Financial Professionals Urge Treasury to Withdraw Check Conversion Plan

T he Association for Financial Professionals (AFP) has urged the withdrawal of a U.S. Treasury Department proposal that would force the conversion of corporate checks to automated clearing house (ACH) debit entries at federal agency points-of-purchase and lockbox locations.

Such a conversion would "seriously disrupt cash-management practices" AFP said in a letter1 filed July 31, 2001 with the Treasury's Financial Management Service. FMS had requested comment on its proposal to revise Regulation 31 CFR Part 210, which governs the use of the ACH system by federal agencies.

NACHA-The Electronic Payments Association issued a similar proposal regarding corporate check conversion, which AFP's letter addresses as well.

In a July survey of AFP members, an overwhelming 81 percent of corporate treasurers and cash managers stated their opposition to the proposal to convert corporate checks to ACH debits.

Widespread use of automated account reconciliation, positive pay and controlled disbursement services justify their opposition, they said, and underline the importance of banks linking check and ACH systems.

Without that link, they said, reconciliation becomes a "nightmare," exposure to fraud increases, and investment and borrowing decisions are delayed.

In addition, the proposal could trigger other consequences:

+ Re-credit and rescission provisions will impair payment certainty and security.

+ Debit blocks and filters and other ACH security measures will increase the number of payments returned.

+ Payers will lose control over their payment methods.

+ Companies will be required to modify internal accounting systems.

While AFP as an organization supports the migration from paper to electronic payments, if adopted, the proposal would have severe, negative consequences for corporate cash management in the absence of two essential pre-conditions:

+ The widespread ability of banks to link their check and ACH systems on a same-day basis so that information can be communicated among them.

+ Provisions requiring explicit authorization by companies whose checks are being converted to ACH debits.

1 AFP's letter was signed by Patrick M. Montgomery, chairman of AFP's Government Relations committee and Vice President of Finance at ULLICO, and Donald L. Hollingsworth, chairman of AFP's Payments Advisory Group and Assistant Treasurer at Ameren Corp.

The Association for Financial Professionals in Bethesda, Md., formerly the Treasury Management Association, has grown in the past 20 years into a consortium of more than 14,000 individuals representing a broad spectrum of financial disciplines. AFP turns knowledge into performance by supporting members throughout all stages of their careers with research, continuing education, career development, professional certifications, publications, representation to key legislators and regulators, and the development of industry standards.