OK - who wants to tackle this one - NACHA/SWACHA says that POP's are considered as an electronic payment. Reg E says that any transaction originating as a check, check guarantee, or check authorization are not covered under Reg E ((c) Exclusions from coverage. The term electronic fund transfer does not include:

(1) Checks. Any transfer of funds originated by check, draft, or similar paper instrument; or any payment made by check, draft, or similar paper instrument at an electronic terminal.
(2) Check guarantee or authorization. Any transfer of funds that guarantees payment or authorizes acceptance of a check, draft, or similar paper instrument but that does not directly result in a debit or credit to a consumer's account.)

So how do you all handle these POP's at your bank, should they be disputed by a customer?

This is perhaps one of the best examples I can think of, Tex, of the need to read beyond the regulation itself and into the Commentary. In this case, the Commentary appears to contradict the language of the regulation itself.

A couple years back the Fed Staff updated the Reg. E commentary to add language including POP and ARC ACH transactions, notwithstanding the fact that the consumer delivered a paper check to start the transaction.

Quote:

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3(b) Electronic Fund Transfer

1. Fund transfers covered. The term electronic fund transfer includes:
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v. A transfer via ACH where a consumer has provided a check to enable the merchant or other payee to capture the routing, account, and serial numbers to initiate the transfer, whether the check is blank, partially completed, or fully completed and signed; whether the check is presented at POS or is mailed to a merchant or other payee or lockbox and later converted to an EFT; or whether the check is retained by the consumer, the merchant or other payee, or the payee's financial institution.
***

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The theory behind this inclusion of these particular ACH transfers is that, although a check is delivered for the payment, that check never enters the payment stream. It is converted to an ACH at the "git go."

Anticipating further discussion, I'll argue that the Fed will not provide similar treatment for checks that are truncated into image documents, since the visual image of the paper item continues to exist, can be reconverted, and, in the form of a substitute check under Check 21 (after this October), will carry all the protections and status of the original paper item. Not so with an ACH conversion item.