Recent Amendments to the NACHA Operating Rules
Following are highlights of NACHA Operating Rules effective beginning March 21, 2008:
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EFFECTIVE MARCH 21, 2008
ODFI Reporting Requirements
This rule incorporates new reporting requirements for ODFIs within Article Two (Origination of Entries). These reporting requirements require ODFIs to provide, when requested to do so by NACHA, certain information about specific Originators or Third-Party Senders believed to have a return rate for unauthorized entries in excess of one percent. This rule also requires ODFIs to reduce the return rate for any Originator or Third-Party Sender whose return rate for unauthorized entries exceeds one percent to a rate below one percent within sixty days after receipt of the National Association’s written request for information and maintain that return rate below one percent for an additional 180 days. This amendment applies to all SEC codes and replaces the existing reporting requirements for TEL entries.
Approved November 8, 2007; Effective March 21, 2008
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EFFECTIVE JUNE 20, 2008
Company Name Identification Rule
This rule will modify the Rules to more clearly identify the source of an ACH transaction. Specifically, the rule clarifies (1) how an Originator must identify itself within an ACH record, and (2) the party that must be identified within the ACH record when the Originator is not the ultimate payee or payor of the transaction.
This rule will expand the description of the Company Name Field to require that it contain a name by which the Originator of a transaction is known and readily recognized by the Receiver of the entry. This name could, for example, be the Originator’s DBA name or “trading as” name. The inclusion of a readily recognizable Originator name will better enable Receivers to identify transactions as they appear on their periodic statements, and improve the customer service experience for RDFIs by reducing the number of unrecognized entries requiring investigation and return. This requirement will also enable more consistent identification of a particular Originator(s) by NACHA and RDFIs for risk management purposes.
This rule also incorporates specific content requirements for the Company Name Field for transactions in which the Originator is not the ultimate payee or payor of a transaction. In an ACH debit transaction in which the Originator is not the payee of the transaction, defined as the party to which payment is ultimately being directed, the Company Name Field must contain the name by which the payee is known and readily recognized by the Receiver. In an ACH credit transaction in which the Originator is not the payor of the transaction, defined as the party from which payment is ultimately being directed, the Company Name Field must contain the name by which the payor is known and readily recognized by the Receiver.
Approved January 24, 2008; Effective June 20, 2008
Clarification of Beneficiaries of the Rules
This rule clarifies that Participating DFIs, ACH Operators and NACHA can enforce their rights under the Rules, notwithstanding that they do not always have direct agreements with each other.
Approved April 29, 2008; Effective June 20, 2008
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Formal Rules Interpretation – Proper Use of SEC Codes and Aggregation of Transactions
On March 20, 2008, NACHA’s Board of Directors approved a delay in the implementation date of the Formal Rules Interpretation on the Proper Use of SEC Codes and Aggregation of Transactions. Initially due to implement on May 5, 2008, this Formal Rules Interpretation will now become effective on August 4, 2008. The specific details of this Formal Rules Interpretation remain unchanged by the Board’s action regarding the implementation date and can be located within the 2008 rulebook under the section entitled “Formal Interpretations of the NACHA Operating Rules.”
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EFFECTIVE SEPTEMBER 19, 2008
Miscellaneous Minor Impact Issues
Rescission of Tax Convention for CIE Entries – On September 19, 2007, NACHA issued an ACH Operations Bulletin announcing the suspension of the September 21, 2007 implementation date for a rule change that would have established a formatting convention for use of the Individual Identification Number Field when CIE Entries are used for online consumer Federal tax payments. This amendment rescinds the convention for the CIE Entry.
Notification of Change Following a Pre-notification Entry– This amendment adds language to Article Four, Section 4.1.2 (Obligation to Verify Prenotification) to codify the practice of allowing RDFIs to send NOCs in response to erroneous prenotes.
Clarification of Field Name and Requirement for Dishonored and Contested Dishonored Returns– This amendment changes the field inclusion requirement for positions 77-78 of the Entry Detail Record for both Dishonored and Contested Dishonored Returns from “R” to “R/M” to accurately reflect ACH Operator edit criteria for the entire return process for the POS and SHR applications. In addition, this rule change revises the field name for positions 77-78 on the Dishonored and Contested Dishonored Return Entry Detail Records to carry the names of each field to which the characters can refer, i.e., “Discretionary Data/Payment Type Code/Card Transaction Type Code”.
Note on Return Reason Code R03 (No Account/Unable to Locate Account) – This rule amendment changes the language in Appendix Five of the Rules under R03 to state, “This Return Reason Code may not be used to return an ARC, BOC, or POP entry solely because it does not contain the Receiver’s name in the Individual Name Field.”
