Request for comments on proposal to amend Regulation CC.

The Federal Reserve Board requested public comment on March 1, 2005, on a proposal to amend its Regulation CC (Availability of Funds and Collection of Checks) 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 the check 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.

To help reduce the potential for fraud, the proposed amendments to Regulation CC would create transfer and presentment warranties under which the depository 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 depository 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.