Truncation is a process that is used in the payment system to replace paper checks with digital images. It is performed after a check enters the processing system and cancelled checks are not returned to customers. A digital image of the check is formatted on a sheet of paper and a certificate is provided next to it. This process improves the national payment system and allows the Federal Reserve Bank, the Clearing House and member banks to exchange images.
Truncation is also an adjective that describes something with a square end as if it had been cut off. The Fair and Accurate Credit Transactions Act (FACTA) of 2003 requires merchants to shorten personal account information printed on credit and debit card receipts. This is done to protect customers from theft or fraud. Truncated coverage means a credit insurance benefit with a term of insurance coverage that is less than the term of the credit transaction.
Truncation requirements are specified in the Fair and Accurate Credit Transactions Act (FACTA) of 2003, which amended and expanded the Fair Credit Reporting Act of 1970. Truncated coverage means credit insurance that provides a term of insurance coverage for a period that is shorter than the full term of remaining indebtedness at the time insurance coverage is chosen. Truncation helps protect customers from theft or fraud by preventing thieves from stealing or finding receipts from discarded customers. Companies can be held liable for truncation violations, even if no harm was done to the customer.
Truncation is an important process in the payment system that helps protect customers from fraud and theft. It also helps improve the national payment system by allowing banks to exchange images electronically. Truncated coverage provides credit insurance for a period that is shorter than the full term of remaining indebtedness at the time insurance coverage is chosen.