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Merchants operating Deposit24 are bound to follow Federally mandated requirements for Accounts Receivable Conversion (ARC).

Customer Notification Requirements
Accounts Receivable Entry Source Document Requirements
Check Handling Rules & Regulations
Prohibited Check Types
Substitute Check Agreement Requirements
Substitute Check Legal Equivalence Requirements
Required Endorsements

Customer Notification Requirements
Billers are required to notify customers of the truncation procedure by a notice on, or enclosed with, the first bill sent to the customer between the time the service is announced and the time the truncation begins. If merchants have a drop box or a common area, they may also post a sign as a form of notification to their customers.

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Accounts Receivable Entry Source Document Requirements
The originator can accept a check as a source document to initiate an ARC entry only if it has been sent through the U.S. mail or delivered to a dropbox. The concept of U.S. mail includes mail delivered by the U.S. Postal Service as well as mail delivered by a courier service, including, but not limited to, Federal Express, UPS, or other local courier service. To be used as a source document for ARC entries, the consumer’s check or sharedraft must comply with these requirements:

• The check or sharedraft must be drawn on a consumer account.
• The check or sharedraft must contain a pre-printed serial number.
• The check or sharedraft must be completed and signed by the consumer.

Check Handling Rules & Regulations
Billers utilizing the Deposit24 ACH option must comply with these conditions when handling consumer checks:

• The original paper item must be destroyed within 14 days of the conversion.
• The check writer must receive notice the conversion is to occur.
• Checks must be received in a drop box or through mail.
• The merchant or the processor should keep an image of the check electronically.
• Customers receive check via lockbox or dropbox locations.
• Electronic capture of MICR is required.
• The front of the image must be retained for two years.
• Any dollar amount is acceptable.

Prohibited Check Types
Certain types of checks are expressly prohibited for use as source documents for ARC entries and will be processed as IRDs. Checks that may not be used as source documents for ARC entries include:

• Checks drawn on corporate or business accounts.
• Third-party checks.
• Demand drafts and third-party drafts that do contain the signature of the receiver.
• Credit card checks.
• Cashier’s checks, money orders, traveler’s checks, official checks, or other obligations of a financial institution.
• Checks drawn on the Treasury of the United States, a Federal Reserve Bank, or a Federal Home Loan Bank.

Substitute Check Agreement Requirements
A substitute check shall be the legal equivalent of the original check for all purposes, provided that it:

• Accurately represents all of the information on the front and back of the original check at the time the original check was truncated.
• Bears the legend: “This is a legal copy of your check. You can use it the same way you would use the original check.”

Substitute Check Legal Equivalence Requirements
A substitute check shall be the legal equivalent of the original check for all purposes, provided that it:

• Accurately represents all of the information on the front and back of the original check at the time the original check was truncated.
• Bears the legend: "This is a legal copy of your check. You can use it the same way you would use the original check."

Required Endorsements
The reconverting bank shall ensure that the substitute check, whether for forward collection or return, bears all endorsements applied by previous processing parties, regardless of form:

• Electronic
• Original check
• Substitute check