Notification of Check Conversion Possibilities

Answered by:

Question:

I was wondering if we need to notify our customers about the conversion of checks as part of compliance? Some vendors that change the customers checks in RCK or ARC ACH format charge the customers, and we are getting calls saying that these are unauthorized. Does anyone know about sending marketing materials to explain this to the customers and make them aware of RCKs and ARC transactions?

Answer:

There is certainly a disclosure requirement under Regulation E, section 205.7(b)(4). You should include in your initial Reg. E disclosures, a description of the EFT services the customer can access.

Disclosures aside, however, it is clearly in your bank's best interest to have informed customers. This is a great opportunity to form a strategic alliance with your Marketing Department to create an information piece covering RCK entries (not subject to Regulation E), ACH debits for bounced check fees (subject to the Reg.), and the ACH single-authorization cousins: ARC, POP, WEB and TEL. In an information piece that Marketing can help develop, you can tout the positive aspects of these transaction types, and alert customers to the changes. You can also inform them how the ARC "authorization handshake" works, and that they have a right under NACHA rules to refuse to have their checks converted.

This alliance with Marketing will also be handy when you're trying to inform customers about Check 21.

First published on BankersOnline.com 10/4/04