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BOC Launch Drawing Near

Paul — Mon, 05 Mar 2007 06:57:27 GMT

For those retailers that have not adopted check conversion at the point of sale (POP), this month there is a new opportunity to begin converting checks taken at the register.

BOC (Back Office Conversion) will allow the conversion of checks to ACH in the back room.

For compliance information and requirements see this thread here.

Back Office Conversion

Paul — Wed, 21 Jun 2006 14:11:21 GMT

This new SEC Code (BOC) is the answer to issues raised by many high volume and multi lane retailers over POP (referred to by some as ECC).

BOC will allow retailers and payment service centers to receive checks at the point of presentment and take the items to the back room for scanning and conversion to ACH items.

Whereas with POP a signed authorization was required with BOC this is not the case. In this case notice equals authorization in conjunction with the presenters election to continue the transaction.

Here are the highlights of BOC requirements:

Authorization Requirements

Provide notice, and; receive the source document.
Notification Language must be substantially similar to Reg E notice language.
Must be posted in a prominent and conspicuous location.
A copy of the notice language must be provided to the receiver.

Opt Out

Receivers can opt out

Originators encouraged to offer alternative payment options to Receiver

Applies only to one specific check -- unlike ARC, where opt out applies to all checks drawn on a particular account.

Source Documents - What can be converted?

Checks that:

Are provided by Receiver at point of purchase or manned bill payment location.
Contain a pre-printed serial number.
Do not contain an Auxiliary On-Us Field in the MICR line.
Are in an amount of $25,000 or less.
Are completed and signed by the Receiver.

What Cannot be converted?

Checks not encoded in magnetic ink.
Checks that contain an Auxiliary On-Us Field in the MICR line.
Checks greater than $25,000.
3rd party checks.
Demand drafts and 3rd party drafts that don’t contain the Receiver’s signature.
Checks provided by a credit card issuer for purposes of accessing a credit account.
Checks drawn on home equity lines of credit.
Checks drawn on an investment company as defined in the Investment Company Act of 1940.
Obligations of a financial institution.
Checks drawn on the U.S. Treasury, a Federal Reserve Bank, or Federal Home Loan Bank.
Checks drawn on a state or local government that are not payable through or at a participating DFI.
Checks payable in a medium other than U.S. currency.

Requirements for MICR Capture

Originator required to use MICR reading device during initial processing.
Must capture routing number, account number, and check serial number from Receiver’s source document.
Key entry allowed during subsequent processing in order to correct errors.

Again these are the basics, and anyone that plans to use this SEC Code will want to be thoroughly familiar with the rules that will be published prior to commencement.

Business Checks Ineligible for Conversion

Paul — Fri, 16 Jun 2006 11:56:18 GMT

The new NACHA rule regarding ARC transactions against business accounts goes into effect in September.

The changes are as follows:

1) Business Checks with an auxiliary on-us field are ineligible. Other business checks are now eligible for conversion unless the receiver has opted out.

2) Opt-Out provisions must be made and adhered to.

3) Checks greater than $25,000 are ineligible.

This applies to business checks only. All other previously ineligible items are still ineligible.

Result of Federal Reserve's Ruling

Paul — Mon, 22 May 2006 11:43:33 GMT

The biggest resultant change in the ACH Network from the recent Fed Commentary is Back Office Conversion, a new product that will become available in March of 2007.

This new use will enable companies that receive checks in a retail environment to move those checks to thier back room for scanning and conversion to ACH debits.

Those who desire to use this new SEC Code (BOC) need to become familiar with the rules, especially those regarding authorization and notification, as well the opt-out requirements.

More information is available in the press release here.

Federal Reserve Reg E Ammendment

Paul — Wed, 04 Jan 2006 09:40:44 GMT

The Federal Reserve Board of Governors has ammended Regulation E and the official staff commentary to the regulation. The revisions address the regulation’s coverage of electronic check conversion services. Please see the link below for more information.

http://www.federalreserve.gov/BoardDocs/Press/bcreg/2005/20051230/attachment.pdf