News You Can Use!

News You Can Use!

July 06, 2007

1. Retention of Original Item
Check 21 does not dictate the retention time for the original check. It is up to individual financial institutions to perform their own risk analysis to determine the appropriate retention period for their institutions. The only exception is when the image exchange provides a retention period through their agreements.

Retention periods vary from a few days to as many as 90 days, and high dollar items are kept longer than low dollar items.

2. Handling of Poor Quality Images
Currently, poor quality images can be handled as returns or adjustments. Many institutions believe they need to be adjustments so that the items are not mishandled and charged to a customer's account.

Some financial institutions are refusing to accept poor quality images as returns or adjustments. Adjustment cases typically have a minimum dollar limit and if the poor quality image is below this limit, the receiving bank may not accept the adjustment.

National Clearing House Association (NCHA) is forming a subcommittee to address this issue. If you are interested in volunteering for this subcommittee, contact NCHA at www.thencha.com/.

3. Return Item Rejects
Financial Institutions are beginning to originate image returns. Poor image quality is one reason these items are rejected.

When image returns are rejected the Paying Bank is still legally obligated to send the return by the midnight deadline or potentially loss their right to return the item. Check law requires the Paying Bank receiving these rejected return items to be able to send the return by their midnight deadline (midnight of the day after presentment).

To avoid missing this deadline, the Paying Bank should incorporate appropriate procedures to minimize this risk.