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Other ACH Services - ARTC/Lockbox

ARTC/Lockbox Defined

ARTC stands for Accounts Receivable Truncated Checks; as the name implies, these are paper checks that are received in the mail (or via other physical delivery means) and then converted, or Truncated, into ACH transactions. It is also called Lockbox because this term applies to a recurring billing system that often receives payments in locked boxes in offices and other locations. 

Although ARTC was created with high-volume accounts receivable applications in mind, it can also be utilized by the smallest merchants to convert their accounts receivable checks into ACH Items.

The first players to look into doing ARTC/Lockbox conversion are large utility companies. Some of these players are now participating in this NACHA Pilot Progam, wherein the new methodology is implemented and tested for full release.

Once a check has been converted into an ARTC transaction, it is then processed through the ACH Network just like any other electronic truncated check.

Companies such as ECHO are working with the Unisys "Source-NDP" high speed check reader/imager, a device which can not only read and image the checks, but can also perform a character recognition operation on the dollar amount of the check. The Source NDP will also "endorse" the check and print the dollar amount in machine readable format on the paper check. This is one example of the type of "front end" that is required to get the check information off of the checks and into the computer system being used in the conversion processing. 

This type of service is so new that no standard industry pricing exists yet. However, we can predict the pricing based on some of the other ACH Services out there. The merchant will need to purchase a quite expensive high volume check  reader/ imager, or a less costly one-at-a-time check reader/imager and terminal set. There will most likely be an Application and/or Set Up Fee,   Software Licensing/Purchase Fee, Statement Fee, and Monthly Minimum Fee. The basic service pricing will be charged on a per-transaction basis. Many industry players will attempt to sell the service at $0.50 to $1.00 an item to new merchants, but a good price should be $0.25 cents per item or possibly less.

How the pilot service works:  

- Biller notifies customer of the truncation service and may obtain explicit authorization.

- Consumer mails check payment to biller in the usual manner.

- Biller captures information from the MICR line (R/T number, account number, check number), enters non MICR info (payee, amount).

- Biller truncates check at the point of receipt and converts it to an ACH debit entry. 

- Biller stores check for 90 days, image of checks for 7 years.

- The entry flows through the ACH Network and is posted to the customer’s account.

- Revised short-term rule approved October 5, 2000. Effective December 15, 2000 through March 14, 2002.

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