Chucking Check in the Mail Story Faxing Collections Finds Supporters, but Bank Official Is Wary of Possible Fraud, Higher Costs

Article excerpt

The scenario: The collections company calls a delinquent customer concerning a bill six months past due. The customer says, "I just mailed that check yesterday, so you should be receiving it in a few days." A few days and then a couple of weeks pass by until, yet again, the collections company must make another call to request payment.

Two California businessmen tired of listening to the "check is in the mail" story decided to do something about it by expanding the technology of the demand draft. Rick Reller, who owned a leasing company, and Thomas Mudry, who has a direct mail company, conceived the idea of Checks-by-Fax.

The system allows a company's customer to pay for items by fax, over the telephone or through e-mail. Using the Checks-by-Fax software, users enter the customer's information and then print a bank draft on check paper guaranteed to meet all Federal Reserve and American Bankers Association guidelines. That draft is then taken to the financial institution for immediate deposit in the registered user's account. This form of payment accelerates cash flow, increases collections, reduces paperwork and lowers electronic fund transfer and credit card service fees, said Michael R. Murray, owner of Checks-by-Fax of Oklahoma, an affiliate of Checks-by-Fax based in Beverly Hills, Calif. Some financial institutions and associations, however, are cautioning consumers regarding this method of payment, saying it is an easy vehicle for fraud and will ultimately end up costing banking customers more for their checking services. "What I would like to stress is that this is perfectly, completely legal," Reller said. "We have a 100 percent money-back guarantee, no questions asked, if the software doesn't do exactly what we say it would do." The most logical purchaser of the Checks-by-Fax system is a corporation that has a large collection department responsible for collecting money on contracts, according to Reller. "Our target market as far as industry groups includes leasing and/or financing companies, insurance companies and agencies, mortgage lenders and mortgage bankers, property management companies, all commercial collection agencies, major manufacturers, catalog sales and all utility companies in the U.S.," Reller said. The Checks-by-Fax system "eliminates most if not all of the `checks in the mail' syndrome," Murray said. "Using this service gives the user a lot more control and a lot more profit. Also there are a surprising number of people who don't have a Visa or MasterCard, who really prefer to pay by checks," Reller said, adding that the product is as safe as the use of a credit card. The company said it has taken several security precautions to lessen the opportunities for misuse of the system. "It is no different actually than writing a check for purchase across the counter or sending a check in the mail. The same information is being transferred in a more convenient and effective manner," Murray said. In cases of misuse, the source of any wrongfully issued check can be identified by magnetic coding used in the system, he said. Software purchasers are registered with Checks-by-Fax by a serial number. The number is imprinted on each check or draft in an unobtrusive spot, allowing the company to track down any case of fraudulent use of the software. "We also have a lot of protection involved in the system itself, such as passwords used to get into the system just to be able to operate it. Also, our safeguards are so stringent that companies cannot move this software from one machine to another within their facility without us having to unlock it," Reller said. …