Answer:
If a merchant captures the MICR data from the check and uses those data and the dollar amount of the sale to generate an ACH debit (using the POP service code), there is no requirement for a written authorization (because the transaction is not recurring). There is a statement requirement for the transaction, and that will include the merchant name and location, and the check number. (The check number requirement is from NACHA rules, not Reg. E).
The merchant satisfies its Reg. E disclosure requirement by posting information about conversion of checks at the point of sale. When the consumer then tenders the check and receives it back marked VOID, the consumer is deemed to have received the merchant's disclosure, and assented to use the service.
As the holder of the consumer's account, the bank also has a requirement to include a reference to check conversions in its initial Reg. E disclosures under Section 205.7. Many would also argue that you should also notify current checking customers of the service, since it will save you having to monitor activity in all accounts and send a disclosure the first time each customer uses check conversion features.
One more thought all of the above also applies to the ARC ACH standard entry class code, which results from checks that are converted by lockbox or accounts payable operations. In these cases, the merchant notice is included in the bill mailing material, and the customer does NOT get the check back. (The merchant warrants that the paper check will not get processed, and is supposed to destroy the original 14 days after the transaction is entered.)
First published on BankersOnline.com 11/04/02
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