The Electronic Check Clearing House Organization (ECCHO), the industry group that sets rules for and promotes the use of electronic check presentment (ECP), is now providing smaller banks the benefit of ECCHO’s rules coverage to limit the losses incurred through snafus in check processing.

The not-for-profit group estimates ECP will save banks using the system $2-3 billion a year. David Walker, ECCHO’s executive director, said the value of ECP to the paying bank comes from posting items a day earlier than if it had waited on a paper check.

"The risk to the depository bank is reduced because it can get return notices faster so it can reduce check write offs. The faster they can be notified about return items, the faster they can protect themselves, reducing losses," Walker said.

ECCHO is now made up of about 20 of the largest banks in the country. Those members pay big fees, $100,000 up front and as much as $80,000 in annual fees. The fees go to pay for lawyers and staff to support the complicated set of ECCHO rules that are becoming an industry standard, and to promote the use of the rules throughout the industry. Now, smaller banks can become members after the board of directors, comprising executives from full-member banks, decided at its thrice-yearly meeting in February to allow them entry through trade groups such as the Independent Bankers Association of America. The smaller banks can join for as little as $100 a year, based upon size.

By following the ECCHO’s rules, which are enforced by its unique status under the Uniform Commercial Code, banks have extra protection because their check counterparties as well as other parties in volved in the transaction are required to follow the rules. Other check processing rules, sources said, do not have this requirement.

Industry organizations such as the Bankers Roundtable agree that implementing ECP should be one of the industry’s highest objectives. It has the goal of implementing 50% of the largest banks’ check volume by 2001. Walker said he does not believe this goal can be met through the biggest banks alone, despite their massive check volume, and that the participation of smaller banks is neccessary.