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Copyright (c) 1996 University of Miami Law Review
University of Miami

ARTICLE: Check Encoding Warranties Under Revised Uniform Commercial Code Article 4 and Regulation CC

October, 1996

51 U. Miami L. Rev. 97


W. David East *


I. Introduction
Uniform Commercial Code Article 4-Bank Deposits and Collections, as originally promulgated in 1951, was designed for a system in which depositary and payor banks processed paper checks and items by hand. 1 Today revolutionary Magnetic Ink Character Recognition ("MICR") technology permits the electronic reading and mechanical processing of checks. With over fifty-five billion checks processed each year, 2 the need for this sophisticated and automated mechanism is readily apparent. MICR symbols printed (encoded) in special ink at the bottom of the checks allow reader-sorter machines to process checks up to an incredible rate of 120,000 items per hour - a vast improvement over processing items by hand. 3 The MICR line on a check contains three different "fields," locations, where the necessary information is encoded. The first field is in the bottom left portion of the check and gives the routing information, which basically tells the reader-sorter machines of depositary and collecting banks where to send the check. 4 The second field is located in the middle portion of the MICR line and contains the drawer's account number at the payor bank and the check number. 5 Finally, the amount field is in the right-hand bottom portion of the check. 6 A financial institution prints the routing information and the account and check numbers (the first and second fields) on the check before furnishing it to its customer. 7 The depositary bank usually encodes the amount of the check after the payee has ...
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