Banking & Finance Law

The Pros and Cons of Electronic Check Conversions

Today, many businesses are processing check payments as electronic check conversions. Typically, this allows businesses faster access to the funds in your checking account. Many consumers may be unaware that an ordinary paper check that is processed as an electronic check creates has different implications for them. This article will highlight some of the pros and cons of the electronic check conversion payment methods for the consumer.
  • If you have a dispute with a merchant and you paid via electronic check conversion then you have the right to have your financial institution investigate any transfers which you believe were unauthorized or incorrect. However, you only have 60 calendar days from the time the bank statement was sent to you to notify the bank of the problem. So, it is important for you to carefully review every statement that you receive.
  • Merchants typically cite several benefits to the electronic check conversion payment system.  They claim that it reduces their bank fees, reduces the time that their employees spend on deposits and reduces fraud. While these benefits directly benefit the merchants, they may also benefit consumers by preventing price increases.
  • If you do not have a debit or credit card, many businesses will accept an electronic check conversion as a form of payment while they may not accept traditional checks. This may allow you to purchase things that you would not otherwise be able to do absent a credit or debit card and you can do so with the risk of credit card debt since the money is withdrawn directly from your bank account.
Some of the drawbacks of this payment method for the consumer include:
  • Funds are typically released from your bank account much faster than when you pay by ordinary check. Therefore, you must make sure that you have enough money in your account to immediately cover the payment.
  • You will not receive any copies of the cancelled checks from your bank, even if you provided a paper check for payment.
The Electronic Funds Transfer Act requires that you be provided prior notice if your payment may be processed as an electronic check conversion. The notice may be included with your paper bill for items that you pay through the mail or posted by the cash register in a retail shop.   Notice, in the form of a detailed receipt must also be provided to you after the transaction. The receipt should include the merchant’s name, the date the transaction was processed and the amount of the transaction.
The Federal Trade Commission recommends that you carefully review your statement each month to make sure that all transactions were processed correctly and that you be vigilant in protecting your checking account number and other personal information since the information could be used to conduct an unauthorized electronic check conversion. If you believe that your rights have not been honored in an electronic check conversion transaction then you have the right to file a complaint with the Federal Trade Commission (FTC) by calling 1-877-FTC-HELP.