I am attempting to think through what information a teller or backoffice person will need once Check 21 is here. The first thing I thought of was a teller will probably need to know if an IRD was part of a transaction. So, my question is, how are your folks identifying IRDs? Will there be an identifier in the account's history? Also, are there other pieces of information a teller needs? Any help will be appreciated!

Aside from its physical appearance, an IRD will be identifiable by the presence of a "4" or a "5" in position 44 of the MICR line. Theoretically, the presence of an indicator in position 44 could be captured and noted on a statement or transcript that was not accompanied by an image of the item, but I am uncertain as to the routine value of that effort.

Ken - thanks for the reply. I understand there will be an identifier on the check, but I think tellers would benefit if there was an indicator in the transaction record (that the teller could inquire upon)that would tell them that a substitute check was part of a particular transaction - without going to the image system to find a copy of the check. It could help in the expedited recredit situation where the customer doesn't have a copy of his statement. Am I way off base in this thinking?

I would agree that it makes sense to carry an indicator in the account history, particularly for the reason you cited. You also commented that a teller might want to know if an IRD was part of a transaction. I define transaction as a deposit. Typically, you will not see IRDs in a deposit, unless it was a previously deposited item that was returend as an IRD or your bank created the IRD for the retunr that you might have received as an image. Other IRDs in deposits would mean that the depositor has created it themselves and should not be doing that without agreement by your bank, since your bank is the reconverting bank and bears the warrants and indemnifications.

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It could help in the expedited recredit situation where the customer doesn't have a copy of his statement.

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...it makes sense to carry an indicator in the account history, particularly for the reason you cited.

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There are some operational issues that are theoretical at this stage, but I cannot quite put my arms around this one. The possibility for triggering expedited recredit provisions exists when a consumer receives a substitute check which the drawee bank has paid. It does not exist when an item returned as a substitute check is being deposited. If a depositary bank feels it necessary to identify substitute checks which are deposited, it can require customers to deposit them separately.

Concerns over expedited recredit initially fall on the bank that has delivered a substitute check to a consumer and the consumer has asserted a claim. It is the consumer's responsibility to provide sufficient information to allow the bank to identify the substitute check and investigate the claim. My opinion is that the consumer would need to provide the bank with the substitute check he received in order to meet that burden. (The substitute check is a piece of paper and the consumer is the one who has it.) If that is thought to be too strict a burden, at a minimum the consumer would be responsible for describing the check to contact personnel.

Creating a mechanism where contact personnel would be able to identify a subsitute check without seeing an image does not seem to eliminate a step - if the customer is not handing the subsitute check to the contact person, the contact person is going to have to come up with an image anyway in order to begin evaluating the claim.

Every bank should be trying to work through the operational issues in advance like Jill W is, but the value of some mechanisms will not be known until we see how many substitute checks there actually are. My personal opinion is that when a paying bank receives a substitute check that is not a large item it will be strong evidence that the converting bank did not understand the pricing structure that is likely to be in place - I am not at all certain there will be that many substitute checks.

Thanks to everyone who has taken the time to reply to my question. Yes, much is still up in the air, but I am trying to identify things that would make life easier for all and my systems people require a good bit of lead time. So, I am attempting to give them an idea of how much work they have ahead of them.

Jill -- If you can stand to dredge this up again, could you explain why you believe a teller would benefit from being able to tell from the online system that a particular check was a substitute item? What scenarios can you describe?

Bill is focusing on deposits. I'm not sure that's what you're concerned about. Perhaps if you could flesh out your question a bit we might be able to hazard some more thoughts.

OK John, I will try. As you guess I am mostly concerned about in-clearings. At this time, in our system, the image system is not one click away from the transaction processing system. A teller would have to log onto another system to get an image. I don't think consumers will be fluent enough in the regulation to really understand how expedited recredit and a substitute check really work and I can see people coming in, contesting a withdrawal and a teller having to determine if it in fact is eligible. If the accounts transaction history had an indicator of "IRD", the teller could answer a question easier or hone into the proper check quicker - especially if the bank offers different kinds of accounts e.g. image statments, truncated, return original checks. I am just thinking of ways to make research easier for a teller. Maybe I am going overboard?

Although I will agree that it will be helpful in some cases to have an IRD indicator in account history, I'm not at all sure that customers will be beating down our doors looking for recredits. However, I can think of one possibility in which it would be REALLY helpful to have that IRD flag available.

Suppose for some unfathomable reason a customer's check posts twice. Of course this can happen even with the original check (customer sends paid check instead of copy to creditor to prove payment, creditor deposits check second time). Since we all know that Murphy's Law operates (and Murphy is an optimist!), it's certain it will happen with a substitute check and the original. It would be nice to see in history which item is which.

Like Ken, I don't think we know quite what to expect from Check 21. Many of the questions haven't even been thought of yet.