Electronic Check Processing

The Check Clearing for the 21st Century Act (Check 21) or regulation CC (12 C.F.R. Part 229) was enacted by the Federal Reserve System to foster the transition from paper-based to image-based check processing to improve the efficiency of the nation’s payment system.

Applicability

Effective in 2004, Check 21 created a unique definition of a bank and affects insured banks, mutual savings banks, savings banks, insured credit unions, savings associations, an agency or a branch of foreign banks, members of a Federal Home Loan Bank, Federal Reserve Banks and any business engaged in the business of banking—such as the U.S. Treasury and U.S. Postal Service.

Banking Industry Impact

While the regulation doesn’t require companies to change current check processing methods, it establishes that a properly prepared electronic check, or substitute check, is the legal equivalent of the original. To truncate, or create a digital image of the check, the bank must capture both the front and the back including the Magnetic Ink Character Recognition (MICR) line. Additionally, it must state that the reproduction is a legal copy of the original. In order to process checks electronically, banks are investing in technologies that enable them to:

• Electronically manage check images in a secure Enterprise Content Management (ECM) system
• Leverage electronic checks for improved check processing efficiency
• Distribute consumer disclosures quickly and easily

ECM Enables Check 21 Compliance

Banks invest in Digitech Systems’ Enterprise Content Management (ECM) solutions, because they simplify the management of electronic check images. Chief information officers, compliance officers and records managers can reduce Check 21 compliance costs while enabling operational efficiency using either PaperVision^® Enterprise, the on-premise ECM system, or ImageSilo^®—the on-demand, or Software as a Service (SaaS) ECM service. With accurate check scanning, automated check processing and a centralized information system, banks of any size can enhance cash flow and build confidence in their compliance strategy.

Electronic Check Management

Check 21 releases banks from physically transferring paper checks, so they can adopt faster, more effective methods of check processing. PaperVision^® Capture is compatible with a variety of check scanners and allows banks to accurately capture check data including the MICR line. PaperVision Enterprise and ImageSilo can then process and securely manage check images in a single, searchable source for information that facilitates productivity.

• Fast and accurate capture technology enables verified check imaging and automated processing.
• Point-and-click integration streamlines management by providing direct access to check images from bank accounting systems or other line-of-business applications.
• Document grants eliminate the transfer of paper checks by allowing outside banks secure access to check images for payment.

Automated Check Processing

Since Check 21 went into effect, more banks are using electronic information to improve check processing times. A Digitech Systems ECM system provides workflow capabilities that can enhance processing speeds to create a competitive advantage.

• PaperVision^® Enterprise WorkFlow automatically routes documents through your bank’s customized procedures to expedite processing.
• Prioritized work queues and time-sensitive alerts ensure your bank responds to customer requests in a timely manner.
• Continually updated workflow reports show check processing status and identify process bottlenecks.
  

Simple Information Disclosure

Each time a consumer requests a copy of a check and the bank responds with a substitute check, a disclosure must be given to the customer. PaperVision Enterprise and ImageSilo make it easy for banks to send disclosures and to keep detailed records of each one.

• Distribution capabilities offer unlimited document distribution and enable banks to easily and securely share disclosures with customers.
• Enhanced auditing maintains a record of all disclosures, so companies can validate who received information, when and why.
• Disclosure reports can be printed, exported and archived for easy recordkeeping.

This document is for informational purposes only; Digitech Systems, Inc. is not liable for errors, omissions or inadequacies. Please consult an appropriate compliance expert to understand your needs. This information is subject to change without notice.