The Federal Reserve Board is accepting comments until May 14 on check collection rule updates to better address the evolution of the nation’s check collection system to a virtually all-electronic one. The Fed is proposing that the changes take effect this July 1.
The Fed proposes to simplify Regulation J, Collection of Checks and Other Items by Federal Reserve Banks and Funds Transfers through Fedwire; and to make it conform more closely with Regulation CC, Availability of Funds and Collection of Checks.
The proposed July 1 effective date is the same date that the Fed’s 2017 amendments to subpart C of Regulation CC go into effect. This subpart implements Electronic Funds Availability Act (EFA Act) requirements on forward collection and return of checks. Last year’s revisions create a regulatory framework for the collection and return of electronic images and electronic information.
The new proposed amendments are intended to align the rights and obligations of parties, including the Federal Reserve Banks, with the Fed Board’s 2017 amendments to Regulation CC. The Fed says the proposed amendments would clarify and simplify provisions of Regulation J, remove obsolete provisions, and improve consistency between Regulation J and Regulation CC.
The proposed amendments are also intended to clarify that electronically created items – check-like items created in electronic form that never existed in paper form – are not “items” that the Reserve Banks are authorized to handle under Regulation J.
The Board has also proposed amending Regulation J to clarify that financial messaging standards for Fedwire funds transfers, such as the international common format standard ISO 20022, do not confer or connote legal status or responsibilities with respect to Fedwire funds transfers.