Reg CC modernization would help credit unions better address check fraud

A rethinking of funds availability rules under the Expedited Funds Availability (EFA) Act and Regulation CC would help credit unions combat serious and persistent check fraud risks. Responding to an executive order reforming the federal disbursement process, America’s Credit Unions Director of Innovation and Technology Andrew Morris submitted several suggestions on this topic to the Treasury Friday. The EO directs the Treasury to cease issuing paper checks and use electronic payments where feasible.

“Modernization of Regulation CC is needed to better address check fraud that exploits the idiosyncrasies of check processing and regulatory limits on hold times,” wrote Morris.

The suggested needed changes include:

• Allowing credit unions to hold funds deposited by check for longer periods based on an assessment of risk; and
• A longer, optional hold period that financial institutions can use to guard against the risk of loss when handling potentially fraudulent checks.

The Treasury issued an official Request for Information on Executive Order 14247 Friday, with comments due June 30. America’s Credit Unions will submit comments responding to this RFI and provide ongoing perspective to the government as it updates the federal disbursement process.

Morris and America’s Credit Unions Chief Advocacy Officer Carrie Hunt attended a Treasury roundtable on the topic earlier this month.