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Information for Better Decisions
Protecting Your Financial Resources
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Electronic Check Conversion
What is it and how does it work?
Electronic check conversion is a relatively new type of payment
process. Your check is scanned for information - for the check number,
your account number, and the financial institution's routing number
- along with an image of the check itself on some occasions. This
information is then used to make a one-time electronic transfer
from your account. The transaction is approved or declined, just
like the process for a credit card transaction. You then authorize
the transaction by signing a receipt. Electronic check conversion
converts a traditional paper check into an electronic item at the
point-of-sale, and processes it through the Federal
Reserve's Automated Clearing House (ACH) network. The check
itself is not the method of payment. In many instances the clerk
will return your voided or marked check to you along with your signed
receipt.
Merchants are required by the Electronic
Fund Transfer Act and the Federal
Reserve Board’s Regulation E to give notice that information
from your check will be used to make an electronic payment from
your account. Notice may be provided in different ways. For example,
a merchant may post a sign at the register or may give you a written
notice that you’ll be asked to sign.
Consumers benefit from the use of electronic check conversion in
a variety of ways:
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Your privacy is protected due to the elimination
of paper checks.
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You immediately have a record of the transaction
to reconcile with your statement.
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Your retailer saves from 50 cents to $2.50
per check in processing costs, a savings that can be passed
directly back to you, the consumer.
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It eliminates the risk of NSF (non-sufficient
funds) checks and fees, saving the retailer and the consumer
valuable time and money.
Your electronic transaction is normally processed
faster than a check. Be sure you have enough money in your account
at the time you make the purchase.
It is very important to keep your voided checks, especially if you
encounter a billing problem. Since your check is never processed
by us in the traditional sense, we are unable to provide you with
a duplicate copy.
Electronic check conversion can be used to make payments over the
phone. Be cautious when sharing your account information over the
phone. Don't provide any personal or financial information unless
you initiate the call.
Note:
Merchants, billers, and
financial institutions now have the option of representing
returned checks (NSF checks) electronically. This means
that if you write a check that is processed in the traditional
manner, and your check bounces, the merchant may represent
the check electronically rather than re-deposit the check
itself. You must be notified in advance (a sign at the merchant's
place of business is considered "notification")
for electronic check conversion or re-presentment to take
place. As long as this notice is provided, the merchant
can process your NSF check electronically. Represented checks
are not subject to the Electronic
Fund Transfer Act or the Federal
Reserve Board’s Regulation E
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Ask
yourself....
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Do I understand that the information from
my check will be used to make an electronic payment from my
account?
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Do I have enough money in my account to
cover the payment?
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Did I receive a receipt?
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Does the amount on the receipt match the
amount of my purchase?
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Was my check returned to me and voided?
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Do the charges on my financial statement
match my records?
Consumer Rights
You have different consumer rights with an electronic check conversion
transaction than when you use your check as payment. For example,
with electronic check conversion, you have the right to an investigation
by your financial institution when an error occurs.
What are my rights in electronic check conversion transactions?
1. You have the right to receive notice when you provide your check
advising you that information from the check will be used to make
an electronic payment from your account.
2. When you provide your check, you have the right to a notice advising
you of any fee that the merchant will collect from your account
electronically if you do not have enough money in your account to
cover the transaction. This fee is similar to a “bounced check”
fee.
3. You have the right to receive a receipt when you make a purchase
at a store. The receipt will contain information about the transaction,
including:
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Date
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Amount
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Location
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Name of merchant
4. You have the right to have this same information
included as part of the regular account statement from your financial
institution.
5. You have the right to ask your financial institution to investigate
any electronic fund transfers from your account that you believe
are unauthorized or incorrect.
Frequently Asked Questions
Q. How is check conversion different
from a debit (check card) transaction?
A. Debit transactions are processed through
ATM networks, where a card number is required to link to
the correct credit union or bank for payment. Check conversion
employs existing infrastructure using MICR (magnetic ink
computer readable) data from the check and running it through
the ACH network.
Q. What is the difference between ATM
cards and debit (check) cards?
A. The primary difference is the network
used to clear your funds. ATM cards use ATM networks and
require a card number to link to the correct financial institution
for payment. Groups of banks sometimes share ATM networks
located throughout a region of the country. Debit (check)
cards use the ACH (Automated Clearing House) network, which
acts as the central clearing facility for all Electronic
Fund Transfer transactions that occur nationwide. The Federal
Reserve Banks operate an automated clearinghouse, as do
some private-sector firms.
Q. Are funds debited instantly from my
checking account?
A. No. Unlike debit cards, funds are moved
within 48 hours of the purchase.
Q. What should I do if I have a problem
with an electronic check conversion transaction?
A. Always review your account statement.
You should immediately contact us if you see a problem.
You have 60 days from the date your statement was sent to
tell us about the problem. It may take up to 45 days from
the time you notify us to complete an investigation.
Q. May the same check be used more than
once?
A. No. An electronic check conversion transaction
is a one-time electronic payment from your account. Your
check number is used to identify the transaction.
Q. Can electronic check conversion occur
if I mail a check to pay a bill?
A. Yes, as long as you are notified by the
merchant. For example, each time you receive your insurance
bill there is a notice that tells you that when you mail
a check, information from that check will be used to make
an electronic payment from your account. If you then send
a check, you have agreed to electronic check conversion.
Your check will not be returned to you because the transaction
was processed as an electronic fund transfer, not as a check
transaction.
Be sure you have enough money in your account when you mail
your check, keep records of your payments, and check your
account statements to make sure the amounts charged are
correct.
Q. What if I don’t want my check
to be used for electronic check conversion?
A. If you don’t want your check to
be used for electronic check conversion, you may have to
provide another form of payment (for example, cash, check
card, or credit card).
Q. Can a merchant charge me a collection
fee, charging my account for both a represented (bounced)
check fee and the electronic fee?
A. No. No collection fee can be charged
to your account without your written authorization.
Q. What happens to my check after it
has been collected electronically?
A. If the merchant does not return your
voided or marked check to you, it should be kept by the
merchant for 90 days. In addition, the merchant is required
to keep a copy for seven years.
Q. What happens if a merchant represents
a check electronically, and I have already paid the amount
for the check?
A. Contact us within 60 days and we will
investigate. If we discover that your account has been charged
twice in error, your account will be credited.
Q. Can I get my check back?
A.Yes. You will need to contact the merchant
directly.
Q.How will a represented check appear
on my statement?
A. It will be listed as an electronic transaction
and the description will read "REDEPCHECK". You
will also see the check amount and its check number.
Q. What if I did not receive notice of
the electronic re-presentment process?
A. You may sign an affidavit with us that
you did not receive notice. Your account will be provisionally
credited for the unauthorized debit and an investigation
will take place.
Q. Where can I file a complaint?
A. The Federal Trade Commission works on
behalf of the consumer to prevent fraudulent, deceptive,
and unfair business practices. Contact them in writing at:
Federal Trade Commission
Consumer Response Center
600 Pennsylvania Ave., NW
Washington, DC 20580
or call 877-FTC-HELP - toll free (877) 382-4357 or visit
their website.
The FTC's online complaint form is located here.
Send a copy of your complaint to:
Board of Governors of the Federal Reserve
System
Division of Consumer and Community Affairs
Washington, DC 20551
(202) 452-3693
or visit their website.
To learn more, visit: Electronic
Processor website or the .
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