Converted Item Return

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Question:

If a bank converts checks deposited by a merchant by Remote Deposit Capture to ACH and the item comes back as a return, can the return be converted back to a paper IRD for redeposit?

Answer:

No. By definition, an IRD (Image Replacement Document) or its Check-21 compliant sister, the Substitute Check, is a document created from an image of an original check. The bounced Back Office Check Conversion (BOC) is returned as an ACH item, not as an image file. The returned BOC entry can be re-initiated in its original BOC format (just as a paper check can be re-deposited and/or re-presented), but only twice (see NACHA Operating Rules, section 2.14), if it is returned for NSF or uncollected funds. NACHA rules allow the original check that is converted to a BOC (or Accounts Receivable Check Conversion -- ARC) entry to be retained under secure conditions. If the BOC entry is returned, the original check can be deposited. The merchant/originator cannot submit both the original check and a re-initiation of the BOC entry at the same time. However, it would be permissible to re-initiate the BOC twice following the first return for NSF and if both those attempts are futile, to retrieve the original and deposit it once or twice. That means the merchant can have as many as five attempts to collect the same payment.

First published on BankersOnline.com 3/09/09