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2016-2017

Copyright© 2016 by ECCHO (Certain contributed content subject to third party copyrights) 1

Standards and Formats

National Check Payments Certification


Copyright© 2016 by the Electronic Check Clearing House Organization

NCP 2017 Exam CycleCore Training Series

Session 4

NOTICES

This training course may provide an introduction to or summary of various aspects of checkpayments and the legal and rules framework for check image exchange. Responsibility forcompliance with image exchange rules, and/or the legal, operational and regulatoryrequirements applicable to check image exchange, remains at all times with the financialinstitution participating in check image exchange and/or the individual or company using acheck image exchange service.

This presentation and the information contained herein is not intended as legal or complianceadvice or recommendation to any person or company. This document could include technicalinaccuracies or typographical errors and individual users are responsible for verifying anyinformation found in this presentation and related “live” webinar or webinar playback.

Financial institutions should consult with their legal counsel regarding legal and operationalrequirements applicable to any check image exchange program they may offer or in which theyparticipate.

These materials may not be reproduced or published, in whole or in part, without the express permission of ECCHO.

Copyright© 2016 by the Electronic Check Clearing House Organization(Certain contributed content subject to third party copyrights)

National Check Payments Certification 2

2016-2017



NCP Exam Registration Reminder

• Free ECCHO / NCP study aids upon registration!– JumpStart Reading ProgramLinks to all program resources

– NCP RoadmapDirection on establishing a personalized study plan

– P.R.E.P. GuideTraining guide, glossary of terms, sample exam

– Question of the Day & Summary New daily question & detailed answer to prior day’s question

• Exam Fees: $400 ECCHO member$500 non‐ECCHO member

– Not sure about membership?Check current status at: www.eccho.org/memberships

o Enter financial institution name in search box on left


Topics – This Session

• X9.100‐140• X9.100‐160 – Parts 1 and 2• X9.100.181• X9.100‐187• X9.100‐188 (new)• TR 47 (new)


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X9 Standards

Payments Standards

• What are standards?–Set of specific documents, defined as either Standards or Technical Reports (TRs), to give the industry guidanceGoal: To provide a structure to facilitate electronic movement or exchange of check‐related data and images

–Standards enable interoperability in check payments processing

• Standards may be updated from time to time to serve the changing needs of the industry


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Payments Standards

• Who provides standards?–Accredited standards body for Financial Services: Accredited Standards Committee (ASC) X9, Inc.

–X9 creates American National Standards (ANS)Standards are accredited by the American National Standards Institute (ANSI)

• Standards are available from either X9 or ANSI–Please visit the websites for additional information

www.X9.org and www.ansi.org


Check Payments Standards

• X9.100‐140: Specifications for an Image Replacement Document – IRD

• X9.100‐160: Magnetic Ink Printing (MICR)–Part 1: Placement and Location: Includes size limits for checksPersonal‐size (6” x 2.75”)Business‐size checks (8.75” x 3.667”).

–Part 2: EPC Field Use• X9.100‐181: TIFF – Tagged Image File Format• X9.100‐187: Electronic Exchange of Check and Image Data

• X9.100‐188: Return Reasons for Check Image Exchange and IRDs


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Image Replacement Document – IRD (X9.100‐140)

IRD Standard

• X9.100‐140 – Provides the financial industry with a specification for Image Replacement Document (IRD)–Standard for machine readable substitute document created from an image made from the front and back of the original check

• Many other X9 standards and technical reports are referenced by this IRD standard–See NCP P.R.E.P. Guide for more details

10National Check Payments Certification

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Substitute Check or IRD?

• What’s the difference between an IRD and a Substitute Check?

