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Check 21 Lingo -- Glossary of Acronyms and Terms

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Lingo for Check 21
These are the acronyms and terms you will need to gain familiarity with in order to understand the Check 21 Act.

Acronyms
CAR - Courtesy Amount Recognition. The ability to locate, analyze, and recognize handwritten or machine-printed amounts on documents.

COF - Common Output Format

CTA - Check Truncation Act

EPC- External Processing Code

IRD - Image Replacement Document that provides for a machine-readable substitute document created from the image that is made from the front and back of the original check

LAR - Legal Amount Recognition

OCR - Optical Character Recognition

Keeping the players straight

All the different banks in the chain:

Bank- means any person located in a State engaged in the business of banking, including any depository institution; and includes:

  • any Federal reserve bank;
  • any Federal home loan bank;
    and to the extent that it acts as a payor-
  • the Treasury of the United States;
  • the United States Postal Service;
  • a State government; and
  • a unit of general local government.

Collecting Bank - means any bank handling a check for collection except the paying bank.

Depositary Bank -
(i) the first bank to which a check is transferred, even if such bank is also the paying bank or the payee; or (ii) a bank to which a check is transferred for deposit in an account at such bank, even if the check is physically received and endorsed first by another bank.

Depository Institution - The term ''depository institution'' has the same meaning as in section 19(b)(1)(A) of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A)).

Indemnifying Bank - means a bank that is providing an indemnity under section 6 of the Act with respect to a substitute check.

Paying bank - means the bank by which a check is payable, unless the check is payable at or through another bank and is sent to the other bank for payment or collection; or the bank at or through which a check is payable and to which the check is sent for payment or collection.

Returning Bank - means a bank (other than the paying or depositary bank) handling a returned check or notice in lieu of return.

Reconverting Bank - means the bank that creates a substitute check; or if a substitute check is created by a person other than a bank, the first bank that transfers or presents such substitute check.

Other Parties:
Board - means the Board of Governors of the Federal Reserve System.

Consumer - means an individual who, with respect to a check handled for forward collection, draws the check on a consumer account; or, with respect to a check handled for return, deposits the check into, or cashes the check against, a consumer account.

Consumer Account - has the same meaning as in section 602(10) of the Expedited Funds Availability Act (12 U.S.C. 4001(10)).

Customer - means a person having an account with a bank.

Person -- means a natural person, corporation, unincorporated company, partnership, government unit or instrumentality, trust, or any other entity or organization.

State - has the same meaning as in section 3(a) of the Federal Deposit Insurance Act (12 U.S.C. 1813(a)).

Unit of General Local Government - has the same meaning as in section 602(24) of the Expedited Funds Availability Act (12 U.S.C.4001(24)).

Other Important Terms
Account - means a deposit account at a bank.

Check Conversion - The process by which essential information contained on a conventional paper check is captured electronically (data and image) at the first point in the clearing process; essential information, consist of the routing & transit number, customer account number, check serial number, and the dollar amount of the check. The electronic data, not the paper check, is then sent though the clearing system.

Business Day - has the same meaning as in section 602(3) of the Expedited Funds Availability Act (12 U.S.C. 4001(3)).

Check - means a draft, payable on demand and drawn on or payable through or at an office of a bank, whether or not negotiable, that is handled for forward collection or return, including a substitute check and a travelers check; and (B) does not include a noncash item or an item payable in a medium other than United States dollars.

Forward Collection - means the transfer by a bank of a check to a collecting bank for settlement or the paying bank for payment.

MICR Line - magnetic ink character recognition line'' means the numbers, which may include the bank routing number, account number, check number, check amount, and other information, that are printed near the bottom of a check in magnetic ink in accordance with generally applicable industry standards.

Noncash Item - has the same meaning as in section 602(14) of the Expedited Funds Availability Act (12 U.S.C. 34001(14)).

Substitute Check - means a paper reproduction of the original check that- (A) contains an image of the front and back of the original check; (B) bears a MICR line containing all the information appearing on the MICR line of the original check, except as provided under generally applicable industry standards for substitute checks to facilitate the processing of substitute checks; (C) conforms, in paper stock, dimension, and otherwise, with generally applicable industry standards for substitute checks; and (D) is suitable for automated processing in the same manner as the original check.

Truncate - means to remove an original paper check from the check collection or return process and send to a recipient, in lieu of such original paper check, a substitute check or, by agreement, information relating to the original check (including data taken from the MICR line of the original check or an electronic image of the original check), whether with or without subsequent delivery of the original paper check.

First published on 10/27/2003

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