What's the deal on Telecheck?

[Stephen Tashiro]

Do any forum members with experience in the retail business know the details of how the "Telecheck" service works?

Some friends of mine have recently had a problem with getting their checks accepted at local merchants (including Walmart) because their checks weren't approved by "Telecheck". They have money in the bank and even got a representative of the bank to speak to a customer service person at Telecheck on their behalf, but only got assurances that their checks might be begin to be approved after about a week had passed.

This makes me very curious about the way Telecheck operates. From reading things on the web, I gather that when Telecheck accepts a check, it makes a payment to the merchant, so the merchant doesn't worry about cashing the check. By that interpretation, when a retailer that uses Telecheck says it will accept checks, it doesn't really mean that the retailer exercises any independent judgement about checks. It only means that it will accept checks that Telecheck will accept. Is that the correct interpretation?

[Dave Lehnert]

Not exactly sure what you are asking. the store I worked at used telecheck. It was a way to verify if the checking account has had any problems at other retailers. There can be problems. For example a customer at store"A" can write a check and the clerk miss keys their ID info. Missed keyed to your info. Now your account is also tied to that other account. So if customer "A" bank account is bad now yours is too. If you can figure out what store origionaly had problems with your check, that is the fastest was to get it corrected.

Just as an easy example. Say a new cashier is afraid to ask customers for ID when writing a check. (And some get mad) So the new cashier just uses her own License number each time. You Checking account is now associated with every other check customer that came through her line that day. So if just one of the checks is bad. Now every customer that went through that line has a bad account.

Since Check 21 was passed (I think that is the name) Checks are processed electronically just like a credit card. You will notice some stores don't keep your check. Just copy your account number. Checks are the worse (IMHO) way to pay now days. You are giving your Name, Address, Home phone and account number on a slip of paper (The check) to be passed around to who knows who. a person would never do that with their credit card info.


By that interpretation, when a retailer that uses Telecheck says it will accept checks, it doesn't really mean that the retailer exercises any independent judgement about checks. It only means that it will accept checks that Telecheck will accept. Is that the correct interpretation?

Guess that is true to a point. but Telecheck is the info they use to make that judgement. Kinda like a police officer stops a guy because he looks shady. But runs a check on the computer and he is clear of any warrants. the office makes the judgement to let him go.

[Ron Natalie]

I believe Telecheck not only on the account information but on their whole estimation with whether the apparent drawer is likely to be fraudulent.

Info here: http://www.firstdata.com/telecheck/telecheck-declined-check.htm

[Stephen Tashiro]

I've read several pages on the web (such as http://www.cardservicesales.com/services/merchant_services/telecheck.htm) that seem to say that it is the Telecheck company that is actually paying the merchant and that the Telecheck company collects the payment from the check itself.

An alternate interpretation of what those pages say is that Telecheck initiates some electronic transaction that transfers money from the customers account to the merchant's account. However, if that was the case, I don't see how Telecheck could take responsibility for collections since the check they were trying to collect wouldn't technically be a payment to them.

I'm trying to understand which picture of how Telecheck operates is correct. One way to visualize it is that Telecheck simply advises a merchant whether to accept a check. If the merchant takes the check, it is his responsbility to deposit the check in his own account, whether electronically or by the old fashioned way of taking the check to his bank. Another way to visualize it is that the merchant gives the check (electronically) to Telecheck and Telecheck accepts it as a "second party" check. Telecheck pays the merchant the amount on the check and then it is Telecheck who must collect on the check.

[Kevin W Johnson]

Check 21 is a big load of you know what.... Its all about helping people overdraw their accounts and not much else, since theres no such thing as "float" anymore. The banks also save big money not transferring paper checks back and forth, but none of that savings was passed on to bank customers.

