Ready for new ACH rules in 2015

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Community banks should prepare for several significant new ACH rules in 2015 and 2016. Here are a few.

By Jennifer L. Kirk

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Unauthorized entry fee. The ACH Network wants to rid itself of unauthorized entries, and the new strategy is to fine Originating Depository Financial Institutions that send unauthorized entries. In a nutshell, for every ACH transaction that is returned as R05, R07, R10, R29 or R51, the ODFI will incur a fee that will range from $3.50 to $5.50. Fees will begin on Oct. 3, 2016, for entries that were originated as early as Aug. 1, 2016.

On the other side of the transaction, Returning Depository Financial Institutions will begin to see a refund in the amount of $3.50 to $5.50 for every return it makes using the return reason codes R05, R07, R10, R29 and R51. This refund to the RDFI is to partially compensate for the costs imposed when preparing and sending the ACH return.
 
Unauthorized return-rate threshold. Another way NACHA—The Electronic Payments Association is working to eliminate unauthorized activity is by lowering the thresholds of unauthorized activity allowed by ACH originators. Effective Sept. 18, 2015, the unauthorized threshold per originator will be reduced from 1 percent to 0.5 percent. Just like in the current rules, when an originator has exceeded the unauthorized threshold, NACHA will contact the ODFI and require a plan to be implemented to reduce the unauthorized return rate below the threshold for at least 180 days.

Return levels—administrative and overall. If an originator exceeds a return rate of 3 percent for administrative or account data error returns (R02, R03 and R04), or 15 percent for all returns, regardless of return reason code, NACHA, through an industry review panel, will have the ability to begin an eight-step review process of that originator. Through this review process, NACHA will be able to determine whether poor origination processes are to blame for excessive returns.

This review process will begin Sept. 18, 2015. While a review will not automatically prompt rules enforcement proceedings, it is possible if the industry review panel determines that an ACH originator is causing harm to the network, the panel can require the ODFI to reduce the originator’s return level. It is important to point out that the only standard entry class code exempt from the overall return level is for a returned check.

 
Unintended credit to a receiver. If an originator sends an erroneous or duplicate entry (or file) into the ACH Network, the ACH rules allow that originator to send an ACH reversal as an attempt to correct the error. But, what happens when the RDFI has returned the erroneous entry as NSF at the same time the originator is sending the reversing entry?

Federal Reserve Changes Posting Rules
The Federal Reserve Board adopted changes to posting rules for ACH and commercial check transactions beginning July 23, 2015. The changes move the posting of ACH debit transactions processed by the reserve Banks’ FedACH service overnight to from 11 a.m. to 8:30 a.m. (Eastern time) to align with the posting of ACH credit transactions.
For commercial check transactions, the board is moving the posting time for receiving most credits for deposits and debits for presentments to 8:30 a.m. and establishing two other posting times at 1 p.m. and 5:30 p.m.

Many times a reversal ends up resulting in, what NACHA is calling, an “Unintended Credit to a Receiver.” To attempt to correct these situations in an automated environment, effective March 20, 2015, NACHA is introducing a new dishonored return code (R62) to allow the ODFI to dishonor a return for which it has already sent a reversal.

Here is one way this could work: Let’s say that Company X sends an ACH credit entry for $1,000, but it was only supposed to send $100. Realizing the error, Company X sends a debit entry for $1,000 to reverse the money sent in error (also sending a correcting entry of a $100 credit to make the payment receiver whole). But, in this situation the receiver doesn’t have the $1,000 in its account when the reversal hits, causing the RDFI to return the reversal as NSF.

At this point, the receiver has received the erroneous $1,000 credit and the $100 correcting credit. The ODFI could dishonor the $1,000 NSF return as R62, stating that the receiver was sent an unintended credit to its account.

And, as part of this rule, NACHA has also introduced a new contested dishonored return code (R77). So, if the money was still not in the payment receiver’s account when the RDFI received the dishonored return, the RDFI could contest the dishonored return stating it was unable to recover the funds from the receiver.


Jennifer L. Kirk (jenk@epcor.org) is director of industry relations for the Electronic Core of Knowledge, a not-for-profit automated clearinghouse affiliated with NACHA – The Electronic Payments Association.

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