NACHA Approves Back Office Conversion of Point-of-Sale Checks

NACHA announced today it has approved a new form of electronic check conversion that will allow retailers to turn bundles of checks into automated clearing house debits in a central location, or back office. Known as back-office conversion, the new application will take effect March 16, 2007, the Herndon, Va.-based association said. The BOC proposal, which NACHA has had under consideration for some time, has drawn considerable interest from merchants that accept large volumes of checks, such as supermarkets (Digital Transactions News, March 14, 2006). The existing ACH application for check conversion at the point-of-sale, POP, has experienced slow growth as merchants shy away from its requirement that cashiers obtain explicit consumer authorization for each transactions. Many merchants also feel the need to equip checkout lanes with check scanners for POP, though check scanning is not a NACHA requirement, and chafe at the cost of installing devices in each lane. With BOC, merchants will be able to collect all consumer checks accepted during the day and convert them in a single location, away from the checkout lane. NACHA's new BOC approval?which technically is an amendment to the operating rules of the association approved by the voting members?requires retailers to post notices in their stores telling customers their checks may be converted and that they may opt out, but does not require customer authorization for each transaction. These requirements are in line with those released in December by the Federal Reserve Board in its clarification of certain rules regarding Regulation E, the regulation governing electronic funds transfers. BOC will also apply to billers that accept checks at manned locations or at the point of sale. And it will allow financial institutions that receive checks as image files to convert the items to ACH debits. As with other ACH applications, checks drawn on commercial accounts are not eligible for conversion. NACHA in November released rules, set to become effective in September, that are intended to make it easier for merchants to identify non-eligible items. These rules specify checks that have auxiliary on-us fields or are made out for amounts greater than $25,000 are not eligible.