Electronic Check Processing Frequently Asked Questions

Financial institutions should contact the Support Center with the following information:

• Date(s)
• Amount
• Total number of items involved
• Detail listing of items involved
• Reference number

Financial institutions should not submit an adjustment request for debit entry. The Federal Reserve Banks will handle any adjustment requests submitted by the paying banks involved (e.g., PAID). Please refer to the Quick Reference Guide (QRG) for specific requirements for these adjustment types.

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

Items may be rejected by the Federal Reserve Banks if (1) they fail our image quality standards, (2) are qualified to invalid routing numbers or routing numbers not in the Check 21 sort table, or (3) are ineligible for image clearing (for example foreign items). 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/return letter (ICL) or deposit the original check in a paper forward/return cash letter.

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

When processed as paper, financial institutions’ indorsements appear as printed ink characters on the back of a check. In an electronic check processing environment, the paper is converted to an image and processed electronically. Indorsements are represented electronically in Addenda records as opposed to being physically printed on the back of the check.

The process of converting a paper check to an electronic item creates a collection of data records for each item that includes:

• 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 should include an electronic BOFD indorsement. Depending on how the item is processed and image captured, the BOFD’s physical indorsement may not be visible on the rear image of the check. If the BOFD indorsement is not on the rear image of the check and BOFD Indorsement record is required.

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.

Should you need to return such an item and cannot identify the BOFD, you may do so as an Unqualified Mixed Return. If you are a FedReturn institution, you can qualify the item to the Federal Reserve Bank.

Your 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 represented as a record in the FedReceipt file.

Yes. Any software that prints substitute checks is required to print the electronic indorsements. A 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 the back of the substitute check.

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’s 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. Subsequent electronic processor indorsements appear at the right end of the substitute check.

Yes. Whether printed on a substitute check or as an electronic record in a 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 (Off-site) as well as the Federal Reserve’s Operating Circular 3 and legal agreements between the Federal Reserve Banks and financial institutions subscribing to services such as FedForward, FedReturn and FedReceipt. Note that electronic bank of first deposit (BOFD) indorsements printed on a substitute check are not required to have the BOFD’s name printed on the indorsement as required for paper checks.