Let's say someone presents a returned item IRD, drawn on your bank, and payable to them. The IRD was returned to them NSF and they would like either cash or a CC. The IRD is legally negotiable (as IRD items will be), but is the piece of paper that is being presented to your bank a real IRD or just a copy? It seems to me that presentation of an IRD in the lobby will be a huge problem for all of us. I'm I missing something?

I am bumping this back to the top because my retail branches are asking what will be the procedure when a customer brings in an IRD to cash after it has been returned. Oh great and magnificent Check 21 Gurus, what do we do ?

Since a substitue checks is a legal representation of the original check, you will handle as you would have handled the original check. I know there are concerns about fraud being perpetrated in this area. I suspect you will have to review your policy on cashing or depositing deposit return items and possibly consider changes to allow additional protection, such as requiring it be deposited and placing an extended hold.

I'm not disagreeing with Bill, I just want to talk about it a little bit more. The underlying concept needs to be that the recipient of the substitute check can do anything with it that he could have done with the original.

If the check is on-us and has been returned one or more times, the payee may show up at the window and want to cash it, just as he could with the original. In this circumstance, your own records should clearly indicate that the check had been presented previously; i.e. you should be able to verify that it is not fraudulent. Your teller should be trained to verify that the original check was returned unpaid, this item is a valid substitute check, and that the funds to pay it are currently avaialable. After that, the teller should ID the payee following normal procedures.

If the check is a deposited item that has been returned, I agree with Bill, I would require that it be deposited; i.e. I would not cash it. Depending on the customer, I would give strong consideration to an exception hold. However, before I accepted the item for deposit, I would verify that mine was the bank of first deposit. If it wasn't, I would not accept the item for deposit.

I've seen a slide presentation on how the warranties would work if a return item were deposited in a different bank for second presentment - I'm not smart enough to understand the permutations and it's easier to just sidestep the problem. (I've said this in a couple meetings and some purists have been appalled. I can live with it.)

I wonder if a policy that states that "we do not negotiate IRD 'checks' for cash or the exchange of a CC if presented in the lobby" would work. In other words, only allow IRD 'checks' to be negotiated through inclearings. The use of inclearings provides protection under Reg CC - duplicate payments. I realize that such a policy would not be fully aligned with the legal status of an IRD, but when it also represents a returned item, more care is needed to avoid losses.

I just don't see how a teller will be able to sort this out productively, assuring that the original was returned and not re-cleared as an original or an IRD prior to cashing the IRD presented or exchanging a CC.

I don't know if this is true or not but a Check 21 presenter said that if a bank chooses not to cash NSF IRD's this information should be placed in the account agreement otherwise it could be considered "wrongful dishonor". Any thoughts from the legal folks out there on this?

If you refuse to cash a check drawn on your bank, whether its the original or a substitute, it could be classified as wrongful dishonor. Your customer ordered you to make a payment pursuant to your contract and you refused. If that refusal is not based on solid grounds and your customer is hurt, get out your own checkbook.

At this point, I would encourage anyone not to consider the substitute check that is a return item as "suspect," particularly if it's drawn on your institution. You should be in a position to verify that the check was presented previously and returned, thus establishing the item's genealogy.

There is another thread discussing substitute checks created by the customer and presented for deposit. That is not what is being addressed here.

Yes, wrongful dishonor provides sufficient risk to prompt the negotiation of IRD's in the lobby. It's just, in theory, the IRD could represent an original checks that was returned months before the IRD is presented - plowing through sufficient data to assure that the original or another IRD was not already paid would be very unproductive.

There are probably groups of people out there right now planning 'stuff' to take advantage of the new checks. Think about it, anyone can secure the right paper, you no longer need real checks, anyone can secure the IRD coding and all one needs is an original check - for the account number, customer signature (just copy the signature - IRD's are copies, so the signature is a copy).

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There are probably groups of people out there right now planning 'stuff' to take advantage of the new checks. Think about it, anyone can secure the right paper, you no longer need real checks, anyone can secure the IRD coding and all one needs is an original check - for the account number, customer signature (just copy the signature - IRD's are copies, so the signature is a copy).

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That's exactly the point that was made at the seminar I attended.

I'm not surprised. I just hate stuff that needs to happen in the lobby environment with little time to give a really serious decision more thought. There is some comfort in viewing a real check with an original signature, versus a less than perfect copy of a check, including a copy of a signature. It's not like IRD's that will be presented periodically in the lobby will represent really good customers as they will have been created out of the returned item process. Within that group of customers and that process anything is possible, but now a decision must be made based on, in essence, a piece of paper that purportedly represents (is) a legal check. This is a very strange road to go down. Someone had better adjust the operations loss budget.

That's a commonly expressed concern. Since there is off the shelf software that allows thieves to replicate most original checks, there will need to be a "business case" for thieves to move to creating the more complex substitute check. They would have to believe it was more readily acceptable than an original check. At present, as this thread indicates, that's a difficult conclusion to support.

That's a commonly expressed concern. Since there is off the shelf software that allows thieves to replicate most original checks, there will need to be a "business case" for thieves to move to creating the more complex substitute check. They would have to believe it was more readily acceptable than an original check. At present, as this thread indicates, that's a difficult conclusion to support.

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Do thieves generate 'business cases'?

Anyway, I see your point. This issue gets down to developing a task list when an IRD is presented in the lobby with determining if the original or another IRD has been already been paid the primary task.