Compliance Blog

Last week, NACHA hosted its annual Smarter Faster Payments conference. Given the current pandemic and all the shelter in place orders in effect across the country, the conference this year was condensed and held virtually. It was still great to get to attend the conference and hear about all the work NACHA and others are doing to support financial institutions and consumers during these times. Today’s post highlights some of the guidance and information NACHA has issued to support ACH operations during the pandemic.

Record Delivery Relief. Under various NACHA Operating Rules, both Originating Depository Financial Institutions (ODFIs) and Receiving Depository Financial Institutions (RDFIs) must provide certain records to each other within 10 banking days of a request. These records include proof of a Receiver’s authorization, Source Documents for certain entries and Written Statements of Unauthorized Debits (WSUD). In ACH Operations Bulletin #3-2020, NACHA encourages ODFIs and RDFIs to deliver records “as quickly as circumstance permit” but it will not recommend enforcement penalties if an ODFI or RDFI deliver the record within 20 banking days of a request. This guidance remains in place for the duration of the coronavirus national emergency.

Delay of Data Security Rule. ACH Operations Bulletin #4-2020 delays the effective date of the Rule on Supplementing Data Security Requirements by one year. As you might recall, this is the rule requiring certain large originators and third-party service providers to protect account information when it is stored electronically. Phase 1 (those with annual ACH volume of 6 million or more transactions) is now effective June 30, 2021. Phase 2 (those with annual ACH volume of 2 million or more transactions) is now effective June 30, 2022.

Electronic WSUDs. While accepting oral or electronic WSUDs is not prohibited under the current version of the Operating Rules, there has been some confusion as to whether this is allowed. NACHA’s Meaningful Modernization proposal, which is open for comment through today, includes amendments to clarify the requirements for accepting oral or electronic WSUDs. However, as this new rule will not be effective until 2021 at the earliest, NACHA issued ACH Operations Bulletin #5-2020 to remind RDFIs they can use electronic means to similarly authenticate WSUDs or accept them via telephone. NACHA has also decided not to enforce the signature/similar authentication requirements until further notice.

Increased Returns for Interrupted Services. With many gyms, spas, clubs and other services shut down and many consumers out of work, NACHA recognizes there may be an increase in the number of returned pre-authorized debits due to non-sufficient funds, stop payment orders or claims that the debits are unauthorized because services have been interrupted (such as a recurring gym membership fee). In ACH Operations Bulletin #6-2020, NACHA explains it will take a case-by-case approach in reviewing potential violations of the Operating Rules due to elevated return rates.

While businesses should be clearly communicating with consumers about how they are handling pre-authorized debits if services have been shut down or otherwise interrupted, credit unions still have stop payment and unauthorized debit responsibilities for these debits. If a member in fact makes a stop payment order for these types of pre-authorized debits, the order must be honored as such. This NAFCU Compliance Blog post provides more details on the stop payment rules. Members may also attempt to claim these pre-authorized debits are unauthorized so credit unions may be required to return posted debits as unauthorized debits or authorization revoked depending on the circumstances involved. Keep in mind that credit unions can take advantage of the new R11 return reason code, which went into effect on April 1, 2020, to return these types of pre-authorized debits.

Other Resources. NACHA has also published a number of FAQs, which are updated as needed. You can find all NACHA’s pandemic resources here. You can also check out all of NAFCU’s coronavirus resources here.