• Nothing!–Image Replacement Document (IRD) Defined in technical standard X9.100‐140

–Substitute CheckDefined in Reg CC

oReg CC definition references the X9.100‐140 standard


Substitute Check

• Check 21 and Reg CC definition–Designed to be processed exactly as if it were the original paper check

–Legal equivalent of original check for all purposes–Contains image of front and back of check–Conforms to industry standards–Suitable for automated processing–Must accurately represent all information on original check

–Bears legal legend– Includes all indorsements– Includes identification of party creating it


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IRD MICR Line and Magnetic Ink

• Magnetic ink required? –Reg CC requirementAll checks (including substitute check) must have routing number of the Paying Bank preprinted or post‐encoded in magnetic ink (MICR characters/E‐13B font)

–However, not required if IRD is created for paid item returned to issuing institution’s customer as a properly paid itemMICR characters may then be printed in non‐magnetic inkSubstitute check used for this purpose must still conform to all other requirements of X9.100‐140 standard


Forward Substitute Check ‐ Front

Notes:Creating, truncating and BOFD Institution is not necessarily the same.Truncating Institution is not necessarily the BOFD or Return Location. Look at Endorsement on back for Return Location.Date & Sequence numbers may not be available for Truncating Institution.

1800539446

[053000183] 01/03/2002

Substitute Check

Original Truncating Institution Routing Number, Date & Sequence

Legal Legend

Creating Institution Routing Number, Creation Date & Sequence Number

Original Scanned Front Image

Optional Area

No branding or marketing

Substitute Check Identifier

MICR Line from Original Check

Clipped Area

*011500120*01/03/20028587408979

This is a LEGAL COPY of your check. You can use it the same way you would use the original check.

14

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Substitute Check

15

Return Reason Printed on Return Substitute Check

Return Substitute Check Identifier

‘5’ can only appear on the qualified return strip.

Return Qualification Strip with BOFD Routing Number and Dollar Amount

Optional – All returns do not have strip. Strip can be applied after Substitute Check is created.

Return Substitute Check ‐ Front Return Reason Overlay

Return Substitute Check

*011500120*01/03/20028587408979

This is a LEGAL COPY of your check. You can use it the same way you would use the original check.


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Magnetic Ink Printing (MICR)(X9.100‐160)

X9.100‐160 – Part 1 / Part 2

• Part 1: Establishes placement and location for printing MICR ink on checks, drafts and other documents for automated processing– Example “other documents” – Internal forms such as batch tickets

• Part 2: EPC Field Use: Establishes assignment and management of one digit optional field (EPC) code– Conveys special information for correct handling or routing of check/check data to financial institutions or other processors

– Primarily used for qualified returns or identification of substitute checks


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Magnetic Ink Character Recognition

• MICR line: Band along bottom edge of check reserved for magnetic encoding– Common fields divided into character spaces, organized into several areas or fields

• Fixed format for all users:– Amount, Routing, and optional EPC fields

Drawer’s Signature


Magnetic Ink Character Recognition

• Variable fields:–On‐Us: Issuing financial institution determines format–Auxiliary On‐Us (Aux On‐Us) May appear at extreme left side on business‐size check

Drawer’s Signature


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TIFF Image Format for Image Exchange (X9.100‐181)

X9.100‐181 – TIFF Standard

• Standard defines specific fields and parameters for check image exchange and allowable values for those parameters– Image data must comply with X9.100‐181 standard

• TIFF standard file contains image data and set of “tags” that describe how the image data is to be interpreted– Key fields include:Image width and Image lengthCompression (DPI must be 200 or 240)B&W or grayscale (Images must be black and white only)

• Check processing systems must understand TIFF tags to be able to view what’s in the file

• Consider TIFF as “envelope” around the image– TIFF “tags” describe the image


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Return Reasons for Check Image Exchange and IRDs(X9.100‐188)

X9.100‐188 – Return Reasons

• Approved May 6, 2016, standard establishes process to add, change or delete a Return Reason code– Includes return reasons previously listed as Annex in two other standards:X9.100‐140 – Image Replacement Document (IRD) X9.100‐187 – Electronic Exchange of Check and Image Data

– Provides list of Return Reason codes for both Customer and Administrative Returns for image exchange and IRD creation

