Image Exchange ECCHO rules session 8 Prep pg 67-97 Flashcards
(143 cards)
1
Q
What is the purpose of understanding warranties and indemnifications in check exchange?
A
To review the rules and regulations governing check exchange
2
Q
What does a warranty represent in the context of check exchange?
A
A promise
3
Q
What does an indemnity provide in check exchange?
A
Protection when the promise is breached
4
Q
Which regulations apply to check payments regardless of the exchange channel?
A
Uniform Commercial Code (UCC) and Regulation CC
5
Q
What is included in the Forward Exchange Warranties under Regulation CC?
A
- Transfer warranties for settlement amount and encoding
- Presentment warranties for settlement amount and encoding
- Transfer and presentment warranties for remotely created checks
- Transfer warranties for Electronic Checks
- Substitute check warranties
6
Q
What are the key warranties provided by the UCC?
A
- Transfer warranties
- Presentment warranties
- Encoding warranty
7
Q
What indemnities are covered under Regulation CC?
A
- Electronically created item (ECI)
- Remotely deposited check (RDC)
- Check 21 substitute check
8
Q
What are the warranties for returned checks under Regulation CC?
A
- Settlement amount and encoding
- Returned check
- Notice of nonpayment
- Electronic returned check
- Substitute check
9
Q
What is the primary function of the Federal Reserve banks in check image exchange?
A
Acts as a collecting bank and is a party to exchange of check images
10
Q
What does ECCHO stand for?
A
Electronic Check Clearing House Organization
11
Q
What is a key difference between ECCHO and Federal Reserve bank image exchange rules?
A
FRB does not incorporate ECCHO rules into its Operating Circulars
12
Q
What types of items are eligible for exchange under ECCHO Rules?
A
- Negotiable demand drafts
- Demand drafts drawn on state or local governments
- U.S. Postal Service money orders
- Traveler’s checks
- Substitute checks
13
Q
Fill in the blank: The _____ is the default when repairing MICR line information.
A
Full MICR line
14
Q
What are the sending bank’s responsibilities when repairing an item?
A
Warrants correct repair and is responsible for amount of item and expenses
15
Q
What must a member do to make a compensation claim under ECCHO Rules?
A
Must comply with the provisions set forth in Rules
16
Q
What is required of the sending bank regarding data security?
A
Warrants appropriate safeguards are established to protect data
17
Q
What is the time frame for making an adjustment claim for an amount error?
A
180 calendar days with entry; up to 1 year without entry
18
Q
What constitutes a Duplicate Item adjustment?
A
Institution received an item which it was asked to pay based on an item that it already had paid
19
Q
What is the timing for a Late Return Claim adjustment?
A
60 calendar days with entry
20
Q
What does the term ‘Non-Conforming Image (NCI)’ refer to?
A
Item that does not conform to the required image standards
21
Q
True or False: ECCHO Rules apply only to members exchanges or between participants of a licensing organization.
A
True
22
Q
What does the acronym FRB stand for?
A
Federal Reserve Bank
23
Q
What must the Banking Practices Agreement (BPA) specifically state?
A
There is an agreement to exchange under the rules
24
Q
What is the timing for a claim related to an item believed to be returned late?
A
60 calendar days with entry
This refers to the timeframe within which a claim must be made for a late return.
25
What is a Mis-Mismatched MICR codeline?
MICR information associated with an item does not match MICR information reflected on image of that item
## Footnote
This can be used when the code line in the Check Detail Record does not exactly match the original check.
26
What is the timing for a Mis-Mismatched MICR codeline claim without entry?
Up to 1 year without entry
## Footnote
This indicates the maximum duration for filing a claim without an entry.
27
What does Non-Conforming Image (NCI) refer to?
Item fails to meet image quality standards, image is missing, or contains an invalid routing number
## Footnote
This also includes invalid data for specific file types or ineligibility for image clearing.
28
What is the timing for a Non-Conforming Image claim with entry?
20 business days with entry
## Footnote
This is the specified timeframe for submitting a claim when an entry is made.
29
Define Non-Negotiable Item according to UCC.
Negotiability is defined in UCC; Non-Cash Item is defined in Reg CC
## Footnote
Examples include items entering the collection stream in error, such as empty carriers or mutilated items.
30
What is the timing for a Non-Negotiable Item claim without entry?
Up to 1 year without entry
## Footnote
This indicates the maximum duration for filing a claim for a non-negotiable item without an entry.
