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THE RULE MAKING PROCESS
The Board of Directors provides general oversight of the Rules & Operations Committee, provides input, and is kept apprised of issue development. The Committee has an increased role in providing strategic direction for the Rule Making Process, categorizing rules proposals and determining time frame for development, identifying participants for groups, and selecting proposal sponsors.
- Rules proposals are categorized as follows: (A) Major impact to Network; (B) Moderate impact to Network; (C) Minor impact to Network; and (D) Editorial clarification. Depending on the category of the rule, the issue is considered using one of four specific processes.
- Only members and key parties are able to submit rules proposals. Other parties wishing to submit an issue need to work with a member or key party to have that member or key party sponsor the issue.
- The process is streamlined for issues with a minor impact to the industry (i.e., some issues will not be distributed as a Request For Comment).
THE PROCESS
Initial Submission
Issues are presented by a member or key party to NACHA staff as a rules proposal. The issue is presented as a 1-2 page initial business case which describes the proposal and meets certain submission requirements. Members are Regional Payments Associations and their financial institution members, and Direct Financial Institution members of NACHA. Key parties are the ACH Operators, the U.S. Department of Treasury, Federal regulatory agencies, and the NACHA Board of Directors and Standing Committees. Any other party wishing to submit an issue will need to work with one of those members or key parties noted above and have that member or key party sponsor the issue.
Rules & Operations Committee Review
The Rules & Operations Committee will consider the issue to ensure that it is consistent with NACHA's strategic plan and appropriate for the Network. The Committee will either: 1) accept the proposal for review under the Rule Making Process, 2) request additional information from the submitter, or 3) reject the proposal. If the Rules & Operations Committee accepts the proposal, the Committee will:
- Evaluate the issue to determine which of four categories of rule changes the proposal would fall under: (A) Major impact to Network; (B) Moderate impact to Network; (C) Minor impact to Network; or (D) Editorial clarification. Depending on the category of rule, the Rules & Operations Committee will forward the issue to be considered under one of four specific processes.
- Determine the estimated time needed to develop the proposal.
- If the proposal would cause a major or moderate impact to the Network, then the Committee will identify a financial institution or RPA sponsor.
Categories of Rules Proposals
Category A changes would have a major impact on ACH participants. Types of Category A changes include: (1) new products; (2) new services; and (3) major modifications to current Rules. The business case for Category A proposals include an increased level of detail in the economic analysis and a balanced articulation of divergent viewpoints.
Category B changes would have a moderate impact on ACH participants. Types of Category B changes include: (1) regulatory changes; (2) modifications to address marketplace changes; (3) emergency changes and Board-driven directives; and (4) moderate modifications. The business case for Category B proposals do not include the level of detail in the economic analysis that is included with Category A changes.
Category C changes would have a minor impact on ACH participants. They should have no significant economic impact. Types of Category C changes include: (1) changes to correct inconsistencies between various rules; (2) changes to rules with the purpose of clarifying intent; and (3) changes that may involve minor software modifications. There will not be a need for a full business case or Request For Comment (RFC) because there would not be a significant impact to the Network participants.
Category D clarifications include: (1) editorial changes to address corrections in grammar, typos, and similar errors; and (2) minor modification to incorporate current practices (e.g., Operator edits, return code descriptions).
PARTICIPATION IN THE PROCESS
Rules & Operations Committee
The Rules & Operations Committee:
- provides strategic oversight to the Rule Making Process;
- assesses potential new applications and services;
- monitors the progress of issues through the Rule Making Process and makes decisions on next steps for an initiative based on recommendations from the Product Group/Rules Work Group;
- reviews Requests For Information and Requests For Comment;
- approves membership of Product Groups, the Member Rules Review Panel, and Rules Work Groups and provides oversight to these groups;
- reviews and approves pilot proposals;
- reviews and approves distributing ballots to the NACHA Voting Membership; and
- is responsible for reporting to the Board.
There are thirteen voting members of the Rules & Operations Committee including the Chairman. Nominations are provided to the Chairman and the Chairman approves the voting members. In addition, there are non-voting liaisons to the Committee from the Federal Reserve Board of Governors, the U.S. Department of Treasury, and the ACH Operators. Members must remain in compliance with NACHA's Code of Conduct.
Member Rules Review Panel
The Panel is a standing tactical group to review all rule proposals from the Rules perspective. The Panel does not make a decision on the future of a proposal, but reviews the proposal to determine the correctness and completeness of the Rules related to the proposal.
The Panel includes a maximum of 15 representatives from the Direct FI members, Regional Payments Associations and their financial institution members as well as representatives from the ACH Operators. In addition, a member of the Rules & Operations Committee acts as a liaison between the Panel and the Committee. The Rules & Operations Committee reviews nominations and approves the participants on the Panel. Members must remain in compliance with NACHA's Code of Conduct.
Category A (Issue with Major Impact to the Network) - Product Groups
Each Category A issue will have a Product Group. The Product Group serves as the lead group on developing a new application or service or developing major modifications to a current product or service. Members of the Product Group are expected to be experts on the subject matter. Product Groups include a maximum of 15 representatives from the Direct FI members, Regional Payments Associations and their financial institution members, including 1-2 sponsors to lead the Group. In addition, each ACH Operator provides a representative to the Group and a member of the Rules & Operations Committee acts as a liaison between the Product Group and the Committee. The Rules & Operations Committee reviews nominations and approves the participants in a Product Group. Members must remain in compliance with NACHA's Code of Conduct.
Category A (Issue with Major Impact to the Network) - Industry Support Groups
Industry Support Groups are formed for each Product Group to assist and provide input on the development of the business case. Members are expected to lend expertise on the subject matter. Industry Support Groups are led by the
Product Group sponsor and include a maximum of 20 representatives from the NACHA Council members and are composed of companies, software vendors, third party processors, government agencies, financial institutions, Regional Payments Associations and other interested parties (e.g., other trade associations such as CUNA, ABA, ICBA, etc.), as selected by the Product Group. Members must remain in compliance with NACHA's Code of Conduct.
Category A & B - Industry Input
Proposals under Category A & B will each distribute Requests for Information and or Requests For Comment on their issue. The industry is encouraged to review and provide input for these Requests.
Category B (Issue with Moderate Impact to the Network) Rules Work Group
The Category B Rules Work Group develops a solution and drafts a business case/RFC for an issue determined to have a moderate impact on the ACH Network and classified as a Category B issue. The Category B Rules Work Group includes a maximum of 20 representatives from the Direct FI members, Regional Payments Associations and their financial institution members, including 1-2 sponsors to lead the Group. In addition, each ACH Operator provides a representative to the Rules Work Group and a member of the Rules & Operations Committee acts as a liaison between the Rules Work Group and the Committee. The Rules & Operations Committee reviews nominations and approves the participants in a Rules Work Group. Members must remain in compliance with NACHA's Code of Conduct.
Category C (Issue with Minor Impact to the Network) Rules Work Group
The Category C Rules Work Group develops a solution and drafts a business case/RFC for an issue determined to have a minor impact on the ACH Network and classified as a Category C issue. This Rules Work Group may determine that a Category C issue is better classified as Category D and move the issue to the Member Rules Review Panel. This on-going Rules Work Group is comprised of a maximum of 20 representatives from the Direct FI members, Regional Payments Associations and their financial institution members, including 1-2 sponsors to lead the Group. In addition, each ACH Operator provides a representative to the Group and a member of the Rules & Operations Committee acts as a liaison between the Product Group and the Committee. The Rules & Operations Committee reviews nominations and approves the participants in the Group. Members must remain in compliance with NACHA's Code of Conduct.
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