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Federal R eserve Bank
OF DALLAS
W IL L IA M
H. W ALLACE
DALLAS, T EXA S 7 5 2 2 2
FIRST V IC E PR E S ID E N T
AND C H IE F O PER A TIN G O FFIC ER
May 25, 1990
Circular 90-29
TO:
The Chief Operations Officer of each
financial institution in the
Eleventh Federal Reserve District
SUBJECT
Return Item S trip Guidelines
DETAILS
To promote the efficient handling of return items that have been
qualified through the use of a strip attached to the bottom of the item, the
Federal Reserve has developed the enclosed "Return Item Strip Guidelines."
The Strip Guidelines serve as a companion to the Return Item Carrier Envelope
Guidelines (Circular 89-35) issued by the Federal Reserve last year.
Together,
the two Guidelines address major operational problems associated with
processing qualified return checks (QRCs).
Adherence to the enclosed Strip Guidelines by financial institutions
will increase the likelihood that stripped returns will be efficiently
processed by automated check sorting equipment and meet Reserve Bank reject
rate standards for QRC items. The Guidelines are intended as an aid in
achieving a more efficient return process, which will benefit paying,
returning, and depository banks. They were developed with the assistance of
strip manufacturers, check equipment vendors, and various banking groups as an
interim step pending the adoption of a longer-term standard by the Accredited
Standards Committee.
The Reserve Banks do not recommend or approve particular
strips or strip equipment.
In general, a strip that meets the Guidelines will provide a surface
conducive to the application of MICR encoding; will be the same length (within
narrow tolerances) as the item; will be accurately aligned at the leading and
trailing edges of the item; will be applied by machine; and will use an
effective adhesive that extends the entire length of the strip so that the
strip is fully bonded to the bottom of the check for its entire length.
In
Guidelines,
depository
procedures
addition to meeting the technical characteristics of
strips and stripping equipment must be properly used
institution.
In this regard, it is recommended that
be established to periodically inspect stripped items
the
by the
daily operating
to ensure
For additional copies of any circular please contact the Public A ffairs Departm ent at (214) 651 -6 2 8 9 . Banks and others are
encouraged to use the follow ing incoming W A TS numbers in contacting this Bank (800) 4 4 2 -7 1 4 0 (in trastate) and (800)
5 2 7 -9 2 0 0 (interstate).
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
strips are of the appropriate length, are properly aligned, and are securely
bonded to the item.
It is also recommended that stripping equipment have a
regularly scheduled maintenance program to ensure proper operation.
If you use strips to qualify your returns, your use of the Guidelines,
supplemented by daily inspection procedures, will make a significant
improvement in the speed and efficiency of the return item process.
ENCLOSURES
Enclosed are the Return Item Strip Guidelines.
M
ORE INFORMATION
For additional information, please contact Robert L. Whitman (214)
698-4357 at the Dallas Office, Eloise J. Guinn at (915) 544-4730 at the El Paso
Branch, Luke E. Richards (713) 652-1544 at the Houston Branch, or Herb Barbee
(512) 224-2141 at the San Antonio Branch.
For additional copies of this
circular please contact the Public Affairs Department at (214) 651-6289.
Sincerely yours,
RETURN ITEM STRIP GUIDELINES
Federal Reserve System
May 1990
TABLE OF CONTENTS
1.0
Background
1
2.0
Purpose/Scope
1
2.1
2.2
3.0
Definition
Referenced
2
Standards
2
Strip Characteristics
3.1
2
Size and Alignment
2
3.1.1.
Length
3
3.1.2.
Height
3
3.1.3.
Thickness
3
3.1.4.
Alignment
3
3.2
3.3
Adhesive
3.4
4.0
Paper Specifications
Color
Preprinted information
3
4
4
on
the Strip
4.1
Preprinted "2" in MICR Position 44
4.2
4
4
Other Preprinting
5
Appendix
Paper Strip Specifications
6
RETURN ITEM STRIP GUIDELINES
1.0
BACKGROUND
On September 1, 1988, the Federal Reserve instituted several changes to
expedite the return of unpaid checks. These changes provided incentives for
depository institutions to qualify returned checks for automated handling.
This process entails putting the item in a carrier envelope or attaching a
strip to the item and encoding the envelope or strip with the depositary b a n k ’s
routing number, the dollar amount of the item, and a "2" in MICR Position 44.
