Question:

If we are capturing images at the teller, what would occur in this scenario?

Customer deposits a check. We image the check, and create an IRD to send to the drawee bank for payment. The IRD is returned to us for some reason (NSF, uncollected funds, etc...) so we receive the IRD back. We debit the funds for the chargeback to the customer's account and send him/her the actual IRD. When he/she comes in to redeposit the IRD, are we capturing an image of the IRD and then subsequently creating an IRD from an IRD? What part of this am I missing????

That is a possible scenario. However, the second substitute check, will not show the reduced original IRD in the window where the front of the IRD is displayed but rather the IRD print software must recognize that the image is of an IRD and will "clip" the image of the front of the check from the image of the IRD and put that in the window of the front on the new IRD. It also clips the truncating bank info from the image of the original IRD. You will also want to train the tellers of the situations when they can accept an IRD as a deposit. If not for a redeposited return item, your depositary agreement should be changed in the event a customer creates IRD on their own and your bank is then the reconverting bank. The depositary agreement should pass the warrants and indemnifications back tot he depsoitor if you agree to let them create their own IRDs.