News You Can Use!
March 19, 2009
When is a duplicate not a duplicate?
The Issue: An image item may be erroneously considered a duplicate when it is represented after it has been returned unpaid as an NSF.
No Duplicate Warranty: No party will be asked to pay an item twice is provided in Reg CC for substitute checks, in the Federal Reserve’s OC3 for image exchanges through the Fed and in the ECCHO Rules for private sector image exchanges.
The Scenario: An image is sent for collection and the paying bank returns the image as NSF. The item is represented either from the returned item that contains all of the endorsements and the previous return reason code or from the original item that was not cleared and that does not contain all of the endorsements and previous return reason code.
Analysis: Since the item was returned as an NSF, it was not paid. Therefore, the represented item is not actually a duplicate under the warranties. Institutions need to verify whether duplicate suspects have actually been paid.
Additional Considerations: Items can be collected, returned and represented as fast as the same day using image exchange. The absence of a return reason code and/or endorsements does not mean the item was duplicated. Duplicate detection systems may need to be modified to account for accelerated image collection/return processes and not rely solely on the missing characters of represented items. Additionally, many institutions prefer to handle duplicates as adjustments rather than returns which creates the potential that a paying institution could miss its return deadline and loose its right to return. Examples of when an item may or may not be considered a duplicate is addressed in ECCHO’s Rules and Commentary on the no duplicate warranty.