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Business Checks > Frequently Asked Questions

General Questions

Questions Financial Institution Employees May Have

Questions Your Business Customers May Have

General Questions

What are the conditions that make a business check ineligible for conversion?

Any one of the following conditions will render a check ineligible:

  • Checks or sharedrafts that contain an Auxiliary On-Us field in MICR line (to learn more about the Auxiliary On-Us field, download The Auxiliary On-Us Field: Why It Is Important)
  • Checks or sharedrafts written for an amount greater than $25,000
  • Third Party checks or sharedrafts
  • Demand drafts and Third Party drafts that do not contain the signature of the Receiver
  • Checks provided by a credit card issuer for purposes of accessing a credit account
  • Check drawn on home equity line of credit
  • Checks drawn on an investment company as defined in the Investment Company Act of 1940
  • Obligations of Financial Institutions (travelers checks, cashier's checks, official checks, money orders, etc.)
  • Checks drawn on the U.S. Treasury, a Federal Reserve Bank, or a Federal Home Loan Bank
  • Checks drawn on a state or local government that are not payable through or at a participating DFI
  • Check or sharedrafts payable in a medium other than U.S. Currency
  • Checks or sharedrafts that do not contain a pre-printed serial number
  • Checks or sharedrafts that are not completed by the Receiver (ARC only)
  • Checks or sharedrafts that have been previously negotiated, voided, or provided by the Receiver for use in any prior POP entry (POP only)
  • An item that the Receiver has notified the Originator to opt out of check conversion

Can any consumer check be converted?

Any consumer check that is not rendered ineligible by one of the conditions above can be converted.

What does it mean to convert a business check?

A business check is "converted" when that check is taken either at the point-of-sale or through the mail for payment, and the account information is captured from the check and an electronic transaction is created for ACH processing. To learn more about check conversion review the Introduction to Check Conversion page on this web site.

What is the Auxiliary On-Us field on checks and how does it work?

The Auxiliary On-Us field is an optional field that can appear on some checks, in the leftmost position of the MICR line. It is generally used on checks issued by corporate treasury, purchasing and accounts payable departments. The Auxiliary On-Us Field: What It Is, Why It's Important was written to help you better understand the Auxiliary On-Us field

Who is liable if a fraudulent check is converted?

The company that converted the check and its originating financial institution would be liable if an unauthorized transaction occurs.

Where can I find more details on the September 15, 2006 amendment?

See the businesscheck-FI.electronicpayments.org for more details, training materials for financial institutions, and additional resources.

Questions Financial Institution Employees May Have

What happens if a check is converted and it was not supposed to be converted?

There are three common instances in which checks are mistakenly converted: either the check was ineligible for conversion, or the check writer had opted out of check conversion, or the check writer later claims the check was unauthorized. In any of these instances, the check writer's financial institution will return the transaction to the biller/merchant's financial institution within 60 days of the settlement date of the transaction.

Please note that if you convert a check that was not supposed to be converted, it is possible that a Report of Possible ACH Rules Violation may be filed with NACHA, and a fine may be incurred.

How will ACH software and editing be affected?

ACH Operators, Third-Party Service Providers and financial institutions will need to modify their ACH software to accommodate a new Return Reason Code R39 (Improper Source Document). Origination software providers will want to modify their origination software to disallow the origination of any ARC or POP entries that exceed $25,000. ACH Operators will modify their software edits to ensure that ARC and POP entries exceeding $25,000 are rejected and returned to the ODFI using Return reason Code R19 (Amount Field Error). All systems will need to be reviewed to ensure they will detect an Auxiliary On-Us field

Where can I find detailed training materials on the new rule?

More information can be found at businesscheck-FI.electronicpayments.org. PowerPoint training presentations are available for download to provide in-depth training to Originator/Originating Financial Institutions (ODFIs) and Receiving Financial Institutions (RDFIs). In addition, Customer Service Training is available.

What is the return deadline for a converted business check?

The deadline to return a converted business check is the same as most other ACH returns - 2 days from the settlement date of the original item. The exception is when it is unauthorized. If the transaction is unauthorized, it may be returned for up to 60 days. Note that if the transaction is returned with a Return Reason Code of R10, it must be accompanied by a written statement under penalty of perjury (WSUPP), which your customers must sign. Items returned as R29 do not require a WSUPP.

We built a database for check conversion entries returned as unauthorized so entries to those accounts would not be converted again. Can we use the information from that database after September 2006?

If the transaction was returned as R29 because it was a business check, it may now be eligible for conversion IF it does not contain an Auxiliary On-Us field and is for an amount of $25,000 or less.

How will this work with debit blocks and filters?

If you have corporate customers using debit blocks who have checks that do not contain an Auxiliary On-Us field, you may wish to notify them that you will automatically return these converted check transactions. If you have corporate customers who have checks that do not contain an Auxiliary On-Us field that are using filters, you may need to work with them to ensure that information is added to the system to allow these converted items to post or notify the Originator of a desire to opt out.

Questions Your Business Customers May Have

How do I keep my check from being converted?

