Electronic Deposit of NSF Checks

An Introduction to Represented Checks

EFC’s represented check entry program is designed to provide commercial depositors, banks and financial institutions with a method by which to expedite and control the representment of checks that have been returned unpaid by the check issuers financial institution for Non Sufficient Funds (NSF), Uncollected funds, account closed, etc.

The entry will provide the originator the ability to create a substitute (an Electronic Check) for the forward presentment of a check that has been previously returned unpaid. The Originator is the entity which holds the physical return in its possession and may be the depositor, the depositor’s financial institution or the depositor’s collection agent.The special feature of the program is the software which manages the system from beginning to end. Once check data is entered into the system it transmits the data, maintains expected payments and results data, retrieves all results files and lets you view and/or print whatever reports you require. The results files are available on all batches, and payment or non-payment information on every check and the reasons for non-payment. You can resubmit eligible items by clicking on them and you can easily add a fee for collection to those items that have been paid. We even update the system automatically through the host computer as modifications are made to the software.


RCK Benefits - Collection Agencies/Commercial Depositors

For Collection agencies and commercial depositors:

More precise timing of representments will result in higher collection rates (about 40%), reduced losses, and reduced processing expenses including re-deposit return check fees practically eliminated.

Our software places your phone number on the check writers bank statement directing phone calls to your office giving you more contact with check writers and an opportunity to obtain authorization for collecting fees.

For consumers:

Ultimately, consumers benefit too, as they are open to buy more quickly as a result of more rapid collections and eradication of negative file records.

·Check Recovery companies profits dramatically improve with check representment since NSF bank charges are practically eliminated, notices are received in days as compared to 8 – 10 days for paper checks. NSF items can be resubmitted much quicker, maximizing the ability to collect the returned check.

In addition, collection fees may be collected as a separate entry through the ACH network or by other means. These fees may pass through to the consumer’s account even if the underlying represented check entry has not been received by the RDFI. You must have some kind of written authorization to transmit the NSF fee.

How the System Works

  • We provide software for input of check data and communications to the client.
  • Client sends data file to our processing center.
  • The processing center makes an electronic presentment through the ACH.
  • The face amount of the check can be presented week one of the representment process.
  • The fee amount can be collected the following week on those successful face amount collections – this prevents the client from inadvertently collecting a fee without first collecting the face amount.
  • For the collection of the fee amount customer authorization is required – this is best obtained via a stamp impression on the check at the point of sale signed by the customer.
  • All funds available for collection are electronically debited from the check writer and credited to the client bank account on the 5th business day.
  • Funds that are still NSF can be electronically presented 1 additional time electronically. This is up to the client and the client can automatically initiate the representment through the software.

Benefits of Electronic Check Representment

  • Cost Effective
  • You get one additional presentment opportunity on an NSF check vs. paper collection – a total of three are allowed (1 paper, 2 electronic; or, 2 paper , 1 electronic).
  • Electronically submitted checks take precedence over paper checks at the bank.
  • Reduced processing expenses
  • No bank redeposit charges
  • Submit checks immediately or use SMART DATES – you determine what date the checks hit the bank – this is always 1 business day after you process to us provided you transmit before the cutoff time.
  • Expedient
  • You are able to recover NSF funds in 5 business days, instead of a much longer period experienced with traditional methods.
  • You can immediately resubmit items that are returned.
  • Representment Recovery Rate – 25-35% higher recovery rate than paper redeposit.
  • Very Low NSF Fee and Never a bank fee to the client. The only fee the client will pay is our transaction fee.
  • Consumers benefit – they are returned to open to buy status more quickly as a result of more rapid collections and eradication of negative file records.

Facts About Check Representment

Check Representment is the conversion of a non-sufficient funds check to an Electronic Funds Transfer (EFT) entry and representing such entry through the Automated Clearing House (ACH) Network for payment.

EFC’s program provides their clients, & their clients customers a way to utilize the Automated Clearing House (ACH) Network to electronically redeposit a check. By doing so, clients and their clients customers can provide payments in a much more cost-effective, efficient, and expedient manner when compared to the traditional cost of handling a physical check.

Check Representment can be used by virtually any type of business in the marketplace today. All businesses that accept payment via check can benefit from the EFT system.

Check recovery companies can use Check Representment as a tool to process transactions for potential clients currently performing in-house check recovery. It is possible to perform collections on a balance of checks not collected.

In order to operate in compliance with the Regulation E, the Federal Reserve, and the National Automated Clearing House Association (NACHA), the merchant must notify the customer of his intentions to redeposit the check electronically should it be returned. Compliance may be in the form of (1) signed authorization…i.e., an authorization stamped on the front of the check and signed by the customer, (Necessary in collecting NSF fee’s) (2) mailed notification slip (representment process can start on date notice is mailed) or (3) Verbiage describing Electronic Check Representment, including notification of a returned check fee, in the contract signed by the issuer.

