Glossary

Account

For the purposes of Check 21 “account” means all deposit accounts as defined in Reg. D, 12 CFR 204.2(a)(1)(i). This includes transaction, savings, MMDA and time deposits.

Automated Clearinghouse or ACH

A facility that processes debit and credit transfers under rules established by a Federal Reserve Bank operating circular on automated clearinghouse items or under rules of an automated clearinghouse association. See also “Clearinghouse”.

Bank

For the purposes of Check 21 a “bank” means an insured bank, a mutual savings bank, a savings bank, an insured credit union, a savings association, an agency or a branch of a foreign bank, and members of a Federal Home Loan Bank. The term “bank” also includes any person engaged in the business of banking, as well as a Federal Reserve Bank, a Federal Home Loan Bank, and a state or unit of general local government to the extent that the state or unit of general local government acts as a paying bank. Unless otherwise specified, the term “bank” includes all of a bank’s offices in the United States, but not offices located outside the United States. A “bank” also includes the Treasury of the United States and the United States Postal Service to the extent that they act as a paying bank.

Banking Day

Means that part of any business day on which an office of a bank is open to the public for carrying on substantially all of its banking functions.

Business Day

Is a calendar day other than a Saturday or a Sunday. These dates are not considered business days; January 1, the third Monday in January, the third Monday in February, the last Monday in May, July 4, the first Monday in September, the second Monday in October, November 11, the fourth Thursday in November, or December 25. If January 1, July 4, November 11, or December 25 falls on a Sunday, the next Monday is not a business day.

Check

Is (1) A negotiable demand draft drawn on or payable through or at an office of a bank; (2) A negotiable demand draft drawn on a Federal Reserve Bank or a Federal Home Loan Bank; (3) A negotiable demand draft drawn on the Treasury of the United States; (4) A demand draft drawn on a state government or unit of general local government that is not payable through or at a bank; (5) A United States Postal Service money order; or (6) A traveler\'s check drawn on or payable through or at a bank. (7) The term check includes an original check and a substitute check.

Note: The term “check” does not include a noncash item or an item payable in a medium other than United States money. A draft may be a “check” even though it is described on its face by another term, such as money order. For purposes of Check 21 the term “check” also includes a demand draft of the type described above that is nonnegotiable.

Claimant Bank

A bank that submits a claim for a recredit for a substitute check to an indemnifying bank under 12 CFR 229.55.

Clearinghouse

Is an association or place where banks exchange checks and drafts drawn on each other, and settle their daily balances.

Collecting Bank

Any bank handling a check for forward collection, except the paying bank.

Consumer

A natural person who (1) with respect to a check handled for forward collection, draws the check on a consumer account or (2) with respect to a check handled for return, deposits the check into or cashes the check against a consumer account.

Consumer Account

Any account used primarily for personal, family, or household purposes.

Contractual Branch

With respect to a bank, means a branch of another bank that accepts a deposit on behalf of the first bank.

Copy

A copy of an original check means any paper reproduction of an original check, including a paper printout of an electronic image of the original check, a photocopy of the original check or a substitute check. See also “Sufficient Copy”.

Customer

Is a person having an account with a bank.

Depositary Bank

Is the first bank to which a check is transferred even though it is also the paying bank or the payee. A check deposited in an account is deemed to be transferred to the bank holding the account into which the check is deposited, even though the check is physically received and indorsed first by another bank.

Forward Collection

Means the process by which a bank sends a check on a cash basis to a collecting bank for settlement or to the paying bank for payment.

Good Faith

Means honesty in fact and observance of reasonable commercial standards of fair dealing.

Indemnifying Bank

A bank that transfers, presents, or returns a substitute check or a paper or electronic representation of a substitute check for which it receives consideration shall indemnify the recipient and any subsequent recipient (including a collecting or returning bank, the depositary bank, the drawer, the drawee, the payee, the depositor, and any indorser) for any loss incurred by any recipient of a substitute check if that loss occurred due to the receipt of a substitute check instead of the original.

Magnetic Ink Character Recognition Line and MICR Line

The numbers, which may include the routing number, account number, check number, check amount, and other information, that are printed near the bottom of a check in magnetic ink in accordance with the American National Standard Specifications for Placement and Location of MICR Printing X9.13 (hereinafter ANS X9.13) for an original check and American National Standard Specifications for an Image Replacement Document –IRD, X9.100-140 (hereinafter ANS X9.100-140) for a substitute check (unless the Board by rule or order determines that different standards apply).

