What is a remotely created check?

What does a remotely created check look like?

It looks like an ordinary business check. It shows your customer's name and address, their bank, the date, you as the payee, the amount in numbers and words, and the MICR line along the bottom with the routing number, account number and check number.

The difference is the signature line. Where a signature would go, a remotely created check carries a short legend stating that the account holder authorized the check. Banks often specify the exact wording they want.

What else are remotely created checks called?

People search for the same thing under several names:

• Check draft or demand draft: the most common everyday names.
• Preauthorized draft: an older banking term for the same idea.
• Check by phone or check by email: describes how the payment is arranged, not a different instrument.
• Remotely created payment order: the FTC's broader term, which includes remotely created checks.

A bank draft can also mean a cashier's check, which is a different thing: a check drawn on the bank's own funds. And an eCheck is usually an ACH debit, which moves electronically and isn't a check at all.

How does a remotely created check work?

1. 1

   Your customer authorizes it

   They agree to the amount (or a cap), the dates and what it's for, on the account they name.

2. 2

   You create the check

   Using their routing and account numbers, with a legend in place of a signature.

3. 3

   You print it

   On blank check stock, with the MICR line printed along the bottom.

4. 4

   You deposit it

   At your own bank, like any other check: at a teller, at an ATM or by remote deposit, where your bank allows it.

5. 5

   It clears like a check

   Your bank collects it from your customer's bank through normal check clearing.

Who uses remotely created checks?

Businesses whose customers pay by check but want to pay now: over the phone, by email, or without waiting for the next check run. Typical cases are a business customer who says "we'll send a check", a past-due account that wants to settle today, and repeat invoices from a customer who would rather approve once than mail a check every month.

DraftPay is for these business-to-business payments only. Every payer must be a business. See the industries that use it.

What are the risks of a remotely created check?

The main risk is a claim that the check wasn't authorized. Under the Federal Reserve's Regulation CC, the bank that takes the deposit warrants that the account holder authorized the check, so if the payer disputes it, the loss can flow back to that bank and, through your account agreement, to you.

That's why proof matters more than anything else. Keep a record of who authorized the payment, for what amount, on which account and when. Read the rules and what happens in a dispute.

How does DraftPay create remotely created checks?

You drop in your customer's check photo or invoice, or type the details. DraftPay emails your customer a link to approve the exact amount, seals their approval in a signed record, and prints the check draft with an E-13B MICR line on blank check stock from your laser printer. You deposit it at your own bank the same day. See how it works.