Check Payments Overview

Depository Financial Institution (DFI)

State or nationally chartered bank, savings and loan association, savings bank, or credit union

Bank of First Deposit (BOFD)

First DFI to which a check is transferred; may also be the Paying Bank or Payee

Collecting Bank

Bank handling an item for collection except the Payor Bank; subsequent bank in forward collection process

Intermediary Bank

Bank to which an item is transferred in the course of collection except the Depositary Bank or Payor Bank

Presenting Bank

Bank presenting an item to the Payor Bank

Payor Bank

Bank that is the Drawee of a draft; see also Paying Bank definition in Reg CC

ECCHO Operating Rules & Commentary

National set of Rules for private sector image exchange maintained by ECCHO, a service of The Clearing House

Uniform Commercial Code (UCC)

Model state law regulating sale of goods, commercial paper, bank collections, and secured transactions

Reg CC or Regulation CC

Federal regulation governing availability of funds deposited in transaction accounts, collection and return of checks

Accredited Standards Committee X9

Develops and maintains open consensus standards for the financial services industry in the US, including X9.100-140, X9.100-160, X9.100-187, X9.100-188

Negotiable Instrument

Written order directing a bank to pay money as instructed, includes checks, money orders, etc.

Remotely Created Check (RCC)

Check not created by the Paying Bank, must be authorized by the account holder and printed to meet Reg CC definition

Magnetic Ink Character Recognition (MICR)

Descriptive information printed at the bottom of a physical check in magnetic ink, recognized by automated processing equipment

Drawer

Person who signs a check ordering payment

Maker

Person who signs a note undertaking to pay

Paying Bank

Bank to which a check is sent for payment or collection, responsible for expedited return of checks and notice of nonpayment requirements

Adjustments

Handled by agreement of parties

Settlement adjustments

Can be made with or without financial settlement for paid checks

Adjustment types

Must be specified for each case, timing and requirements vary

Fraud

Involves intentional untrue representation leading to loss of money or property

Check fraud

Criminal acts using checks to acquire funds illegally

Payment systems

Checks can be cleared physically, electronically, or as ACH debits

Automated Clearing House (ACH)

Governed by Nacha Rules for interbank clearing of electronic entries

ACH transactions

Include debits or credits for various payments like payroll or bills

ACH participants

Originators, ODFIs, RDFIs, and ACH Operators like FRB and The Clearing House

Debit Card

Allows payment directly from user's DDA account, uses shared ATM networks

Credit Card

Issued by companies for purchasing goods/services, major networks include American Express, Discover, MasterCard, and Visa

Wire transfer

Immediate, irrevocable electronic fund transfer between banks

Funds transfer

Defined in UCC 4A-104, includes payment orders and beneficiary acceptance