Tuesday, Oct. 24, 2006, 08:00 PM UPDATED 11:59 AMBy Nick Zulovich
NASHVILLE, Tenn. -- CheckVelocity recently began partnering with auto finance companies, including buy-here, pay-here dealerships, to facilitate collection procedures.
CheckVelocity said it has several programs, including VerifyNow, PayNow and RecoveryNow, which were created to verify a payment is valid once it is given to the dealer and provide the ability to resubmit a payment to a bank if it doesn't go through the first time. Moreover, if after being resubmitted the payment still hasn't processed, a finance company can use CheckVelocity's collections' department to recover some of the lost funds.
"As a dealer, nothing is more important than cash flow and profitability," pointed out David Newman, executive vice president of CheckVelocity. "Our payment processing services reduce costs and significantly improve cash flow. Using VerifyNow, a dealer reduces the probability of accepting a bad check for payment. Through an online system, the routing and account numbers are entered along with the check amount, and the payment is either accepted or declined.
"When a payment is declined by VerifyNow, return-item fees charged by banks are eliminated and potential collection efforts are avoided," he continued. "After the payments are deposited, the remaining ‘non-sufficient funds' checks that bounce are electronically collected via RecoveryNow.
By using the company's programs, the bank will notify the dealer of the returned item and will send all returned checks to CheckVelocity for collection.
"With a proven electronic and strategic method of recovery, CheckVelocity will collect returned items on behalf of the dealer," Newman told SubPrime Auto Finance News recently. "With a successful recovery rate of 80 percent, payments are collected on average within two weeks and are deposited directly back into the dealer's account. There is no cost assessed to the dealer for our RecoveryNow service, as our sole source of compensation is the NSF fee collected from the check writer."
If dealers elect to work with CheckVelocity, they do need to sign a contract to define the responsibilities of the parties and flow of collections activity. However, Newman said no long-term commitment is required.
"By utilizing CheckVelocity, a dealer can use one company to streamline and improve the collections process," Newman explained. "While not mutually exclusive, verification and electronic check recovery are most effective when utilized together. RecoveryNow is the core service, which is enhanced with VerifyNow and our collections program."
He went on to say that RecoveryNow is available as a stand-alone service to collect on bounced checks.
"Reduced charges would be evaluated based on return volumes for one or all services," Newman highlighted. "The benefits to the dealer are: higher collection rates; lower rates of bounced checks and NSF bank fees if VerifyNow is used; a higher percentage of bounced checks recovered; a faster receipt of bounced check proceeds; and one-stop efficiency of a single vendor taking full responsibility for all collections follow-up."
VerifyNow Verifies a Payment is Good When Turned In
According to CheckVelocity, VerifyNow stands as the first defense against the need to start collections proceedings against a customer. The program verifies payments instantly over the phone, Web or in person, the company said.
"VerifyNow prompts you to accept or deny a check, just like a debit or credit card," Newman explained. "A total of 99 percent of checks approved with VerifyNow clear and are posted to your account. With VerifyNow's online system, there is no equipment to buy or lease and 100 percent of the principal balance is paid to your account immediately."
The only requirement for the program is an Internet connection, according to Newman. The dealer just needs to enter the routing and account number, along with the dollar amount of the check, into CheckVelocity's Web-based application to find out if the payment is good.
"With an instant response, a dealer will know whether or not to accept that payment," Newman said. "If declined, a dealer could instruct the customer to use a credit card or provide certified funds."
As for charges for this service, the company said a dealer is assessed a transaction fee ranging from 15 to 45 cents, depending on the type of verification service used.
"A negative database can be used that verifies the check writer's history and outstanding checks," Newman said. "A positive database verifies if the check writer's account is valid and open. It can also notify the dealer if there have been stop payments or recent returns on that account."
RecoveryNow Resubmits Returned Payment to Bank
RecoveryNow is a program that re-presents non-sufficient funds checks to a bank by using an algorithm designed to know when a payment is most likely to process successfully, CheckVelocity said.
"The majority of working Americans are paid via electronic deposit, with the majority of those deposits occurring on Fridays," Newman pointed out. "To take advantage of this fact, CheckVelocity submits an electronic debit for the amount owed to the dealer on a Friday.
"In addition to the strategic timing of the debit, ACH (Automated Clearing House) transactions are generally posted before paper checks are cleared," he continued. "This means that a dealer's payment is processed before other checks that may clear that day. Because the returned check has been converted into an ACH transaction, it may be presented again. With two strategic and electronic attempts, our successful recovery rates average 80 percent."
As for fees associated with this service, Newman said his company collects the state-regulated NSF charge from the check writer.
CheckVelocity's Collections Procedures
The company also offers collections services. Newman said it can prove more cost-effective for dealers to use service bureaus that have made significant investments in their technology and efficiencies instead of trying to duplicate these procedures on a smaller scale at their store.
"If a dealer elects to utilize our secondary collections program, we will write letters and make phone calls on their behalf," Newman said. "If successful, we will keep 20 percent of the face amount of the check. By utilizing a sophisticated interactive voice response system and a series of letters to the customer, the dealer is able to outsource a very effective secondary collections program."
History of CheckVelocity
CheckVelocity was established in 2001 after new regulations were implemented in the late 1990s that allowed returned paper checks to be converted into ACH debits that can be re-presented, Newman said.
"CheckVelocity was founded in May 2001 to take advantage of this new opportunity," he pointed out. "By initially partnering with financial institutions, CheckVelocity's services were immediately made available to thousands of bank clients seeking to improve their collection process and cash flow.
"Clients with high volumes of recurring payments were identified as good prospects for our services," Newman continued. "Cable systems, telecommunications companies and other utilities quickly saw the benefits of outsourcing an effective recovery service. By learning what they needed, we expanded our offerings to include verification services, VerifyNow and front-end payment acceptance, PayNow.
"Today, CheckVelocity is a successful payment processing company with a unique focus on serving the needs of clients with high volumes of payments," he added. "As a full-service provider of payment processing services, auto finance companies can utilize one company to process all types of payments, reduce processing costs and improve cash flow."
Going further in depth as to how the company works, Newman said when a check or ACH payment is made, the recipient is given immediate credit by the financial institution the payment was deposited to.
"The item is presented by the RDFI (receiving depository financial institution) to the ODFI (originating depository financial institution) for payment, and if the funds are not available, the check is ‘charged back' and the funds are debited from the recipient's bank account," Newman said. "For a fee of approximately $6, the recipient of the (bounced) payment can instruct his bank to re-clear or redeposit the item.
"Successful recovery rates are only about 30 percent with this method because the item is processed again as a paper check just once," Newman noted. "There is nothing strategic about the process, and the bank assesses consistently higher fees for the service."
Finally, the Nashville-based company services more than 60,000 clients, Newman highlighted, saying CheckVelocity processes payments for dealers, financial institutions, cable systems and municipalities.
"Organizations with high volumes of recurring payments benefit the most from our services," Newman said. "However, any company that receives recurring payments and has a significant risk of bounced checks can reduce expenses and increase collections success and timing through our technology.
"By outsourcing and consolidating payment processing with one company, dealers are able to reduce costs and significantly improve cash flow," he concluded.
For more information on CheckVelocity's services, visit , or e-mail David Newman at.