• Standard includes both:– Short name for each Return Reason with abbreviation; and– Guidance for the proper use of Return Reason codes

• Standard does not address operational, implementation or settlement considerations

• See “Exceptions – Returns and Adjustments” session of this training series for discussion of common Return Reason codes


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Universal Companion Document

Universal Companion Document

• Industry needed common edit practices for image files being exchanged

• UCD developed to formalize the use of the industry standard for check image exchange–Designed to clarify how financial institutions should use/apply that image exchange standard

• Uniform format that provides flexible approach to identify data elements critical to payment processing and establishes:–Business practices for image exchange–File‐level and item‐level rejection criteria


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Image Standard and UCD

• Establish industry consistency in use of the X9.100‐187 standard–Standard defines which records must be usedfor check image exchange (forward and return)

–UCD explains how to populate the fields in those records

• UCD details each record deemed to have critical payment data–Lists all associated fields contained in standard


UCD and TR 47

• UCD will be released as a new technical report through X9:–“TR 47 Universal Companion Document Industry Adoption of X9.100‐187”

• ASC X9 recently voted to approve TR 47–Anticipated release date – November 2016

• Will be a free document available at:– www.X9.org; and –Linked via CheckImage Central website


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Cash Letters

What is a Cash Letter?

• Group of negotiable instruments, usually checks• Includes instructions for handling

–Who it’s from (Presenting Bank) –Where it’s going (Receiving Bank)

• Describes what kind of items are included–Forward collection–Return

• Includes control totals–Number of Items–Total $ Value


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Cash Letters and Bundles

• To manage balancing and controls for large check volumes, paper cash letters sub‐grouped into bundles–Approx. 300 items in each bundle

• Separate instructions for each bundle:–From/To –What’s included–# Items–$ Value

Source: JPMorgan ChaseNational Check Payments Certification 31

Cash Letter Structure

• Representation of Physical Cash Letter (CL) File– One file – three (3) Cash Letters– Cash letter may have one or

more bundles

• Image file/record formats:– X9.100‐187 record formats

mirror paper environment in many ways, as shown in example

Example: FILE‐1: Cash Letter #1 3 Bundles – forward debit Item(s)

Cash Letter #2 1 Bundle – forward debit Item(s)

Cash Letter #3 2 Bundles – forward debit Item(s)

CASH LETTER #3 WITH TOTAL

Bundle 1

Bundle 2


Bundle 1


Bundle 1

Bundle 2

Bundle 3

File‐1


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Image Cash Letter Standard

Overview

• Standard for image files exchanged today–Started with Draft Standard for Trial Use: DSTU X9.37 (2003)

–X9.100‐187 emerged as “New” standardEssentially the X9.37 standard with known errors addressed

–More robust documentation– Intent was to be compatible with X9.37

• Fed OC3 references DSTU X9.37 (2003) “. . .as amended from time to time”–“Amended” standard referenced is the X9.100‐187 standard


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X9.100‐187

• Cash letter structure that supports exchange of:–Posting data only–Posting data and check images–Posting data followed by additional data & image file

–Variable length records to accommodate images• Utilizes UCD as guideline for industry consistency

• Defines records for both:–Forward image exchange (20‐series records) and –Return image exchange (30‐series records)Will discuss both in this section

o Focus on specific records that carry indorsement information


X9.100‐187

Cash Letter Hierarchy Diagram

File Header

(01)

File Control

(99)

Cash Letter Header

(10)

Cash Letter Control

(90)

ForwardPresentment

Bundle

Return Bundle

Cash Letter

Forward presentment bundles and/or return bundles

Mandatory Record

Multiple Logical Entities

M

LEGEND

Selected Record Views


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File Records

• File Header Record (Type 01)–First record of file containing:Origin / Destination Routing Numbers and Names Creation Date and Time

• File Control Record (Type 99)–Contains file control information:Cash Letter countItem countTotal amount

–File Header Record (Type 01) associated with File Control Record (Type 99)