31
What does 'Not Our Item' mean in the forward collection process?
Item contains routing transit number (RT) that does not belong to the institution that receives the item
## Footnote
This applies to items that are not authorized for processing by the receiving institution.
32
What is the timing for a 'Not Our Item' claim with entry?
20 business days with entry
## Footnote
This timeframe is specified for claims made with an entry.
33
What is Remote Deposit Capture Indemnity?
Claim may be made against any RDC depositary bank that meets the required conditions for providing the indemnity
## Footnote
This refers to the protections in place for banks receiving remote deposits.
34
What is the timing for a Remote Deposit Capture Indemnity claim?
Within 90 calendar days of the PAID adjustment or return letter date
## Footnote
After 90 calendar days, claims should be dealt with directly.
35
What is a Return adjustment claim?
Member institution seeks to adjust return item that was incorrectly returned
## Footnote
This addresses the process for correcting errors related to returned items.
36
What is the timing for a Return adjustment claim with entry?
60 calendar days with entry
## Footnote
This indicates the period allowed for making an adjustment claim.
37
What are Rule 8 and Rule 9 claims?
Claims that follow timing in ECCHO Rules
## Footnote
These rules provide the framework for timing and processing various claims.
38
What does a Source of Receipt Item request entail?
Request to identify from whom an institution received an item
## Footnote
This involves tracing the origin of a check or item received by the institution.
39
What is the response time for an Information Adjustment claim?
Receiving Party must respond within 20 business days from date of request
## Footnote
This sets a clear expectation for timely communication regarding claims.
40
What is an Unauthorized RCC Warranty claim?
Claim that the person on whose account RCC is drawn did not authorize the issuance of the check
## Footnote
This protects individuals against unauthorized transactions on their accounts.
41
What is the timing for an Unauthorized RCC Warranty claim?
90 calendar days; up to a year without entry
## Footnote
This specifies how long one has to file such claims.
42
What is a Warranty Indemnity claim?
Adjustment for claim of a Check 21 Breach of Warranty/indemnity or for a claim for a breach of an ECI indemnity
## Footnote
This addresses claims related to warranty breaches in check processing.
43
What is the timing for a Warranty Indemnity claim?
1 year
## Footnote
This is the maximum duration for filing this type of claim.
44
What does settlement timing refer to in claims processing?
Settlement occurs by close of banking day following banking day claim was received with entry
## Footnote
This outlines the expected timeframe for processing claims once they are received.
45
What options exist for making a compensation claim under ECCHO Rules?
Make a claim under ECCHO Rules Section VII or through the provider
## Footnote
Claims can also be made outside ECCHO Rules under applicable law.
46
What conditions allow for the rejection of a claim?
If claim did not comply with Rules or Matrix, did not relate to item handled by Member, was a duplicate, or lacked factual basis
## Footnote
These criteria protect institutions from unwarranted claims.
47
True or False: The rules establish liability for members with respect to claims.
False
## Footnote
The rules do not alter a member’s obligations under UCC, Reg CC, or Rules.
48
49
What are adjustment types based on?
Adjustment types are updated from time to time based on member input and ECCHO Board of Director approval.
50
Where can the current list of adjustment types be found?
The current list can be found in the ECCHO Rules - Exhibit I Adjustment Matrix, available at the ECCHO Rules webpage.
51
What does Exhibit 7 in the Guide provide?
Exhibit 7 provides a side-by-side comparison of selected ECCHO and FRB investigation types of adjustments.
52
What is an Imperfect Image?
An Imperfect Image permits the sending bank to send an Imperfect Image for forward exchange and presentment.
53
What are the characteristics of an Imperfect Image?
Imperfect Images allow for the original paper item to be used for clearing purposes and can be returned by the Returning Member.
54
What are examples of Imperfect Images?
Examples include an Electronic Check/Electronic Returned Check that does not conform to industry standards or does not pass quality edits for exchange.
55
What must be done with images that do not conform to standards?
They must be identified/flagged and can be returned or adjusted.
56
What is the responsibility of the creating bank regarding Imperfect Images?
The creating bank is fully responsible for the Imperfect Image.
57
What is the retention requirement for paying agents regarding paper savings bonds?
Paying agents must retain paper savings bonds for at least 30 calendar days following the date that the image cash letter of the paid savings bond was submitted to the FRB.