You can go to Walmart and write a check, and by the time you get home that money is withdrawn from your account. However, you get a cashiers check from bank A, and deposit it to an account in bank B, and you'll likely have to wait 7 days to access the full amount of that check. The bank knows full well after the first business day what the status of that check is. They act like they have to wait for the money to be physically moved from bank to bank, which isn't the case.

[Mike Henderson]

Check 21 is a big load of you know what.... Its all about helping people overdraw their accounts and not much else, since theres no such thing as "float" anymore. The banks also save big money not transferring paper checks back and forth, but none of that savings was passed on to bank customers.

You can go to Walmart and write a check, and by the time you get home that money is withdrawn from your account. However, you get a cashiers check from bank A, and deposit it to an account in bank B, and you'll likely have to wait 7 days to access the full amount of that check. The bank knows full well after the first business day what the status of that check is. They act like they have to wait for the money to be physically moved from bank to bank, which isn't the case.
Instead of getting a cashier's check, you can have the first bank electronically transfer the funds to your bank and the funds will be available immediately.

Mike

[Kevin W Johnson]

Instead of getting a cashier's check, you can have the first bank electronically transfer the funds to your bank and the funds will be available immediately.

Mike

Yeah, but not the point. Since with check 21, it IS an electronic transfer.

[Mike Henderson]

It's possible to produce a counterfeit cashier's check. The receiving bank will get the funds immediately but if the it turns out the check is bogus, the sending bank will take the funds back (electronically). The receiving bank will then have to find you and try to get the funds back from you. They hold the funds until they are sure the check is valid.

When you have the funds transferred electronically, the receiving bank is sure that the sending bank actually sent the funds. There are significant technological techniques to verify the sending bank and prevent someone who tapped into the line from sending false transfer orders.

Moral: have your funds sent electronically and avoid paper techniques which are less reliable. And as a side note, you could lose the cashier's check.

Mike

[I might point out that when you (or an impostor) cashes a check at Walmart, the funds are immediately transferred to Walmart. If the check is bad (a forgery), the bank will take the funds back from Walmart. The difference is that the bank knows it can find Walmart and get the money back.]

[Stephen Tashiro]

You can go to Walmart and write a check

But (to return to the topic of the thread here in the off-topic forum) if Telecheck declines to approve your check then Walmart won't take it - at least a manager at a local Walmart claims she has no authority to take a non-approved check.

Another Telecheck related question is whether Telecheck is governed by the same rules as the credit rating agencies. Those agencies, as I understand it, have some obligation to reveal to you the reasons for your credit rating and what that rating is. It isn't clear to me whether Telecheck has any obligation to explain why they decline your check. It also isn't clear to me whether there are any limitations on what information about you can be used in their check acceptance algorithms. For example, can they decline your checks if you move into a "bad neighborhood"?

[Dave Lehnert]

Are you sure your friend has not had any problem checks in the past? The check they may be writing is good but another account they are associated with is /was bad. ??????

Checks are kinda old fashioned now days. I bet we see the day (Soon) places will stop taking checks. Bet banks won't even offer them. Kinda surprised it has not happened already. Our store, Most of the people who wrote checks were around 60+ in age. Other customers pay with debit or Credit Card. A lot of people float everything on their credit card. Pay the account off in full at the end of the month. I could run register for 8 hours and not take one check.

[Kevin W Johnson]

It's possible to produce a counterfeit cashier's check. The receiving bank will get the funds immediately but if the it turns out the check is bogus, the sending bank will take the funds back (electronically). The receiving bank will then have to find you and try to get the funds back from you. They hold the funds until they are sure the check is valid.

When you have the funds transferred electronically, the receiving bank is sure that the sending bank actually sent the funds. There are significant technological techniques to verify the sending bank and prevent someone who tapped into the line from sending false transfer orders.

Moral: have your funds sent electronically and avoid paper techniques which are less reliable. And as a side note, you could lose the cashier's check.

