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Check 21-Enabled Services Frequently Asked Questions

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Check 21 Frequently Asked Questions

The following Frequently Asked Questions (FAQs) relate to our FedForward®, FedReturn®; and FedReceipt® services.

Q: What if my financial institution submits for presentment duplicate substitute checks or duplicate items in an image cash letter file?

A: Financial institutions should contact their Federal Reserve Regional Adjustments Site with the following information:

  • Date(s)
  • Amount
  • Total number of items involved
  • Detail listing of items involved
  • Reference number to use when resolving paid items

Financial institutions should not submit an adjustment request. The Federal Reserve will handle any paid adjustment requests submitted by the paying banks involved. Every attempt will be made to include the reference number provided above when resolving paid cases to the originator of the duplicate items.

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Q: What if my financial institution receives for presentment a duplicate substitute check?

A: Financial institutions may submit a PAID adjustment request. When using this adjustment type an immediate provisional entry will be passed if the required documentation is provided and the request is submitted in a timely manner. Alternatively, institutions may submit a Check 21 Warranty/Indemnity Claim (WIC) or an Expedited Recredit (EXCR) request, if the associated requirements are met. However, provisional entries are not provided on WIC and EXCR requests. Please refer to the Quick Reference Guide for specific requirements for these adjustment types.

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Q: What if a substitute check is returned to my financial institution as a Non-Conforming Image (NCI)?

A: Items may be rejected by the Federal Reserve because (1) they fail our image quality standards, (2) are qualified to invalid routing numbers, or (3) are ineligible for image clearing. Financial institutions should take the appropriate action to correct the reported issue and re-introduce the item into the collection stream for processing. For example, if an item was rejected because it did not meet our image quality standards, institutions should re-image the item and re-submit the item in another image cash letter (ICL) or deposit the original paper check in a regular cash letter.

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Q: What if my financial institution receives an illegible substitute check?

A: If an item fails to meet legal equivalence requirements financial institutions may request credit for a non-cash item (NCH). Institutions using this adjustment type will receive immediate provisional entry if the required documentation and timeframes are met. Alternatively, customers may submit a Request for Original or Sufficient Copy (OSCR) to request the original item or a sufficient copy of an original item.

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Q: Why cant I see the usual indorsements on the rear image of checks in the FedReceipt file?

A: In the paper check world, financial institutions indorsements appear as printed ink characters on the back of a check. In the post-Check 21 world, the paper is converted to an image of the item and may later be reconverted into a Substitute Check. When the item is an image there is no paper on which to print an indorsement, so at that stage financial institutions add an electronic indorsement to the collection of data records that represents the check.

The process of converting a paper check to an electronic item creates a collection of data records for each item that includes (see ANS X9.37 (Off-site Link) for a complete description):

  • The MICR line data of the check
  • Front image
  • Rear image
  • Electronic Indorsements

When the Bank of First Deposit (BOFD) converts a paper check to an electronic item, it may include an electronic BOFD indorsement with each item converted. While a BOFDs physical indorsement is visible on the rear image, if the image is taken prior to indorsement, the BOFD indorsement will not be visible on the image of the back of the item. The physical ink BOFD indorsement is not required if an electronic indorsement is present.

Each subsequent financial institution that processes an electronic item adds its indorsement electronically to the data records for that item. These electronic indorsements are not visible on the rear image of the item in a FedReceipt file.

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Q: How can I see the electronic indorsements in a Check 21 FedReceipt file?

A: Your financial institutions software vendor should have a means for your staff to view electronic indorsements by looking at records other than the image record in the FedReceipt file. Each electronic indorsement is a record in the FedReceipt file that follows the ANS X9.37 (Off-site Link) specifications available from www.X9.org (Off-site Link).

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Q: Are electronic indorsements visible on substitute checks?

A: Yes. Any software that prints substitute checks is required to print the electronic indorsements. An substitute check includes the front and rear images of the check which is a picture of the check when it was converted to an electronic item. Any financial institution that processed the imaged item added an electronic indorsement. When the imaged item is reconverted into a substitute check, these electronic indorsements are printed on top of the rear image of the check as an overlay.

When reviewing a sample substitute check (PDF), the standard ink indorsements are printed from left to right or horizontally on the substitute check. The electronic indorsements are overlaid on the substitute check and appear vertically or from top to bottom. Note that this substitute check has the BOFD indorsement on the item twice; once from the image of the physical ink indorsement on the paper item and again as an overlay printing of the electronic indorsement. Other electronic, subsequent processor indorsements appear at the right end of the substitute check.

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Q: Do electronic indorsements meet legal requirements?

A: Yes. Whether printed on an substitute check, or as an electronic record in a X9.37 FedReceipt file, an electronic indorsement has the same legal effect as a printed indorsement on a paper check. The legal basis of electronic indorsements is founded in Regulations J and CC as well as the Federal Reserves Operating Circular 3 and legal agreements between the Federal Reserve Banks and financial institutions subscribing to services such as FedForward, FedReturns and FedReceipt. Note that electronic Bank of First Deposit indorsements printed on an substitute check are not required to have the BOFDs name printed on the indorsement, as required for paper checks.

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