notice of an intended deposit.

First published on BankersOnline.com 7/14/08