I am so confused. If the dep bank forwards a paper check to Bank A, Bank A truncates it (produces an image) and sends the image to the payor bank. Where does the payor bank get a substitute check, if it later needs to? From Bank A?
I will join the ranks of the confused on substitute checks. Mary Beth, in your answer to Ashleigh you say that the payor bank has the image and they would create the IRD. Doesn't Bank A have to have an agreement with the payor bank to send images? If Bank A doesn't have an agreement with the payor bank doesn't Bank A have to send an IRD to the payor bank? Thanks in advance for any clarification!
Quote: I will join the ranks of the confused on substitute checks. Mary Beth, in your answer to Ashleigh you say that the payor bank has the image and they would create the IRD. Doesn't Bank A have to have an agreement with the payor bank to send images? If Bank A doesn't have an agreement with the payor bank doesn't Bank A have to send an IRD to the payor bank? Thanks in advance for any clarification!
Yes. Before the depositary bank (or any other bank in the chain) is allowed to send an image to the next bank, the party sending the image must have an agreement with the next bank in the chain that permits it to send an image, rather than paper.
No bank is required to accept an image. Images will be accepted only by agreement of the parties. If a party is not willing to accept an image, the sending party then has two options:
Send the original check (if it is in their possession and they choose to do it);
or
Send a substitute check (which is a paper reproduction of the original which meets certain standards and carries with it certain warranties.)
[The choice of which one of those two to send is the sending party's choice to make.]
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