Mike

[I might point out that when you (or an impostor) cashes a check at Walmart, the funds are immediately transferred to Walmart. If the check is bad (a forgery), the bank will take the funds back from Walmart. The difference is that the bank knows it can find Walmart and get the money back.]

"EXPECT THE CHECKS YOU WRITE TO CLEAR FASTER: Don't write a check unless the funds are already in your account. The checks you write will clear faster, but banks aren't required to speed up the time when they make funds available from the checks that you deposit."

http://www.consumersunion.org/finance/ckclear1002.htm

Regardless, it doesn't take 7 business days for banks to establish if a check is good. Banks are making BIG money holding PEOPLE'S funds hostage. Check 21 greatly speeds check processing time, but didn't require banks to make those funds available faster.

The issuing bank knows right away and the receiving bank knows soon after if an electronically presented check is valid or not. I've deposited checks written by others that have bounced, takes about a day, 2 days max to know.

Back to the OP. I'd be supprised if you can get the proper answers. From what I read however, is that when your check is denied, your supposed to receive information on how to contact telecheck.


"When a check or card is denied, the customer is given the bank routing number and checking account number that was denied along with a reason code and a phone number to call so they can sort out the problem. Sometimes TeleCheck will not have any negative information on the account or writer of the check but will also not have enough information to approve the check."


Also, as i read it, Telecheck is just a check guarantee service purchased by the merchant. If Telecheck "accepts" a check, they are simply taking responsibility for making that check good should it bounce. I'd also bet that if a credit score is tied to the information of an account holders database, its used as well.

[Stephen Tashiro]

It's still not clear to me exactly how Telecheck works.

Is a check to Walmart paid fom the account of the checkholder directly to Walmart? Does a payment from Telecheck to Walmart only occur when the check bounces from the checkholder's account?



when you (or an impostor) cashes a check at Walmart, the funds are immediately transferred to Walmart. If the check is bad (a forgery), the bank will take the funds back from Walmart. The difference is that the bank knows it can find Walmart and get the money back.]

Or does Walmart give the check to Telecheck as a second party check and get funds from Telecheck as opposed to the checkholder's account?


Telecheck is just a check guarantee service purchased by the merchant. If Telecheck "accepts" a check, they are simply taking responsibility for making that check good should it bounce.


It's clear that Telecheck is a check guarantee service, but I don't know how such a service works. The same question comes up about whether the guarantee service becomes the owner of the check (as a second party check) or whether the service only gets some legal standing to act on behalf of the merchant.

I suppose other debt collection agencies operate in a similar manner, but what manner is it? Do the merchants sell the debts (checks or otherwise) to the debt collectors so that the debt collectors have legal standing to collect them? Or do the merchants simply give the debt collection agencies a kind of power of attorney for them to act on the merchant's behalf?

[Mike Henderson]

I can see no reason to run the funds through Telecheck. Telecheck can stand behind the check without receiving the funds. The more efficient way is to transfer the funds between the parties in the transaction, with Telecheck acting like a guarantor. If the check is bad, they will make good on it. For that guarantee, they receive a fee for each check they process.

Mike

[Stephen Tashiro]

I can see no reason to run the funds through Telecheck. Telecheck can stand behind the check without receiving the funds.

However, my understanding is that Telecheck is also a collection agency. Can it collect on debts that are not owed to it?

[Mike Henderson]

However, my understanding is that Telecheck is also a collection agency. Can it collect on debts that are not owed to it?
Once Telecheck pays the merchant, they become the "holder in due course" and can proceed against the check writer.

Mike

[Matt Meiser]

Even if Walmart didn't use Telecheck, what's to say they HAVE to take a particular person's check. In the "old days" they would call the manager over to approve the check. They could just have easily said no.

[Stephen Tashiro]

Even if Walmart didn't use Telecheck, what's to say they HAVE to take a particular person's check.

