I. INTRODUCTION
On March 4, 1998, the National Automated Clearing House Association (NACHA) approved two amendments to NACHA Operating Rules that allow companies and financial institutions to utilize the Automated Clearing House (ACH) Network to electronically collect checks returned for insufficient or uncollected funds. The first amendment, effective from September 18, 1998, until September 14, 2000, represented an interim solution using an existing Standard Entry Class Code to transmit ACH debit entries in place of a paper check after the paper item is returned for insufficient or uncollected funds. The second amendment, effective September 15, 2000, created a new Standard Entry Class Code, called “RCK” (Re-presented Check Entry), to transmit ACH debit transactions in place of a check after the paper item is returned for insufficient or uncollected funds.
II. EFFECTIVE DATES OF RULES
The interim rule amendment was effective September 18, 1998 and automatically expired September 14, 2000. The amendment expands the definition of the “Prearranged Payment and Deposit” (PPD) Standard Entry Class Code to allow for the transmission of ACH debit entries in place of a paper check after the check has been returned for insufficient or uncollected funds.
The final rule amendment was effective September 15, 2000. At that time, use of the PPD Standard Entry Class Code will no longer be permitted to represent checks via the ACH network. The new Standard Entry Class Code created for the transmission of ACH debit entries in place of a paper check after the check has been returned for insufficient or uncollected funds is the Re-presented Check Entry (RCK).
III. CHECKS ELIGIBLE FOR ACH RE-PRESENTMENT
The types of paper transactions that may be cleared via the ACH Network using the re-presented check entry process are limited by a number of specific criteria. To be eligible to be transmitted as a re-presented check entry, the item must: (1) be an amount less than $2,500; (2) indicate on the face of the check that it was returned for insufficient or uncollected funds; (3) be dated less than 180 days from the date the entry is transmitted via ACH; (4) be drawn on a consumer account; and (5) have been previously presented no more than two times in paper form if the entry is an initial re-presented check entry, and no more than once in paper form if the entry is a re-initiated re-presented check entry.
IV. COLLECTION FEES
Companies utilizing the re-presented check entry process must be aware that re-presented check entries may be originated for the face amount of the check only. No collection fees may be added to the amount of the item when it is transmitted as an ACH entry.
To collect fees related to returned check processing, originating companies must first obtain the written authorization of the consumer and must originate a separate ACH debit entry to the consumer’s account using the PPD format. PPD debit entries for the collection of fees are considered to be separate transactions from re-presented check entries and must comply with all requirements governing the traditional use of the PPD debit (e.g., direct deposit of payroll, direct debit, etc.).
V. NOTICE OF RE-PRESENTED CHECK ENTRY POLICY
Originating companies are obligated under NACHA Operating Rules to provide notice to each consumer who writes a check, prior to receiving the consumer’s check, informing the consumer of the re-presented check entry policy under which the consumer’s check may be collected electronically if it is returned for insufficient or uncollected funds. The manner of consumer notification is not specified by NACHA Operating Rules however, the rules require an originating company to provide notice that clearly and conspicuously states the terms of the re-presented check entry policy in advance of accepting the consumer’s check.
NACHA Operating Guidelines recommend that notice of the re-presented check entry policy provided at the point-of-sale be clearly displayed on a sign at the point-of-sale. Notice provided by a billing firm (such as a utility company or a credit card company that issues a bill for payment) should be clearly displayed on or with the monthly billing statement.
VI. NUMBER OF RE-PRESENTMENTS
If the item has been deposited and returned through the check collection process twice, a re-presented check entry may be transmitted only one time. If the item has been deposited and returned through the check collection process only once, a re-presented check entry may be transmitted up to two times.
VII. RECEIVING INSTITUTIONS
Receiving institutions are not required to make any modifications to their ACH software to accommodate the receipt and processing of RCK entries using the PPD interim rule. Receiving institutions will be required to modify their ACH software to identify and process the new RCK Standard Entry Class Code. In addition, the new rule requires receiving institutions to provide the check serial number on their customer statements to assist in identifying returned checks collected through the ACH network. Institutions must modify their Demand Deposit Account (DDA) applications accordingly to ensure that they are able to meet this requirement.
The return time frame for RCK entries is slightly different than for other ACH transactions. NACHA Operating Rules require most RCK entry returns to be transmitted by the receiving institution to its ACH operator by midnight of the second banking day following the banking day of receipt for the presentment notice. The presentment notice is considered to be received by the receiving institution when the RCK entry is made available to the receiving bank by its ACH operator. There are certain items that may be returned up to 60 days after the settlement date of the RCK entry (e.g., check is ineligible; notice was not provided to consumer by originating company; signatures on check are not authentic or authorized; check is altered; or stop payment order was placed on check).
A consumer requesting a stop payment order be placed on an RCK entry must notify the receiving bank so that the receiving bank has a reasonable opportunity to act upon the stop payment order prior to acting on the debit entry.
The originating bank must provide the receiving bank with either the original or a copy of the item within ten banking days of the receiving bank’s written request, provided that the request for an original item was received within 30 days of the settlement date of the RCK entry, and the request for a copy of the item was received within seven years of the settlement date of the RCK entry.