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Check Conversion Heating-Up on Yet Another Front |
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It
appears that TeleCheck has been successful in getting NACHA to draw a line
in the sand on the concept of Consumer as Keeper, by issuing a status
report on the potential risks of staying on this course (meaning
NOT handing
the check back to the consumer).
Status
of Proposed Pilot on Point-of-Purchase Truncated Check Debit:
NACHA’s Electronic Check Council
has been analyzing and developing a framework for a pilot program to test
check truncation at the point-of-purchase. It was determined that a short-term
rule would be the most appropriate method to pilot test this application.
This
application would allow for an in-person payment for goods or services at
a point-of-purchase, where the check is run through a MICR reader and the
account number, routing number, and check serial number are read. The
transaction would be sent as an ACH debit and the check would be stamped
void and retained by the ODFI, its agent, or the merchant. Retaining the
check would assist the Originator in collecting the debt in cases where
the ACH debit is returned unpaid. Because the check is completed and
signed by the consumer and not returned to the consumer, this application
is a form of check truncation and would be regulated by applicable NACHA
Operating Rules, the Uniform Commercial Code, and the Federal Reserve’s
Regulation CC.
The
Rules Work Group is in the process of finalizing a Request For Comment on
this proposed rule that will be distributed to the NACHA Family in mid-January.
If the response to the Request For Comment is positive, then, shortly
thereafter, a ballot would be sent to the NACHA Board of Directors so that
they could vote on the short-term rule. If approved by the NACHA Board of
Directors, this short-term rule would allow a one-year pilot test of this
application beginning in March 2000. A short-term rules proposal would
include the requirement that any ODFI that wants to provide this check
truncation service would be required to sign an agreement with NACHA,
thereby requiring them to provide statistics on their experiences with the
pilot program. “Danger,,Will
Robinson”
In
the meantime, ACH participants should realize that using the ACH Network
for this type of check truncation (meaning Consumer or any other party
other than Consumer as Keeper-giving the check back to the consumer) is
outside the scope of the NACHA Operating Rules, and that any ACH
participant who chooses to transmit this type of application at this time
is exposing their organization to substantial risk. When an ODFI chooses
to transmit an entry that is outside the scope of the NACHA Operating
Rules, the ODFI is breaching its warranties and therefore liable for any
and all claims, demands, losses, liabilities, or expenses based on the
breach of that warranty, which could include consequential damages. The
ODFI would also be subject to the national system of fines. In
other words, “Go ahead, make my day.” On a closing note, TeleCheck’s recent $1 billion press release had an interesting fact—if you took the time to do the math. Their total check services transactions had an average value of about $51, but their Electronic Check Conversion transactions have an average value of $75. It is clear that TeleCheck is targeting high value retailers with their offering.
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