The new amendment to the NACHA Operating Rules is designed to make it easy for businesses to opt out of check conversion. The simplest way to make sure your checks are not converted is by using checks that include the Auxiliary On-Us field in the MICR line of your check. To learn more about the Auxiliary On-Us field see The Auxiliary On-Us Field: What It Is, Why It Is Important. You will need to work with your financial institution to determine what information should appear in this field.

You can also contact the companies that send you bills directly to opt out of check conversion, and choose to use a different form of payment in a store if they are using check conversion at the point of sale.

What do I do if my check is converted and I did not want it converted?

If you do not wish to have your checks converted, and your checks do not contain an Auxiliary On-Us field in the MICR line of the check, you can contact the billing company to opt out of conversion. In a store, you may use a different form of payment.

The company must notify you if it is using the check conversion process, usually with a note on the bill or with an enclosure in the bill. When you mail in the payment, you have authorized that your payment can be converted from a paper check to an electronic transaction. At a retail store, the company must obtain your signature authorizing that your payment can be converted. If you do not receive notification (billing company) or provide written authorization (in a store), you may ask your financial institution to return the transaction as unauthorized.

If you are certain you did not authorize the conversion, or suspect a mistake was made, you will have to sign a written statement under penalty of perjury saying that the entry was not authorized. Speak to your financial institution within 60 days of the original transaction settlement for details on how to proceed.

What if I don't care that my checks will be converted?

As of September 15, 2006, when the new amendment to the NACHA Operating Rules takes effect, if you want your check to be eligible for conversion, you should use checks WITHOUT an Auxiliary On-Us field. The Auxiliary On-Us Field: Why It Is Important discusses the field and MICR lines in greater detail.

My checks have Auxiliary On-Us fields. Will they be converted?

No. Under the new NACHA rule, a check bearing an Auxiliary On-Us field is not eligible to be converted to an electronic payment. To read more about the Auxiliary On-Us field see The Auxiliary On-Us Field: Why It Is Important.

My company uses checks that are larger than six inches. Will they be converted?

While standard business checks typically exceed six inches in length, allowing space to include an Auxiliary On-Us field, the size alone does not make these items ineligible for conversion. If the check has an Auxiliary On-Us field, it will be ineligible for conversion; if the check does not have an Auxiliary On-Us field it will be converted.

How will stop payments work? Will I still be protected?

You will still be able to place a stop payment on the transaction. You may need to place the stop payment before the check has been converted. Check with your financial institution about this procedure.

Some financial institutions' stop payment systems will not recognize a check converted into an ACH transaction. You should watch your account and notify your financial institution right away if a stop payment was placed but did not stop the transaction.

How will this work with debit blocks and filters?

If you use debit blocks on your account, all converted check transactions will automatically be returned to the company to which the check was written and the payment will not be processed. If you use filters on your account, you will need to talk to your receiving financial institution to ensure that converted checks are added to your filter list and processed.

What do I need to do to convert my customers' checks?

Work with your financial institution or Regional Payment Association to develop a check conversion program for your business.

How can I convert a business check and remain compliant with the ACH Rules?

Work with your financial institution to ensure compliance with the ACH Rules. Be sure to closely review the conditions that render a check ineligible for conversion.

Does my company have to give notice before converting business checks?

If you plan to convert a business check at the Point-of-Purchase (POP) you must obtain the check writer's written authorization prior to converting a check to a debit entry. If you wish to convert business checks that are mailed to you by customers (ARC) you must provide notice of conversion to the customer prior to the receipt of each check, and provide an opportunity to opt out of check conversion. In both cases, customers using business checks with an Auxiliary On-Us field will not have their checks converted.

What happens if I convert the check and it wasn't supposed to be converted?

There are three common instances in which checks are mistakenly converted: either the check was ineligible for conversion, or the check writer had opted out of check conversion, or the check writer later claims the check was unauthorized. In any of these instances, the check writer's financial institution will return the transaction to your financial institution within 60 days of the settlement date of the transaction.

If you convert a check that was not supposed to be converted, it is possible that a Report of Possible ACH Rules Violation may be filed with NACHA against your company and/or financial institution and a fine may be incurred.

What is the impact on controlled disbursement?

Most checks used for controlled disbursement are larger in size and carry information in the Auxiliary On-Us field, so they would be ineligible for conversion. If checks used for a controlled disbursement account are converted and the account is not set up to accept an ACH transaction, funding and reconciliation issues may occur.

Will a converted check clear faster than a paper check?

The deposit schedule for a converted check will be the same schedule that is followed today with a non-converted check. Variables impact timing but, generally, the payment may clear faster when a paper check is converted for processing through the ACH network.

How will I recognize a converted business check on my statement?

Only the check serial number is required to be provided, but how the information actually appears will vary depending on your financial institution. Speak to your financial institution to discuss how converted checks appear on their statements and reconciliations.

How do I get a copy of the original business check?

Contact your financial institution to have them request a copy from the company to which you wrote the business check.

Rules Questions?

Do you have a question about the NACHA rule related to business checks?