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Published Articles by David Balovich

Title: The Float Is Gone
Published in: Creditworthy News
Date: 5/3/07

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 effect.

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 business day.

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.  

The information provided above is for educational purposes only and not provided as legal advice. Legal advice should be obtained from a licensed attorney in good standing with the Bar Association and preferably Board Certified in either Creditor Rights or Bankruptcy.  

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