Check Issuing

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REQUIRED BANK INPUTS

• “Per-org” Check Issuing Settlement account: each fintech customer enabled for check issuing will have their own check issuing specific settlement account.
• Account Closure Check Issuing Settlement account: every bank will establish a settlement account in its own name for the purpose of closing acounts. To learn more about this account, please refer to our: Account Closure Guide
• FBO Account: This account is needed for end-to-end testing purposes. Once the FBO account is opened, Treasury Prime will create a test ledger for testing, and deposit funds into the ledger account.
• Dollar limits issued per-check unit: If this field is set to null, the value will default to $3,000. However, if we have a "good funds model" provided, it will default to a per-check unit limit of$100,000.
• Issued Check Report (this is only necessary for banks that don’t use the Bank Console to review and manage checks; to see the required format, click on the link): The bank will provide Treasury Prime with a daily report of all issued checks in CSV format.
• Cleared Check Report (this is only necessary for banks that don’t use the Bank Console to review and manage checks; to see the required format, click on the link): The bank will provide Treasury Prime with a daily report of all cleared checks in CSV format.

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Funds flow

• Check Image Example

1. A fintech customer can use Treasury Prime’s API to create a new issued check object. The customer needs to provide a payload that describes the check, including a memo and message (if desired), as well as metadata on the originating account and the amount transferred to the recipient. Once this data is received, Treasury Prime records a created_at timestamp on the check object and the check is immediately put into a pending status. At this point, the check data is sent to Lob, and funds are transferred from the ledger account to a per-org check settlement account. Treasury Prime’s banking partners can view the checks in the Bank Console once the check object is created.
2. If a check fails to be created (for example, if a fintech customer submits incomplete data), it immediately moves to a status of error. This is a terminal status. When this happens, funds are moved back from the settlement account to the FBO and a new corresponding deposit transaction is created on the appropriate ledger account.
3. If a fintech customer wants to cancel a check that is still pending, they can do so by updating the check status to canceled in the Developer Dashboard. Banks can also initiate the cancellation of a check by updating the check status to canceled via the Bank Console.
4. One hour after the check is created, Lob adds the check to the printing queue. At this point, the status of the check is changed to sent.
5. If a fintech customer wants to request a stop payment on a check while it is in the status of sent, they can do so by updating the check status to stop_payment_pending. All checks in this status are displayed for Treasury Prime’s banking partners to review in the Bank Console. Checks with a status of stop_payment_pending are organized in a queue for review. Bankers can also search for individual checks to retrieve unique check records. Once the bank approves the stop payment, Treasury Prime updates the check object with a status of stop_payment. Treasury Prime’s banking partners are able to handle stop_payment_pending in two ways:
   1. Our banking partners review a queue of checks with a status of stop_payment_pending and update them to stop_payment within the Bank Console. Any updates made in the Bank Console are immediately reflected in Treasury Prime’s database.
   2. Alternatively, all checks with a stop_payment_pending status are listed on the positive pay report with a negative amount and a stop_payment_pending status. The bank needs to update the status to stop_payment in the issued check report before Treasury Prime can update the status on our end.
6. Once a bank moves a check into either a status of canceled or stop_payment, funds are moved back from the settlement account to the FBO and a new corresponding deposit transaction is created on the appropriate ledger account.
7. When a check is deposited, the bank’s core receives an X9 file from The Fed containing information about checks issued and deposited at the Receiving Depository Financial Institutions. The bank then reviews and downloads the X9 file. Using Treasury Prime’s Bank Console or by passing Treasury Prime a file in the specified format predetermined SFTP folder (see the Auto-Clearing Checks section below for more information on this alternative to the Bank Console), the bank updates the status of the checks to either dishonored or cleared. If the check was previously marked as stop_payment_pending, it is updated to stop_payment.
8. After updating check status in the Treasury Prime console, the bank also updates the checks in their core. The core then moves funds from the organization’s positive pay check issuing settlement account to the bank’s Fed settlement account for checks that have cleared.
9. If a check is not actioned by the bank 180 days after it is moved into any non-terminal status (see check statuses below), Treasury Prime automatically moves it into a status of expired. This is a terminal status that is reflected in the Bank Console. When a check expires, funds are moved back from the settlement account to the FBO and a new corresponding deposit transaction is created on the appropriate ledger account. The exceptions to this is if the originating account has beenclosed, or any time a check is canceled, dishonored, or stop_payment. In these cases, funds stay in the per-org settlement account.
10. Once per day at a time agreed upon with the partner bank, Treasury Prime reconciles each fintech customer’s check issuing-sweep accounts, ensuring all deposits, cancellations, or dishonored checks are accounted for (or covered by a fintech customer’s loss-reserve account). Any alerting required to inform the fintech customer, bank, or Treasury Prime about reconciliation is done during the same step.

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Loss Reserve Requirements

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Reviewing and Managing Checks in the Bank Console

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Clearing Checks

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Canceling Checks

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Stopping Payment on Checks

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Checks’ Status Overview

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Auto-Clearing Checks Issued via Treasury Prime’s API

1. The bank will drop a report of cleared checks in the agreed-upon format into the specified SFTP folder.
2. Upon receipt of the report, Treasury Prime will perform the following actions for checks identified in the Cleared Checks Report:
   1. Update the status of the check object to cleared.
   2. Funds are book transferred from the Check Settlement Account to the Bank-specified Fed Aggregate Clearing Account.
3. Upon completion of step 2, Treasury Prime will generate and send a report to the bank identifying:
   1. All successfully cleared checks.
   2. Any checks present on the Cleared Checks Report that Treasury Prime was unable to clear.

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Positive Pay Report

• Positive Pay Example Report

1. Update the amount field to be the negative of the original amount on the check.
   1. Original amount: 50.20 0 → -50.20
2. Set the positive_pay_sent field to null.
3. Set the status of the check to stop_payment_pending.

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Frequently Asked Questions

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What roles does someone need to be set with in bank console in order to be able to decision on checks?

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What event triggers bank operations staff to clear a check?

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Does the bank manually need to decision on every check?

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What test scenarios should be validated as part of launching check issuing?

• Clearing a check, funding the payment from the correct account.
• Acknowleding a fintech’s request to stop payment.
• Dishonoring a check (e.g. the check amount does not match) and returning.

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How do stop payments work?

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When can a fintech request a stop payment?