Demand Draft is a legitimate and commonly used method to collect payments
n the recent battle between Federal Trade Commission (FTC) and unscrupulous telemarketers, FTC has proposed changes to the Telemarketing Sales Rules (TSR) to fight back the fraudulent telemarketers.
The proposed changes address many areas, including prohibiting telemarketers from accepting or requesting remotely created checks (RCCs) or remotely created payment orders (RCPOs) during inbound or outbound telephone calls. In a nutshell, FTC’s proposal seeks to ban telemarketers from using RCCs and RCPOs.
Regarding such a broad prohibition imposed on all telemarketers, Payment21® agrees with American Bankers Association (ABA), and strongly supports the efforts that FTC putting on protecting consumers from unscrupulous telemarketers. However, such a broad prohibition will in fact harm consumer interests including improperly prohibiting legitimate telemarketers from using RCCs and effectuate an unauthorized direct regulation of banks engaged in the intermediation of lawful transactions.
Needless to say that FTC has its rationales behind the proposal, Payment21® as an experienced RCPOs integration service provider and ABA as the representative of the banking industry, believe that there are several convincing arguments which undermine FTC’s assertions.
First and foremost, the FTC acknowledges that the telemarketing industry has a history of “unscrupulous” treatment of customers, but instead of directly addressing the bad actors themselves, this proposal would penalize all telemarketers, and their banks and customers, with no regard to whether they are operating lawfully or not.
Secondly, the FTC’s assertion that use of RCPOs by all telemarketers meets the standards of unfairness to warrant regulation as an abusive practice under the Telemarketing Act has not been substantiated by the facts or the law and ignores the substantial record of daily operations that are beneficial to customers.
Last but not least, the FTC opines that consumer protections for check transactions are not as vibrant as those for electronic transactions. However, existing regulations, such as Regulation CC and Federal Reserve Bank Operating Circular 3 (Circular 3), as well as the Uniform Commercial Code (UCC), provide consumers with robust protections as parties to check transactions.
To support our argument further, we take our solution—Check 21 DD as an example. First of all, the Check 21 DD stands for Demand Draft, also known as remotely created payment orders (RCPOs), is a legitimate and commonly used method to collect payments and is governed by the U.S. Check Clearing for the 21st Century Act, unlike ACH transactions that are controlled by NACHA-rules. As permitted under the law, the recipient of a paper check can create a digital version of the original check, a process known as check truncation, into an electronic format thereby eliminating the need for further handling of the physical document. Furthermore, the Demand Draft, as a payment instrument, is used in a variety of ways to process payments quickly and efficiently. For example, for people needing to pay a utility bill or credit card bill on the due date, merchants allow their customers to make a same day payment remotely over the Phone or enable consumers to forward the details of the debit entry over the Web, helping them to avoid late-payment penalties, including fees.
On top of all the general RCPOs advantages to merchants and customers, Payement21®’s Web-based imaging service allows merchants to process Demand Draft in the Cloud. Our proprietary system captures eCheck transactions through an API or via batch-upload. The first step of the procedure supports printing of paper checks. Subsequently, the system scans the items in the Cloud and turns these direct debit payments into so-called X9.37-files referred to as Image Cash Letter (ICL). Our Check 21-technology then goes ahead and securely transmits the ICL to the designated account, and as a result the transactions get deposited to the bank account of the merchant. Funds clear instantly and are available same day.
To benefit from Check 21 DD, merchants require a bank account with a financial institution providing Check 21 services with digital lockbox processing. Get started by contacting your bank with regards to accepting Image Cash Letter (ICL), and forward their ICL-specs, so we can begin working on your integration process.
Source: American Bankers Association