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Issue 01:07:02

It Was Their Kind of Retail Convention

The Feminine Side of ISO

Company Profiles

CDE Services

Payment Online Inc.


First Data's Shopping Spree

E-Wallet Gets Left Behind

CrossCheck Introduces Wireless Check Authorization

New Products

It's Z ... as in 'Zoop'

WearLogic's Shopcarte

Beaming Through Barrier


'Mirror, Mirror on the Wall'

Cool Advice on Hot Days

'Help, I've Been Robbed!'


Resource Guide


Massive Change in Check Collections ... But Not Yet

In the June 25, 2001 issue of the Green Sheet, I noted that major retailers WILL (future tense) be dancing in the street with this NACHA1 rules change. However, NACHA would like to have it made clear that although the Federal Reserve Board of Governors has cleared the way for collecting a service fee on returned checks based solely on a sign at the point of sale, NACHA has not yet approved the change2.

While my comments about the Fed's opinion were in my mind clear, here is further illumination on the subject:

Last September, the Electronic Check Council unanimously endorsed a proposed change to the National Automated Clearing House Association bad check service fee authorization rule, and it voted to present the proposed rules change to the NACHA Rule Making Process.

The new rule would authorize the electronic collection of the bad check service fee directly from the check writer's bank account based on a notice posted at the point of sale. The proposed NACHA rule also would require that a letter be sent to the check writer explaining the collection procedure, and it would provide a phone number so the check writer would be able to make alternate payment arrangements if necessary.

The proposed NACHA rule would make it possible to collect a majority of the bad checks and related service fees directly from the check writer's bank. This would speed up the recovery of the check and fee while dramatically lowering the cost to collect.

The new rule also would result in an overall increase in the recovery of bad checks and related service fees. In short, many expect automatic collection of the service fee to revolutionize the way bad checks are collected, and that was the point of the previous article on this subject.

On March 15, as noted in the previous article, the Federal Reserve issued a commentary on Regulation E and various check truncation issues (See Detail in the previous article). In the new commentary, the Federal Reserve clearly stated that Regulation E does not require a separate signature for electronic presentation of service fee payments, noting that a sign at point of sale is sufficient to authorize electronic service fee transactions.

While NACHA representatives do admit that there are no legal impediments to liberalizing the service fee authorization rule, no further progress has been made since the Electronic Check Council sent its proposed rules change to the NACHA Rule Making Process.

To assure that no one is confused by the previous article or the "Final rule; official staff interpretation, from the Board of Governors of the Federal Reserve System," published by the Green Sheet, NACHA would like our readers to know that the service fee issue is being assigned to a NACHA rules workgroup for the next step in the approval process.3 It is most likely that a pilot program for electronic service fee transactions authorized by posted notice will not start until sometime in 2002.

(Watch for the third story in this series in the next Green Sheet: "How To Beat the NACHA Rule Now.")

1 National Automated Clearing House Association is the trade association that develops operating rules and business practices for the ACH network.

2 NACHA has not changed its authorization requirements for one-time ACH transactions, although the recent Reg. E interpretation permits (but does not require) NACHA to change such rules. The current NACHA requirement for a signature for one-time ACH transactions, including collecting an RCK service fee through the ACH network, remains in force.

3 A request for Comment (posted on the NACHA Web site, on electronic check applications asks for opinions on the proposed rule changes.

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