The movement to a paperless payment system began in 2004 with the passage
of The Check Clearing for the 21st Century Act, or as it is
commonly referred to "Check 21". This law allows banks to replace
paper checks with digital copies of the originals.
Effective March 16, 2007 the "float", that period of time
between when a person writes a check and it actually cleared their bank was
officially eliminated. On that day BOC or Back Office Conversion went into
BOC allows both retailers and businesses that accept consumer and
business checks of less than $25,000 to clear the checks through the ACH
network. The same network used for payroll direct-deposit transactions.
Checks are then later converted from paper to an electronic debit at a
central location. Although this process is not as immediate as a debit
transaction, any check under $25,000 is guaranteed to clear the following
Retailers and businesses who implement BOC are required to disclose to
their customers that their checks will be converted into an electronic
payment. Retailers are required to post notice prominently at the cash
register and on the customerís receipt. Businesses, including credit card
companies and mortgage lenders must provide written notification of the back
office conversion on the billing statement or on a separate enclosure that
must be included with the bill, invoice or statement.
There is a provision to opt out of having checks electronically converted
to back office conversion and it is the responsibility of the business to
specify the process for the customer to take to opt out.
BOC is covered under the Federal Reserveís Regulation E that regulates
electronic fund transfers. This will provide additional protection to the
check writer, such as a longer period to report errors. Under rules
established by NACHA, the not for profit electronic payment association, if
there is an error or unauthorized debit from a customers bank account, the
financial institution has to immediately credit the money back to the check
writers account until the investigation is completed.
It is believed by many that back office conversion will result in fewer
bad checks and provide major savings to those firms that implement the new
payment technology. As we move forward to eliminating paper checks through
more efficient ways to process payment transactions it will be our
responsibility to educate the customer not to write a check unless they have
sufficient funds available in their bank account.
I wish you well.