EzCheck

What is POP?

The Standard Entry Class code for Point-of-Purchase Check Conversion is POP. Companies that accept checks at the point of sale or manned bill payment locations can convert paper checks to an ACH debit in a location. POP entries are single-entry debits and may only be used for non-recurring, in-person payments. The consumer signs an authorization for conversion, and receives their voided check back along with a document that provides information about the transaction.

What types of businesses benefit from offering POP?

POP 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 POP; for example, multi-lane retailers like grocery stores, pharmacies, utility companies, automotive companies and retail service businesses, such as dry cleaners and mail services stores.

Some of the notable POP benefits include:

Cost-savings created by processing paper checks as ACH transactions
Reduction of the time-frame for processing payments
Earlier notification of returned items
Reduction of errors resulting from manual processing

Compliance Considerations

As established by the NACHA Operating Rules, there are a number of compliance requirements for companies that accept POP transactions, including advance notice of the intent to convert the check, providing the customer with a copy of the authorization notice and a receipt, and electronic capture of payment information from the MICR line. The company must mark the check as “void” and return to the customer. Additionally, there are eligibility requirements that checks must meet for conversion to POP.

Authentication Requirement

Companies 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
Companies must offer customers an opt-out method

Receipt Requirements

In addition to the voided paper check, the company must also hand the consumer a document containing specific information. The following information may be included on the same document as the customer’s receipt.

Company name
Company’s phone number
Date of transaction
Transaction amount
Check serial number
Merchant number (or other unique number that identifies location of the transaction)
Terminal city
Terminal state

It is also recommended, but not required, that the following information be provided to the customer:

Merchant address
Merchant identification number
Customer’s financial institution routing number
Customer’s truncated account number
Customer’s truncated identification number
Transaction reference number

Note: The complete account number cannot be placed on the customer’s takeaway receipt or document.

Sample POP Authorization Language

Signage 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.

Customer Authorization/Take-away Copy Language:

[Date]
[Merchant Name and Number]
[Street Address]
[City, State]

I authorize [Merchant] to convert my check and electronically debit my account for the sale amount. For customer service inquiries, please call [phone number].

Sale Amount: [$] Check Number: [#]

___________________________

Customer Signature

Eligibility Requirements

A company may accept a check as a source document for POP 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
Does not contain an Auxiliary On-Us Field in the MICR line (large format business checks)
An amount of $25,000 or less
Has not been previously negotiated, used in a previous POP transaction or voided

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
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, along with any relevant customer information, such as address, phone number, driver’s license number, etc.

Collection of Fees

POP 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 the POP 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.