Green Sheet

Short but sweet

Keep up the great work.

Bill Lally

Business check conversion clarification

The title and content of the Industry Update item "Business checks can be converted to electronic payments" (The Green Sheet, Sept. 25, 2006, issue 06:09:02) are misleading and not stated correctly. The recent change allows for the conversion of all checks that do not contain an auxiliary on-us (AOU) field in the MICR [magnetic ink character recognition] line.

This means if a business account is using consumer-size checks (six inches), they can [now] be converted. If such a business does not want its checks converted, it should change its check stock to the larger size business checks and include the AOU field.

[However] not all checks without an AOU field are eligible for conversion. ... In addition to checks over $25,000 or checks with an AOU file, following is the complete exclusion list:

• Third-party checks or share drafts
• Demand drafts and third-party drafts that do not contain the signature of the receiver (account holder)
• Checks provided by a credit card issuer for purposes of accessing a credit account or checks drawn on a home equity line of credit
• Checks drawn on an investment company as defined in the Investment Company Act of 1940
• Obligations of a financial institution (e.g., traveler's checks, cashier's checks, official checks, money orders, etc.)
• Checks drawn on the U.S. Treasury, a Federal Reserve Bank or a Federal Home Loan Bank
• Checks drawn on a state or local government that are not payable through or at a participating depository financial institution
• Checks or share drafts payable in a medium other than U.S. currency.

Probably, many such instruments would carry the AOU or be over $25,000, but even if they are not, they are not eligible for conversion. Never have been.

William L. Saffici
Vice President, Item Processing Division
Fiserv

William:

Thank you for taking time to provide The Green Sheet with such a detailed clarification.

Editor