58
What is required for the electronic endorsement of an Electronic Check?
The electronic check must be indorsed as required by Reg CC, and the depositary bank must electronically indorse it.
59
What happens if the receiving bank cannot process an electronic file?
If the receiving bank cannot process the electronic file, it is not considered 'received' and must notify the sender of the failure to process within 1 business day.
60
What is the status of an electronic check under UCC and Regulation CC?
An electronic check shall be deemed to be an 'item' for purposes of UCC and an 'Electronic Check' for purposes of Regulation CC.
61
What is the presumption of alteration for certain items?
The presumption applies to adjustment claims, arbitration, dispute resolution, court proceedings, or other legal actions between Members with respect to images exchanged under rules.
62
What does the Check 21 provision allow?
The Check 21 provision allows liability incurred under Check 21 to be passed to the prior bank.
63
What are the general provisions for the exchange of images of Canadian items?
The general provisions govern the exchange and return of images of Canadian items and are subject to Canadian law.
64
What must a depositing customer agreement include for Canadian items?
It must include the destruction of the original check within 120 days and prohibit redeposit without permission.
65
What warranties apply to Canadian images and paper returns?
ECCHO warranties apply to Canadian images and Canadian paper return items, as appropriate.
66
What is the claims process for unauthorized remotely created checks?
Section XIX(N) of ECCHO Rules establishes a process for claims against the Sending Member for a breach of the Reg CC presentment warranties.
67
What does Rule 9 of the ECCHO Rules establish?
Rule 9 establishes a warranty that the signature of the drawer customer is not forged or unauthorized, and/or the check is not counterfeit.
68
69
70
What is the Remotely Created Check Warranty Claim Process commonly referred to?
Generally referred to as Rule 8
## Footnote
Developed in local paper clearing houses.
71
Where is Rule 8 defined in the ECCHO Rules?
Section XIX.N in the ECCHO Rules.
72
What does the warranty in Rule 8 do?
Moves liability from the paying bank to BOFD for an unauthorized remotely created check.
73
What was removed from the ECCHO Rules when added to Regulation CC?
Warranty and definition of RCC.
74
What does the ECCHO Rules set forth for the paying bank?
Claim process to make an Unauthorized RCC warranty claim (Rule 8).
75
What is outlined in the ECCHO Rules for handling warranty claims?
Detailed process and related timing for responding to breach of warranty claim.
76
What must a paying bank's customer do to initiate a claim?
Complete/sign/deliver a written statement under penalty of perjury (WSUPP).
77
What is the time frame for the paying bank to deliver a claim to BOFD?
Within 90 calendar days after presentment of the item in question.
78
Where must the claim be made to BOFD?
To the location BOFD receives returns.
79
What is the relationship between Rule 8 claims and FRB process?
Aligns to FRB process and the ECCHO adjustment process for Unauthorized Remotely Created Check (URCC).
80
What cannot BOFD do regarding the unauthorized RCC?
May not disclaim on the basis of evidence that the item was authorized by the paying bank’s customer.
81
What options does the paying bank have if it determines a breach of warranty claim?
Make claim to BOFD via return channel, use adjustment process for RCC warranty claim, or make claim outside ECCHO rules process.
82
What is Rule 9 generally referred to as?
Forged and Counterfeit Check Warranties (Rule 9).
83
Where is Rule 9 defined in the ECCHO Rules?
Section XIX.O in the ECCHO Rules.
84
What does Rule 9 govern?
Bank-to-bank warranty; does not govern how banks interact with their customers.
85
What can a depositary bank choose regarding fraudulent items in Rule 9 claims?
Whether to absorb loss or charge their customer’s account based on their agreement.
86
What allows a depositary bank to disclaim Rule 9 claims?
Sufficiency of funds test when insufficient funds in depositing customer’s account to cover the claim.
87
What must a depositary bank do after receiving a claim?
Verify depositor account balance once during the 15 business days after it received the claim.
88
What does the sending bank warrant to the paying bank in Rule 9?
Signature of purported drawer is not forged or otherwise unauthorized, and/or related Physical Check is not counterfeit.
89
What is the participation default in the ECCHO Rules?
Opt-out permitted unless clearing arrangement does not allow.
90
What happens if the opt-out is cancelled?
Default back to participation under the rules; cannot elect to opt-out again for 6 months.
91
What is the claim process for a Forged/Counterfeit (Rule 9) warranty claim?
