LOS ANGELES - With electronic check pilots proceeding at a rapid clip, credit unions need to make sure their ACH software-or that of third party processors-is up to speed to properly recognize new ACH transaction items coming into the system, NACHA - The Electronic Payments Association has warned. The biggest change in the electronic check comes Sept. 15 when new NACHA rules take effect on point of purchase items, it was announced at NACHA's Payments 2000 Conference held here. "There are electronic check pilots out there now and it will be the challenge of credit unions as well as other institutions to make sure their systems can recognize these new items coming in as ACH services," explained Nancy E. Grant, senior director of electronic check services for NACHA. Operations people in credit unions, she said, will have to "work hard on staff training and on the software to make sure the checking and ACH sides are talking to each other to prevent checking items getting improperly bounced." Under new NACHA rules, consumers at the point of purchase can authorize the return of voided checks after MICR information is scanned and captured. The ACH debit is then created from MICR information. Another plan is for merchants to keep and store checks rather than return them to consumers. In either case, NACHA officials said, consumers will have to be educated on the new process and there could be confusion in the authorization process as well as on the return of voided checks. During several break-out sessions on electronic checks at the Payments 2000 Conference, speakers reviewed the new rules and rationales for new ACH procedures. Conversion to the new procedure could provide several advantages to financial institutions and retailers including reducing bad check losses, improving return check ratios and speeding customer service in retail outlets, offered Stephen A. Schutze, director of e-Strategies for the American Bankers Association. At the same time by reducing checks that need to be collected "it also would lower bank fees," Schultze said with a smile as the audience laughed. A credit union executive in the audience, Deb Davis, EFT Supervisor for U-Lane-O Credit Union in Eugene, Ore., said she expects to start working immediately with her software vendor, Ultradata, and her check printer to prepare for Sept. 15. That's because CUs like hers may have problems with NACHA's reading of the MICR strip since all accounts are contained under a member number. Loan items might end up drawing from checking accounts resulting in overdrafts. The result is that CUs must perform hand processing to handle exceptions resulting in greater expenses. "I plan to talk with my software vendor on how to handle this," said Davis who represents a $400 million CU with 57,000 members. "I think this is something that needs to be done now and not wait until the last minute." In that vein, Howard N Forman, senior product manager at PNC Bank, Pittsburgh and a session speaker, urged financial institutions to pay close attention to education and training of staffers who have customer contact. "Understand the rules and understand the consumer's rights with respect to these transactions," he cautioned. He said financial institutions need to consider "how will customer service inquiries be handled." Are consumer directed to the merchant or will the financial institution "research the issue. "If so, will you send the customer directly to ACH operations? Will you refund disputed POP transactions or send the consumer to merchant for refund?" In putting together a project plan for implementation, Forman suggested a "fair level of detail" be drawn and that there be a "clear understanding of the impact across the organization and vision for the end result." -
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