ARC Entries, Retention Requirements, and Advice For Customers

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Question:

We recently trained our employees on the new ARC entries and what to tell customers when one of their checks is converted to an ACH entry. It is my understanding that the originator is required to retain a copy of the source document (the check) for two years from the settlement date. The originator is required to send the RDFI a copy in the event our customer requests it. We obtained this information from the NACHA operating rules. My concern is that customers often need their cancelled checks or copies more than two years after they clear. What about in the case of an IRS audit? What do we tell these customers?

Answer:

As electronic payments become more common, you will find that the IRS will accept copies of bank statements showing the date, amount and payee of an e-payment as evidence the payment was made. All of those data, plus the original check number, should appear on the customer's statement for ARC and POP payments.

First published on BankersOnline.com 8/12/02