1. Traditional definition: Deposited checks are held at the financial institution or Federal Reserve Bank of first deposit instead of being sent to the drawee financial institution. Information from the checks is transmitted electronically from the truncation financial institution to the drawee financial institution. 2. Additional definition: Checks tendered in payment at non-financial institution locations are held by the payee or by the maker (check writer), and the payment initiated by the check is made electronically.
A generic term used to describe the conversion of a paper check to an electronic payment or digitized image for clearing, posting and settlement. These transactions can be governed by paper check or EFT laws.
The conversion of a check to an electronic debit or image of the check by someone in the payment system other then the paying bank. The transaction may be governed by check law (UCC, Reg CC and Clearing house rules) or by electronic banking law (Electronic Fund Transfer Act).
capturing electronically all the information on a paper check to be sent through the clearing system
Check truncation is the practice of holding a paper check at the bank at which it was deposited and then electronically forwarding that check's essential information to the bank on which it was written. A truncated check is not returned to the writer.
The practice of storing checks at the credit union rather than returning them to the member. When a check first enters the check clearing process, the information on the check is captured and transmitted by computers to the drawee bank. The check itself is not sent through the nation's check clearing system. All account transaction information is included on a member's monthly statement. Members may request copies of specific checks.
Practice of holding a paper check at the bank at which it was deposited (or at intermediary bank) and electronically forwarding the essential information on the check to the bank on which it was written. A truncated check is not returned to the writer.