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Questions and Answers Question: What is the Electronic Check Clearing Law, 5776–2016, and how does it help me? Answer: This is a new process that will enable a transition from physical clearing of checks to electronic clearance by stopping checks at the presenting bank (the collecting bank) and sending image files of the checks to the paying bank, as an alternative to physically shipping the check from the presenting bank where it was deposited to the bank from which the money is withdrawn. This process is also called check truncation, since the check is truncated at the presenting bank, or a check imaging process, since the presenting bank creates an image (picture) file of the physical check. Thanks to the Electronic Check Clearing Law, 5776–2016, cheaper, more innovative and more intuitive banking services can be provided for customers, and the customer can deposit a check without needing to come to the branch, by depositing it through the banking application. Question: Why was the check truncation / check imaging process created? Answer: The 138 million checks deposited in Israel in 2015 emphasize that the use of checks is still a significant part of how we make payments. The new process improves on the old check settlement process, and makes use of innovative technologies to increase the efficiency and speed of settlement. Making the process more innovative enables more rapid, more convenient, and less expensive deposits. Question: How does the check truncation process affect me? Answer: You will still use a physical check to make payments, and when you receive a check, you will be able to deposit it through the branch. However, there is now a new, advanced and accelerated method available to deposit the check, and you will be able to deposit the check without going to the bank branch—through the banking application. In addition to changes in the deposit process, another level that will change is the process of returning a check. As stated, the change means turning the physical check into a picture file. Therefore, when a check is returned to a customer, two alternatives will be possible: The customer may ask the bank to deposit the check a second time, or to receive an “output of a returned check” (see the answer to the question “What is an output of a returned check”), which includes a picture of the check and the reasons for its return. After the output is generated, the customer will not be able to redeposit the check or transfer it to a third party. Question: Will the check clearance duration change as a result of the new process? Answer: As of the beginning of the process, the check clearance duration will not change. But thanks to the Electronic Check Clearing Law, once the process is completed, we will be able to shorten the amount of time that elapses from when the check is presented for payment to the time the customer’s account is credited. (Currently, the credit from the check is final only after three business days.) This means that a customer depositing a check will be able to receive the final credit in his account more rapidly. Question: When will the new process begin? Answer: The law is being implemented in two main stages: November 8, 2016: Beginning on this date, the following banks will enable their customers to make interbank deposits of checks through the banking application: Bank Hapoalim, Bank Leumi, Arab-Israel Bank, Israel Discount Bank, Mercantile Discount Bank, Bank Mizrahi-Tefahot, First International, Otzar Hahayal, Bank Massad, U-Bank, and Poalei Agudat Yisrael (PAGI). February 2018: Checks deposited through other means, as well as shekel checks from all Israeli banks, will be presented for settlement via an electronic process. Question: What is the benefit for me as a result of the new process? Answer: The new process will make it possible to provide less expensive, more innovative and more intuitive banking services for customers. The check imaging will make it possible for banks to expand the check deposit services through the banking application. Currently, it is possible to deposit checks through the application, at some banks, only if they are drawn on the same bank. But starting on November 8, 2016, at most banks1, the customer will be able to make use of the banking application in order to deposit checks from other banks as well, and he will not be required to come to the branch in order to deposit the check for payment. As a result, the costs of depositing a check will be reduced by up to 75 percent, since electronic deposit is considered a customer-executed transaction (and for customers on the tracks service, it will be counted within the transactions permitted without payment in that channel). Question: Will the new process include all checks and all banks? Answer: The new process will include all checks denominated in shekels. The process will be implemented gradually. The first stage will begin on November 8, 2016, when interbank clearance will be enabled between most banks1 in Israel for checks deposited through the banking application. The second stage will begin in February 2018, and will include all banks in Israel, as part of which all checks undergoing interbank clearance will be presented for settlement in an electronic manner. Question: Am I required to do anything different? Answer: If you don’t want to, you are not required to change your behavior with checks. Nevertheless, the new process will give you the ability to choose whether to come to the branch in order to deposit the check, or to make the deposit without coming to the branch by using the banking applications. If you usually deposit checks through a teller, the new process 1 Bank Hapoalim, Bank Leumi, Arab-Israel Bank, Israel Discount Bank, Mercantile Discount Bank, Bank Mizrahi-Tefahot, First International, Otzar Hahayal, Bank Massad, U-Bank and PAGI. will also make it possible for you to lower deposit costs by about 75 percent, since electronic deposit is considered a customer-executed transaction, and for customers on the track service, it is considered one of the transactions permitted without payment in this channel. Question: I deposited a check and it was returned. What possibilities do I have? Answer: 1. Ask your bank to redeposit the check if there is nothing to prevent this. 2. Ask the person who gave you the check for a different form of payment. 3. Ask your bank for a document called an “output of a returned check”. Important: If you ask for an “output of a returned check” (see answer to the question “What is an output of a returned check”), you will not be able to redeposit the check or transfer it to a third party once you receive the output. Question: What is an “output of a returned check”? Answer: In the past, when a check would be returned, the customer would receive the physical check, containing the reasons for which it was returned. Today, when a check is returned, the bank must—at your request—provide an output of a returned check that replaces the physical check, and serves as admissible evidence in legal proceedings (court or Enforcement and Collections Agency). Important: If you deposited a check through the banking application and the check is returned, and you are interested in receiving an output of a returned check, the bank will notify you before producing the output that you may not present the check for collection a second time, and that it must not be transferred to a third party. Question: I decided to ask the bank for an output of a returned check. What details must I ensure appear on the output? Answer: A hyperlink to Appendix 314 of the Clearinghouse Rules—Output of a returned check. (In Hebrew) Question: Do the banks’ applications enable scanning of a check? Is the process simple? Answer: The implementation of the Electronic Check Clearing Law, 5776– 2016 will assist in the development of cheaper, innovative and more intuitive banking services for customers. Since each bank enables different technological services for its customers, you must check with your bank whether it enables checks to be deposited through the banking application. Checks can be deposited through the banking application, without physically depositing the check itself, through the “Cellular check deposit” service in the bank’s application, by photographing the check and sending it to the bank online using an encrypted technology. In this way, the customer avoids the need to come to the branch or to a self-service machine in order to make the deposit. Through this method, only checks labeled “To the payee only” can be deposited, and they must be for an amount lower than NIS 10,000. Once the deposit is made, the customer will be asked to keep the original check for at least three business days. Question: Photographing the check through the application is not easy, and my business deposits dozens of checks each day. Will it be possible to scan the checks in a way other than through the cellular banking application? Answer: Starting on November 8, 2016, you will be able to deposit checks through the cellular banking application. Other technological services that enable the remote scanning and depositing of checks without the customer needing to come to the branch will be made possible by the banks beginning in February 2018. In any case, each bank offers different technological services to its customers, and therefore, when the time comes, you must check with your bank whether it enables this service. Question: Will it be possible to deposit post-dated checks to be held? Answer: The Electronic Check Clearing Law, 5776–2016 has no effect on the deposit of post-dated checks since the change begins only once the check is presented between the banks.

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