Transcript Test Master Look

NCP 2015 Exam Cycle
Core Training Series
Session 4
National Check Payments Certification
Standards and Formats
Copyright© 2014 by the Electronic Check Clearing House Organization
NOTICES
This training course may provide an introduction to or summary of various aspects of check
payments and the legal and rules framework for check image exchange. Responsibility for
compliance with image exchange rules, and/or the legal, operational and regulatory
requirements applicable to check image exchange, remains at all times with the financial
institution participating in check image exchange and/or the individual or company using a
check image exchange service.
This presentation and the information contained herein is not intended as legal or compliance
advice or recommendation to any person or company. This document could include technical
inaccuracies or typographical errors and individual users are responsible for verifying any
information found in this presentation and related “live” webinar or webinar playback.
Financial institutions should consult with their legal counsel regarding legal and operational
requirements applicable to any check image exchange program they may offer or in which they
participate.
These program training materials may not be reproduced or published, in whole or in part,
without the express permission of ECCHO.
Copyright© 2014 by the Electronic Check Clearing House Organization
(Certain contributed content subject to third party copyrights)
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Session Overview
• Three Key Standards
– X9.100-140
– X9.100-160
– X9.100-187
• Universal Companion Document (UCD)
• X9.100-187 Standard
– Select Record Formats
• Appendix: Additional Standards
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X9 Standards
Standards
• Consists of Standards and Technical Reports (TR)
• Accredited standards body for Financial Services
– Accredited Standards Committee (ASC) X9, Inc.
• X9 creates American National Standards (ANS)
– Standards accredited by American National
Standards Institute (ANSI)
• Standards can be obtained from X9 or ANSI
– www.X9.org
– www.ansi.org
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Check Standards
• X9.100-140: Image Replacement Document – IRD
• X9.100-160: Magnetic Ink Printing (MICR)
– Part 1: Placement and Location
– Part 2: EPC Field Use
• X9.100-187: Electronic Exchange of Check and
Image Data
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References
• May include “normative” or “informative”
references
– Normative – considered part of the standard
– Informative – information only
Example: X9.100-140 has ten annexes
o Annexes A, B, and C are normative and considered part of
the standard;
» Annex A: Return Reason Codes
» Annex B: Check or IRD Conversions
» Annex C: Conversion Table – Inches to millimeters
 Remaining annexes (D through J): Provide
information but not considered part of the standard
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Standards and Companion Documents
• What Is the UCD?
– Universal Companion Document (UCD)
– Guideline to establish industry consistency in use of the
standard; Not currently part of the standard
– Bank-driven approach to use of the X9.100-187 standard
Focuses on business needs not technological capabilities of image
exchange
• Why Was It Developed?
– To improve image exchange interoperability, minimize and
document differences in files between major image exchanges
Endpoint Exchange
Federal Reserve
The Clearing House/SVPCO
Viewpointe
– To provide uniform industry approach for creating and
validating check image files
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Image Replacement Document – IRD
(X9.100-140)
IRD Standard
• X9.100-140 current revision: Dec. 20, 2013
• 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
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References Other Standards & Reports
• Many other X9 standards and technical reports referenced by IRD
standard
– INCITS-17[R2000] (X3.17): Character Set for Optical Character
–
–
–
–
–
–
–
–
Recognition (OCR-A)
X9.100-110 (X9.7): Document Imaging Compatibility
X9.100-10: Paper for MICR Documents
X9.100-20: Print and Test Specifications for Magnetic Ink Printing
(MICR)
X9.100-111: Physical Check Endorsements
X9.100-151: Check Correction Strips
X9.100-160-1: Magnetic Ink Printing (MICR). Part 1: Placement and
Location
X9.100-160-2: Magnetic Ink Printing (MICR), Part 2: EPC Field Use
Technical Reports:
X9 TR 2: Understanding, Designing and Producing Checks
X9 TR 6: Guide to Quality MICR Printing and Evaluation
X9 TR 8: Check Security
X9 TR 100: Organization of Check-related Payments Standards
– X9.100-187: Electronic Exchange of Check and Image Data
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Substitute Check or IRD?
• What’s the difference between an IRD and a
Substitute Check?
• Nothing!
