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Banking by Phone? With Convenience Comes Risk

July 13, 2012

Using a Smartphone to make a payment or deposit a check is becoming the norm, with at least twenty percent of phone users engaging in mobile banking with their devices. The convenience of this technology does not come without some legal risk. 

What happens if a scanned and deposited check is presented a second time to either the same or a different financial institution? Who is responsible if a check is presented and accepted more than once? Liability is likely addressed in the financial institution’s customer terms covering remote deposit capture. A related question is what should an organization do with the paper checks once they are scanned and deposited? Technology based solutions, along with appropriately tailored record retention policies and procedures can help. 

From a regulatory standpoint, federal laws applying to financial institution payments were enacted long before the existence of mobile payments. Stephanie Martin, Associate General Counsel with the Federal Reserve Board of Governors, recently testified before a U.S. House subcommittee on financial institutions and consumer credit and identified a potential gap in these laws with respect to mobile payment practices. 

Making strategic use of mobile banking technology includes taking appropriate steps to minimize accompanying risks, particularly given the current regulatory lag.

>> Learn more about remote deposit capture risks and review Ms. Martin’s testimony before the House subcommittee.