As far as I know, nothing would prohibit them from refusing a check or posting one of those "We reserve the right to refuse service to anyone" signs. They don't even have to let particular people in the store and they probably don't have to give reasons for their actions. They would only be prohibted from a pattern of exclusions that made some sort of illegal discrimination. But I don't see what this has to do with anything that I've posted - in case you were addressing something I said.

[Stephen Tashiro]

Once Telecheck pays the merchant, they become the "holder in due course"

According to the Wikipedia, if Telecheck is a "holder in due course" it means that Telecheck must purchase the debt. (I assume Walmart doesn't give them rights to it for free.) The concept of "holder in due course" is very interesting. Telecheck is in a better position than Walmart to get money from the customer if there is a dispute about a product being defective. As I read that article, the customer cannot refuse to pay Telecheck on the grounds that the product he purchased was defective.

[Mike Henderson]

According to the Wikipedia, if Telecheck is a "holder in due course" it means that Telecheck must purchase the debt. (I assume Walmart doesn't give them rights to it for free.) The concept of "holder in due course" is very interesting. Telecheck is in a better position than Walmart to get money from the customer if there is a dispute about a product being defective. As I read that article, the customer cannot refuse to pay Telecheck on the grounds that the product he purchased was defective.
I would bet that the agreement Telecheck has with the merchant is that when Telecheck pays for a dishonored check, they become the "holder in due course". By paying the merchant, they are purchasing the "debt" (the check writer has a debt to the merchant - the obligation to pay the amount of the check). The merchant cannot proceed against the check writer because the merchant has been made whole (by Telecheck), but the obligation of the check writer is still there. Since Telecheck is out the money which it gave to the merchant, they are the ones who will proceed against the check writer.

Mike

[Matt Meiser]

As far as I know, nothing would prohibit them from refusing a check or posting one of those "We reserve the right to refuse service to anyone" signs. They don't even have to let particular people in the store and they probably don't have to give reasons for their actions. They would only be prohibted from a pattern of exclusions that made some sort of illegal discrimination. But I don't see what this has to do with anything that I've posted - in case you were addressing something I said.

I was referring to the comment about the local manager refusing to take the check because Telecheck refused. In the "old days" the manager looked you up and down, made sure to have your info, and made a decision. Now they make the decision based on some data, which is occasionally bound to be wrong. Probably less so than the manager who didn't like the way you kept your hair or the way you dressed. Statistically, I bet the data beats the manager's best guess hands down.

It wouldn't surprise me one bit if their criteria is intentionally undisclosed to prevent fraud.

Is a check considered in the same manner as extending credit? I know they have to tell you why you weren't given credit (and based on a recent experience even if they extend you credit I think they might be required to tell you your score if I'm reading the letter I got from the credit union right.)

[Stephen Tashiro]

I would bet that the agreement Telecheck has with the merchant is that when Telecheck pays for a dishonored check, they become the "holder in due course".


I wouldn't bet against you. But I'd also bet the agreement says that Telecheck becomes the "holder in due course" of all checks, good and bad. It would simplify things. It would also make it impossible for a consumer to (legally) to put a stop on a check and refuse to pay until a complaint about defective merchandise was settled.

[Curt Harms]

.........
Checks are kinda old fashioned now days. I bet we see the day (Soon) places will stop taking checks. Bet banks won't even offer them. Kinda surprised it has not happened already. Our store, Most of the people who wrote checks were around 60+ in age. Other customers pay with debit or Credit Card. A lot of people float everything on their credit card. Pay the account off in full at the end of the month. I could run register for 8 hours and not take one check.

Our local Ace hardware doesn't take checks. That's the only place I'm aware of now but you're right. I could also see some sort of surcharge to accept a check 'justified' by the additional time by the cashier to check I.D. etc. Also this part of the world has more than its share of the 60+ age group.

[Bill ThompsonNM]

Telechek and similar services are guarantors of the check only. Where I work we get distinct payments from our guarantor only after the check has bounced. They don 't take ownership of all checks. They also limit the maximum size of check they will guarantee.