May 1, 2007
Check conversion through the ACH Network is governed by the ACH Rules established by the National Automated Clearing House Association (NACHA). Before BOC, retailers had one option for converting checks received at the point of sale, called Point of Purchase (POP) transactions.
Some retailers have found that POP is not the right option for their business due to its high training and implementation costs. POP requires that checks be converted to ACH transactions at the point of sale.
Retailers must provide equipment to each cashier and ensure that POP requirements are being followed. Businesses may find BOC a better alternative to POP.
With BOC, checks can be converted in a back office setting, rather than at the point of sale. Checks eligible for conversion include consumer and business checks in the amount of $25,000 or less that do not contain the, "Auxiliary On-Us," field.
Customer authorization is required before a check can be converted into a BOC transaction. A retailer obtains authorization by providing a notice that informs customers that the retailer is authorized to use information from the check to make a one time electronic funds transfer from the customers' account.
A copy of the notice must also be provided to customers at the time of the sales transaction. In addition, a telephone number of the retailer's that is answered during normal business hours must be made available for customer inquiries. Until January 1, 2010, retailers must also notify customers that funds can be withdrawn from a customers' account that same day and that customers will not receive the check back from their bank.
Notices to customers must be posted in a prominent and conspicuous location. A retailer must also provide an opt out option. These include allowing customers to use a different form of payment, such as a credit card.
Retailers must create an electronic image of the check and retain the image for at least two years. The original check must be securely stored until it is destroyed.
In deciding what's best for a particular retail operation, retailers should consider the advantages and disadvantages of BOC before deciding if it is the right method of electronic check conversion for their business. Here are several questions that can help merchants in making the decision:
Before implementing any check conversion option, retailers need to be aware of requirements imposed by the ACH Rules, as well as applicable federal and state laws. Complying with these laws and the ACH Rules will reduce a retailer's risk of potential liability and fines. It may also prevent a retailer from being an easy target for fraud.
BOC may be a viable alternative for many retailers in the check processing world. NACHA estimates the potential market size for BOC to be one to four billion payments annually by 2010. With BOC, more businesses may now benefit from electronic check conversion.
Information in this article was excerpted and edited from a story on the GlobeSt.RETAIL website.
Topic: Business Strategies
Related Articles: BOC
Article ID: 149
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