A new Standard Entry Class Code will go into effect March 15, 2002. ARC will be the new code to be used by Originators for converting consumer checks received via mail or at a "dropbox" to ACH debits. ARC will replace the temporary use of PPD for Accounts Receivable Truncated Check Debit Entries.

The Originator is required to provide notice to the Receiver that the receipt of the check (by the Originator) is authorization to convert the check to an ACH debit. Since the check is only used as a source document, the check will not enter the check collection process. Also, the check is not considered an "access devise". The new revisions to Federal Regulation E allow for the check conversion approach to this application.

Eligible items must have the check serial number pre-printed on the check, be drawn on a consumer account and be signed by the consumer. These transactions will be considered one-time debit entries since they are for a specific check number. During initial processing of the source document the Originator must capture the routing, account and check serial numbers directly from the document using a MICK reader. The amount will be key entered.

All Return Reason codes can be used for returning ARC transactions. Several have been amended and one new one has been added:

        1. R08 Stop Payment - has been modified to allow for a stop being placed on the check system instead of for the ACH item. If used for this reason, R08 has a 60 day right of return.
        2. R10 Customer Advises not Authorized - has the added reasons of 1) required notice not provided by Originator 2) improper source document and 3) amount of ARC entry not the same as source document.
        3. The new Return Reason code is R37 Source Document Presented for Payment. This new reason code has a 60 day right of return.

Look in the "Revisions" section of the 2002 ACH Rule Book for complete information on this new SEC code, its related rules and the impact on the various ACH participants.

We are preparing our CAP2000 ACH Core Processing System to handle this new code, and all the other 2002 Rule changes that have an impact on processing software. If you are using CAP2000 you can look for an update in late February or early March.