If a substitute check clears for less than the amount of the original check, what are the institutions liabilities or recredit requirements under this scenario?
This type of entry could end up being handled either via the recredit process (even though technically a debit) or through the Fed adjustment process. The Fed is currently working on adjustment codes that will be tied to Check 21 item entries. An institution discussed that original checks are perforated which makes it easier to detect fraud. The concern is the loss of this ability with substitute checks. While using perforations to detect possibly frauds, this is basically a best practice. Original checks are not required to have a perforated edge and items from a laser printer may not perforations. Substitute checks may or may not have perforated edges, depending on the type of printer and paper being used.
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