The 1998 NACHA ruling for representing NSF checks through the ACH network
Returned Checks Can Now Be Collected Electronically, NACHA Announces
Seattle, WA, March 10, 1998 -The National Automated Clearing House Association (NACHA) announced today that its Board of Directors has approved a "rule" for the electronic collection of checks returned for insufficient funds (NSF). Checks that have been returned unpaid for NSF can now be collected through the Automated Clearing House (ACH) Network, the network that allows financial institutions to exchange payments on behalf of business customers and consumers. NACHA announced the new rule at it PAYMENTS 98 conference in Seattle.
Keith Theisen, Vice President of Norwest Bank, led the NACHA Rules Work Group that developed the rule. He said, "The collection of returned checks through the Ach Network can bring substantial cost and time savings to businesses, consumers and financial institutions. Respondents to the group's request for comments estimate that costs associated with representing an NSF check can be reduced by up to 50 cents per check for businesses, and one dollar per check for financial institutions. Lower costs also make the collection of small-value checks more cost-effective." In addition, NACHA projects that the rate of successful collection could increase by 25 to 50 percent.
Consumers will benefit from the new provision, too. Hal Piotrowski, Vice President of Charter One Bank and the Chairman of NACHA, said, "Use of the new ACH check collection transaction will result in quicker removal of negative information from check verification databases, which many merchants use to screen out bad check writers. This means that consumers will be able to write checks again sooner."
Currently, returned checks that are to be "re-presented" must be physically sent through the check clearing system in order to be collected. The new NACHA rule allows this representment to take place over the ACH network.
The new rule creates a new Standard Entry Class Code - RCK (for Represented Check Entry)- under NACHA's Operating Rules for the ACH Network. The RCK code provides a method to initiate and ACH debit transaction in place of a paper check, after the original paper check is returned for insufficient funds. The RCK rule becomes effective September 17, 1999.
Steve Shutze, Senior Vice President of NationsBank said, "The new Represented Check Entry transaction was created in response to the needs of businesses that need faster and more successful collection of returned checks."
The NACHA Board also approved an interim rule, effective September 18, 1998 through September 16, 1999, to allow ACH participants to use the existing Pre-authorized Payment and Deposit (PPD) Standard Entry Class Code to initiate these transactions.
The RCK rule requires businesses who plan to collect returned checks electronically to notify check-writers, at the point of sale or on monthly bills, in a manner to notices currently required for collection fees.
About the National Automated Clearing House Association (NACHA)
NACHA, located in Herndon, Virginia, represents more than 13,000 financial institutions through its 35 regional ACH associate, six councils and corporate Affiliate Membership program. A leader in the payments industry, NACHA develops operating rules for the Automated Clearing House (ACH) Network and for emerging electronic payment solutions in the areas of Internet commerce, bill payment and presentment, financial EDI, cross border transactions, electronic checks, and electronic benefits transfer. NACHA produces marketing collateral and technical publications, and provides extensive education services, including major conferences and seminars. Visit NACHA on the Internet at www.nacha.org .