More Steps Toward Fully Electronic Interbank Check Collection and Return: Amendments to Federal Reserve Board Regulation CC and a Regulatory Resolution of a Circuit Split

Abstract

This article analyzes two actions in 2017 and 2018, respectively, by the Board of Governors of the Federal Reserve System that amend Regulation CC, which governs expedited deposit availability and collection of checks generally and implements the Expedited Funds Availability Act of 1987 and the Check Clearing for the 21st Century Act of 2003. It selects examples from the two sets of amendments that highlight regulatory strategies being used by the Board to facilitate faster payments through the movement of electronic images of checks or electronic information among banks in the check-collection process. Those strategies involve creation of new forms of instruments that can be treated as checks or used to return checks to depositary banks, and, in the 2018 amendments, establishment of a presumption that reallocates risks in collection long a feature of Anglo-American payments law, the doctrine of Price v. Neal. The strategies offer evidence of the surgical precision with which the Board has acted over the past 30 years to modernize check collection regulation with little use of its authority to preempt state laws, primarily Articles 3 and 4 of the Uniform Commercial Code (“UCC”). This article does not describe or evaluate all provisions of Regulation CC that the Board revised or added in 2017 and 2018.