(1) the reformatted TIFF tags do not comply with TIFF standard for Image Exchange,

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1 V. ELECTRONIC IMAGE FORMATS (CONTINUED) B. TIFF. If the TIFF tags associated with an Electronic Image, received by a Receiving Bank under these Rules, are non-compliant with the TIFF standard for Image Exchange, or the Receiving Bank encounters an allowable variant in such TIFF tags, the Receiving Bank may at its option reformat the TIFF tag(s) to comply with the TIFF standard for Image Exchange. The Receiving Bank shall have no liability under these Rules or any other applicable law to the Sending Bank or any other person for any loss or damage that such Sending Bank or other person may incur as a direct or indirect result of such re-formatting of the TIFF tags, unless the Sending Bank can demonstrate all of the following: (1) the reformatted TIFF tags do not comply with TIFF standard for Image Exchange, (2) the Electronic Image was materially altered by the reformatting, and (3) such alteration of the Electronic Image resulted in the loss or damage.

2 V(B). COMMENTARY Comment: The purpose of this rule is to permit the Receiving Bank to reformat the TIFF tags of an Electronic Image in accordance with the current TIFF standard for Image Exchange. An example of such a standard is Specification of TIFF Image Format for Image Exchange - ANS X This rule does not permit a Receiving Bank to reformat the TIFF tags to an allowable variant within the current TIFF standard for Image Exchange when returning the image to the Sending Bank. Sending Banks are encouraged to comply with the TIFF standard for Image Exchange, and nothing in this rule limits or releases the Sending Bank from liability or obligations to a Receiving Bank that may arise in the event that the Sending Bank sends an Electronic Image with non-conforming TIFF tags to a Receiving Bank.

3 XII. ADJUSTMENT CLAIMS E. Settlement and Rejection of Adjustment Claims. (1) Members shall agree to a process for financial settlement of their Adjustment Claims. If a Member sends the Adjustment Claim through an Adjustment Provider, the settlement process of the Adjustment Provider shall be used, unless both Members have expressly agreed to an alternative settlement process. (2) The requirements for the timing of settlement set forth in Subsections XII(E)(3) and XII(E)(4) shall apply unless the Members otherwise have agreed to different settlement timing requirements. (3) For an Adjustment Claim that is listed as a with entry type of Adjustment Claim on the Adjustment Matrix, the Member receiving the Adjustment Claim shall settle by the close of the banking day following the banking day on which the Adjustment Claim was received. The receiving Member may either reject the request for settlement for the Adjustment Claim or initiate a second timely Adjustment Claim to reverse the settlement on the first Adjustment Claim in the following circumstances: (a) the Member sending the first Adjustment Claim did not comply with this Section XII or the requirements of the Adjustment Matrix; (b) the first Adjustment Claim does not relate to an item handled by the receiving Member; (c) the first Adjustment Claim was a duplicate of another Adjustment Claim for which the receiving Member previously settled or is currently pending resolution at the receiving Member; (d) the receiving Member had itself previously initiated an Adjustment Claim relating to the same matter; or (e) the receiving Member has reasonable basis for concluding that the sending Member has not established the factual basis for the claim, except as provided below for an Adjustment Claim relating to a RCC warranty. For an Adjustment Claim relating to a RCC warranty, a receiving Member shall not, pursuant to subsection (A)(3)(e), reject a request for settlement for the Adjustment Claim or initiate a second timely Adjustment Claim to reverse the settlement on the first Adjustment Claim on any basis relating to the effectiveness or validity of the payor customer s authorization for the creation of the Remotely Created Check, including without limitation on the basis that the receiving Member (or its depositing customer) has evidence of the payor customer s authorization for the Remotely Created Check. (4) For an Adjustment Claim that is listed as a without entry type of Adjustment Claim on the Adjustment Matrix, the Members shall settle for the Adjustment Claim only upon (a) agreement of the Members as to the resolution of the Adjustment Claim, or

4 XII. ADJUSTMENT CLAIMS E. Settlement and Rejection of Adjustment Claims. (b) the time period for settlement of the Adjustment Claim as established by the Adjustment Provider, if applicable. The receiving Member may reject a request for settlement of the Adjustment Claim for the reasons set forth in Section XII(E)(3) for rejection of with entry claims. (5) Settlement of an Adjustment Claim does not limit the ability of a Member receiving an Adjustment Claim (a) to subsequently reject the Adjustment Claim in accordance with Section XII(E)(3) and the Adjustment Matrix, or (b) to otherwise bring an action against the Member making the Adjustment Claim, as described in Section XII(A)(6).

