For immediate release

The Federal Reserve Board on Tuesday requested public comment on a proposal to amend its Regulation CC to set forth rules governing remotely created checks. In place of a signature, a remotely created check generally bears a statement that the customer authorized the check or bears the customer's printed or typed name.

Remotely created checks can be useful payment devices. For example, a debtor can authorize a credit card company to create a remotely created check by telephone. This may enable the debtor to pay the credit card bill in a timely manner and avoid late charges. However, remotely created checks are vulnerable to fraud because they do not bear a signature or other readily verifiable indication that payment has been authorized.

In order to help reduce the potential for fraud, the proposed amendments to Regulation CC would create transfer and presentment warranties under which the depositary bank would warrant that the remotely created check that it is transferring or presenting to the paying bank is authorized by the person on whose account the check is drawn. The proposed warranties would apply only to banks and would ultimately shift liability for losses attributable to an unauthorized remotely created check from the paying bank to the depositary bank. These amendments would not affect the rights of checking account customers, as they are already not liable for unauthorized checks drawn on their accounts.

Comments on the Board's proposal are due on or before May 3, 2005.

The Board's Federal Register notice is attached.

Attachment (197 KB PDF)

2005 Banking and consumer regulatory policy