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 CHECK AUTORISATION PROCESS

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PostSubject: CHECK AUTORISATION PROCESS   Fri Jun 22, 2012 8:01 am

Some info on this process:

The machine that reads checks at retailers goes by various names. Checkmate comes to mind as the most popular. This machine reads the full MICR, all the numbers across the bottom of the check. Although I have no idea what operations are run at that point, I do know what happens when the check is flagged. The check is either declined on the spot or the clerk must call for manual check approval (referral). If a check is declined at the machine, negative information most likely is already on file for the customer. When a referral occurs, a prompt alerts the clerk to call a toll-free number to obtain check approval. After providing necessary information to the agent, the clerk is given an approval number to input or informed that the check is being declined.

A company called Certegy (spin-off of Equifax) handles most referrals from retailers. If you’re at a retailer and see the words Tele-Check or Equifax accompanied by the store’s check policy, that’s Certegy. Certegy is responsible for guaranteeing check’s written to be deposited. Profits are gained mainly by POS (point-of-sale) terminals aka Checkmate. For guaranteeing the check, Certegy receives a certain percent of the check’s face value. This percent various between stores. If a check is approved and it bounces, Certegy absorbs the cost. That is why manual approvals are required quite often.

There are a number of items could require a manual approval. This is not complete by any means.
1. Activity exception - significantly larger volume of checks written. The duration considered may be for just that day or the whole week.
2. Gaps in check numbers - self-explanatory. The logic sees a big enough gap in between previous check written and check in question.
3. Amount - high dollar amount, bigger risk.
4. Low check number - in addition to a low check number, the system is cautious with check numbers such as 5000, 100000, as they would be the novices’ choice for starting a new account and wanting a high check number.
5. Invalid license number - if the clerk is required to enter a license number, he/she must enter it exactly how it appears on the ID. Certegy’s system will verify that the number is in the proper format.
6. Invalid routing number - also knows as the ABA number, is the first set of nine digits along the bottom of the check. This is compared to a database of routing numbers to make sure it is valid.
7. DIFS - stands for Derogatory Information Filing System. This database contains all negative records (bounced checks, fraud) on the customer. If the customer matches a DIFS file, the check is automatically declined.

Funds Verification:
Some transactions will require funds verification. This process is usually a last resort. The agent will ask the merchant to be placed on hold and place a call to the bank responsible to the checking account. Banks are found using the routing number gathered.

Certegy separates their merchants into two catagories:
1. FACS - No idea what this stands for. These merchants, when calling for approval, will jump ahead of all other calls in queue. Read: extra money for Certegy. As an added perk, FACS merchants are only required to know their store number when calling. All other merchants, with a couple exceptions, require a ten-digit station number to identify themselves to the agent. When a FACS clerk forgets his/her approval number, and calls Certegy back, a little utility is used to generate the approval number again. If a bank is unreachable for funds verification, a last chance of using a credit card number as third identification may be offered. *Any valid credit card number will do in this case. The number is not verified to my knowledge.
Example of FACS merchants: Macy’s, Bloomingdale’s, Bon Marche

2. All of the others - sit around in a queue reaching upwards of 20 minutes (during holiday season). Ten digit station numbers are required upon calling for approval. Approval numbers are sequential. Each approval number (always four digits) is one greater than the previous number.


-Declines- These are, verbatim, the statements given to customers when their check is declined.

Code 1: ‘Due to previously reported information on our files, we must decline to authorize this transaction.’ DIFS would give a code 1 decline.

Code 2: ‘Although we show no negative information on file, we must decline to authorize this transaction based on certain established limits.’ This is just Certegy saying that you may have a good check there, but they are unwilling to accept the risk.

Code 3: ‘This ID information you have given us does not match our records.’ Basically, the license number won’t go through the system. Because nothing can be verified, the transaction is just declined. If license numbers are faded, the agent may try a couple different combinations of numbers to have the system accept it.

Code 4: Code 4 is like a code 2, only for casinos. I think Indiana has a state law customers may not exceed $1000 worth of written checks to a casino, weekly. This code only applies for casinos.

- The preceding is for educational purposes only. Accuracy not guaranteed. v
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