General Questions About Check Conversion
Questions Your Individual Customers Might Have
Questions Your Business Customers Might Have
General Questions About Check ConversionWhat is check conversion and how does it work?Check conversion is the process of converting a check payment into an electronic payment. Check conversion saves financial institutions and businesses considerable time and money in payment processing. In addition, check conversion results in fewer returned checks, earlier fraud detection, and less errors. Is check conversion new?No. Check conversion has been in place for five years using the same secure Automated Clearing House (ACH) system that has been used for close to 40 years for Direct Deposit and Direct Payment. Does check conversion go by other names?Check conversion may also be called Accounts Receivable Entry (ARC), Point of Purchase (POP), Back Office Conversion (BOC), electronic check, e-check, electronic check processing, and ACH. What is Accounts Receivable Entry (ARC)?Converted checks have a unique identifier code, called a standard entry class code that distinguishes them from other ACH transactions. Accounts Receivable Entry (ARC) is the standard entry class code for check conversion for checks that were written to pay bills. What is Point of Purchase (POP)?Point of Purchase (POP) is the standard entry class code for checks that are written at a store checkout counter, voided, returned to a customer, and converted through the ACH. What is Back Office Conversion (BOC)?Back Office Conversion (BOC) is the standard entry class code for checks that are written at a payment location for goods or services, and converted from paper to electronic debit later at a centralized location. Checks converted under BOC are securely stored by the merchant until destroyed. What are the benefits of check conversion?As with other electronic payments, check conversion can result in fewer returns, earlier fraud detection, less processing errors, more privacy and reduced costs. Who benefits from check conversion?Check conversion adds significant efficiencies added to the U.S. economy. Electronic payment processing has advanced to the point that the processing is seamless and for the most part transparent to individual customers, who benefit from the reduced time between writing and processing checks. How widespread is the use of check conversion?Check conversion is an increasingly common process of converting paper checks to electronic payments. Exactly how is a payment made under check conversion?Checks are converted into electronic payments via the Automated Clearing House (ACH) network, the same safe, reliable system used by hundreds of thousands of companies for Direct Deposit of payroll and by the Federal government for benefit payments such as Social Security. The ACH system is a closed, secure network that is not accessible to the public and has been in existence for close to 40 years. How did the movement toward electronic payments and check conversion begin?Electronic payments, such as Direct Deposit, have close to a 40-year history of safety, security and privacy. Due to the costs and risks involved in processing checks, many industries have been encouraging a move from paper-based payments to electronic payments for many years. Questions Your Individual Customers Might HaveIs check conversion governed by any regulations?The Federal Reserve's Regulation E and the NACHA Operating Rules regulate electronic payments processed over the ACH Network. Because of Reg E and NACHA's Operating Rules, consumer accounts are protected from unauthorized or fraudulent transactions. Is check conversion safe and secure?Yes. Electronic payments are safe and private - a network of computers does the work. Encryption, message authentication codes and other security procedures protect the information. How will I keep track of my checks that are converted?Check conversion provides easier recordkeeping for your individual customers because the name of the business, the date of the payment, the check number, and amount of the payment are listed on account statements. Let your customers know where on their statement check conversions and other electronic payments will appear. Who authorized the billing company, store or other merchant to convert my check?The business notifies the customer that it is converting paper checks to ACH debits. When customers mail in the payment, they are authorizing the conversion from a paper check to an electronic transaction that will be processed via the ACH Network. Businesses using POP or BOC must notify customers that they may be converting checks. If your customer chooses to make a payment by check, they are authorizing the business to convert the check. Do businesses have to notify me in advance that they are converting checks?Yes. The notification can occur in a number of ways - if you're in a store, the notice must be posted in a "prominent and conspicuous" location and notification must be on your receipt or a "takeaway". If you mail in a check to pay a bill, a notice will be inserted in your bill or you may see a note on the bill itself. If a business uses check conversion, am I required to comply?Businesses are required to offer consumers an opt-out option. When in a store, the easiest way to opt out is to use a different form of payment. What happens to my check after it is converted?Checks converted at the point of sale using POP are voided and returned to customers. Checks converted using BOC will be imaged, securely stored until destroyed and destroyed. Can a billing company, store or other merchant take extra money from my account using check conversion?No. Under Regulation E and the NACHA Operating Rules, only the amount of the payment may be deducted from a customer's account. Your customers can be assured that NACHA Operating Rules and Regulation E provide protection if there are unauthorized debits from individual accounts. Can the billing company, store or other merchant see how much money I have in my account?No. Assure your customers that you protect their financial information. While the business's