– Substitute Check
Legal definition in Reg CC
– Image Replacement Document (IRD)
Defined in technical standard X9.100-140
According to X9.100-140, an IRD supports legal
framework for Check 21
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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 requirement
All checks (including substitute check) must have
routing number of the Paying Bank preprinted or postencoded 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 item
MICR characters may then be printed in non-magnetic
ink
Substitute check used for this purpose must still
conform to all other requirements of X9.100-140
standard
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MICR Areas
• IRD – Required MICR Region (region 5F)
– Must be present on IRD and contain MICR line as taken
from original item
– Must include special EPC character in position 44
“4” identifies a forward substitute check
• IRD – Optional Qualified MICR Region (region 6F)
– Used for printing Optional Qualified MICR line on strip
attached to IRD
– Qualified Returns – use region 6F
For return to BOFD or Return Processing Bank
– Must include special EPC character in position 44
“5” identifies a return substitute check
• For both required and optional MICR areas:
– Must use only E-13B MICR characters
– Must be printed in specific area on IRD (5F or 6F)
See following substitute check examples
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Substitute Check
Forward Substitute Check - Front
Clipped Area
Creating Institution Routing Number,
Creation Date & Sequence Number
Legal
Legend
1800539446
[053000183] 01/03/2002
Original Truncating Institution Routing
Number, Date & Sequence
Original Scanned Front
Image
Region
5F
Optional Area
No branding or
marketing
Substitute Check
Identifier
MICR Line from
Original Check
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.
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Substitute Check
18
National Check Payments Certification
Return Substitute Check
Return Substitute Check - Front
Return Reason Overlay
Region
6F
Return Reason
Printed on Return
Substitute Check
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Return Substitute Check
Identifier
‘5’ can only appear on 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.
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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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References Other Standards & Reports
• Many other references, X9 standards and technical
reports are referenced by IRD standard
– Accuity: American Bankers Association Key to Routing
Numbers
– X9.100-110: Bank Check Background and Convenience
Amount Field Specification
– X9.100-10: Paper Specifications for MICR Documents
– X9.100-20: Print and Test Specifications for Magnetic Ink
Printing (MICR)
– X9.100-140: Specifications for an Image Replacement
Document - IRD
– X9.100-151: Check Correction Strip Specification
– Technical Reports
X9 TR 2: Understanding, Designing and Producing Checks
X9 TR 100: Organization of Standards for Paper-based and Imagebased Check Payments
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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
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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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Universal Companion Document
Universal Companion Document
• Background: Needed vehicle for common edit practices
– Uniform format needed for the exchange of images to:
Provide flexible approach to identify data elements critical to payment
processing
Establish business practices for image exchange
Establish file-level and item-level rejection criteria
• Purpose of UCD
– Formalize industry standard for check image exchange
– Clarify how financial institutions should use image standard
• Components to UCD adoption:
– More detailed documentation
– Validation
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Image Standard and UCD
• Guideline to establish industry consistency in the
standard
– X9.100-187 standard defines “WHAT” records must be used
for image exchange
– UCD explains “HOW” to populate the fields in each record
• Hierarchy of File/Record Formats
– Forward and Return Record Types
– Cash Letter structure
– Endorsement records for both:
BOFD; and
Subsequent Collecting Bank(s)
• Following section will illustrate commonly used record
formats
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UCD Document – General Conventions
• UCD details each record deemed to have critical
payment data
– Lists all associated fields contained in standard
• Two additional pieces of data not included in
standard also covered in the UCD:
– Validation Criteria: What will exchange partner(s)
expect?
Is data validation for this particular field:
o Required, Required, if present, and None
– Comments: Information augmenting/clarifying the
standard to facilitate exchange
Example: Records May be Mandatory or Conditional
o Mandatory: Must always appear within the file
o Conditionally Required: Will appear when specific condition is
fulfilled
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Electronic Exchange of Check and Image Data
(X9.100-187)
X9.100-187
• Standard for image files exchanged today
• What is the current format?