This enables subsequent processors, including Federal Reserve Banks, to accept
deposits of qualified return checks (QRCs), process them on existing high
speed check sorter equipment, and thereby process returned checks more
expeditiously and efficiently than previously possible.
Initially, the QRC process did not work as effectively as anticipated
due, in part, to problems experienced when processing the wide variety of
carrier envelopes and checks with strips from various manufacturers.
Of these
problems, those related to carrier envelopes were most severe, and an effort
was immediately undertaken to identify those characteristics that would improve
the "machinability" of the envelope. The study, conducted by the Federal
Reserve, various banking groups, check equipment manufacturers, and carrier
envelope vendors, resulted in the "Return Item Carrier Envelope Guidelines"
published in May 1989. Since their implementation, the Envelope Guidelines
have been instrumental in improving the effectiveness of return item
processing.
It should be noted the Envelope Guidelines are considered a short
term bridge to a longer-term Accredited Standards Committee (ASC) standard
currently under development.
Attention was then turned to those problems encountered when processing
checks with strips.
Those problems included high reject rates, low throughput
rates, and high jam rates related to handling stripped items. Additional
problems involved were strips that come off during high speed processing,
strips that are longer or shorter than the check, and strips that are difficult
to remove without causing significant damage to the original item. The Federal
Reserve System, with the assistance of various banking groups, check equipment
manufacturers, and check-stripping equipment makers, reviewed ways to reduce
those problems by identifying strip characteristics that improve the
"machinability" of stripped items. This document is a result of that review
process.
2 .0
PURPOSE/SCOPE
The Return Item Strip Guidelines (Guidelines) have been designed to
immediately address the most pressing operational problems in the current
return environment related to handling of stripped return items. Adherence to
these Guidelines will increase, but not guarantee, the likelihood that stripped
returns will be processed efficiently by automated check sorting equipment and
meet Reserve Bank reject rate standards for QRC items.
Similarly, failure to
adhere to these Guidelines would not necessarily result in stripped checks that
will not meet Reserve Bank reject rate standards for QRC items. The Reserve
1
Banks do not approve or endorse particular brands of check-stripping equipment
or paper strips.
It should be noted that these Guidelines are expected to serve as a
short-term bridge to a longer-term ASC standard that will be developed for
return item strips.
2.1
DEFINITION
A check repair strip ("strip") is a narrow piece of paper attached along
the entire bottom edge of a check. Magnetic Ink Character Recognition (MICR)
information is encoded on the strip, and the combined check and strip are
sorted and transported as a single document through the check collection
system.
To achieve reliable document processing, the combined check and strip
should be free of tears, dog ears, and cutouts.
(A cutout, a tear, or dog ears
may cause a problem.
Dog ears other than on the lower leading corner of the
code line area are not as likely to create operational difficulties).
There
should be no staples, holes, clips, and so forth in or on the combined check
and strip.
Labels used to correct encoding should not be applied to strips.
Rather, the incorrect strip should be removed and a new strip applied to the
check.
Finally, multiple strips should not be applied to a check without
removing a previous strip, and strips should not be used on carrier envelopes
that are greater than 3.375 inches in height.
2.2
REFERENCED STANDARDS
These Guidelines utilize standards established by the Accredited
Standards Committee.
These include:
o ANSI X9.13 Specifications for the Placement and Printing of
Magnetic Ink Character Recognition (MICR) Printing
o ANSI X9.18
Paper Specifications for Checks
o ANSI X9.27
Specifications for Magnetic Ink Characters
3 .0 STRIP CHARACTERISTICS
In general, the strip must have certain characteristics to promote
efficient, automated handling. These characteristics are broadly divided into
four categories:
size and alignment, paper specifications, adhesive, and
color.
3.1
SIZE AND ALIGNMENT
A primary requirement for the effective processing of the document is
2
that the size and alignment of the strip placed on a check be correct.
3.1.1
LENGTH
Generally, the length of the strip should be the same as the length of
the document to which the strip is attached.
3.1.2
HEIGHT
The height of the entire strip (prior to being attached to the check)
should be no more than 0.8125 inches.
The height of the attached strip should be 0.6250 plus or minus 0.030
inches from the bottom of the check to the bottom of the strip for the full
length of the check. This measurement defines the MICR clear band area.
3.1.3
THICKNESS
The thickness of the strip in the MICR clear band area should be between
0.0035 and 0.0060 inches. The combined glue and paper should not exceed 0.0060
inches in thickness. At the point of overlap, the strip should not add more
than 0.0045 inches to the thickness of the check.
