News

NACHA approves news rules for check conversion

November 2, 2005

HERNDON, Va. - The voting members of NACHA - The Electronic Payments Association have approved an amendment to the NACHA Operating Rules, according to a news release.

The amendment relates to methods used by originators to identify business checks that are ineligible for check conversion, and also provides corporate receivers with methods to opt-out of check conversion.

Existing rules allow only consumer checks to be converted. But many checks written by businesses are being inadvertently converted because originators cannot distinguish business checks from consumer checks, the release noted.

"The new rules will give originators simple and effective methods to identify business checks that should not be converted," said Elliott C. McEntee, president and chief executive of NACHA. "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."

Some new-rule highlights:

• Checks that contain an auxiliary on-us field in the MICR line are ineligible for conversion. Businesses that want to opt out of check conversion can use check stock that contains the auxiliary on-us field.
• Checks for more than $25,000 are ineligible for conversion.
• Businesses will have the the same ability as consumers to opt out of check conversion.
• RDFIs will have the same 60-day right of return for unauthorized transactions that exists for consumer check conversions. Under the existing rules, originators of ARC transactions also must have reasonable procedures to allow consumers to opt out, and that provision will now be available to businesses that do not use checks with auxiliary on-us fields.
• NACHA's rules relating to RDFIs' 60-day right to return unauthorized ACH debits upon obtaining written statements from consumers will now apply to ARC and POP transactions to corporate accounts, too.

The new rules become effective Sept.15, 2006. NACHA will begin industry education efforts with a teleseminar on Dec. 1. Information about the teleseminar is available on NACHA's Web site.