– Cash letter structure
– Supports the exchange of:
Posting data only
Posting data and check images
Posting data followed by additional data and image file
– Variable length records to accommodate images
• Utilizes UCD as guideline for industry consistency
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Cash Letter Structure
• Physical File Representation
– One file with three (3) Cash Letters
– Cash letter may have one or
more bundles
File-1
Bundle 2
• Image file/record formats:
Bundle 1
– X9.100-187 record formats
CASH LETTER #3
WITH TOTAL
mirror paper environment in
many ways
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)
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Bundle 1
CASH LETTER #2
WITH TOTAL
Bundle 3
Bundle 2
Bundle 1
CASH LETTER #1
WITH TOTAL
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Forward Presentment
X9.100-187
Selected Record Views
Cash Letter Hierarchy Diagram
File
Header
(01)
Cash Letter
Header
(10)
LEGEND
M
Mandatory
Record
Forward
Presentment
Bundle
File
Control
(99)
Cash Letter
Forward presentment bundles
and/or return bundles
Return
Bundle
Cash Letter
Control
(90)
Multiple
Logical
Entities
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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 count
Item count
Total amount
• File Header Record (Type 01) associated with
File Control Record (Type 99)
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Cash Letter Records
• Cash Letter Header Record (Type 10)
– First record of cash letter containing:
Destination and ECE Institution Routing Numbers
Various dates and time
– Codes to indicate
Forward or return cash letter
Inclusion or to follow of image records
Type of returns
• Cash Letter Control Record (Type 90)
– Provides control totals for cash letter
Bundle Count
Item Count
Total Amount
• Cash Letter Header Record (Type 10) associated with
Cash Letter Control Record (Type 90)
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X9.100-187
Selected Record Views
Forward Presentment Bundle Diagram
Forward
Presentment
Bundle
M
Bundle
Header
(20)
Check
Detail
“25” Record
“25” record
contains check
MICR DATA
One ”26” record to
identify return
location
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Check Detail
Add. A
“26” Record
One “28” record
to identify each
subsequent
endorser
Check Detail
Add. C
“28” Record
Mandatory
Record
C
Bundle
Control
(70)
Item(s)
Addenda
Records
Logical
Entity
LEGEND
Multiple
Logical
Entities
C
Conditional
Record
Multiple
Conditional
Records
Image View
Image View
Detail
(50)
Image View
Data
(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
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Bundle Records
• Bundle Header Record (Type 20)
– First record of bundle containing:
Destination and ECE Institution Routing Numbers
Various dates
Bundle ID
Bundle Sequence Number
Cycle Number
– Code to indicate forward or return bundle
Not 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 with
Bundle Control Record (Type 70)
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Selected Cash Letter Records – Forward
• 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 auxon us field in this record
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Selected Cash Letter Records – Forward
• Check Detail Addendum A Record (Type 26)
– Associated with previous Check Detail Record
– May contain multiple records when check re-
presented
– Identifies/provides information on return location
for customer returns - typically BOFD
Fields conform to Reg CC requirements
– Codes indicate institution that truncated original
check; Not truncated IRD
One and only one truncation indicator set to ‘Y’
o Unless ‘4’ in EPC field in Type 25 or Type 31 record indicating
an image of a substitute check
o If this is the case, ALL truncation indicators set to ‘N’
– Codes indicate whether / how MICR line repaired
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Selected Cash Letter Records – Forward
• Check Detail Addendum C Record (Type 28)
– Associated with previous Check Detail Record
– May contain multiple records for subsequent
endorsers
– Identifies and provides information for each
endorsing institution
Fields conform to Reg CC and other endorsement
requirements
– Codes to indicate
Institution that truncated original check; Not truncated
IRD
Whether / how MICR line repaired
Carries Return Reason
Defines bank’s role in collection process
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Selected Cash Letter Records – Forward
• Check Detail Addendum C Record (Type 28)
– Two key purposes
Carry Return Reason
o When flipped from a prior 35 record on a re-presented
item
 For subsequent indorsements
o Shows bank’s role in collection process if additional
financial instutition(s) handled the item and provided
indorsement(s)
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Returns
X9.100-187
Selected Record Views
Return Bundle Diagram
Return
Bundle
M
Mandatory
Record
C
Conditional
Record
“31” and “33”
Return Detail records
contain MICR data
Return
Detail
“31” Record
Bundle
Header
(20)
Return Detail
Add. A
“32” Record
One ”32” record to
identify return
location
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Return
Item(s)
Return Detail
Add. B
“33” Record
One “35” record
to identify each
subsequent
endorser
Logical
Entity
LEGEND
Multiple
Logical
Entities
C
Multiple
Conditional
Records
Bundle
Control
(70)
Return Detail
Add. D
“35” Record
Image View
Image View
Detail
(50)
Image View
Data
(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
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Selected Cash Letter Records – Return
• 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 Reason
Archive available
Number of Times Returned
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Selected Cash Letter Records – Return
• Return Addendum B Record (Type 33)
– Used in conjunction with Return Record (Type 31)
• Contains Auxiliary On-Us field for business-sized
checks
– Auxiliary On-Us: Optional field left of routing
number field on MICR line
Used on business-sized checks for:
o Consecutive serial numbers
o Account control information
o Product codes/ other information
– Carried in Check Detail Record (Type 25) on the
Forward presentment file
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Selected Cash Letter Records – Return
• Return Addendum A Record (Type 32)
– Record mirrors Check Detail Addendum A
Record (Type 26)
 Type 26 record identifies return location for
customer returns
• Return Addendum D Record (Type 35)
– Record mirrors Check Detail Addendum C
Record (Type 28)
 Type 28 record identifies and provides information
for each endorsing institution and any subsequent
indorsement information
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Image Views
X9.100-187
Selected Record Views
Forward Presentment Bundle Diagram
Forward
Presentment
Bundle
M
Bundle
Header
(20)
Check
Detail
“25” Record
“25” record
contains check
MICR DATA
One ”26” record to
identify return
location
National Check Payments Certification
Check Detail
Add. A
“26” Record
One “28” record
to identify each
subsequent
endorser
Check Detail
Add. C
“28” Record
Mandatory
Record
C
Bundle
Control
(70)
Item(s)
Addenda
Records
Logical
Entity
LEGEND
Conditional
Record
Multiple
Logical
Entities
C
Multiple
Conditional
Records
Image View
Image View
Detail
(50)
Image View
Data
(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
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Selected Cash Letter Records – Image
• 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 view
– Partial views permitted by agreement
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Selected Cash Letter Records – Image
• Type 50 Record - Image view
– Contains codes that describe the image including:
Format
Compression
View side (front or rear)
View descriptor (full or partial view)
Digital signature and security information, if included
• Type 52 Record – Image Data
– Includes the image and:
Reference Key information
Security information
Clipping information
Digital signature, if included
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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 representment (3)
– BOFD A may represent 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)
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Which Electronic Records?
