News

NACHA approves rules for back-office check conversion

May 9, 2006

SAN DIEGO - NACHA-The Electronic Payments Association approved an amendment to its operating rules that allows retailers and billers to convert eligible checks to ACH debits at the back-office.

According to a news release, the amended rules, known as back-office conversion or BOC, are set to take effect March 16, 2007. NACHA announced the new rules at its Payments 2006 conference.

"Back-office conversion will enable financial institutions to provide additional value to their customers in a business environment where many checks are still used," Steve Ellis, NACHA chairman and executive vice president of Wells Fargo & Company's Wholesale Banking Group. "As consumers and businesses continue to move from cash and checks to electronic forms of payments, financial institutions continue to find opportunities to provide their customers with value-added electronic services to collect checks."

Consistent with rules passed by NACHA in November 2005 that take effect in September 2006, checks that contain auxiliary on-us fields or those written for amounts greater than $25,000 as ineligible for conversion, according to the BOC rules. BOC will allow FIs to convert eligible checks received in image files to ACH debits.

Check conversion at the POS has been available in the marketplace since September 2000, when NACHA's point-of-purchase rules took effect. Additional check-conversion rules for accounts-receivable payments took effect in March 2002. And NACHA estimates that 2.3 billion checks were converted into ACH payments in 2005.

Several notification requirements have been included with the amended rules, and all are consistent with notification requirements recently laid out by the Federal Reserve in its changes to Regulation E, NACHA said.

NACHA is expected to conduct an industry-training and education program about BOC this summer.

Materials will be made available on the check conversion section of the new Electronic Payments Web site: www.electronicpayments.org.