5 XII(E). COMMENTARY Rule: For an Adjustment Claim that is listed as a with entry type of Adjustment Claim on the Adjustment Matrix, the Member receiving the Adjustment Claim shall settle by the close of the banking day following the banking day on which the Adjustment Claim was received. The receiving Member may either reject the request for settlement for the Adjustment Claim or initiate a second timely Adjustment Claim to reverse the settlement on the first Adjustment Claim only as permitted in Section XII(E)(3). Comment: Some Adjustment Providers may allow the receiving Member to reject settlement of an adjustment claim, whereas other Adjustment Providers permit the receiving Member to initiate a second Adjustment Claim to reject/reverse settlement of the first Adjustment Claim. There is no requirement under these Rules for an Adjustment Provider to offer its participant banks both options for handling the rejection or reversal of the settlement of an Adjustment Claim. Rule: For an Adjustment Claim relating to a RCC warranty, a receiving Member shall not, pursuant to subsection (A)(3)(e), reject a request for settlement for the Adjustment Claim or initiate a second timely Adjustment Claim to reverse the settlement on the first Adjustment Claim on any basis relating to the effectiveness or validity of the payor customer s authorization for the creation of the Remotely Created Check, including without limitation on the basis that the receiving Member (or its depositing customer) has evidence of the payor customer s authorization for the Remotely Created Check. Comment: In the event of a factual or other dispute involving the payor customer s authorization of a Remotely Created Check, this Rule places the ultimate liability for the Adjustment Claim on the depositary bank. Under this Rule, the depositary bank that accepts a Remotely Created Check for deposit, or a collecting bank that subsequently transfers the Remotely Created Check, shall not reject an Adjustment Claim for an RCC warranty from another Member on the basis that the bank believes, or has evidence, that Remotely Created Check was properly authorized by the payor customer. If there are collecting banks involved in the forward exchange of the Remotely Created Check, the Adjustment Claim for the RCC warranty should work its way back through the collecting banks to ultimately rest with the depositary bank. The depositary bank may have chargeback rights for the RCC warranty claim under its deposit agreement to its customer that deposited the Remotely Created Check. The depositary bank or its depositing customer also should have a direct relationship with the payor customer, and can seek to resolve any dispute regarding payment with the payor customer outside of the ECCHO rules and the check payment system.

6 XIX(L). COMMENTARY (continued) Clause (7) is intended to protect the Receiving Bank in the event of an inappropriate duplicate or multiple presentments or sending of the same item. Clause (7) is structured to be similar to the warranty relating to duplicate presentment/transfer/return that is set forth in Section (a)(2) of Regulation CC. This warranty is intended to protect a Receiving Bank regardless of the form (image, original check or substitute check) in which the duplicate item is, or multiple items are, received by the Receiving Bank. This warranty would also cover duplicate Presentment Notices that are received by a Receiving Bank from a Sending Bank, even if the related Electronic Images were never sent to the Receiving Bank. A warranty breach from the payment of duplicate items can occur in a number of ways. While not a complete list, the following are examples of such duplicate payments: (a) an Electronic Image is received and paid (and not returned) by the Paying Bank and the Paying Bank subsequently receives presentment of the original paper check and pays that check; (b) the Paying Bank receives from the same Sending Bank two Electronic Images created from the same original paper check, pays both items, and does not subsequently return them, or (c) the Paying Bank receives, from two different Sending Banks, two Electronic Images that purport to be created from the same original check, pays both items, and does not subsequently return them. However, by its terms, this warranty against duplicate presentment is limited to a situation where the Receiving Bank pays an item that it has already paid. Accordingly, this warranty is not applicable to a situation where the Receiving Bank has returned and undone provisional settlement of the first item, and then receives a second presentment of the same item. In this situation, the Receiving Bank has only paid a single item, and has not paid the item twice. For example, the resending of an Electronic Image after a return, which is allowed under the Rules, does not constitute a breach of the warranty in Clause (7). As a general matter, the fact that there are different indorsements reflected on the back of the two Electronic Images or in the electronic indorsement records of the check images is not in itself determinative of whether or not the two Electronic Images arose from different paper checks.