Capturing in-person checks

Remote Deposit Capture (RDC) is a service that allows you to convert paper checks received in-person into electronic payments without physically depositing them at a bank. This guide explains the key concepts, requirements, and best practices for implementing RDC.

RDC is the process of:

1. Capturing images of paper checks
2. Extracting check information using OCR (Optical Character Recognition)
3. Converting the checks into electronic payments
4. Processing these payments through the ACH (Automated Clearing House) network

When you capture a check image, you typically take a photo of the front and back of the check using a mobile device or scanner. The images are then sent to a payment processor for verification and conversion.

Back Office Conversion (BOC)

In Payabli, when you capture a check image using RDC, that’s the first step in converting it into an electronic payment. This process is called Back Office Conversion (BOC). BOC allows businesses to convert checks received at a point-of-sale or staffed payment location into electronic payments. Only some checks are eligible for BOC processing, and the process must comply with specific rules and regulations.

Eligible checks:

• Consumer checks only (no business, cashier’s, insurance, or government checks)
• Checks received in-person at point-of-sale for goods or services
• Checks from staffed bill payment locations
• Checks with proper MICR line data

Ineligible checks:

• Cashier’s checks
• Checks that weren’t received in-person (for example, mailed checks)
• Checks from un-staffed payment locations (for example, drop boxes)
• Checks where the consumer has opted out of electronic conversion

Check image requirements

For successful RDC processing, check images must meet these standards:

• Format: Image must be in JPEG or PNG format.
• Size: File size should be less than 1MB per image.
• Quality: The entire check must be visible, clear, and legible.
• Positioning: No partial, blurry, or illegible images.
• Lighting: Good lighting conditions that help create a clear image.
• ** Magnetic Ink Character Recognition (MICR) line**: The bottom line containing routing and account numbers must be clearly visible. The MICR line at the bottom of a check contains:
  • Routing number (⑆123456789⑆)
  • Account number (⑈123456⑈)
  • Check number (0123)
• CAR and LAR values: The check image must have clear and legible CAR (Courtesy Amount Recognition) and LAR (Legal Amount Recognition) values. The CAR is the numerical amount, while the LAR is the written amount. The system verifies the two amounts match.

Compliance requirements

When you implement RDC, you must comply with the following requirements:

1. Customer notice: Tell customers that checks may be converted to electronic payments. See Notice requirements.
2. Check retention: Retain the original check for a minimum period (typically 14 days).
3. Secure destruction: Securely destroy converted checks after the retention period.
4. No double presentment: Never process both the paper check and the electronic version.
5. Privacy protection: Safeguard all customer banking information.
6. Opt-out mechanism: Give customers a way to opt out of check conversion.

Notice requirements

BOC rules require you to notify customers that their check may be converted to an electronic payment. Provide two types of notice at the point of purchase:

• Posted signage (point-of-sale notice): Display the notice in a prominent, conspicuous location at the point of purchase or staffed payment location where customers present checks.
• Take-away notice (customer copy): Give the check writer a copy of the notice, or equivalent language, at the time of the transaction. This can be on a receipt, a separate card, or another printed format.

Both notices must be clear and readily understandable. When a customer proceeds with the transaction after receiving the notice, that serves as their authorization to convert the check.

Each notice must include:

• A core message that the check may be converted to an electronic payment, and that the financial institution won’t return the original check.
• A working customer service phone number for inquiries, answered during your normal business hours. Display this number on both the posted notice and the take-away notice.
• An opt-out option. Customers can decline conversion, so you must offer alternative payment methods such as card or cash.

Sample notice

Use the following as a starting point. Consult your bank or another competent authority before you publish a notice, because requirements vary.

 NOTICE: CHECK CONVERSION TO ELECTRONIC PAYMENT
 When you provide a check as payment, your check may be converted
 to an electronic fund transfer. This means we copy your check and
 use the account information from your check to make an electronic
 payment from your account.
 The transaction usually occurs on the same day you make your
 payment, and appears on your bank statement as an electronic
 payment, not a check payment.
 Your financial institution won't return the original check.
 If the electronic payment is returned unpaid, your payment will be
 considered unpaid. Any additional fees or penalties for unpaid
 amounts, if applicable, will be applied.
 AUTHORIZATION
 By providing your check for payment, you acknowledge that you've
 received this notice and authorize us to convert your check to an
 electronic fund transfer and process it accordingly.
 OPT-OUT OPTION
 If you don't want your check converted to an electronic payment,
 you may choose an alternative payment method such as credit card,
 debit card, cash, or other available options. Please tell the
 cashier before completing your transaction.
 For questions about this payment method, please call:
 [Your customer service number]
 Hours: [Your business hours]

Next steps

If you’re interested in using RDC, contact the Payabli team to enable it. You can use the API to integrate Payabli’s RDC features into your app. See the RDC developer guide for more information.