Noncash Item

Is an item that would otherwise be a check, except that (1) a passbook, certificate, or other document is attached; (2) it is accompanied by special instructions, such as a request for special advice of payment or dishonor; (3) it consists of more than a single thickness of paper, except a check that qualifies for handling by automated check processing equipment; or (4) it has not been preprinted or post-encoded in magnetic ink with the routing number of the paying bank.

Original Check

The first paper check issued with respect to a particular payment transaction.

Paper or Electronic Representation of a Substitute Check

Any copy of or information related to a substitute check that a bank handles for forward collection or return, charges to a customer’s account, or provides to a person as a record of a check payment made by the person.

Paying Bank

Means (1) the bank by which a check is payable, unless the check is payable at another bank and is sent to the other bank for payment or collection; (2) the bank at which a check is payable and to which it is sent for payment or collection; (3) the Federal Reserve Bank or Federal Home Loan Bank by which a check is payable; (4) the bank through which a check is payable and to which it is sent for payment or collection, if the check is not payable by a bank; or (5) the state or unit of general local government on which a check is drawn and to which it is sent for payment or collection.

For purposes of Check 21 a “paying bank” also includes the Treasury of the United States or the United States Postal Service for a check that is payable by that entity and that is sent to that entity for payment or collection.

Person

Is a natural person, corporation, unincorporated company, partnership, government unit or instrumentality, trust, or any other entity or organization.

Qualified Returned Check

A returned check that is prepared for automated return to the depositary bank by placing the check in a carrier envelope or placing a strip on the check and encoding the strip or envelope in magnetic ink. A qualified returned check need not contain other elements of a check drawn on the depositary bank, such as the name of the depositary bank.

Reconverting Bank

Is the bank that creates a substitute check; or with respect to a substitute check that was created by a person that is not a bank, the first bank that transfers, presents, or returns that substitute check or, in lieu thereof, the first paper or electronic representation of that substitute check.

Returning Bank

Is a bank (other than the paying or depositary bank) handling a returned check or notice in lieu of return. A returning bank is also a collecting bank for purposes of UCC 4–202(b).

State

Means a state, the District of Columbia, Puerto Rico, or the U.S. Virgin Islands. For purposes of Check 21, state also means Guam, American Samoa, the Trust Territory of the Pacific Islands, the Northern Mariana Islands, and any other territory of the United States.

Substitute Check

A paper reproduction of an original check that (1) contains an image of the front and back of the original check; (2) bears a MICR line that, except as provided under ANS X9.100-140 contains all the information appearing on the MICR line of the original check at the time that the original check was issued and any additional information that was encoded on the original check’s MICR line before an image of the original check was captured; (3) conforms in paper stock, dimension, and otherwise with ANS X9.100-140; and (4) is suitable for automated processing in the same manner as the original check. The Federal Reserve Board can by rule or order determine different standards.

Sufficient Copy

A copy of an original check that accurately represents all of the information on the front and back of the original check as of the time the original was truncated or is otherwise sufficient to determine whether or not a claim is valid. See also “Copy”.

Transfer and Consideration

For the purposes of Check 21 transfer means, with respect to a substitute check or a paper or electronic representation of a substitute check, delivery of the substitute check or other representation of the substitute check by a bank to a person other than a bank. A bank that transfers a substitute check or a paper or electronic representation of a substitute check directly to a person other than a bank has received consideration for the substitute check or other paper or electronic representation of the substitute check if it has charged, or has the right to charge, the person’s account or otherwise has received value for the original check, a substitute check, or representation of the original check or substitute check.

Truncate

To remove an original check from the forward collection or return process and send to a recipient, in lieu of such original check, a substitute check or, by agreement, information relating to the original check (including data taken from the MICR line of the original check or an electronic image of the original check), whether with or without the subsequent delivery of the original check.

Truncating Bank

The bank that truncates the original check; or if a person other than a bank truncates the original check, the first bank that transfers, presents, or returns, in lieu of such original check, a substitute check or, by agreement with the recipient, information relating to the original check (including data taken from the MICR line of the original check or an electronic image of the original check), whether with or without the subsequent delivery of the original check.

Uniform Commercial Code, Code, or U.C.C.

The Uniform Commercial Code as adopted in a state. It is the general business law adopted by a majority of the states regulating the fields of sales of goods; commercial paper, such as checks; bank collections; and secured transactions in personal property.

United States

Are all 50 states, including the District of Columbia, the U.S. Virgin Islands, and Puerto Rico.

Unit of General Local Government

Any city, county, parish, town, township, village, or other general purpose political subdivision of a state. The term does not include special purpose units of government, such as school districts or water districts.