ARC or Check 21 is the term used by NACHA & the Federal Reserve to describe the process of converting a paper check into an Electronic Funds Transfer (EFT) and transmitting it through the Automated Clearing House* (ACH). In an ARC Check 21 application, the check is used as a source document to initiate a one-time ACH debit against the check writer’s bank account. ARCCheck 21 can be used for payment items remitted by a customer through the US mail or via a drop box. ARC Check 21 can also be used in satellite payment locations where the payments are batched daily for processing.
* The ACH is a federally regulated electronic payment network used by 95% of the banks and financial institutions in the US.
Consumers continue to enjoy the convenience of mailing their bill payments to companies, along with the advantages of mail and collection float associated with such payments. For merchants, the cost of collecting and processing these checks is high. ARC Check 21 focuses on methods that may be used by merchants to increase processing efficiencies within the lockbox setting, by reducing collection float and other check collection costs, through the truncation and conservation of paper checks to electronic entries. NACHA’s (National Automated Clearing House Association) ARC rule went into effect on March 15, 2002, establishing a new Standard Entry Class Code, allowing the implementation of this form of check conversion.