A service to facilitate check payments by telephone is moving ahead, even though the National Automated Clearing House Association has yet to test its proposed rules governing this type of payment.
Telecheck Services Inc. said 100 of its merchant customers are using its Checks by Phone service, which lets them initiate automatic debits from customer accounts after getting customer authorizations over the telephone.
Rules governing such transactions remain vague. Though Nacha and the Federal Reserve, through its Regulation E, require written authorizations for recurring ACH debits, they are not clear on the rules for one-time, nonrecurring debits.
Nacha is set to begin in July a nine-month pilot of proposed guidelines for such payments, aimed at resolving the issue.
"I think Nacha is doing the right thing by trying to clarify what the rules are," said Clay Spitz, vice president of vertical markets at Telecheck.
The ambiguity has not stopped Telecheck from providing its 10-month-old service. Mr. Spitz said he rarely encounters a bank that refuses to transfer the funds.
Telecheck uses its proprietary data bases to verify customer identities and checking account information. In initiating ACH debits, it assumes the risks of telephone fraud and return items.
"The service is in response to a need" for merchants to offer consumers payment options, Mr. Spitz said. "Sometimes we forget there is a very large population of consumers who have bank accounts, but do not have access to a credit card."
Under the pilot guidelines, Nacha will require merchants either to record telephone conversations or send written confirmations of the authorizations to consumers before debiting their accounts.
"Creating ACH debits by phone is inconsistent with Nacha rules," said Elliott C. McEntee, president and chief executive officer of the Herndon, Va.-based association. "We are going to allow it to occur under limited circumstances under this pilot program."
Telecheck also offers a paper version of its service. Instead of originating ACH transactions, it creates paper drafts that are sent via express mail to the merchant or the merchant's bank for deposit.
"Some folks prefer paper," Mr. Spitz said. "We are not going to tell them they have to go electronic. Our job is to provide a service."