PREP Guide - Payment System History Flashcards
What are the legal roots of the check payment system in the United States?
The origin of the check predates the United States and has firm legal roots in English law
What was the primary method of handling checks before 1970?
All checks were written and collected as paper payment instruments
What innovation occurred in the 1980s regarding check information exchange?
Banks began experimenting with exchanging information about checks for posting and reporting to customers
What organization was formed in 1990 to facilitate electronic check presentment?
ECCHO
What was the purpose of the first nationwide electronic check presentment (ECP) exchanges?
To transmit MICR line information to paying banks prior to the arrival of the original paper checks
How did paying banks utilize electronic information from ECP?
For posting
What were the benefits of ECP?
Accelerated posting and the return of unpaid items
What action did the Federal Reserve Bank (FRB) take in the 1990s regarding check information?
Made MICR line information available to banks in the Michigan Upper Peninsula
What type of products did the FRB begin offering in the 1990s?
Products to support forward collection and returned items based on early delivery of MICR line information
What was a significant development by Nacha in the late 1990s?
Offering check conversion products using original paper checks as source documents for ACH debit transactions
What project did the Financial Services Technology Consortium (FSTC) create in the late 1990s?
Paperless Automated Check Exchange & Settlement (PACES)
What was the goal of the PACES project?
To provide a vendor-neutral solution to clearing checks using image exchange
What did ECCHO develop to support the PACES project?
The first private sector image exchange rules
What program did the FRB implement at the end of the 1990s?
Electronic Presentment Image Check (EPIC)
What were the key features of the EPIC program?
Imaging of checks, archiving images, and transmitting images to the paying bank for posting
What significant legislative proposal did the FRB make in the early 2000s?
The Check Clearing for the 21st Century Act (Check 21)
What barrier did Check 21 overcome?
It created a new legal instrument, the substitute check, overcoming a key barrier to check truncation
What trend occurred between 2005 and 2011 regarding substitute checks?
The volume of substitute checks grew rapidly and then declined due to growth in image-enabled options
What service was introduced by banks between 2005 and 2011?
Remote deposit capture (RDC)
What does remote deposit capture (RDC) allow customers to do?
Deposit images of checks via transmission from remote locations and later from personal mobile devices
What has been the trend in check collection since January 2005?
Virtually all checks are now collected via image exchange
