Check Verification -
What is check verification?
How is check verification
different from check guarantee?
How does check verification
work with BetterCheck?
What is factoring? Why don't banks verify funds?
BetterCheck is a check verification system for businesses, and
validates the actual bank account status as of the beginning of the
business banking day.
Not all check verification systems, and check
verification companies are the same. The term check
verification can be very general and broad, or very specific.
Check verification should not be confused with check guarantee,
which is a very different service.
Check verification is a system that uses the
Routing Number, the Account Number, and optionally the Amount of the
Check and the Check Number to determine if the checking account is
real, if it is open and if there are positive funds in the account.
Check verification will determine based on the
Routing Number if the check actually comes from the bank that is
stated on front of the check or draft. Check verification will
provide the name, address and phone number for the bank the check is
drawn upon, if the routing number is valid. Check verification
systems can be useful for ACH debit verification as well as check
Check verification will also address the
account number at that bank by checking the bank's information from
that business banking day, as posted by the individual institution.
Checking account number positive verification will determine, is the
actual account and open and active account? Is there a positive
balance listed on the account as of that day? Are there any holds or
limits on the account?
Checking account number negative information is limited to the
information supplied by the individual bank. Negative
responses for check verification could be as simple as, "invalid
routing number," but could also be more specific account
indication messages to help you determine exactly why your check may
or may not be good.
Each verification message supplied by current
check verification systems will indicate something about the account
status to allow businesses to decide if they should process or not
process the item.
Keep in mind that there is currently no system
offered in the U.S. that allows a merchant or individual to verify
and exact amount of funds.
Why is there no company that can offer funds
verification for exact dollar amounts during a
One reason is that new bank privacy policies prevent the banks from
disclosing this information to anyone except the account holder.
While it is not the law that dictates banks cannot provide account
balance details on customers, more than 90% of banks have issued
such privacy policies voluntarily. One reason for this is
literally to protect the privacy of the consumer.
Banks that offered "merchant funds verification" by telephone until
recently found that with automated systems, or live operators
merchants, collectors and fraudsters alike could narrow down a
balance using a technique called factoring.
Factoring is when you narrow down the account holder's balance by
trying to verify using trial and error. An example would be
collection agency, or shopkeeper, or even a relative could sweep the
account by doing a verification like this: Verify a check for$500
and find that it will not clear, then a $400 that won't clear
either, then the next verification attempt for $300 says it will
clear - that means there is at least $300 in the account. Now
try $375, that says it will clear too - then try $395 and the answer
is no. Someone doing factoring now knows there is about $375
in the account. This is dangerous for unscrupulous users and
eliminates the privacy of any individual who pays by check.
This practice of factoring is illegal in some states and banks have
made it their business to not facilitate factoring by not providing
check verification or account information.
Another reason that banks don't offer check verification any longer
is that it saves them a lot of money. Some banks and credit
unions have spent 5% of their call-time and call center resources
verifying checks for customers and non-customers. This is a
large expense that is eliminated as soon as the bank stops offering
the service. A bank with a call center of 20 can drop to 19 by
eliminating this service.
Some banks have switched to still offering the service via a 900# or
pay per call service only. This type of system must be called
from a land line phone and usually verifies one check at a time for
$5 to $15 per call. Factoring is near impossible as calls are
traceable to a physical address and the cost of the call would
prevent anyone from profiting on collecting.
Banks also set up check verification
capabilities for businesses and corporate clients who can also
maintain the same level of confidentiality that is required in their
own privacy policies. Qualified businesses can get check
verification systems like BetterCheck after agreeing to these
privacy policies and proper use as defined in the Fair Credit
BetterCheck is a system that offers the very best and most
comprehensive check verification in the industry. BetterCheck
is designed to drastically reduce the number of bad checks you
deposit or ACH returns you receive by providing live account
information for most U.S. checking accounts.
Unlike check guarantee companies that base their decision on the
customer's check writing history, BetterCheck uses the actual status
and information about the account that day.