Similar process as RCC (Rule 8) warranty claim; claim made through return process but is not a return.
92
What are the reasons Rule 9 claims can be disclaimed?
Account closed, claim amount exceeds funds in account, claim not made timely, not first bank to which check was transferred, or effective election to opt-out.
93
What must a paying bank's customer complete within 60 calendar days?
A written statement under penalty of perjury (WSUPP)
## Footnote
This statement is necessary for filing a claim.
94
How many business days does a paying bank have to file a claim after receiving the WSUPP?
15 business days
## Footnote
This is the timeframe for the paying bank to act on the claim.
95
What can a BOFD request from the paying bank within 15 business days?
A copy of the WSUPP
## Footnote
This request is part of the claims process.
96
Under what conditions may a BOFD disclaim a claim?
* Account closed
* Insufficient funds in the depositing customer's account
* If claim process was not timely
97
What are the Electronic Returned Check Provisions based on?
The same as forward exchange provisions
## Footnote
These provisions include general rules, compensation, data security, and more.
98
What must be included in the Electronic Information associated with an Electronic Returned Check?
Return reason and Returning Member's indorsement
## Footnote
These details are crucial for processing returns.
99
True or False: A member is required to indicate all applicable reasons for return.
False
## Footnote
Indicating multiple reasons for return is not required.
100
What hierarchy must be followed for return routing?
Return Routing Hierarchy
## Footnote
This hierarchy determines where to route a return.
101
What are the responsibilities of the sender, paying bank, or returning bank regarding the FRB account?
To monitor the account for acknowledgments
## Footnote
This ensures receipt of presented items and returns.
102
What is the cut-off hour for processing items under UCC?
2:00 pm local time
## Footnote
Items received by this time are considered for today's processing.
103
Which items does the FRB handle as cash items?
* Government checks
* Postal money orders
* Postdated checks
* Other demand items acceptable to paying bank
* Electronic checks
* Substitute checks
104
What types of items does the FRB not handle as cash items?
* Items declined for payment two or more times
* Retired or invalid routing numbers
* Items with special instructions
* Items not qualifying for high-speed check processing
* Items without proper magnetic ink encoding
105
What warranties does the Returning Member provide to each Returnee Member?
That it has complied with all requirements of the Rules applicable to it
## Footnote
This is in addition to warranties in UCC and Reg CC.
106
How many re-presentments are permitted under ECCHO rules?
2 re-presentments
## Footnote
This is the same as the number of re-presentments permitted under Nacha Rules for ACH entries.
107
What must all cash items and returned checks comply with?
Reg CC requirements for indorsements
## Footnote
Compliance is crucial for processing.
108
What is the responsibility of a bank regarding its files?
To retrieve its files in a timely manner
## Footnote
This ensures effective management of records.
109
What does the FRB retain cash letters for?
No longer than 2 days
## Footnote
This limits the retention period for these documents.
110
What must a bank do when using electronic access to FRB services?
Establish systems compatible with FRB
## Footnote
This includes meeting conditions and identifying the FRB office for item sending.
111
What are the appendices in OC 3 related to?
* Government Checks
* Postal Money Orders
* Redeemed Savings Bonds
* Foreign Cash Items
* Truncation Services
112
What is the effective date for the amendment of OC 3 regarding returned items?
March 18, 2024
## Footnote
This amendment preserves the right to adjust or charge back returned items.
113
What does FRB provide for foreign items payable in non-U.S. funds?
Deferred credit in U.S. funds based on the exchange rate in published procedures
## Footnote
The sender bears the risk of exchange rate fluctuation during processing.
114
Who bears the risk of exchange rate fluctuation during the processing of a foreign item?
Sender
## Footnote
The credit is provisional and based on the exchange rate at the time of the return by the FRB.
115
What do Appendix E services pertain to?
Terms under which FRB provides certain MICR presentment services to a paying bank
## Footnote
Generally involves the electronic transmission of data obtained from the MICR-line.
116
What is provided for cash letters in paper form identified for accelerated processing?
Credit and accelerated processing by converting items into electronic items
## Footnote
They are thereafter presented to paying banks as electronic items or substitute checks.
117
What does the Federal Reserve not perform adjustments for?
Every kind of claim, only those covered in OC 3 and online Check Adjustments Quick Reference Guide
## Footnote
Banks may need to pursue other claims directly with another bank.
