Fed announces single standard format for transmitting check detail

WASHINGTON – Whatever the long-term effects of the Fed’s plans to adopt a single standard for MICR detail transmission, the short-term ramifications are sure to include some change in practices by item processors. The Fed’s standard will conform to the ANSI ASC X9.37 format. It plans to have the standardization in place by mid-2005. The initiative is designed to help the Fed reduce the cost and complexity of the country’s paper-based payments system. Transmitting MICR detail electronically allows financials and other processors including the Fed, to move essential check information more efficiently without having to move the paper check. The lack of uniform exchange standards has been one of the chief obstacles to the electronification of paper checks, the agency said. The Fed currently supports about 70 different formats across the agency’s 45 check processing sites. The Fed said the four-year transition to the single standard format will give Fed customers and their software vendors time to adapt. The agency plans to issue a user and implementation guide in 2002 and will host a software vendors’ conference next year as well. Michelle Profit, assistant general counsel for CUNA and the person considered to be the association’s expert on the payment system said, “Moving to a MICR standard should promote efficiency and help everyone involved in the payment system. It will allow payments to pass through the system more efficiently.” Profit said CUNA intends to work closely with the Fed on the issue and the implementation of the standardization plan. “We want to make sure the standard they adopt is readily accessible to smaller financials.” Paul Malone, vice president of planning and research for Liberty and a member of the board of the Check Payment Systems Association (CPSA), the trade association of check printers, foresees the implementation of the Fed’s MICR detail transmission standard will have the most effect on item processors, and the least impact on credit unions and check printers. He said the only credit unions that could be affected would be those that decide to change their routing and pass through number to be their own, rather than through a bank. In cases like that, a CU would just have to notify their check printer to make the change. Item processors though will have to do more leg work, but even here Malone said they are already building their databases to accommodate the standardization. “Required data including the routing number, account number and amount field have to be presented in a particular order. The routing number and amount field have always been standardized, but the account number never has. That’s where the problem is. There’s been no consistency, it’s pretty much been up to each processor. With the standardization, whoever reads the check will have to figure out how to format the MICR line into ASC X9.37 format.” – [email protected]