3.1.4
ALIGNMENT
The strip must be located parallel to the bottom of the check.
The
leading edge of the strip must be aligned within plus or minus 0.0625 inches
of the leading edge of the check. That is to say, the leading edge of the
strip cannot extend more than 0.0625 inches beyond the leading edge of the
check, and the leading edge of the check cannot extend more than 0.0625 inches
beyond the leading edge of the strip.
Similarly, the trailing edge of the
strip should be aligned within plus or minus 0.0625 inches of the trailing edge
of the check.
Given these stringent alignment requirements, it is believed that only
through machine-application can strips consistently be attached properly.
Therefore, it is recommended that hand-applied strips not be utilized for
returns.
Rather, it is suggested that machine-applied strips or carrier
envelopes be used instead.
3.2
PAPER SPECIFICATIONS
The paper used for the MICR clear band area of the strip must meet
certain porosity, smoothness, opacity, and reflectance requirements to ensure
quality MICR characters can be encoded onto the strip. These are defined in
technical detail in the Appendix, "Paper Strip Specifications," and are based
on previously published ANSI X9.18 standards.
3
The bottom 5/8 inch of the strip is reserved for MICR printing and must
be clear of extraneous magnetic ink and extraneous adhesives.
3 .3
ADHESIVE
The adhesive used to secure the strip to the check is an important
element of an effective strip.
In general, the adhesive seal must be strong
enough to ensure the strip will stay on during multiple machine handlings but
must not be so strong as to significantly damage the original check when the
strip needs to be removed.
In addition, the adhesive should have the following
characteristics:
o
o
The adhesive process should not leave any residual adhesive
on the exposed surfaces of the combined check and strip
document that can cause other checks to stick to it (i.e.,
cause items to piggyback).
o
3 .4
The adhesive should extend the entire length of the strip so that the
strip is fully bonded to the bottom of the check for its entire
length.
If a strip needs to be removed, the adhesive should not leave
a residue on the check that will cause the check to adhere to
other items.
COLOR
While no specific color is mandatory, it is preferred that the strip be
white or a light pastel color. The color must have a reflectance of 75% or
greater.
4 .0
PREPRINTED INFORMATION O THE STRIP
N
Preprinting of certain information on a strip may be desirable. To
ensure that preprinting promotes efficient handling and does not interfere with
reading or microfilming needs, certain guidelines must be met.
4.1
PREPRINTED "2" IN MICR POSITION 44
Since the strip length on a particular check is dependent on the length
of the check, it is impossible to determine the proper location of position
44
prior to the completed application of the strip to the check. Therefore,
preprinting of the "2" in position 44 is discouraged.
Rather, it is
recommended that the "2" be printed at the same time the routing field is
printed.
4
4.2
OTHER PREPRINTING
Preprinted material relevant to the handling of the item should appear on
the bottom 0.1875 inches of the front of the strip or any place on the back of
the strip so that this preprinted material is legible after the strip is
affixed to the check.
It is encouraged that a printed or hand-stamped name and
address or routing number of the financial institution qualifying the return
item be placed in either of these locations on the strip. Any other preprinted
information not related to the handling of the item, such as strip supplier
name, address, form number, etc., should not appear on any visible part of the
strip after it has been placed on the check. All preprinting and/or hand
stamping must be in nonmagnetic, OCR blind ink so that it will not interfere
with the optical or magnetic reading of the MICR characters which are to be
printed in the MICR clear band area of the strip.
5
APPENDIX:
PAPER STRIP SPECIFICATIONS
The minimum weight document refers to safety type and/or bond type paper.
Feature
Minimum
Thic k n e s s 1
Maximum
.0035"
Porosity (Gurley)2
12 seconds
Smoothness^
(Sheffield units)
both sides
50 units
.0060"
Opacity^
200 units
83%
Reflectance^
75%
NOTES
1 Measured
in accord with TAPPI method
T 411
OM-84.
2 Measured
in accord with TAPPI method
T 460
OM-88.
3 Measured
in accord with TAPPI method
T 538
OM-88.
4 Measured
in accord with TAPPI method
an effective wavelength of 572 nm.
T 425 OM-86 using a light source with
5 See Section 6.1 and Appendix I of ANSI X 9 . 18-1986 Paper Specifications for
Checks for an explanation of reflectance.
6