• Examples of Type 01 / Type 99 records on next slides


File Header Record (Type 01)

• Data as stored in Image Cash Letter (ICL) file:

• View using image viewer

38Source: www.AllMyPapers.com National Check Payments Certification

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File Control Record (Type 99)

• File Control Record (via image viewer)• Note: One cash letter only in this file

National Check Payments Certification 39Source: www.AllMyPapers.com

Cash Letter Records

• Cash Letter Header Record (Type 10)– First record of cash letter containing:Destination and ECE Institution Routing NumbersVarious dates and time

– Codes to indicateForward (01) or Return (03) cash letterInclusion (or “to follow”) image recordsType of returns

• Cash Letter Control Record (Type 90)– Provides control totals for cash letter including:Bundle Count, Item Count, Total Amount

• Cash Letter Header Record (Type 10) associated with Cash Letter Control Record (Type 90)

• Examples of Type 10 / Type 90 records on next slides40National Check Payments Certification

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Cash Letter Header Record (Type 10)

• Cash Letter Header Record (via image viewer)

–Note: Two bundles are included in this cash letter


Cash Letter Control Record (Type 90)

• Cash Letter Control Record (via image viewer)–Note: Two bundles are included in this cash letter


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X9.100‐187

Bundle Header

(20)

Bundle Control

(70)

Check Detail

“25” Record

Image ViewDetail(50)

Item(s)

Image View

Image ViewData(52)

Record Types 50 and 52 occur together for each Image ViewPair of 50/52 records for front view Pair of 50/52 records back view

Check DetailAdd. A

“26” Record

Check DetailAdd. C

“28” Record

One ”26” record to identify return

location

Forward Presentment

Bundle

One “28” record to identify each

subsequent endorser

Forward Presentment Bundle Diagram

Mandatory Record

Conditional Record


Multiple Conditional Records

C

M

C

LEGEND Logical Entity

Addenda Records

“25” record contains check

MICR DATA



Bundle Records

• Bundle Header Record (Type 20)– First record of bundle containing:Destination and ECE Institution Routing NumbersVarious datesBundle IDBundle Sequence NumberCycle Number

– Code to indicate forward or return bundleNot mixed in same cash letter

• Bundle Control Record (Type 70)– Provides control totals in bundle for:Item count, Total amount, Images within Bundle count

• Bundle Header Record (Type 20) associated withBundle Control Record (Type 70)

• Examples of Type 20 / Type 70 records on next slidesNational Check Payments Certification 44

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Bundle Header Record (Type 20)

• Bundle Header Record (via image viewer)–Note: Ten items are included in this bundle


Bundle Control Record (Type 70)

• Bundle Control Record (via image viewer)– Note: In this example, 300 items are included in bundle


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Check Detail Record (Type 25)

• One record for each check containing:– Information from MICR line of check–ECE Institution Item Sequence Number

• Codes to indicate:–Type of Documentation associated with this check–Type of returns accepted–Archive available–Whether and how MICR line repaired

• For business‐sized check, would carry the aux‐on us field in this record


Check Detail Record (Type 25)

• Sample check MICR line:

• Type 25 record using image viewer:


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Check Detail Addendum A Record (Type 26)

• Associated with previous Check Detail Record–Multiple Type 26 records if check re‐presented

• Identifies/provides information on return location for customer returns – typically BOFD–Fields conform to Reg CC requirements

• Codes indicate:–Whether / how MICR line repaired– Institution that truncated original checkTruncation indicator set to ‘Y’

o Only one truncation indicator set to ‘Y’ o Note: If value of ‘4’ in EPC field in Type 25 or Type 31 record indicates this is an image of a substitute check, ALL truncation indicators set to ‘N’


Check Detail Addendum A Record (Type 26)

• Type 26 record (via image viewer)– Truncation Indicator = “Y” in example indicating the institution that truncated the original physical check

50National Check Payments Certification Source: www.AllMyPapers.com National Check Payments Certification

