|
Flow of Returned
Checks
Over the past few years, many of the nation’s top retailers have
implemented a returned check consolidation service. One of the chief
benefits of consolidation is that it speeds up the flow of returned
checks, allowing retailers to more quickly identify intentional
bad-check writers and foil related fraud, thereby reducing the systemic
risk and costs of check acceptance.
Check 21 could compromise this process. The Accredited Standards
Committee, X9 Subcommittee B, is the organization working on the
standards for Check 21. Solutran is a voting member. One portion of the
standard under development is a subsection called X9.37, which deals
with electronic exchange of check and image data. The current version
of the X9.37 standard is written to allow a bank to handle returned
checks. However, the purpose of creating that option was to allow a
national bank to redirect its own returned checks (those written
on the bank’s own customer accounts) back to a specific data center
selected by the same bank as it returned check processing center.
For retailers, this bank-proprietary environment for returned check
processing could eliminate the flexibility and choice they currently
have in selecting returned check processing options – options that
create the greatest efficiency in mitigating fraud. Services like RCK,
where you can control your re-presentment options, service fee collection
and online reporting will be threatened should only proprietary bank
options be available.
As Check 21 standards are written, we all need to work to make sure the
flow of returned checks remains flexible and is not restricted to a
proprietary bank network. If not, the merchant industry would be taking
a significant step backwards by allowing unwarranted risk back into the
system — a step that’s guaranteed to have a negative effect on your
bottom line.
Quality of the IRD
Another significant risk to merchants in Check 21 deals with the quality
of the IRD. To comply with the new law, a legible image of the front
and back of the original check needs to be produced for presentment
(whether it’s a paper IRD, or an electronic image). For retailers, it’s
particularly imperative that the evolving standards accommodate all
the information on the front and back of the check. Here’s why.
Along with the obvious settlement information on the front (MICR line
data), frequently there is additional information such as name and
address, driver’s license, phone number, etc., essential to merchants
for customer service reasons. The back of the check also contains audit
information, such as store numbers, checkout lanes, cashier information,
control numbers, etc., that’s vital to large retailers in effectively
managing their businesses. These are used to perform proper accounting
as well as to help manage potential fraud.
Should the standards of Check 21 provide for lower image quality — one
that is designed to capture only the minimum level of information
necessary to settle the transaction — much of the information that is
critical to a retailer’s audit and customer service process could be
lost.
Take Action
Preserving both the flexibility that allows merchants to determine the
flow of their returned checks and providing for a high-quality IRD or electronic-image standard will help ensure a more efficient and
effective payment system for all. If these requirements are not met,
merchants lose.
There’s a lot at stake and we urge you to get involved. The most
important thing Solutran and our clients can do now is let our positions
and requirements be known. What follows is a short list of contacts
playing central roles in the development of Check 21 standards.
As previously mentioned, the Accredited Standards Committee, X9
Subcommittee B, is developing the standards for Check 21. Specifically,
X9.37 addresses the specifications for electronic exchange of check and
image data. X9.90 addresses the specifications for the IRD.
The contact person for X9.37 is:
Phyllis
Meyerson
ECCHO
pmeyerson@eccho.org
The contact person for X9.90 is:
Andy Garner
Wachovia Bank
andy.garner@wachovia.com
The Federal Reserve is charged with writing the regulations for the
operating procedures for Check 21. Proposed regulations are expected to
be released before the end of the year with an ensuing 60-day comment
period.
The contact at the Federal Reserve is:
Louise Roseman
Director, Division of Reserve Bank Operations and Payment
Systems
Board of Governors of the Federal Reserve System
louise.roseman@frb.gov
Thank you for getting involved; your feedback and participation is
required to ensure that Check 21 is a success for all stakeholders. Solutran will remain actively involved in this issue. If you’d like to
have additional conversations regarding Check 21 please call your
Solutran representative. |
