Compliance Blog

Happy Friday before a three-day weekend! Columbus Day is a controversial holiday and some states celebrate Indigenous Peoples Day instead, while some counties choose to not observe the holiday at all. I personally think the holiday is just an extra day to celebrate my birthday, which is this weekend.

Holidays are always tricky because some credit unions may be open, but other financial institutions and government entities may be closed. Different regulations have different definitions for what constitutes a “business day,” and how to handle holidays. The NAFCU compliance team has written holiday blogs before, addressing Regulation CC and Regulation Z requirements, and this blog will tackle operational considerations including ACH and wire processing.

ACH Processing - NACHA

ACH processing is subject to the National Automated Clearing House Association (NACHA) rules. Subsection 3.3.1.1 states,

“For a credit Entry that is not a Same Day Entry and that is made available to the RDFI [Receiving Depository Financial Institution] by its ACH Operator by 5:00 p.m. (RDFI’s local time) on the Banking Day prior to the Settlement Date, the RDFI must make the amount of the credit Entry available to the Receiver for withdrawal no later than 9:00 a.m. (RDFI’s local time) on the Settlement Date.

For a credit Entry that is not a Same Day Entry that is made available to the RDFI by its ACH Operator after 5:00 p.m. (RDFI’s local time) on the Banking Day prior to the Settlement Date, the RDFI must make the amount of the credit Entry available to the Receiver for withdrawal no later than the end of the Settlement Date.”

The NACHA rules (the credit union may want to reach out to their NACHA representative or review their NACHA agreement for access the NACHA operating rules) defines banking day as “any day on which such Participating DFI is open to the public during any part of such day for carrying on substantially all of its banking functions.”

For Originating Depository Financial Institutions (ODFIs), the NACHA operating guidelines state, “if the scheduled Settlement Date of a credit entry is not a banking day for the ODFI, but the applicable Federal Reserve office is open on that date, settlement will occur on the scheduled Settlement Date.”

The operating guidelines continue, “if an RDFI is closed for business on the scheduled Settlement Date of a debit entry, but the Receiving ACH Operator is open, the RDFI will be debited on the scheduled Settlement Date unless it has advised the ACH Operator to delay settlement to the next business day of the RDFI.”

These guidelines would require that if the settlement date is on a day the Federal Reserve is open, the settlement will occur unless the RDFI informs the operator to delay the settlement.

Mailed/ATM deposited Checks

The Uniform Commercial Code (UCC) and Reg CC govern check deposits. Model article 4-108(b) of the UCC states, “An item or deposit of money received on any day after a cutoff hour so fixed or after the close of the banking day may be treated as being received at the opening of the next banking day.” The UCC defines “banking day” in article 4-104 as “the part of a day on which a bank is open to the public for carrying on substantially all of its banking functions.” This definition aligns with the Reg CC definition, which governs funds availability.  If a member deposits a check at an ATM on a Friday night after the close of the banking day, assuming the credit union is closed on the weekends and Monday for the holiday, the UCC allows the credit union to treat the check as received on Tuesday morning.

Incoming Wires

Wire transfers are governed by the model Uniform Commercial Code. UCC Article 4A-404(a) states, “if acceptance occurs on the payment date after the close of the funds-transfer business day of the [credit union], payment is due on the next funds-transfer business day.” Section 4A-105(4) defines “funds-transfer business day” as “a day during which the receiving [credit union] is open for the receipt, processing, and transmittal of payment orders and cancellations and amendments of payment orders.”  If a credit union is not open for “wire receipt, processing, or transmittal” on a Friday, assuming the credit union is also closed on weekends, the UCC requires the credit union to process the incoming wire on Monday.  Keep in mind that not all states have adopted the model UCC, so credit unions may want to work with local counsel to determine whether the provisions discussed above apply in their states.

Regardless of whether your credit union is open on Monday or not, I hope everyone has a happy Janice’s birthday weekend!

Coming to Regulatory Compliance Seminar this month? Join us for the Compliance Research Workshop! Hone your research skills by learning tips and tricks for finding key resources and performing research exercises in a small group setting. Seats are extremely limited and being filled on a first-come, first-served basis. I’ll be one of your co-hosts for the workshop so it would be the greatest birthday gift to see you all there! Sign up by emailing us or calling 800.344.5580. There is no extra fee to attend the workshop.

Programming Note: NAFCU’s offices will close early today and we’ll be closed on Monday in observance of Columbus Day. We know the credit union compliance community works hard and hope you have a safe and relaxing weekend. We will be back to blogging on Wednesday!