ECCHO Returns and Adjustment Subcommittee

May 7, 2015
11:00 a.m. ET (10:00 a.m. CT, 9:00 a.m. MT and 8:00 a.m. PT)

(866)290-9319 with pass code of 322464223

  1. Topics and objectives for today’s call

Subcommittee Objectives

In-person Returns and Adjustment meeting – 2015

Operations Committee Update

  • Matrix updates

Wrong Payee Credit

Return Adjustment

  • Rule 9

Duplicates Treasury Checks – Guest

Matrix Update – Canadian code - Guest

OCC Guidance

Description of Adjustment Reasons

Adjustment Matrix Timeframes

Duplicates

  • ECCHO Suggestion Paper

Exceptions

Intermediary Duplicate Processing

Going Forward

  1. Subcommittee Objectives

Objective of Subcommittee is to investigate and make recommendations for Returns and Adjustment issues, resolution and rules changes or updates

  1. In-person ECCHO Returns and Adjustment Meeting - 2015

Scheduled for September 16 and 17

  • Same format as 2014

Operations Committee meeting morning of September 16

R & A meeting afternoon of September 16 and morning of September 17

  • SAVE the DATE was sent

Please try to attend

  1. Operations Committee Update of Returns and Adjustment changes (previously reviewed)

Matrix Updates agreed to recommend approval by Board at its June meeting

  • Wrong Payee Credit
  • Return Adjustment

Rule 9 Changes (not attached)

  • Committee requested change

Drafted to allow extensive of timing for settlement when banks “do not regularly participate in direct settlement for return of checks”

Felt banks may choice to use letter process, even when they have regular direct settlement arrangement

  • Updated Draft Rules Section XIX(O)

In event Paying Bank makes warranty claim to Depositary Bank in manner that not subject to automated or electronic settlement for returned items between banks, time periods for payment of warranty claim or disclaimed warranty claim shall be extended to fifteenth Business Day

  1. Duplicates Treasury Checks – Guest

Member contacted regarding duplicates of Treasury Checks

  • As Treasury’s bank Fed makes duplicate claim based on Treasury’s direction
  • Treasury is directing Fed to make claim to bank that they received second item from

Treasury is making adjustment claim

Industry now attempting to make duplicate claims to first bank

  • Fed provided Treasury contact and been in discussions with them

Treasury doing internal research

Banks felt needed to do internal research on their experience with Treasury duplicates

Treasury contact is joining meeting for discussion

  • James (Jim) Jeffries
  1. ECCHO in process of developing rules for exchange of Canadian items in U.S.

Canadian returns are different than U.S. with three timeframes, all with entry

  • Next day
  • 90 days
  • 6 years

In order to accomplish return within U.S. may need adjustment code

  • Should be flexible to be used for all returns and any possible adjustments

Canadian flow

Discussed on last call

  • General agreement code is needed

Asked to consider code for exchange rate differences

  • Felt it would be helpful for someone to help educate group about Canadian process

Invited Bill Saffici to talk to group– Been working with Canadian banks

His presentation material is included separately

Canadian Item matrix

Adjustment
Reason / Deadline (Ranges) / Min $ / With/Without Entry / Dr
/Cr / Party who can Make Adj / Party to whom Adj Can be made / Information
Needed / Group Adjust
27 / Canadian Item / None / W Entry / Db/Cr / Either Party / Either Party / No
  1. OCC Guidance on Customer Adjustments

Member contacted regarding discussions with OCC on Customer Adjustments

Banks long standing practice of pushing small dollar adjustments to internal general ledger loss account (credit or debit) vs making smaller dollar adjustment to customer

  • Also have practice of not passing small dollar adjustments between banks
  • Been in place because Fed and/or Banks decisions that OOBs under certain dollar threshold are cheaper to write off

OCC is pressing industry to lower this level

  • Have mentioned $0 dollar threshold
  • Banks are pushing back for something higher like $1 or $5

Discussed at last meeting and members shared their processes and concerns

  • Some have heard CFBP may also be involved
  • Some banks do provide customer credit for any amount, if identified by customer
  • Some always provide credit, but debit is optional
  • This could affect straight through processing
  • Fed may have to consider lowering their dollar threshold
  • This could increase staff and other costs within banks

Anything new to report

  • Is there anything ECCHO can or should do
  1. Description of Adjustment Reasons

It was recommended to document what certain adjustment reasons mean

  • At in-person meeting talked about developing common language

It was felt common language may be able to be satisfied with descriptions

Positive feedback on descriptions

  • Additional input from last meeting tracked
  • Introductory statement tracked
  • Legal disclaimer to be added
  • Other input