financial institution debits the account, the company itself has no access. Actually, less people see the customer's information when a check is converted. What if the billing company, store or other merchant debits the wrong amount?Problems with check conversion are rare. Electronic payments processed through the ACH Network have fewer problems and faster error resolution than checks. If a problem should occur, advise your customer what your policy is and/or ask them to contact the business if appropriate. What if the bill is deducted twice, once as a check and again as an electronic payment?The system was designed with safeguards to avoid this problem. However, in the event of any such error, your customers should be alert you immediately. When the check is converted to an electronic payment, customers are protected under Regulation E, the same regulation that protects against unauthorized use of an ATM or debit card. Where does a converted check show up on my account statement?A converted check may appear in the same space as ATM withdrawals, Direct Payments and other electronic payments, or it may remain in the check listing. Tell your customers how you display electronic payments on your print, online, and telephone/audio statements. How will I recognize the payment on my account statement?The "payee" on your customer account statements should match the "payee" on the checks they write. The check number will be included in the transaction detail on account statements. What if it turns out the debit is unauthorized?In this case, your customers should let you know that they believe the debit/transaction was unauthorized. Internal policy should be followed Ð generally you will advise the customer you will return the transaction, initiate research, and they will need to sign an affidavit saying that the transaction was unauthorized. What is a check image?A check image is simply a "picture" or "copy" of your customer's original check in the process of check conversion. Can I get my original check back? What about a copy of the check?Customers will most likely not be able to get the original check back. Businesses must provide a copy of the check if requested. Assure your customers that all of the relevant information will be on a customer's account statement, including the name of business, the check number, the date, and amount of payment. What happens if I have a dispute with the billing company, store, or other business?Customers should notify you if they cannot resolve payment disputes directly with the business. With electronic payments, a customer's account is protected against unauthorized debits by Federal Regulation E. Can I put a stop payment on an check conversion?Yes. As with a paper check, customers can place a stop payment before the payment is posted. I placed a stop payment on a check but it went through anyway. Why did this happen?A stop payment must be placed before the check is converted to an ACH payment. Customers must report errors with you within 60 days after account statements are postmarked. Does my payment clear faster with check conversion?The payment may clear faster when a business has converted the paper check to an ACH electronic payment. Consumers should be sure they have adequate funds in their accounts to cover the amount of their payments. How can I prove that I made the payment?A customer's account statement will show the date, the check number, thename of the business, the date, and the amount of the payment. The account statement is accepted as proof of payment. I recently made a payment by check at a business. The cashier ran the check through a machine and handed it back to me. Is this check conversion?The check was processed electronically. Referred to as a POP (point-of-purchase) transaction, this allows businesses to capture the customer's payment information. The payment is processed electronically through the ACH network. The original paper check is voided and is returned to the customer. I recently made a payment by check at a business, but didn't get the cancelled check back, and it is showing up on my account statement with the ATM withdrawals. Is this check conversion?Yes. The check was most likely converted in the "back office" (BOC). This check conversion application is one way that businesses can process paper checks. Once the payment information from the check has been captured, the payment is processed electronically through the ACH Network. The original check is securely stored until destruction. Questions Your Business Customers Might HaveWhat is the best way to notify customers that we will begin using check conversion to process payments?To promote acceptance and to minimize confusion and complaints, let your customers know you will be converting checks. Businesses are required to post a notification in a "prominent and conspicuous" location and provide notification on the receipt or a "takeaway". In addition, the business must provide the customer a working telephone number that they can call for more information or dispute resolution. How much notice do I have to give my customers that we willl be using check conversion?Businesses are required to provide notice to their customers prior to the receipt of each check to be converted to an ACH electronic payment. Because check to ACH conversion transactions are considered to be single entry debits, the customer must be notified prior to each check payment. How should I handle inquiries or complaints?To instill confidence in the business and in check conversion, business customers should make sure that their customer service representatives are trained to handle inquiries. The resources on the Business area of this Web site should provide the information necessary to educate the staff at the business. How should I handle topics such as opt-out and questions about where the original check is?Businesses are required to offer their customers an opt-out and will need to build an opt-out policy into their business/operating policies. If asked, you should let the customer know your opt-out policy. |
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