118
What is the minimum dollar threshold to adjust through the Federal Reserve?
$0.01
## Footnote
There are exceptions for Late Return Claim (LC) and Late Return Disclaimer (LR) which have a $100 minimum.
119
Which types of claims are among the top incoming adjustment investigation types reported through September 2024?
* ENC (encoding error claims)
* PAID (duplicate item claims)
* NCH (noncash item claims)
* LC (item returned late claims)
## Footnote
Figure 1.18 illustrates these adjustment investigation types.
120
What is the purpose of the Check Adjustments Quick Reference Guide?
Specifies adjustments FRBs handle and related requirements and timeframes for submitting different adjustment requests
## Footnote
Information required varies depending on the investigation type (ITYP).
121
Fill in the blank: The Federal Reserve provides certain _______ services to a paying bank.
MICR presentment
## Footnote
This includes the electronic transmission of data from the MICR-line.
122
True or False: The sender does not bear the risk of exchange rate fluctuations for foreign items.
False
## Footnote
The sender is responsible for recognizing that credit is provisional.
123
What does DUP stand for?
DUP – Duplicate Entry
## Footnote
Request to reverse/investigate a previous adjustment entry that appears to be a duplicate.
124
What is the purpose of the ENC investigation type?
ENC – Encoding Error
## Footnote
Item clearly encoded for an amount different than the legal (written) amount; or written amount differs from the stated amount in the image cash/return letter.
125
What does ERR represent?
ERR – Entry in Error
## Footnote
Request to reverse/investigate an entry made in error.
126
What is a Late Return Claim (LC)?
LC – Late Return Claim
## Footnote
Depositary institution claims item was returned late; must be $100 or greater.
127
What does NCH stand for?
NCH – Non-Cash Item
## Footnote
To request entry for a non-valid item or other item included in a cash/return letter received from FRB.
128
What does NOI mean?
NOI – Not Our Item
## Footnote
Item was charged in cash/return letter which does not bear the receiving institution’s routing number.
129
What is the definition of a PAID item?
PAID – Paid Item
## Footnote
Request for credit for item that is being refused either because it is the original or a sufficient copy and the other item has already paid.
130
What are the various Warranty Indemnity Claim (WIC) investigation types?
Various Warranty Indemnity Claim (WIC) investigation types for:
- Warranty/indemnity claim Check 21 or electronically created items (ECIs)
- Warranty/indemnity claim remote deposit capture (RDC) Item
- Warranty/indemnity claim unauthorized electronically created items (UECIs)
- Warranty/indemnity claim associated with unauthorized remotely created checks (URCCs).
131
What is the main difference between DUP and PAID adjustments?
DUP is used for reversal or investigation of an accounting entry that appears to have been previously made, while PAID is used for requesting credit for an item that is being refused because it has already been paid.
132
What is the timing requirement for DUP adjustments?
Adjustment must be received within 20 business days of most recent entry date.
133
What is the timing requirement for PAID requests?
Request must be received within 6 calendar months of the cash/return letter date of the item being reported as paid.
134
What is the basis for presentment in Federal Reserve Rules?
Presentment is based on what is 'sent'; occurs when the electronic data is sent or made available to the paying bank.
135
What is the basis for presentment in ECCHO Rules?
Presentment is based on what is 'received'; occurs when the electronic check and the electronic information are received or made available to the paying bank.
136
What indemnity is provided by the Federal Reserve when sending items?
When FRB sends items to paying bank, no indemnity is provided other than Check 21-related indemnity.
137
What indemnity is provided by ECCHO rules?
ECCHO rules provide full indemnity for breach of image rules warranties.
138
How are Remotely Created Checks (RCC) claims handled under Federal Reserve?
Handled only through adjustment process; only for items sent forward through the FRB.
139
How are RCC claims handled under ECCHO?
Handled as either return (Rule 8 claim) or adjustment process; can be items sent through FRB or ECCHO forward exchange.
140
What is required for an item to be eligible for exchange under Federal Reserve?
Full MICR line is required to create a substitute check.
141
What is the ECCHO Rules default for MICR?
ECCHO Rules default is Full MICR; allow partial MICR by agreement.
142
What is required for adjustments under Federal Reserve?
Item to be adjusted must have been exchanged through FRB.
143
What adjustments are allowed under ECCHO rules?
Rules allow items to be adjusted between members that may/may not have been exchanged under Rules.
