As reported in previous Green Sheet publications, new rules allowing the conversion of paper returns to ACH transactions have been approved by NACHA (the National Automated Clearing House Association). Since September of 1998, organizations have been given the official green light (no pun intended) to transform an eligible NSF returned check into an ACH, and resubmit the item for payment. For several reasons, some discussed below, organizations have seen very promising results.
SolutranSM, the Minneapolis customized payment processor founded in 1984, adds a unique angle to its service. While many RCK service providers offer one or two of the steps necessary to reap the benefits of this new rule change, SolutranSM offers complete outsourcing optionóincluding the consolidation of returns on the front end. In a recent interview with company management, we discussed SolutranSMís six major steps involved in their return processing program.
Step 1: Consolidating the Returns
Clients utilize an endorsement at the point of sale that allows for returns to be routed to SolutranSM after the paying bank has returned the check. Subpart C of Regulation CC states "... a paying bank may send a returned check to the depository bank, or any other bank agreeing to handle the returned check expeditiously..." For a client with several hundred or more locations, that sometimes works with as many banks, using the banking system to funnel their returned checks to one point offers significant efficiencies and cost savings. (Note that not all checks are able to be consolidated due to the all items file processing methodologies utilized by banks. SolutranSM has observed a successful return rate of 78 to 80% through its system. The other returns may either be forwarded to SolutranSM through the mail system for additional processing, or sent directly to the client.)
Step 2: Return Disposition
Once the return checks arrive at the SolutranSM facility, they need to be sorted down based on eligibility. Returns that are not going to be redeposited are sent into a system where information is captured for reporting purposes and the items are charged back to the clientís account. The RCK-able returns are sent to step three.
Step 3: RCK file creation
All returns scheduled for RCK are sent through a data capturing system to create an ACH file. Several additional pieces of information are captured so the client is able to maintain the integrity of which returns came from which store.
Step 4: RCK File Processing
Once a week, typically on Fridays, the ACH file is sent out for processing. For the most part, this entails a typical ACH processing system. SolutranSM has tested other scenarios but has found that sending the file on Friday, for a Monday settlement date, is the most effective. Conventional wisdom says that most people are paid on Fridays and, therefore, are more likely to have money in their accounts on Monday.
Step 5: Retrieval of Returns
RCK items returned the first time are resubmitted in the following cycle. Items that have been presented the maximum number of times (a total of three under the new rules), and still returned are pulled and returned according to the clientís instructions.
Step 6: Customized Reporting
Based on the data gathered throughout the preceding steps, reports are available in a variety of formats. Clients are able to get information detailing the success rates at each step in the process: immediate chargebacks, first time RCK presentments, second time RCK presentments, final chargebacks, total RCK clear rate effectiveness, and total return rate data. Furthermore, all data is available by store in formats ready to be loaded directly into a clientís general ledger.
SolutranSM offers two distinct advantages. First, they consolidate the returns. This feature allows the client to reduce their banking fees by simply concentrating most of them into one source. Clients are able to negotiate a more competitive fee structure if they have 100,000 returns in one location than if they have 200 returns at 500 different banks. Second, SolutranSM manages the most difficult aspects of this service, steps 2, 3, 5, and 6. If a high volume client is required to play this role, they will experience a manual process that can be frustrating, time consuming, and costly.
If you would like more information about this service, please call SolutranSM at 888-SOLUTRAN.