The number of electronic representments will be limited to two, after the return of the forward (paper) presentment, for a total of three presentments.

Represented check entries may only be created for negotiable demand drafts for amounts under $2,500 and may be presented only up to 180 days from the date on the original check.

The Representment Process: (Step by Step)

1. Enter check data into the NSF check manager software. This can be done by keystroke, check reader, or import of an ASCII file into the software. The software manages the entire process from the transmission of the NSF check to the receipt of the results data.

2. Transmit the data to our processing center by pressing a button. The software sends the data and lets you know that it has been successfully received.

3. All files received by 4:30 PM EST will be transferred into NACHA files and transmitted to the ACH the same day.

4. Once a day for five business days all payments and returned items are received from the ACH. Return items are those items not paid because of NSF, account closed, etc.

5. On the 5th business day it is assumed that most of the items which will be returned have done so and that day we credit the agency bank account through the ACH for those cleared items. At the same time, the client’s results files are posted in the host computer and when the client dials in, the host computer automatically transmits the results files back to the client’s computer.

6. Results Files give the client a complete tracking of every check in every batch – what was paid, when paid, what was unpaid and the R code reason for nonpayment – the CheckREP software is an NSF check manager system.

7. Reversals are those items for which the agency has already been paid but which are returned after the 5th day. Under ACH rules a Consumer has 60 days from the effective date to reverse a previously authorized ACH transaction. Once we receive a reversal we immediately debit the agency and fax a “Reversed Item Report” citing the original batch containing the reversed item, the amount, and other pertinent data.

8. Invoicing is performed and sent to the agency on the 5th day of the month following the transmission of files and your accounts will be debited 10 days later for the previous month’s activity.

Important Software Features

IMPORTANT FEATURES OF THE SOFTWARE: the software does much more than just transmit the data and retrieve the results. Constant updating has made the software the most powerful software package in the industry.

Here are just some of the important features of this extraordinary software package:

1. ABA database  includes the bank name, address, telephone # for the bank associated with every ABA # – just right click on an ABA number and get the info.

2. Checkwriter Search – See a familiar name? Want to find out the history of a particular check writer? Key into the search area and find all the activity of that check writer in your system. All checks and their disposition will show up.

3. Closed Accounts filters out and warns you of closed accounts if a closed account check has previously been entered into the database saves you money by not transmitting.

4. Transmit Limit a check that is entered a 3rd time will be rejected (you can only transmit 2 times electronically). In addition, the system will reject an item that is over 180 days old and/or over $2500 in accordance with NACHA rules.

5. Resubmit Pool When you receive results files you can resubmit the NSF and Uncollected funds items (up to a total of 3 times paper and electronic). Just send them to a buffer for resubmission. Once the buffer is complete, transmit!

6. Fees collection when you are paid on an item it can be viewed in a paid list on screen. You can add fees to these items and submit the item for fee collection by just clicking on it.

7. Letter Selection there are multiple notification letters that you can create in system and print out to send to your customer.

8. Enhanced Windows Functions screen resizing, data sorting, and printing.

9. Imaging System The software includes a built in imaging system. All that is need is the RDM imaging reader. The RDM imager reads the check and transfers the information into the CheckREP software and at the same time sends the check image into a database. This database can later be transferred to a writable CD Rom for storage.

Eligible Item Requirements

ELIGIBLE ITEM REQUIREMENTS: the following requirements must be met in order to electronically represent a check item:

  • A check dated 180 days or less from the day of transmission
  • A check in an amount of less than $2500
  • A check that has not already been transmitted twice electronically
  • A check that indicates on its face it was returned for “NSF” or Uncollected Funds

Notification to Consumer of Electronic Representment

NOTIFICATION TO CONSUMER OF ELECTRONIC REPRESENTMENT: The consumer must be informed of the intention to collect NSF checks via electronic representment. Following are acceptable forms of notification:

A sign posted at the point of sale

An authorization slip signed by the consumer at the point of sale

SIGN EXAMPLE: Following is a sample of a sign that should be used at the point of sale


In the event that your check is returned unpaid for insufficient or uncollected funds, we may present your check electronically. In the ordinary course of business, your check will not be provided to you with your bank statement but a copy can be retrieved by other means. Additionally, we may electronically assess a $xx.xx returned check fee against your account.

Thank you for your cooperation.