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Check Detail Addendum C Record (Type 28)

• Associated with previous Check Detail Record– May have multiple Type 28 records – subsequent endorsers– Fields conform to Reg CC and other endorsement requirements (e.g.; ECCHO Rules)

• Record carries codes to indicate– Institution that truncated original check– Whether / how MICR line repaired– Defines bank’s role in collection process – Carries Return Reason (on re‐presented item)

• Two purposes for Type 28 records– Carry Return Reason from prior 35 record (re‐presented items)

– For subsequent indorsements: Identifies and provides information for each endorsing institutionRequired for IRD creation


Check Detail Addendum C Record (Type 28)

• Type 28 record (via image viewer)

–Note the Truncation Indicator = “N”Only one institution that is the Truncating Bank

52National Check Payments Certification Source: www.AllMyPapers.com National Check Payments Certification

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Image Cash Letter Standard – Returns

X9.100‐187

Bundle Header

(20)

Bundle Control

(70)

ReturnDetail

“31” Record

Return Item(s)

Image View


location

Return DetailAdd. A

“32” Record

Return DetailAdd. D

“35” Record

Return Bundle


subsequent endorser

Return Bundle Diagram

Return DetailAdd. B

“33” Record

Mandatory Record

Conditional Record



C

M

C



Image ViewData(52)

“31” and “33” Return Detail records contain MICR data

Record Types 50 and 52 occur together for each Image ViewPair of 50/52 records for front view Pair of 50/52 records back view



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Return Records

• Different set of records used to return items in image cash letter file (30‐series records)

• Return records correspond to forward records–Type 25 to Type 31With Type 33 if Aux on‐us value present

–Type 26 to Type 32–Type 28 to Type 35

• When returning an item:–Forward records convert to return records by copying the data from/to corresponding fields Generally referred to as “flipping the records”


Return Record (Type 31)

• One record for each return created by Paying Bank or returning institution containing:–Information from Check Detail Record or original check

–Forward Bundle Date–ECE Institution Item Sequence Number–Codes to indicate:Return ReasonArchive availableNumber of Times Returned


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Return Record (Type 31)

• Example: Type 25 data copied to Type 31 record–Note Return Reason Code – “A”


Return Addendum B Record (Type 33)

• Used in conjunction with Return Record (Type 31)

• May contain Auxiliary On‐Us field–Auxiliary On‐Us: Optional field left of routing number field on MICR lineUsed on business‐sized checks for:

oConsecutive serial numbersoAccount control informationoProduct codes/ other information

–Carried in Check Detail Record (Type 25) on the Forward presentment file


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Return Addendum Records

• Return Addendum A Record (Type 32)–Mirrors Check Detail Addendum A Record (Type 26)

–Type 26 record identifies return location for customer returns

• Return Addendum D Record (Type 35)–Carries Paying Bank identification; and –Return Reason codeSame Return Reason as Return Record (Type 31)

–For re‐presented itemsRecord mirrors Check Detail Addendum C Record (Type 28) which identifies and provides information for each endorsing institution in the forward collection process


Return Addendum A Record (Type 32)

• Example: Data copied from Type 26 to Type 32 record

Record 26 Record 32


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Return Addendum C Record (35)

• Type 28 to Type 35 record (via image viewer)–Note: Two Type 35 records for this itemReturn Reason Code (“A”) in last Type 35 record

61

Source: www.AllMyPapers.com National Check Payments Certification

Image Views

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X9.100‐187

Bundle Header

(20)

Bundle Control

(70)

Check Detail

“25” Record


Item(s)

Image View

Image ViewData(52)

Record Types 50 and 52 occur together for each Image View- Pair of 50/52 records for front view - Pair of 50/52 records back view

