Let's stay on this topic of check conversion because I am still sort of grasping it, but not fully understanding it.

Okay, we will offer check conversion services to our corporate customers. Consumer writes a check to our corporate customer, which then converts the check to an ACH item. For the items that cannot be converted to ACH, our customer will convert them to Image Replacement Documents.

First, do Regulation E protections flow to the check-writer after conversion? Secondly, under Check 21, do the expedited recredit protections flow to the check-writer in the event that the customer receives a substitute check w/ statement, gets double-hit for check and alleges she suffers a loss? Finally, who is responsible for ensuring the quality of the converted check meets industry standards? Our corporate customer or us?

Thanks.

You probably are aware that your corporate customer will have to have the appropriate agreement with its customers with respect to check conversion to ACH or truncation to something other than presentment of the original check. Next, your bank will have to have the appropriate agreement with your corporte customer regarding the creation of IRDs, since your bank will be the Reconvertig Bank, as defined by Check 21 (to be effective 10/28/04). As a Reconverting Bank, you will be responsible for the Warrants and Indemnifications of Check 21. Your agremeent will want to pass that back to your corproate customer since they will be responsible for image quality in producing the IRD and ensuring it meets the legal equivalency requirments of the substitute check, as well as ensuring a double debit does not result from mishandling by your customer.
Reg E applies to the ACH transaction and Reg CC Part D will apply to the substitute check. The Expedited Recredit Process applies to the maker if presented with a substitue check in their statement. The Expedited Recredit does not apply if the customer receives an image statement or a truncated statement. In those case, if a loss can be proven that resulted due to the substitute check, remedy is still available under the warrants or indemnification.
Regarding quality, there is no industry standard. The creator (Reconverting Bank) of the IRD is responsible to ensure it meets the definition as defined in Check 21. That is, it must contain an image of the front and rear of the item that accurately represetns the original, contain the full MICR line of the original item, be in MICR ink (machine processable) and bear the appropriate legend that states it is the Legal Copy of the original item. As stated earier the Reconverting Bank bears the responsibility but can, through its agreement, pass that back to the corporate customer who creates the item.