NACHA DRTC Pilot Study on Check Truncation Gaining Volume

VIENNA, Va. – Eight months into a Deposited and Returned Truncated Check (DRTC) pilot study being conducted by NACHA – The Electronic Payments Association, Navy FCU is still the only credit union participating. In fact, only four financials have volunteered to be part of the pilot. That doesn’t surprise Don Chapman, senior vice president of internal audit of the $16.4 billion NFCU. NACHA, he said “has struggled to get financial institutions involved in its pilots because to get in to a pilot requires a financial to do a lot of extra work.” For example, he explained that financials participating in the DRTC pilot have to manually prepare statistics on a monthly basis for NACHA on the status of transactions. Since there are no recording mechanisms in place, this process is very time consuming and it’s in addition to a participating financial’s regular workload. Then after all the resources a financial commits to a pilot, there are no guarantees anything positive and useful will come out of the study. Even so, said Chapman, “Navy wanted to participate in the Deposited and Returned Truncated Check pilot. We have always been proactive in trying to automate and take paper out of the payment system. A paperless payment system is less expensive for credit unions to maintain and process, and it means one less thing they have to manage. ” In addition to Navy FCU, other participants in the DRTC pilot include three banks – Washington Mutual, Wells Fargo Bank, N.A., and World Savings. Although any accredited financial can join the pilot, Chapman said it’s no coincidence that all of the banks participating so far are based in California and that Navy FCU has a large presence there too. It allows the pilot to generate volume and “ makes for a somewhat closed pilot,” he said. The one-year pilot was initiated by NACHA on Nov. 1, 2002 and is designed to test truncation of unpaid deposit items – checks that have been deposited to a financial account at a financial institution and have been returned for non-sufficient funds or uncollected funds could be re-presented through the ACH network. Chapman said the first transaction was made in February 2003. He emphasized that Navy FCU is only acting as a receiver in the pilot, not as an originator. In its `receiver’ role, a Navy FCU member with a share draft account at the credit union writes a check; when the payee deposits the check, it’s sent to Navy which returns the check as NSF. The payee’s financial subsequently returns it to Navy as an ACH transaction. So far, Chapman said Navy has received about 400 ACH transactions. Chapman is confident the pilot will garner sufficient data by the end of the test period for NACHA to draw statistically reliable conclusions, and he is hopeful the test has the potential to be expanded. -