NACHA has authorized banks to turn some
business checks into automated clearing house transactions through accounts
receivable conversion (ARC). According to NACHA estimates, 1.25 billion checks were converted via ARC last year, a number the association says could reach 2 billion in 2005.
Conversion of consumer checks is common place today, but businesses have opposed using the process for their checks largely due to the downstream impact on fraud prevention via Postive Pay and the float impact. Initially banks were reluctant to impose conversion on business checks. But the rules NACHA issued November 2nd signal a reversal for banks, which now
appear wiling to support using ARC on some business checks.
The rules reflect the fact that many business checks,
which are hard to distinguish from consumer ones, are currently being converted by
New rules at a glance:
- Checks with a so-called auxiliary on-us field in the MICR line will be ineligible for conversion to electronic transactions through the ACH. For the most part, these are checks written by purchasing and accounts-payable departments of businesses, and are generally distinguished from consumer checks because they are 9 inches long, compared to the typical 6-inch consumer check.
- Checks valued at $25,000 or more will also be ineligible.
- The new rules also provide businesses the same ability to opt out from ACH processing that already exists for consumers.
The new rules become effective on September 15, 2006.
"Nacha Allows Conversion of Some Corporate Checks"
by Steve Bills,
American Banker, November 3, 2005
"NACHA Sets Rules to Tell Business Checks from Consumer Checks"
by Digital Transactions, November 3, 2005