Frequently Asked Questions

1. Is taking checks by fax legal?

Check demand drafts, or "drafting" funds from a second party's checking account, have been a method of payment for more than 8 years, usually in collections. Telephone checks (pre-authorized paper bank drafts) are completely legal. The primary requirement is that the checking account holder (your customer) must give you verbal or written pre-authorization, such as faxing you their check. Once you've received pre-authorization, you really don't even need a signature on the paper-draft, just as you don't need a signature on a phoned in credit card order. Paper drafts are explicitly established as a legal method for payment as provided in: Uniform Commercial Code, Title 1, Section 1-201 [39] and Title 3, Sections 3-104, 3-403, 2-403 Code of Federal Regulations, Title 12 Chapter II, Part 210 Regulation J, Federal Reserve Bank, Part 2, Sections 4a-201 to 4a-212 Also see Romani v. Harris, 255 Md. 389. The Federal Trade Commission in late 1995 proposed rules that became law in January 1996 (Regulation 16CFR Part 310) that requires businesses who take checks over the phone to have a "verification" procedure in place. This could include receiving written authorization by mail or fax, recording the "authorization" phone call with customers permission, and/or sending out written notice to customer prior to depositing paper draft. This notice only needs to be in the mail prior to making deposit. The 3 part check paper you use with ECS provides this important notice that fits into a standard #9 or #10 window envelope. Or you can just include it with the product you ship provided you don't deposit the paper draft prior to actual shipping. Both you and your customer are now protected by requiring ALL users of such a payment system to have a "verification of authorization" procedure.

2. What else do I need to accept and print checks by fax?

All you need in addition to this software is blank check paper (Safety Paper). For most laser printers, no special toner is required. The magnetic content of the toner in most laser printers is sufficient. (In rare cases, a special MICR toner is required.) This is available from your toner supplier.

3. Can I use a bubble jet printer?

Many users use Bubble Jet Printers or Ink Jet Printers to print checks by fax with no problems. Most banks have gone to optical scanning which requires no special toner. There are many areas that are still requiring magnetic scanning, and this is where the problem lies. The best thing to do is call your bank and ask if they use optical scanning.

4. What do banks think?

Since paper drafts are perfectly legal, your bank must accept your deposit. The only problem that may arise is if you are not using the magnetic toner with a laser printer. The best way to find out is print out a check to yourself on the proper security check paper needed and deposit it. Sit back and watch it go through! You actually don't even need to use security paper, but the banks do get a little more fussy about that kind of thing.

5. Can companies outside of the U.S. use this program?

At the present time most countries do not have banking guidelines in place for the processing of bank drafts. We recommend using this program for processing checks for banks in the USA and its possessions and Canada only.

6. What if my customer has concerns about giving out their check information?

Explain that you would have the same information if they mailed you a check. Taking checks by fax is really no different than accepting a credit card over the phone. No signature is required for a phone in credit card order, the customer knows he will only be charged for what he has ordered or the business that takes the order would be breaking the law. The same theory applies to bank drafts, the business can only legally create a draft for the amount that has been authorized by the customer. As more and more people find out about checks by phone, fax, or online, the more it will be accepted. Once the public gets over the uniqueness of the product, they will find it really makes a whole lot of sense.

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