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Back Office Conversion (BOC)

What is BOC?

The Standard Entry Class code for Back Office Conversion is BOC. Organizations that accept checks at the point of sale or manned bill payment locations can convert paper checks to an ACH debit in a location away from the point of sale, such as a back office. BOC entries are single-entry debits and may only be used for non-recurring, in-person payments.

What types of businesses benefit from offering BOC?

BOC can help companies of all sizes, whether they accept a handful or a significant number of checks.  A wide range of industries enjoy a variety of advantages by utilizing BOC. Some examples include multi-lane retailers like grocery stores, health care providers and pharmacies, utility companies and not-for-profit organizations.  Other companies that benefit by using BOC include in-home service providers, professional service providers like attorneys, retail service businesses and quick service/delivery restaurants.

Some of the notable BOC benefits include:
  • Cost-savings created by processing paper checks as ACH transactions
  • Reduced time-frame for processing payments
  • Earlier notification of returned items
  • Reduction in errors resulting from manual processing
  • The ability to convert checks accepted at the point of sale with minimal impact upon the customer experience
  • Because the checks are converted away from the point of sale, the checkout process flows normally

Compliance Considerations

As established by the NACHA Operating Rules, there are a number of compliance requirements for companies that accept BOC transactions, including advance notice of the intent to convert the check, electronic capture of payment information from the MICR line and retention of a copy of the source document. Additionally, there are eligibility requirements that checks must meet for conversion to BOC.


Compliance Checklist for BOC Transactions

Authentication Requirements
  • Originators are required to verify the identity of the consumer at the point of sale
Authorization Requirements
  • The company must provide notice to the customer of the company’s intent to convert the check on signage at the point of sale that is posted in a prominent and conspicuous manner
  • A copy of the notice must be provided to the customer
  • Both notices must include a working customer service telephone number for customer inquiries, which is answered during normal business hours
  • Companies must offer customers an opt-out method

Sample BOC Authorization Language

When you provide a check as payment, you authorize us to either use information from your check to make a one-time electronic fund transfer from your account or to process the payment as a check.

Until January 2010, the notice must also include similar language such as:

When we use information from your check to make an electronic fund transfer, funds may be withdrawn from your account as soon as the same day you make your payment, and you will not receive your check back from your financial institution.

Eligibility Requirements

A company may accept a check as a source document for BOC if it meets the following criteria:
  • Presented as payment at the point of sale or at a manned bill payment location
  • Contains a pre-printed serial number
  • Completed and signed by the checkwriter
  • Payable in U.S. currency only
  • Does not contain an Auxiliary On-Us Field in the MICR line (large format business checks)
  • An amount of $25,000 or less

Ineligible items include:
  • Checks or sharedrafts that have not been encoded in magnetic ink;
  • Checks or sharedrafts that contain an Auxiliary On-Us Field in the MICR line;
  • Checks or sharedrafts in an amount greater than $25,000;
  • Third-party checks or sharedrafts;
  • Demand drafts and third-party drafts that do not contain the signature of the customer;
  • Checks provided by a credit card issuer for purposes of accessing a credit
    • account or checks drawn on home equity lines of credit;
  • Checks drawn on an investment company as defined in the Investment Company Act of 1940;
  • Obligations of a financial institution (e.g., traveler’s checks, cashier’s checks, official checks, money orders, etc.);
  • Checks drawn on the Treasury of the United States, a Federal Reserve Bank, or a Federal Home Loan Bank;
  • Checks drawn on a state or local government that are not payable through or at a Participating DFI; and
  • Checks or sharedrafts payable in a medium other than United States currency.


Capturing Payment Information from the MICR line

NACHA sets forth specific guidelines for capturing payment information from the source document:
  • The company must use an electronic check reading device to capture MICR information, such as the account number, routing number and serial number
  • Companies are prohibited from key entering MICR information from the check, except for correcting errors from the reader device
  • Companies may key enter the transaction amount

Retention of Source Document or Copy

The NACHA Rules do not specify a destruction requirement timeframe.  All banking information must be securely stored in a commercially reasonable manner.  A copy of the front of the source document must be stored and available upon request for two years from the Settlement Date of the transaction.  If requested, the company’s bank has 10 banking days to provide a copy of the source document.


Collection of Fees
BOC entries must accurately reflect the source document. The dollar amount, routing and account numbers and serial number must be the same as the information that appears on the original paper check. Fees for returned checks may not be added to a BOC transaction.

If a company wants to collect a returned check fee via the ACH Network, a separate PPD entry must be originated, and the NACHA authorization requirements for PPD must be met.
 
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