Check DetailAdd. A

“26” Record

Check DetailAdd. C

“28” Record


location

Forward Presentment

Bundle


subsequent endorser

Forward Presentment Bundle Diagram

Mandatory Record

Conditional Record



C

M

C


Addenda Records

“25” record contains check

MICR DATA



Image View Records

• Image View Detail (Type 50) / Image View Data (Type 52) Records

• Conveys image data and image: –On forward collection for Check Detail Record (Type 25); or

–On return for Return Record (Type 31) • Records occur together; for each check imaged, must have:–Pair of 50/52 records for front view and–Pair of 50/52 records for back viewPartial views permitted by agreement


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Image View Records

• Contain very technical information that describes the item (Type 50 record) and contains the view of the imaged item (Type 52 record)–Type 50 Record – Image view Contains codes that describe the image including:

o Format o Compressiono View side (front or rear)o View descriptor (full or partial view)o Digital signature and security information, if included

–Type 52 Record – Image DataIncludes the image and:

o Reference Key informationo Security information o Clipping informationo Digital signature, if included


Image View Records Type 50 / Type 52

• Variable length records–Example shows Type 50/52 records (via image viewer)Length = 80 for detail about the image (Type 50); and Length = 5742 for the image view (Type 52)

66Source: www.AllMyPapers.com

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Record Formats – Processing Flows

Build an Image Cash Letter (ICL)

Build the ICL – Overview


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Which Electronic Records?

Processes 1 – 3: • Deposit and image presentment (1)• Image return (2)• Image re‐presentment (3)

– BOFD A may re‐present item automatically

What X9 record types would be required on:– Initial image presentment (1)– First return (2)– Re‐presentment (3)

Processes 4 – 6: • Second image return (4)• BOFD A provides a substitute check to customer• Customer re‐deposits substitute check at a

second depositary bank ‐ BOFD B (5)• BOFD B presents item as image (6)

What X9 record types would be required on:– Second return (4)– Presented image from BOFD B to Paying Bank (6)



Forward Presentment and Initial ReturnProcesses 1 – 3: • Deposit and image presentment (1)• Image return (2)• Image re‐presentment (3)

X9 record types required on:• Initial image presentment (1)

– Type 25– Type 26

• First return (2)– Type 31/33 – (33 only if aux on‐us from business‐sized check)– Type 32 – “flipped” from 26 record– Type 35 – New record to carry Return Reason Code

• Re‐presentment (3)– Type 25– Type 26 – “flipped” from 32 record on first return (2)– Type 28 – “flipped from 35 record on first return (2)– Type 26 – New for second presentment (3)


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Second Return and Re‐PresentmentProcesses 4 – 6: • Second image return (4)• BOFD A provides a substitute check• Customer re‐deposits substitute check at

second depositary bank ‐ BOFD B (5)• BOFD B presents item as image (6)

X9 record types required on:• Second return (4)

– Type 31/33 – (33 only if aux on‐us from business‐sized check)– Type 32 – “flipped” from first 26 record (1)– Type 32 – “flipped” from second 26 record (3)– Type 35 – “flipped” from first 28 record (3)– Type 35 – New record for this return (w/current return reason code)

• Substitute Check deposited at BOFD B (5)– Item has been dropped to paper when IRD created– Substitute check (IRD) carries all prior indorsements

• Image presented from BOFD B (6)– Type 25 ‐ New– Type 26 – New w/BOFD B indorsement information


Questions


2016-2017



Recommended Resources

• Standards available at: www.X9.org• Supplemental Handout: X9 File‐Records Example• Universal Companion Document (UCD)

– Currently available at CheckImage Collaborative website: www.checkimagecentral.org

– CheckImage Central websiteReviews various papers on Technical and Operational topics – examples:

o “Endorsements: Information and Usage”o “Proper Use of Return Codes in Image Exchange”


Thank You!


NOTICEThis NCPC Program document contains copyrighted materials of its publisher.

These materials may not be reproduced or published, in whole or in part, without the express permission of ECCHO

Copyright© 2016 by the Electronic Check Clearing House Organization

notices - wespay.org · image replacement document –ird ... notes: creating ... (dpi must be 200...

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