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2019 ACH origination client training, rule amendments summary and general origination information

As part of our commitment to keep our ACH origination customers informed of ACH rules changes, we are providing you the following summary of the NACHA Operating Rules (“ACH Rules”) amendments taking effect in 2019. This summary has been tailored to provide the impacts of upcoming rule changes to the most common types of corporate origination services and is not intended to replace the detailed analysis we encourage your organization to perform to determine the specific impact these changes may have on your processes.

1) Providing Faster Funds Availability

Effective September 20, 2019

Summary

Funds availability standards for ACH credits are changing on September 20, 2019. This impacts the timing of when receivers of ACH credits will have visibility and use of the ACH credits they receive.

Details

The following funds availability standards are established for ACH credits:

  • Funds from same day ACH credits processed in the existing, first processing window will be made available by 1:30 p.m. in the Receiving Depository Financial Institution’s (RDFI) local time.
  • Funds from non-same day ACH credits will be available by 9:00 a.m. RDFI’s local time on the settlement date, if the credits were available to the RDFI by 5:00 p.m. local time on the previous day. In summary, this applies the previous “PPD rule” to all ACH credits.

Originator and Third-Party Sender Impact

Originators of same day ACH credit entries, who transmit their files to their Originating Depository Financial Institution (ODFI) in time to make the first same day ACH processing window of the day can expect that the receivers of those entries will see them in their account by 1:30 p.m. local time. Previously, these same day credit entries may have been available to the receiver as late as 5:00 p.m. local time.

The non-same day ACH credit availability standards apply the former PPD credit availability standards to all credit ACH entries, where future-dated entries received by the RDFI by 5:00 p.m. the prior day must be made available to the Receiver by 9:00 a.m. local time on the settlement date. Generally speaking, the vast majority of RDFIs are already meeting this standard, so the true impact of this “new” rule is not expected to result in a significantly different receiver experience.

Technical Information

The faster funds availability requirements were amended into the ACH Rules in the following locations:

  • Article Three, Subsection 3.3.1 General Rule for Availability of Credit Entries to Receivers
  • Article Three, Subsection 3.3.1.1 Availability of Credits that are Not Same Day Entries
  • Article Three, Subsection 3.3.1.2 Availability of Credits that are Same Day Entries

 

2) ACH Rules Compliance Audit Requirements

Effective January 1, 2019, to apply to audits required to be conducted by December 31, 2019.

Summary

The structure of the audit requirement within the ACH Rules has been changed but not the requirement for third-party service providers and third-party senders to conduct an annual ACH Rules compliance audit.

Details

The rule change modifies the ACH Rules to provide financial institutions, third-party service providers and third-party senders with greater flexibility in conducting annual ACH Rules compliance audits. The rule does not change the requirement to conduct an annual audit, it just consolidates the audit requirement language into one section within the ACH Rules and removes redundant material.

Originator and Third-Party Sender Impact

Third-party senders that currently or exclusively rely upon Appendix Eight within the ACH Rules as a checklist for conducting their audit should be aware of its limitations and should be prepared to audit on all relevant rules, even those not expressly listed within current Appendix Eight language.

For third-parties that may prefer a workbook or guide to facilitate their annual audit, more robust educational resources exist separately in the form of audit guides.

Technical Information

This rule modifies the following areas of the ACH Rules:

  • Article One, Subsection 1.2.2 (Audits of Rules Compliance) – consolidates the core audit requirements described within Appendix Eight under the general obligation of participating Depository Financial Institutions (DFIs) and third-party service providers/senders to conduct an audit
  • Appendix Eight (Rule Compliance Audit Requirements) – eliminates the current language contained within Appendix Eight; combines relevant provisions with the general audit obligation required under Article One, Subsection 1.2.

3) Clarification on TEL Authorization Requirement

Effective January 1, 2019

Summary

Clarifies that the general rules governing the form of authorization for all consumer entries also apply to TEL (Telephone-Initiated) entries. This rule also incorporates a reference to consumer accounts within the general rules for TEL entries.

Details

This is a clarification that general authorization requirements apply to TEL entries and that the TEL format is to be used for consumer accounts only.

Originator and Third-Party Sender Impact

There is no change to the intent of the original ACH Rules, and this clarification should not impact originators of TEL entries.

Technical Information

This rule clarifies language within the following locations of the ACH Rules:

  • Article Two, Subsection 2.5.15.1 (Specific Provisions for TEL Entries)
  • Subsection 2.5.15.2 (Authorization of TEL Entries)

4) Editorial Clarification on Reinitiation of Return Entries

Summary

Clarification of the existing intent of the ACH Rules that reinitiation of return entries is limited to two attempts.

Details

This is a clarification of the language within the ACH Rules that reinitiation of return entries is limited to two times, maximum.

Originator and Third-Party Sender Impact

Originators and third-party senders who reinitiate ACH entries continue to be limited to a maximum of two reinitiation attempts of the same ACH debit entry.

Technical Information

This rule clarifies language within Article Two, Subsection 2.12.4.1 of the ACH Rules.

5) General Originator Responsibilities

In addition to the new ACH Rules, all originators and third-party senders and third-party service providers are required to comply with the general origination requirements of the ACH Rules including:

  1. Obtaining proper authorization from its receivers. Subsection 2.3.1 (Originator Must Obtain Authorization from Receiver)
  2. Retaining the original or copy of each written authorization of a receiver, or a readily and accurately reproducible record evidencing any other form of authorization for at least two years from the termination or revocation of the authorization. Subsection 2.3.2.5 (Retention and Provision of the Record of Authorization)
  3. Providing proper and timely notice to receivers for changes to the amount or scheduled date of recurring debits. Subsection 2.3.2.6 (Notices of Variable Debits to Consumer Accounts)
  4. The proper way to initiate prenotification entries. Section 2.6 (Prenotifications)
  5. The proper way to reverse files or entries. Section 2.8 (Reversing Files) and Section 2.9 (Reversing Entries)
  6. Familiarity with the proper actions to take upon receipt of a notification of change entry Section 2.11 (Notifications of Change)
  7. Familiarity with the rules pertaining to reinitiation of ACH entries. Subsection 2.12.4 (Reinitiation of Returned Entries)

The originator should also be aware of the provisions for the specific types of entries it originates:

  • ARC (Accounts Receivable) provisions are included in Subsection. 2.5.1
  • BOC (Back Office Conversion) provisions are included in Subsection 2.5.2
  • CCD (Corporate Credit or Debit) provisions are included in Subsection 2.5.3
  • CIE (Consumer Initiated) provisions are included in Subsection 2.5.4
  • CTX (Corporate Trade Exchange) provisions are included in Subsection 2.5.5
  • IAT (International ACH Transaction) provisions are included in Subsection 2.5.6
  • POP (Point-of-Purchase) provisions are included in Subsection 2.5.10
  • POS (Point-of-Sale) provisions are included in Subsection 2.5.11
  • PPD (Prearranged Payment and Deposit) provisions are included in Subsection 2.5.12
  • RCK (Re-presented Check) provisions are included in Subsection 2.5.13
  • TEL (Telephone-Initiated Entry) provisions are included in Subsection 2.5.15
  • WEB (Internet-Initiated/Mobile Entry) provisions are included in Subsection 2.5.17