Document will be posted on ECCHO website under Check Image resources

  • Description will reference Adjustment Matrix and how to access
  1. Adjustment Matrix Timeframes

In developing ECCHO Adjustment rules and matrix, spent a lot of time on Deadlines

When developed adjustment rules, adjustment providers agreed they would adopt ECCHO rules

  • Viewpointe adopted ECCHO rules, few years ago
  • SVPCO is working on it

Comparison of timeframes below

Agreed to compare SVPCO with ECCHO timing

  • Left Fed timeframe for reference

Combined Rules Adjustment Matrix 2015

Adjustment Type / SVPCO - Timeframe / ECCHO Timeframe / Federal Reserve - Timeframe
Adjustment Reversal / 180 Days / 90 Calendar days / 20 Business Days
Amount Error/Difference / 180 Days / 180 Calendar Days / 6 calendar months
Duplicate Single/Multiple / 180 Calendar Days / 180 Calendar Days / 3 calendar months
Entry in Error / 180 Days / 20 Business Days / 20 Business Days
Image Cash Letter Difference / 7 Calendar Days / 20 Business Days / N/A
Late Return Claim / Doc Other/180 Calendar Days / 60 Calendar Days / 2 months
Late Return Disclaimer / Doc Other/180 Calendar Days / 20 Business Days / 20 Business Days
Mis-Matched Micr / 7 Calendar Days / 180 Calendar Days / 20 Business Days
Non-Conforming Image (NCI) / 7 Calendar Days / 20 Business Days / 20 Business Days
Non-Negotiable item / 180 Calendar Days / 90 Calendar days
Not Our Item / 180 Calendar Days / 90 Calendar days / 20 Business Days
Return Adjustment / within 180 settle 21st day / N/A / N/A
Unauthorized Remotely Created Check Claim / Not Specified / 90 Calendar Days / 90 Calendar Days
Warranty Indemnity Claim / Not Specified / 1 Year / 1 Year
Other / 180 Days / Without Entry only / Without Entry only
WithOut Entry Adjustment Type
Disposition of item / N/A / 1 Year / N/A
Expedited Re-Credit Claim / Not Specified / 120 Calendar Days / 120 Calendar Days
Other / Not Specified / 1 Year
Request for information / Items within 180 calendar days auto-settle on the 21st day
Items OVER 180 calendar daysWill auto-settle on 45th day / 1 Year
Source of Receipt / Items within 180 calendar days auto-settle on the 21st day
Items OVER 180 calendar daysWill auto-settle on 45th day / 1 Year
  1. Duplicates

Request from in-person meeting to poll members to determine whether banks handle duplicates as returns vs adjustments

  • There was interest and survey will be conducted

Duplicate Adjustment Suggestion Paper

  • Improving Duplicate Payment Adjustment Resolution - An ECCHO Suggestion Document – July 2014 – Posted to ECCHO website
  • Paper addresses possible adjustment actions for most common scenario of when deposit made through RDC and then deposit of physical check

Exceptions and intermediary processing would be worked on later

Exceptions for Duplicate Suggestion paper

  • In development of paper it was felt there would be need to deal with exceptions, like stolen or counterfeit checks

Initially addressed BOFD and Paying banks with intermediaries to be addressed later

  • Stale Dated Items

Item should be adjusted to BOFD B who’s customer or itself should not have taken stale dated check and is not HIDC

Cashier’s check cannot be stale dated so BOFD A should take adjustment

  • Stolen Check

BOFD B should take it as long as it wasn’t the same person making deposit or in concert with that person

Possibly require police report for B to take item

  • Represented checks

Do not represent original check, only use IRD

If original is presented BOFD who presented should take adjustment

  • Altered checks

Claim should be made to bank that sent altered item

  • Duplicate claim, where first item was presented over year ago

Seeing increase in questions when first item was presented and second item presented a year or more later

Making claim to BOFD A is more difficult in this situation

  • Other exceptions

Counterfeit items

Others

  • If agreement on some of above will start documenting in Suggestion paper
  1. Intermediary Duplicate Processing

Identification of duplicate at intermediary bank

  • One BOFD and one intermediary bank

Claim to BOFD A

  • Two BOFDs and one intermediary bank

Who does Intermediary Bank make claim?

