Opinion ID: 3013502
Heading Depth: 2
Heading Rank: 4

Heading: FNCB’s Encoding Error

Text: When FNCB sent the Disputed Check to the Reserve Bank on March 13, 2001, FNCB included a letter designating it as a “Qualified Return Check” prepared for high speed processing.5 In so doing FNCB communicated to the Reserve Bank that it had attached to the Disputed Check a strip of paper encoded with magnetic ink that would permit the check to be processed through the Reserve Bank’s automated processing system. However, FNCB erroneously encoded the strip with the routing number for PNC Bank instead of the routing number for NBT. 4 The FedLine is a telecommunications service provided by the Federal Reserve for the purpose of, among other things, sending notices of dishonor. 5 Banks may convert checks to qualified return checks in order to expedite processing and save on per-check processing fees. See 12 C.F.R. § 229.30(a). 8 In sum, the Reserve Bank physically received the Disputed Check complete with the wrongly encoded strip prior to 11:59 p.m. on March 13, 2001. Because the Disputed Check was improperly encoded, NBT did not receive it back from the Reserve Bank until March 16, 2001. With proper encoding the Disputed Check likely would have been received on March 14, 2001. The parties have stipulated, however, that NBT suffered no damages or actual loss as a result of the encoding error, inasmuch as NBT had actual notice from FNCB on March 13 that the Disputed Check had been dishonored.6