Forward Presentment and Initial Return
Processes 1 – 3:
• Deposit and image presentment (1)
• Image return (2)
• Image representment (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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Which Electronic Records?
Second Return and Re-Presentment
Processes 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
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Questions
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Recommended Resources
• Standards available at: www.X9.org
• Universal Companion Document (UCD)
– Published/freely available at Checkimage Collaborative
website: www.checkimagecentral.org
– CheckImage Central website
Various papers on Technical and Operational topics –
examples:
o “Endorsements: Information and Usage”
www.checkimagecentral.org/PDF/UCD_Endorsements_Reformatted_2011_Mar_09.pdf
o “Proper Use of Return Codes in Image Exchange”
www.checkimagecentral.org/pdf/ProperUseOfReturnCodesInImageExchange.pdf
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Ellen Heffner, NCP
Director and Education Manager
[email protected]
214-273-3211
Standards and Formats
Thank You!
Electronic Check Clearing House Organization
3710 Rawlins Street; Suite 1075
Dallas, Texas 75219
NOTICE
This NCPC Program document contains copyrighted materials of its publisher.
These program training materials may not be reproduced or published, in whole or in part, without the express permission of ECCHO.
Appendix – Additional Standards
Standards & Technical Reports
• Additional Standards and Technical Reports
– Available from X9 organization www.x9.org
– Standards
X9.100-110: Document Imaging Compatibility
X9.100-111: Physical Check Endorsements
X9.100-181: TIFF Image Format for Image Exchange
X9.100-183: Electronic Check Adjustments
– Paper Standards/Technical Reports
X9/TR-2: Understanding, Designing and Producing Checks
X9/TR-8: Check Security
X9/TR-33: Check Image Quality Assurance and Processes
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X9 Standards
• X9.100-110: Document Imaging
Compatibility (2011) [New name]
– Scope: Standard specifies the location and
background design of essential check data
fields. It is intended for all business size and
personal size checks
Formerly part of X9.7
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X9 Standards
• X9.100-111: Physical Check Endorsements
– Standard for legibility / uniformity of
endorsement process as defined within
exchange of standard formatted files
Does not currently apply to areas for placement of
“endorsement overlay areas” on check image but
could include that in scope for next revision
– Specifies parameters for:
Design elements on back of the check; and
Placement and data content of endorsements
• Currently being updated
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X9 Standards
• X9.100-181 – TIFF Image Format for Image
Exchange (2010)
– Scope: Defines specific fields and parameters for
check image exchange and the allowable values
for those parameters.
Identifies the fields that should be read and required
or allowable values for those fields to accomplish
interoperability
Goal – Interoperability for check image exchange
– Consider TIFF as “envelope” around the image
TIFF “tags” describe the image
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X9 Standards
• X9.100-183 – Electronic Check Adjustments
(2010)
– Scope: Establishes the file sequences, record
types, and field formats to be used for the
electronic exchange of check adjustment
messages.
Standard format supports:
o Check related adjustment notices
o Requests for individual checks
o Bundles of checks
o Check cash letters
o Attachment of images
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X9 Paper Standards/Technical Reports
• X9/TR 2: Understanding, Designing and
Producing Checks (2005)
– Purpose: To promote uniformity in design and
production of checks
Improve processing and handling throughout
check payments system
– Note: This technical report used as reference
for the “life cycle of a check”
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X9 Technical Reports
• X9/TR 8 – Check Security Guidelines
– Scope: Provides information about industry
practices and processes that identify and deter
fraudulent use of paper checks, check images,
and electronically transmitted check data
Report also discusses tools that detect and
prevent fraud, covering topics from high-tech
software to low-tech physical control of the source
documents
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X9 Technical Reports
• X9/TR 33 – Check Image Quality Assurance —
Standards and Processes
– Scope: Provide a framework for assuring and
assessing image quality to support the exchange of
check images between financial institutions.
– Provides detail about the problems and limitations
associated with automated methods and systems
that might be used to detect check quality
problems (i.e., image defects and usability issues)
• Currently being updated
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