Correction to Return Containing Invalid Effective Entry Date – This rule change adds to Return Reason Code R74 (Corrected Return) a description for the correction of the Effective Entry Date.
Physical Presentment of an Item – This amendment includes the following language within the rules governing RCK eligibility and re-presentment, “…through the check collection system (as a physical item, substitute check, or image)…”
Approved April 29, 2008; Effective September 19, 2008
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EFFECTIVE DECEMBER 19, 2008
Minor Impact Issues
Clarification of Submitters for System of Fines– This amendment modifies sections in Appendix Eleven (Rules Enforcement) to address the parties allowed to submit rules violations.
Clarification of Third-Party Sender Rules – This amendment modifies Article Five (Obligations of Third Party Senders) to explicitly state that ODFIs are responsible for their Third Party Senders (TPS), and close gaps of coverage under the Rules in a Third Party Sender relationship.
Revision of Definition of Erroneous Entry This amendment modifies Article Two, Subsection 2.5.1 to refine the definition of “erroneous entry” as it relates to reversals.
Addition to Beneficiaries of the Rules – This amendment revises Article One, Section 1.9 (Beneficiaries of the Rules) to include ACH Associations within the list of intended beneficiaries of the rules.
Clarification of Point-of-Purchase Entries for Manned Bill Payment Location – This amendment revises Article Two, Section 2.12.1 (General Rule) and Article Three, Subsection 3.9.2 (Source Documents) to incorporate source documents provided at a manned bill payment location within the discussion of POP entries.
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EFFECTIVE SEPTEMBER 18, 2009
International ACH Transactions (IAT)
This amendment requires ODFIs and Gateway Operators (which may be Participating DFIs and ACH Operators) to identify all international payment transactions transmitted via the ACH Network as International ACH transactions using a new Standard Entry Class (SEC) Code – IAT. This amendment also requires IAT payments to include specific data elements defined within the Bank Secrecy Act’s “Travel Rule,” so that all parties to the transaction have the information necessary to comply with U.S. law, including sanctions programs administered by the Office of Foreign Assets Control (OFAC).
Approved August 14, 2007; Effective September 18, 2009
International ACH Transactions (IAT) Related Changes
Article Four, Section 4.4.3 (Provision of Payment-Related Information to Receiver) – This amendment adds IAT to Article Four, Section 4.4.3 to require the RDFI to provide IAT remittance information to the corporate Receiver upon request.
Modifications to Change Codes C01 (Incorrect DFI Account Number) & C06 (Incorrect DFI Account Number and Incorrect Transaction Code)
Change Code C01 –This amendment revises the description of C01 to accurately reflect the IAT NOC formatting specifications, which accommodate corrections to a 35-character Foreign Receiver’s Account Number.
Change Code C06 –This rule change revises the description to indicate the code is not applicable to IAT due to field length limitations.
Correspondent Bank Restriction – In this amendment, the definition of Correspondent Bank and requirement to identify all such parties within an IAT entry is revised to reflect the identification of only Foreign Correspondent Banks involved with the IAT entry. With this modification, no additional correspondent banks need to be added to the IAT entry once an inbound IAT reaches the U.S.
Providing Payment-Related Information from an IAT on a Periodic Statement – This amendment expands the use of the Transaction Type Code Field for IAT entries to also require the specific identification of underlying MTE, SHR and POS entries, and defines a specific convention for the Payment-Related Information Field of the IAT remittance addenda record for MTE, SHR and POS terminal information. This rule change also revises the defined banking convention for terminal identification to incorporate the identification of the foreign country in which such terminal is located.
Clarification of Return Reason Codes R80–R84 – This amendment revises language related to the use of Return Reason Codes R80 through R84 (as described within Appendix Five, Section 5.4 – Table of Return Reason Codes) to clarify that such codes are restricted to Gateway Operator use only.
Clarification of Operator Return of IAT Pre-note – This amendment revises ACH Operator Return Reason Code R25 (Addenda Error) to modify the specific edit criteria to clarify that pre-notification entries for IAT transactions must also contain the seven mandatory addenda records (which are necessary for processing of the entry) or the entry will be rejected and returned by the ACH Operator.
Branch Country Code Descriptions – This amendment revises the descriptions of the Foreign Correspondent Bank Branch Country Code Field, the Originating DFI Branch Country Code Field, and the Receiving DFI Branch Country Code Field to reflect the use of a 2-digit ISO country code. (Note: Because the length of this field is three positions, the branch country code will occupy the two leftmost positions, with a space filling the third position.)
Approved April 29, 2008; Effective September 18, 2009
