CUNA Regulatory Comment Call

January 31, 2006



Please feel free to fax your responses to CUNA at 202-638-7052; or e-mail them to Assistant General Counsel Lilly Thomas at; or mail them to Lilly c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, D.C. 20004. Click here for a copy of this Interim Final Rule.


NACHA has issued a proposal that would implement back office conversion using the Point-of- Purchase (POP) Standard Entry Class (SEC) Code. Checks accepted at the point of purchase that do not contain an Auxiliary On-Us Field in the MICR line and are less than $25,000 would be able to be converted into ACH entries in the back office. The check would be used as the source document for capturing the Receiver’s routing number, account number, check serial number, and dollar amount of the entry.

The proposal would allow Originators (merchants) and Originating Depository Financial Institutions acting as Originators to accept checks at the point of purchase or at manned bill payment locations and convert the checks to ACH debits during back office processing. The Originator (merchant) would be required to provide a notice to the Receiver (customer) at the point of purchase before accepting the Receiver’s check that would be converted in the back office to an ACH debit. The authorization to convert the check would be obtained through the notice at the checkout or where the check is presented. Receivers would have the ability to opt out of the conversion and would have to notify the Originator at the point of purchase that a particular check does not authorize an ACH debit entry.

The Originator would hand the Receiver a receipt that includes similar language to the notice and phone number for the retailer that is valid, active and answered during normal business hours. This would help the customer understand that their check would be converted to an ACH debit transaction as well as easily resolve issues directly with the Originator before the payment posts on their statement. The Originator would keep the check and forward it to a centralized back- office environment where the check would be converted into an ACH debit entry.

The check would be used as a source document to initiate a POP Entry Processed in the Back Office only if the check or share draft:

  1. Contains a pre-printed serial number;
  2. Does not contain an Auxiliary On-Us Field in the MICR line;
  3. Is in an amount of $25,000 or less; and
  4. Is completed and signed by the receiver.

Prior to originating this type of POP entry, the ODFI would be required to register with NACHA and notify NACHA of any changes or updates to the information provided when registered as well as notify NACHA when they cease originating this type of entry for themselves or a Third Party Sender.

The Originating Depository Financial Institution would have warranties related to POP entries processed in the back office. The ODFI would have liability for breaching any of] these warranties additional warranties.


  1. Do you support permitting checks accepted at POP that do not contain an auxiliary ON-Us Field in the MICR line and are in an amount less than $25,000 to be converted into ACH entries in the back office? Please explain.

  2. Do you support the proposed definition of “POP Entry Processed in the Back Office” that would accommodate the use of the POP SEC Code for the interim rule? Please explain.

  3. Do you support the proposed method of authorization by providing notice to the Receiver (customer)? Please explain.

  4. Do you believe that the rules should contain required notice language? Please explain.

  5. Should the Originator be required to provide each receiver with a receipt? Please explain.

  6. Should the rules provide suggested receipt language? Please explain.

  7. Should the customer service phone number be required on the receipt? Please explain.

  8. Should the Receiver (customer) be allowed to opt out of this type of conversion? Please explain.

  9. Please provide any other comments.

Eric Richard • General Counsel • (202) 508-6742 •
Mary Mitchell Dunn • SVP & Deputy General Counsel • (202) 508-6736 •
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 •
Lilly Thomas • Assistant General Counsel • (202) 508-6733 •
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 •