Letter Elements

LETTER ELEMENTS: the ChekREP software can automatically print notification letters for you. The software can print the letters for every customer in a batch or for selected customers. A sample letter is included in the batch but you can modify it to your preferences – you can have several different letters in the software and simply choose the one that is most appropriate for each customer.

Authorization Signature for Fee Collection

AUTHORIZATION SIGNATURE FOR FEE COLLECTION: According to NACHA rules the fee amount can be collected but needs an authorization signature from the check writer in order to legally collect it.

The best way to gather the authorization signature is at the Point Of Sale using a stamp to imprint the proper wording on the check and having the check writer sign the stamped authorization.






SIG. _______________________________


BILLING: You will receive an invoice for all transaction charges and monthly maintenance fees on or about the 5th of the month following the month during which transactions took place. Your account will be billed via EFT 10 days past the invoice date of the bill.

Nacha Approval

The first in a series of articles on implementing the new RCK rules

On March 4, 1998 NACHA approved a rule for the electronic collection of checks returned for insufficient funds (NSF). Beginning September 18, 1998, checks that have been returned unpaid for NSF can be collected through the ACH Network instead of the paper check clearing system.

The new rule creates a new Standard Entry Class Code – RCK (for Re-presented Check Entry) – under NACHA’s Operating Rules for the ACH Network. The RCK code provides a method to initiate an ACH debit transaction in place of a paper check, after the original paper check is returned for insufficient funds. The RCK rule becomes effective September 17, 1999.

NACHA also approved an interim rule, effective September 18, 1998 through September 16, 1999, to allow ACH, participants to use the existing Preauthorized Payment and Deposit (PPD) Standard Entry Class Code to initiate these transactions,

For businesses and financial institutions, the collection of returned checks through the ACH Network will bring substantial cost and time savings. Steve Schutze, Senior Vice President of Nations Bank said., “The new Re-presented Check Entry transaction was created in response to the needs of businesses and financial institutions for faster and more successful collection of returned checks.”

In preparing this rule, a NACHA Rules Work Group reviewed 126 comments from financial institutions, businesses, and other stakeholders in the ACH Network. The respondents estimate that costs associated with representing an NSF check can be reduced by up to 50 cents per check for businesses, and one dollar per check for financial institutions, by using electronic representment. Lower costs make the collection of small-value checks more practical. In addition, NACHA projects that the rate of successful collection of NSF checks could increase by 25 to 50 percent.

Use of the new ACH check collection transaction can result in quicker removal of negative information from check verification databases, meaning that merchants will be able to accept checks again sooner from many of their customers.

The RCK rule requires businesses that plan to collect returned checks electronically to notify check writers, at the point of sale or on monthly bills, in a manner similar to notices currently required for collection fees.

The RCK Rule - Frequently Asked Questions

The RCK Rule:
Frequently Asked Questions

Answers to some frequently asked consumer questions on electronic check representment are provided below:

Q. How does electronic check collection work?

A. If your check is returned for insufficient funds (NSF), the merchant or company you wrote the check to may resubmit (re-present) the check electronically instead of redepositing the paper check.

Q. How does the merchant obtain permission to debit my account for an electronically re-presented check?

A. The merchant will provide notice of its electronic re-presentment policy before accepting your check.

Q. Who can electronically debit my account for an NSF check?

A. Merchants, billers and financial institutions have the option of debiting your account electronically for checks that have been returned NSF, as long as the proper notice has been provided to you in advance.

Q. How will an electronically represented check appear on my statement?

A. Listed with electronic transactions, the re-presented check entry will contain the name of the payee, the description “‘REDEPCHECK”, the check serial number (optional until September 19, 1999) and the check amount.

Q. What happens to my check when the electronic process is used instead of paper?

A. The merchant or collection agent retains your physical check for 90 days, and a copy is kept for seven years.

Q. What are the benefits to me of electronic check re-presentment?

A. The majority of NSF checks are honest mistakes by the check writer, but the record still reflects a “bad check.” Electronic re-presentment quickly clears up these mistakes and allows you to continue to write checks.

Q. Our member customers are receiving represented checks as PPD debit items. Should we post or return these items?

1. Many merchants have continued to utilize the advantages of the ACH Network to collect NSF checks following NACHA’s Electronic Check Council pilot. Financial institutions can post these items providing the account number indicated for the transaction is a valid account number for your financial institution.

If your customer or member advises you that they did not authorize the transaction, execute an Affidavit of Unauthorized ACH Debit and return the debit R 10, Customer Advises Not

Authorized. initiating a returned check fee as a separate transaction. If your customer or member did not authorize the transaction for the fee, it can also be returned as R 10, Not Authorized, once a properly completed affidavit is secured.