Recognizing Substitute Checks

Answer by John Burnett: Returned substitute checks may still have attached the MICR line with a "5" in position 44 (to the left of the R/T number). The R/T number will identify your bank (the bank that first took the check for deposit) instead of the drawee. So it's important this MICR line be removed before doing ANYTHING with the check.

If that return MICR line has already been stripped from the check, the check will appear like any other substitute check, with the substitute check warranty statement included, along with a bunch of endorsement records. In short, it will look a lot like the current returned check being redeposited, except for the slightly reduced image size, the SC warranty, and the truncating and reconverting banks' identification.

I agree with your thought that accepting these only for collection is unnecessarily cumbersome, particularly as the volume of returned original checks drops and that of substitute returned checks grows.

If stripping the MICR line off results in a MICR line without a substitute check identifier, you will want to make sure that the item is properly encoded with a "4" in position 44 before it leaves your bank to avoid the image's being further reduced if the item is truncated once again.