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NEWS RELEASE
CONTACT:
Michael Herd
mherd@nacha.org |
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NACHA Approves Rules for Identification of Business
Checks Ineligible for Conversion
Herndon, Virginia, November 2, 2005 -
The voting members of NACHA - The Electronic
Payments Association have approved an amendment to
the NACHA Operating Rules that provides
methods for Originators to identify business checks
that are ineligible for check conversion, and also
provides corporate Receivers with methods to opt-out
of check conversion. The existing rules for check
conversion allow only consumer checks to be
converted. In practice, however, many checks written
by businesses are being inadvertently converted
because Originators cannot distinguish many business
checks from consumer checks.
"Business checks are being converted today," said
Elliott C. McEntee, President and Chief Executive
Officer of NACHA. "The new rules will give
Originators simple and effective methods to identify
business checks that should not be converted. The
new rules could also lead to greater use of check
conversion, particularly ARC, by making it easier
for Originators to comply with the rules. We know
that some companies have not implemented ARC because
they believe they cannot identify many business
checks that should not be converted."
The new rules provide that checks that contain an
auxiliary on-us field in the MICR line are
ineligible for conversion. Such checks are typically
used by corporate treasury, purchasing and accounts
payable departments, and can be readily identified
because they are nine inches in length, compared to
the standard six inches for consumer checks.
Businesses that want to opt-out of check conversion
can use check stock that contains the auxiliary
on-us field.
The new rules also provide that checks for more than
$25,000 are ineligible for conversion. In practice,
virtually all such checks are business checks, and
the dollar limit will ensure that checks sent to
wholesale lockboxes are not converted.
Finally, the new rules provide businesses with the
same ability as consumers to opt-out of check
conversion, and provide RDFIs the same 60-day right
of return for unauthorized transactions that exists
for consumer check conversions. Under the existing
rules, Originators of ARC transactions must have
reasonable procedures to allow consumers to opt-out,
and this provision will now be available to
businesses that do not use checks with auxiliary
on-us fields. In addition, the NACHA Operating
Rules provide an RDFI with a 60-day right to
return an unauthorized ACH debit upon obtaining a
written statement from a consumer, and this
provision will now apply to ARC and POP transactions
to corporate accounts.
The new rules become effective on September 15,
2006. NACHA will begin industry education efforts
with a teleseminar on December 1. Information about
the teleseminar can be found on NACHA's web site at
www.nacha.org.
Check conversion has been available in the
marketplace since September 2000, when NACHA's rules
for converting checks at the point-of-purchase (POP)
went into effect. In March 2002, NACHA's rules for
accounts receivable conversion (ARC) became
effective. NACHA estimates that in 2004 there were
1.25 billion consumer checks converted into ARC
payments, and that at its current growth rate may
reach 2 billion payments in 2005, making ARC the
fastest-growing payment application in the 33-year
history of the ACH Network.
About NACHA - The
Electronic Payments Association
NACHA is the leading
organization in developing electronic solutions to
improve the payments system. NACHA represents more
than 11,000 financial institutions through direct
memberships and a network of regional payments
associations, and 650 organizations through its
industry councils. NACHA develops operating rules
and business practices for the Automated Clearing
House (ACH) Network and for electronic payments in
the areas of Internet commerce, electronic bill and
invoice presentment and payment (EBPP, EIPP),
e-checks, financial electronic data interchange
(EDI), international payments, and electronic
benefits transfer (EBT). Visit NACHA on the Internet
at www.nacha.org.
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