Post Reg CC: How has your Bank or Credit Union Adapted?
Banks and credit unions face many challenges when it comes to the minimization of risks and losses, but the level of acceptance varies for new solutions built to meet the regulatory demands in this area. On July 1, 2018, recommended protection to financial institutions (FIs) providing mobile remote deposit capture (mRDC) came in the form of a restrictive endorsement via the Reg CC changes.
With a restrictive endorsement, a written and intentional phrase of “For mobile deposit only at XYZ” can now reduce duplicate deposits and shift the payment liability; thus, prohibiting any further action or negotiability other than the language stated on the back of the check. See my previous blog for a quick recap.
In our industry, a restrictive endorsement is quite known, and based on recent results from RemoteDepositCapture.com’s monthly RDC Industry Research poll, nearly 70% of the FIs surveyed have welcomed a restrictive endorsement variant. Of those, about 50% adopted the full phrase of specifying the origination from mRDC and the intent to the bank of first deposit. The remaining 20% elected to use a phrase omitting "mobile" or the FI name, for a more general statement.
As more FIs consider adoption, perhaps the best practice is to rely on a hybrid of technology solutions and revised workflows to onboard a solution that works best.
From the technology side, we at Alogent found that the mobile application provider, paired with the integration of recognition partners, allows for an ideal solution to stop an invalid restrictive endorsement at the point of capture and presentment. A simple message permits immediate correction when a mobile user is reminded of the expected endorsement, and inconsistencies are flagged.
From a workflow standpoint, we believe in Consistency - so determining when to catch risk is an important factor to your review process. This can be the upfront approach mentioned above, or further leveraging those results for central review. In fact, keeping up with the regulation changes, Mitek suggests simplifying the phrase to “Mobile Deposit at XYZ” and then extending the correction to back-office review, so as to offer a better user experience when it comes to the restrictive endorsement usage.
Additionally, we stand by One Source of Truth, and in turn, updating your FI’s member agreements and notices is necessary to communicate your direction and policy around mRDC.
As change often is, adoption of new regulations can be a vetting process. What works best for one FI may not mean success to another. And it takes flexibility and growth to fold new, unfamiliar regulations into your existing policies. Despite the challenges that adoption can bring, the rewards are much greater. Credit Union Times previously addressed mitigating risks from duplicate check presentment through prevention and detection solutions, which continues to resonate these same strategies post Reg CC. Ultimately, be it best practices or other strategies, finding the optimal approach to ensure indemnity for your institution is the best solution for the protection that you want to achieve.