Identification of duplicate at paying bank

  • One BOFD and one intermediary bank

Claim to BOFD A

  • One BOFD and two Intermediary Banks

Claim to BOFD A

  • Two BOFDs and one intermediary bank

Who does intermediary make claim to

  • Two BOFDs and two intermediary banks

Intermediary makes claim to respective BOFD

  1. Going Forward

Conduct survey on returns vs adjustment for duplicates

Continue work, as needed, on

  • Re-evaluating matrix deadlines
  • New adjustment reason in Matrix for Canadian items
  • Other issues

Continue work on Duplicate Adjustment Suggestion Paper for exceptions

Other topics this Subcommittee may want to discuss

  • Administrative Reasons
  • Other issues

Next meetings

  • Tuesday June 16, 2015 at 3:00 p.m. ET (2:00 p.m. CT, 1:00 p.m. MT and 12:00 noon PT)
  • Friday July 31, 2015 at11:00 a.m. ET (10:00 a.m. CT, 9:00 a.m. MT and 8:00 a.m. PT)

Calendar entries were sent

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Explanation of Adjustment Reasons

This document is intended to be used in conjunction with the Adjustment Matrix which is Exhibit II in the ECCHO rules. See for access to the complete ECCHO rules or the Matrix as a standalone document.

Adjustment Reason / Explanation
Non Conforming Image (NCI)
Image Missing
Ineligible item
Invalid RT / Item fails to meet image quality standards, contains an invalid or undefined routing number or invalid data for specific file type or the item is ineligible for image clearing.
Mis-matched MICR / Items in which the MICR information associated with the item does not match the MICR information reflected on the image. Where the full MICR line of one item or multiple items has been misaligned with the image of another item or a sequence of items rather than a misread of a character or characters on the same item. Encoding error of amount only and/or incorrect character(s) in MICR field is not a mis-match MICR.
Not our Item / In forward collection process an item that contains routing transit number that does not belong to institution that receives item or institution authorized to process the item.
In return collection process an item that was not indorsed, either physically or electronically by institution that receives the return item
Non-negotiable item/Non Cash Item / “Negotiability” is defined in the UCC (see UCC) and “Non-Cash Items” are defined in Reg CC which says it is an item that would otherwise be check except for certain circumstances (See Reg CC). Examples include item that enters collection stream in error including empty carrier, control document, deposit/withdrawal ticket, pay stub or mutilated item, item not encoded with magnetic ink.
Duplicate / A party received an item to which it was asked to pay based on to make a payment based on an item that it already has paid.
Amount Error – Legal amount
  • Encoding Error
  • Misread
/ An item was clearly encoded for an amount different than the legal (written) amount or the written amount differs from the stated amount in the ANSI X9.100-187 image cash/return letter.
Entry in Error
Adjusting Errors
Settlement / An accounting entry was incorrectly made, either for the wrong amount or to the wrong party.
Warranty Indemnity Claims / A claim for any breach of warranty under ECCHO, UCC or Reg CC
Rule 8 & 9 Claim / See ECCHO rules for explanation.
Disclaim – Rule 8 & 9 / See ECCHO rules for explanation
Unauthorized RCC Warranty Claim / Person on whose account RCC is drawn did not authorize the issuance of the check in the amount or payee stated on the check.
Late Return Claim / Item was returned late.
Late Return Disclaim / Dispute of a late return claim.
Request for Information / Requesting information regarding a forward, return or adjustment.
Request for original or sufficient copy / Typically used to determine whether a Check 21 claim is valid.
Other / Adjustment reason not specifically identified
Disposition of Item / Request to identify where an item was presented/returned, including the routing number, and the associated cash/return letter information (date, total, bundle and sequence number).
Source of Receipt / Request to identify the source of receipt of an item, including the routing number, and the associated cash/return letter information (date, total, bundle and sequence number).
Image Cash Letter Difference
Missing
Out of Balance / Investigate cash/return letter credit for which the depositor believes was functioned for an incorrect amount.
Expedited Recredit / Check 21 expedited recredit claim (see Reg CC).
Adjustment Reversal / Ability to adjust an item that was incorrectly adjusted. Can only be used when Party Making Claim has reference number for adjustment to reverse.
Claim of Damage due to Under-encoding / Paying Bank disclaims item in which BOFD under encoded item to protect Paying Bank from loss.
Pricing Error Adjustment / Initiated by Federal Reserve at request Bureau of Public Debt (BPD) when it determines bond was redeemed for incorrect amount or was processed for incorrect amount.
Wrong Payee Credit / Ability to pass credit to correct maker’s account.
Return Adjustment / Ability to adjust a return item that was incorrectly returned.

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