Our bank is in the process of deciding how we will handle items received via image exchange as it relates to non-truncated accounts. At the BAI conference, I heard the following options that banks are considering:

1. Best Option - Do not print a copy of a substitute check to return in the statement. Rather, include information within the text of the statement that states that the check was received electronically.
2. Second Best Option - Return actual checks received, but print image statements of the checks received electronically.
3. Worst Option - Print substitute checks of items received electronically and include with actual checks received in the statement to the customer.

I have confirmed that our disclosures will allow...or can be adjusted to allow any of these three options.

I'm curious how other banks are handling this issue. Are there any other options I've left out? Our marketing department feels strongly that we need to use option 3, but as an operations person, I'm concerned about the cost and complexity of doing this way. Any comments would be appreciated!

I was hoping other bankers would respond to your post because your exploration of options is thoughtful. Perhaps I can help prime the pump... I agree with your order of desirability and am a bit nonplused that your marketing folks chose the least desirable option from any perspective.

To me, the only thing that could explain that choice is a lack of understanding that the substitute check is not expected to be a permanent feature of the landscape; it will eventually go away. It is a stopgap measure intended to allow paper based banks some time to convert to image processing or a statement that does not include images or checks, only the amount and number of the check and the date it was processed. Your bank apparently already there, but some folks want to hold onto the past. Moreover, providing the customer with the check number, amount and date of posting (all the UCC requires) rather than the substitute check, has a secondary effect of significantly reducing the possibility of consumer claims.

If all that is on the other side of the scale is a theoretical claim of "customer satisfaction," it is outweighed. Customer satisfaction is dramatically increased by "customer communication."

Ken, I don't profess to know the details but how does the state law of New York and Massachusettes come into play with respect to your response. My understanding is that in those states a bank must offer a check return product, which suggests providing an alternative without the customer agreement is not acceptable. I might not have the correct understanding.

I hope you are correct because I agree with you. My opinion is, in states where the law obligates the bank to return the original check, then it would have to return the substitute check. mdmtx doesn't indicate what state he or she is from. However, the question was sophisticated enough that I assumed mdmtx would have mentioned being in one of the states where the relevant provisions of the UCC do not conform to the model language. Of course, you know what happens when you assume...

mdmtx, I will be attending the BAI Check 21 conference next week in Dallas. What did you think of the conference?

Our bank has branches in Texas and California. I have heard that New York and Mass have special requirements, however I'm told that for where we are located, we as a bank do have the option of not sending IRD's in non-truncated accounts. We may need to change our customer agreements to satisfy this option, should we decide to use it.

I was referring to the BAI Trans Pay Conference in Las Vegas. Of course, the major topic of dicussion was Check 21. As with all of these conferences, some of it was very informative, and some less so. It was good to hear what the Fed had to say. I always learn the most just talking to other banks about what they are doing.