Check 21 Services File Validation Changes – Friday, November 17, 2023 Production Activation
Federal Reserve Financial Services will implement enhanced Check 21 Services file validation procedures at the start of the processing cycle for November 20, 2023, or immediately after the 12:00 p.m. ET deposit deadline on Friday, November 17, 2023. In accordance with the Federal Reserve Banks’ adoption of the Accredited Standards Committee X9’s Specifications for the Electronic Exchange of Check and Image Data, the truncation indicator must be set to ‘Y’ or ‘N’ (but not both) unless the item converted was a substitute check, in which case there will be a 4 in the EPC field (Record 25 field 3) and all truncation indicators must be set to ‘N’. The same imperative exists for Returns (Records 32 and 35). Items that fail critical edits may be rejected by the Federal Reserve Banks.
Impact to your institution
Currently, if the value in the truncation indicator field is missing, multiple, invalid, or the item has an EPC field value of 4 and a truncation indicator of ‘Y’, an error for that item is reported as a warning on the Customer’s Deposit Notification (DNO) but the items are still passed on to the receiving financial institution. Effective as of the processing date of November 20, 2023, any check record on an Image Cash Letter file that has either an invalid, multiple, or missing truncation indicator field OR has an EPC field value of 4 and includes a truncation indicator of ‘Y’ will fail the validations and the check will be adjusted back to the depositing financial institution. These items will continue to be reported on the DNO but will not be presented to the Paying Bank for forward items or the Bank of First Deposit for return items.
An analysis of recent Check 21 Services file validation samples indicate that you deposited items that would fail the modified truncation indicator edits. It is essential that you contact your relationship manager as soon as possible to determine the potential impact to your financial institution and to assess what operational changes may be necessary before November 17, 2023. If you have any questions regarding this change, please contact your relationship manager or the Federal Reserve Bank Services Support Center at 833-377-7827.