A Huntington Bancshares unit and AFS & LSC Inc., a payment systems consultant, have formed a company that will offer image-based electronic check exchange to speed up detection of bad checks.

The National Returns Clearinghouse, formed exclusively to help banks handle exception items, is expected to start operating this month. The Huntington unit involved is Huntington Treasury Management Co., the treasury services arm of the Columbus, Ohio-based banking company.

"This is a tremendous new opportunity for banks on both ends of the return-item process," said Harry Miller, a market manager for the new venture.

It is not the only recent effort intended to improve exceptions processing.

Last summer Citicorp and Chemical Banking Corp. - the latter has since merged with Chase Manhattan Corp. - began exchanging exception items through a service developed by the New York Clearing House Association.

More recently, the Financial Services Technology Consortium demonstrated image-based, exception-item processing between Huntington and Bank of Boston Corp.

The Huntington-AFS start-up will be closely tied to the National Clearinghouse Association, which was created in 1988 by Huntington, U.S. Check, and Littlewood Shain & Co. - now part of AFS & LSC.

Participating banks would send checks for processing to Huntington's Columbus facility, where check images and magnetic ink line information would be captured.

Images of items would be available to receiving banks and their customers over a private computer network.

"This new company will do for return items what the NCHA has done in revolutionizing the way forward presentment of checks (is) handled," said Thomas Bowen, a managing director of the new National Returns Clearinghouse.

Officials said they believe the service will start processing about 45,000 items a day almost immediately. They said they hope to double the volume in one year's time.

About 1% of the estimated 65 billion checks written each year are exceptions.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.