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March 6, 2008

Mr. Bill Brushwood

Financial Management Service

401 14^th^ Street, S.W.,

Room 400A

Washington, DC 20227

Re: Docket number FISCAL-FMS-2007-0008

Dear Mr. Brushwood:

The Association for Financial Professionals (AFP) welcomes the
opportunity to respond to the Financial Management Service's (FMS)
request for comment on proposed amendments to 31 CFR Part 210 governing
the use of the Automated Clearing House (ACH) system by Federal
agencies. AFP's comments will address primarily the proposed change in
the government's rule for the conversion of business checks to ACH
debits.

AFP represents approximately 16,000 finance and treasury professionals
who, on behalf of over 5,000 corporations and other organizations, are
significant participants in the nation's payments system. Organizations
represented by its members are drawn generally from the Fortune 1,000
and the largest of the middle market companies. Many of AFP's members
have responsibility for the disbursement and receipt of check and ACH
payments and for their organization's cash management operations. They
thus have a significant stake in the adoption of policies that protect
the efficiency and safety of payment systems.

FMS is proposing to adopt for use by Federal agencies, with some
exceptions, the ACH rules developed over the past few years by
NACHA---The Electronic Payments Association (NACHA) as reflected in the
2007 ACH Rules book. The amendments include changes relating to the
conversion of business checks to ACH debits for Accounts Receivable
(ARC) entries, Point-of-Purchase (POP) entries, as well as Back Office
Conversion (BOC) entries.

**Current and Proposed FMS Rules**

FMS rules currently permit Federal agencies to convert all business
checks to ACH debits at points-of-purchase and lockbox locations. In
April 2002, when these FMS rules were adopted, NACHA rules did not
permit the conversion of business checks to ACH debits.

Effective September 15, 2006, however, NACHA adopted an amendment to its
rules that allowed for the conversion to ACH debits of certain business
checks and identified business checks that are ineligible for
conversion. Checks with an auxiliary on-us field in the MICR line are
ineligible for conversion to ACH debits, according to NACHA rules.
Checks that do not meet this criteria may be converted. Many large size
business checks (those greater than six inches in length) have an
auxiliary on-us field, usually containing the check serial number. NACHA
rules also allow payers to opt out of having their checks converted by
informing the Originator after receiving the required notification that
their checks will be converted. In the case of POP entries, NACHA rules
require the signing of a written authorization allowing the check to be
converted. Failure to sign the authorization would serve as an opt out.

The proposed FMS amendment would delete the current provisions in the
Federal rule located at 31 CFR § 210.6(h) dealing with ARC entries and
the Federal rule equivalent of BOC entries. Instead, by the proposed
adoption of the 2007 NACHA rules, Federal agencies' conversion of
business checks for ARC and BOC entries would conform to the NACHA
rules, meaning that checks with an auxiliary on-us field would be
ineligible for conversion. The same would be true for POP entries,
although the proposal would not require a Federal agency to obtain the
Receiver's written authorization in light of the fact that notice of the
conversion would be required to be posted and a copy of the notice would
be provided to the Receiver. Please see page three below for concerns we
have with this aspect of the proposal.

**AFP Supports Rules Standardization**

AFP welcomes FMS's continuing efforts to incorporate the rules
amendments adopted by NACHA into the rules governing the use of the ACH
system by Federal agencies. Standardization and harmonization of payment
system rules improves efficiencies, reduces costs and facilitates
compliance by all participants in the payment system.

ACH rules relating to the conversion of business checks to ACH debits
are of primary importance to corporate treasury and finance
professionals. AFP applauds the government's decision to restrict its
conversion of business checks. We support the FMS plan to abide by NACHA
rules limiting conversion to checks that do not have an auxiliary on-us
field in the MICR line and affording businesses the opportunity to opt
out of conversion. While the ineligibility of checks with an auxiliary
on-us field was specifically noted in the Supplemental Information
accompanying the proposal,[^1] we

assume that FMS also will not convert checks written for an amount
greater than \$25,000, in accordance with NACHA rules. As FMS points
out, the NACHA rules change provides a way for Federal agencies to
identify, in an automated fashion, whether a business check is
ineligible for conversion to an ARC, BOC or POP entry. Moreover, other
options exist for processing checks more efficiently, notably through
image presentment.

**Consequences of Business Check Conversion**

AFP advocates and encourages the migration from checks to electronic
payments, which generally are safer, cost effective and more efficient.
However, AFP has long opposed the conversion of business checks to ACH
debits because conversion disrupts corporate cash management practices,
prevents automated account reconciliation and circumvents fraud controls
like positive pay. The consequences are widespread. Paid checks posted
as ACH debits would remain on outstanding check files, requiring manual
reconciliation. Fraudulent checks converted to ACH debits would by-pass
positive pay services. ACH debit blocks must be in place to defend
against fraud. Check payments delayed by ACH debit blocks may result in
late payment penalties, an inability to take discounts, or the rejection
of a contractually required payment.

Systems that would prevent these disruptions have not been put in place
at a large number of financial institutions. Many banks have not yet
developed the capability to link their check and ACH systems so that
information can be communicated between them.

**POP Authorization**

For POP entries, NACHA rules require that the Receiver sign an
authorization at the point of sale, authorizing the debit to its
account. Under this proposal, there will be no change in the rules
governing Federal agencies' POP authorization procedures, which will
continue to differ from NACHA rules. Agencies will be allowed to
originate POP entries without a written authorization, as long as the
notice required by the ACH rules is posted and the Receiver is provided
with a copy of the notice. As FMS points out, this approach is
consistent with the authorization requirements of Regulation E.

While we acknowledge that the proposal is consistent with Regulation E,
business accounts are not covered by Regulation E. For consumer accounts
subject to Regulation E, the person providing the check to the Federal
agency is the owner of the account at issue. This is not the case with
business checks. Staff paying for purchases with business checks at
point of sale may not be authorized to make decisions about payment
method and may not to be informed about the need to read posted notices.
Being required to sign a written authorization would alert staff to the
importance of the decision. Accordingly, AFP recommends that Federal
agency rules for POP authorization conform to NACHA rules.

AFP supports the proposal to adopt NACHA rules as the rules governing
the use of the ACH system by Federal agencies. We recommend that FMS
minimize exceptions and follow the NACHA rules for POP authorization.

AFP appreciates the opportunity to comment on rules for Federal
agencies' use of the ACH system. Please address questions about AFP's
position to Arlene Chapman at AFP, 301-907-2862.

Sincerely,

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| height="0.9708333333333333in"}    | height="1.1972222222222222in"}    |
|                                   |                                   |
| Maureen O'Boyle, CCM              | Rue Jenkins                       |
|                                   |                                   |
| Assistant Treasurer               | Assistant Treasurer               |
|                                   |                                   |
| Shaklee Corporation               | Costco Wholesale Corporation      |
|                                   |                                   |
| Chairman                          | Chairman                          |
|                                   |                                   |
| AFP Government Relations          | AFP Payments Advisory Group       |
| Committee                         |                                   |
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[^1]: See, e.g., 73 Fed. Reg. 1560, 1561 (right column).