bank’s logo check 21 and image exchange. 2 11/19/03 agenda payments system check 21 what the check...
TRANSCRIPT
211/19/03
Agenda
Payments System Check 21 What the Check 21 Does Not Cover Implementation of the Check 21
311/19/03
Paying Paying BankBank
Depository Depository BankBank
ExpensiveExpensive Labor IntensiveLabor Intensive InefficientInefficient UnreliableUnreliable
BrancheBranchess
USPS
IssuesIssues
Check Payment System Today
411/19/03
Potential Impact of Check 21
Paying
Bank
Processing
Centers Image Statement
Statement
Exchange Data and Images
Image Archi
ve
WEB
Remote Branches
Depository Bank
Image Archi
ve
Remote Tellers
ATMs
Branches
Substitute Checks
Lockbox If necessary
!
611/19/03
Federal Reserve’s Objectives
To facilitate truncation To foster innovation in check collection
systems without mandating receipt of checks in electronic format
To improve the overall efficiency of the nation’s payments systems
711/19/03
Legislation Encourages check truncation by allowing unilateral decisions to
truncate checks Unlike current environment with requirement to obtain
agreements from all the parties Creates a new legal instrument - Substitute Check - that replaces
the original paper check For those customers that have not agreed to check truncation For those banks that have not agreed to receive electronic
files Use and Acceptance
Use of substitute checks does not require an agreement between any of the parties
The substitute check must be accepted by any party This includes forward collection and returns processes
811/19/03
Legislation Check 21 only applies to “Substitute Checks”
Image reprints of original paper checks Use of substitute checks does not require agreement between
the parties Excluded from the Check 21 are:
Check safekeeping products Other check truncation or conversion products ECP & image exchanges
Products and services under other agreements
Products and services under other agreements
911/19/03
Substitute Checks Substitute Check is legal equivalent of original check for all
purposes, if: Contains image of front and back of check Conforms to industry standards
MICR Physical characteristics of check
Suitable for automated processing Must accurately represent all information on original check Bears legend - Includes all endorsements Includes identification of party creating it
This is a legal copy of yourcheck. You can use it the same way you would usethe original check.
1111/19/03
Expedited Recredit Consumer Consumers that receive a substitute check, may
make a claim under the Act that the substitute check was not properly charged or for warranty claim
If a consumer has: Suffered loss that they would not have suffered if they
had received the original check or The original check or a better copy is necessary to
determine validity of the check The Bank must:
The Bank has 10 day to determine the validity of the claim or
Recredit up to $2,500 per check The remainder by the 45th calendar day
1211/19/03
Expedited Recredit Consumer
Bank may withhold availability for exception situations (similar to Reg. CC) New accounts Excessive ODs Cause to believe fraud Emergency conditions
Bank may withhold availability for 45 days Bank must notify consumer of delay in availability Bank can not charge overdraft fees for 5 days
1311/19/03
Check 21 Expedited Recredit - Banks Banks may make claims
When consumer makes claim or bank makes warranty claim
Bank has suffered a loss Original check or substitute check
necessary to determine validity of charge
A claim must be made within 120 days of transaction
1411/19/03
Check 21 Expedited Recredit
Paying Bank
Reconverting Bank
substitute check
CLAIM CLAIM
40 DAYS
$$$10 DAYS
10 DAYS
ConsumerStatemen
t
1) Paying bank must provide consumer with original check, substitute check or Re-credit within 10 days of claim up to $2,500 per check
2) Amounts > $2,500 must be recredited to consumer within 45 days
3) Paying bank must make claim to reconverting bank within 120 days of transaction that gave rise to claim
4) Reconverting bank must provide recredit, original check or substitute check within 10 days of paying bank claim
120 DAYS
Check, Better Copy
or $$$
1511/19/03
Notice to Consumers
Banks must notify consumers of:Check substitution process and how it
differs from original check processExpedited recredit rights
Fed has provided “Substitute Check Policy Disclosure”
1711/19/03
Branch
Check Truncated
DP / Image Capture Site
of a bankPaying Bank
Exchange
Network
Paying Bank
IRD
OR
IMAGE
IMAGE
IMAGE
Reconverting Bank
IMAGE
Check 21 & Rules
1811/19/03
Check 21 covers this relationship
Branch
Check Truncated
DP / Image Capture Site
of a bankPaying Bank
Exchange
Network
Paying Bank
IRD
OR
IMAGE
IMAGE
IMAGE
Reconverting Bank
IMAGE
Check 21 & Rules
1911/19/03
Rules are needed for these Rules are needed for these relationshipsrelationships
Branch
Check Truncated
DP / Image Capture Site
of a bankPaying Bank
Exchange
Network
Paying Bank
IRD
OR
IMAGE
IMAGE
IMAGE
Reconverting Bank
IMAGE
Check 21 & Rules
2011/19/03
Check 21 & Rules
Image rules are needed to support the Check 21 because: Check 21 is image based Image exchanges are not covered by the Check 21 All depository financial institutions must have a
common national set of image exchange rules for image exchange to work.
2211/19/03
Multiple Step Process Prepare for Check 21 and the
Substitute checkCustomersContact StaffOperations
Develop strategic plan for image exchange
2311/19/03
Bank’s Role with Consumers
Customer Awareness Advance notice to customer of substitute checks Check 21 notice to consumers beginning October 28, 2004
Substitute Check Policy Disclosure from Fed rules Consumer education Education of business customers
Training All contact staff should be trained on substitute check
and expedited recrediting Q & A for Staff Expedited Refund procedures
2411/19/03
Check 21 Ops Minimum
Expedited recredit procedures Qualified returns of substitute check – change to MICR
line Identifying duplicate checks Determine how substitute checks look on image
statements Procedures to detect fraud with substitute checks Deposit Agreement change to move liability to a
customer that deposits a substitute check.
2511/19/03
Conclusion
Consumers have rights under bill Bill drafted to minimize potential fraud and
consumer inconvenience Prepare customers and public Plan for the future of check processing