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Customer Approval For E-Checks

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We are receiving more and more e-checks, drafts that come through without a customer's signature. currently, we have been contacting the customer to get their approval to pay the check, but long range this is impracticable. What do you suggest we have in place to allow for these transactions to be processed without manual intervention?

Your use of the term "e-checks" is a little ambiguous. If you are referring to ACH transactions created from customer's checks (POP/ARC) or from telephone or Web authorizations (TEL/WEB) you won't be in a position to intercept the items to check them individually with customers.

If you're referring to paper drafts issued by merchants who received (or allegedly received) customer authorization, you might want to think carefully about how to protect the bank/customer from fraud.

These paper drafts are the subject of pages of discourse in Brady on Bank Checks, among other publications. If you miss one and your customer later (when s/he gets the statement) claims lack of authorization (or gets buyer's remorse, a closely-related and usually indistinguishable malady), your bank is generally "up the creek." There may be exceptions in Texas and California, where more progressive language is in their versions of the UCC.

Check with your processor to see if they can detect these items to bring them to someone's scrutiny. It's a challenge, since merchants often obtain a customer's current check number to make the item really go in "under the radar." Otherwise, you may have to get more selective about when you refund the alleged unauthorized transactions to your customers. When you think about it, if the merchant had the customer's bank routing number, account number, and check number, isn't it pretty likely the customer actually authorized the transaction?

Merchants using this system -- at least the reputable ones -- keep audio recordings of customers' authorization conversations. If you need to be truly investigative, you can ask your customer to contact the merchant using your telephone, and have the merchant play back the authorization call. Then decide.

First published on 04/21/03

First published on 04/21/2003

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