Facing the Challenges of the Check 21 World

Since Check 21 became law, we have seen the transition from paper settlement to the digital domain. Paper processing is now more the exception than the standard, and the system is still evolving.


Now that we're into the third year of  Check 21, there can be no doubt: the check-processing world has been turned upside down. Since the legislation, we have seen the transition from paper settlement to the digital domain rapidly evolve. Today, check truncation at the point of presentment is happening at a dramatic pace. At WesCorp (Western Corporate Federal Credit Union), for example, more than 50% of member deposits are now cleared through image exchange—and more than 80% of member share drafts. Paper processing is now more the exception than the standard. Even though WesCorp has no plans to force any of its members to move from paper to image exchange, the trend is clear: This is something credit unions want.

The electronic leap, however, is not without its challenges. New image-exchange processors have entered the market; many with their own image cash letter technology.  With image clearing standards yet to completely evolve, and the emergence of new fraud techniques in the marketplace, the potential exists for delays in deposit processing. What does this mean? Even if you are still processing your deposits by paper, chances are they will be turned into an image or even a substitute check somewhere along the way.

Although the promise of faster clearing times for image presentment is indeed true, occasionally your paper deposits may take longer to clear than normal. Think of it this way: Mix a variety of technologies with the overall challenges many are facing as they gear up for image cash letter presentation and the possibility of delays becomes more probable. Most importantly, these delays usually occur in the middle of the deposit process, say from when your member deposits the item with you and your corporate sends it for clearing until it's presented to the payer financial institution. The delays can happen as the check is turned into an image for clearing and then runs the risk of being rejected for image quality or routed through a correspondent for payment. Given this scenario, some of the protections of Reg. CC do not apply.  So what can you do? How can you protect yourself and your members?

Knowledge is the Advantage
No matter how you process your checks, either by image or paper, knowing and trusting your member is the first line of defense. This means knowing the ir  credibility  and the history  of their account deposits. In addition, you should educate your members themselves to know the person or company from whom they are accepting payments by check. This is particularly important given the increasing rise in check fraud.  Also, when you have doubt, any doubt, you should extend the deposit hold to the limit that Reg. CC allows. Ultimately, the best way for you to prevent losses due to delays in the processing of paper deposits is to process these deposits electronically. By implementing a branch capture solution, for example, you can create your own image file, thereby preventing the delays inherent in paper batch processing. You may already be considering such a solution.

WesCorp can help with this. We offer a comprehensive array of front-end image capture solutions for every need—all of which can speed up your check clearing and settlement, in addition to providing substantial cost savings. Our IMAGEin platform includes solutions for Branch, Teller and Merchant Capture, and we have forged strategic partnerships with CO-OP Financial Services and Ensenta to offer MYDeposit Home Capture, ATM Image Capture and Fast Branch Kiosks to our members. Additionally, WesCorp stands ready to provide back-end settlement services and day two processing for virtually every front-end capture system on the market today. 

WesCorp is America 's largest corporate credit union with approximately $29 billion in assets and more than 1,000 member/owner credit unions throughout the United States . If you are interested in finding out more about WesCorp's image capture solutions, please call (800) 442-4366, ext. 6453. We'd be delighted to answer your questions and help you implement a strategy to meet the challenges of Check 21—one that makes sense for your credit union.



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March 17, 2008


  • The article does illustrate some of the benefits of C21 processing but doesn''t provide enough information on the challenges associated with it. Although WesCorp may enjoy over 50% of it''s items clearing electronically, as a overall market, we have yet to crest the 50% benchmark. Additionally, no reference is made to the significant risk assoicated with personal and merchant capture the FI''s assume when using that technology. I''d love to see a little more concern about risk assessment, as apposed to a marketeer slant. Not to discourage but to educate a woefully under educated market segment.
    Bret Weekes