Monday , December 11, 2023

Nacha Amends ACH Rules in the Face of New ‘Channels’ And ‘Technologies’ for Payments

Nacha has approved eight amendments to its operating rules governing the use of ACH payments. The amendments were approved as part of Nacha’s strategy to modernize the ACH network through infrastructure improvements and to make ACH payments easier to initiate for consumers, businesses, and other organizations.

The new rules are intended to define explicit scenarios for reversal of ACH payments as invalid and enhance Nacha’s authority to enforce penalties for egregious rules violations, Nacha says.

Two amendments—Reversals and Enforcement and Limitation on Warranty Claims—are expected to play a key role in providing businesses, financial institutions, payment providers and technology companies with a framework for authorizing consumer ACH payments that can be applied to myriad new channels and technologies consumers and businesses are using to transact digitally. 

The reversals rule, which will become effective June 30, 2021, is intended to address improper uses of reversals by expanding permissible reasons to include a wrong date error. A wrong date error, for example, can be the reversal of a debit entry that was for a date earlier than intended by the originator, or a credit entry that was for a date later than intended by the originator. In addition, the rule will permit the receiving depository financial institution (RDFI) to return an improper reversal.

The new rule on reversals will provide originators, third-party senders, and originating depository financial institution (ODFI) a clearer understanding of when it is inappropriate to initiate a reversal, especially in regard to the failure to fund an ACH credit file.

The enforcement rule, which goes into effect Jan. 2, 2021, will allow the ACH Rules Enforcement Panel to determine whether a violation is “egregious,” and to classify an egregious violation as a Class 2 or 3 rules violation. The sanction for a Class 3 violation can be up to $500,000 per occurrence and a directive to the ODFI to suspend the originator of the transaction or the third-party sender. More significant enforcement will be available for cases involving outlier violations.

The limitation on warranty claims rule, which goes into effect June 30, 2021, limits the time in which an RDFI will be permitted to make a claim against the ODFI’s authorization warranty to one year from the settlement date of the entry.

Warranty claims for an entry to a consumer account will have two time periods. The first unauthorized entry to the consumer’s account will always be covered within 95 calendar days from the settlement date. 

“This period covers the time period in Regulation E in which an RDFI may be liable to a consumer for errors for 60 days from the transmittal of an account statement that shows the first error,” NACHA says on its Web site.

If the claim is made outside the first 95 days, the time period to make a warranty claim extends to two years from the settlement date of the entry. 

“This period exceeds the one-year Statute of Limitations in the Electronic Funds Transfer Act (covering Regulation E claims), which runs from the date of the occurrence of the violation, which may be later than the settlement date of the transaction,” NACHA site says. 

Other new rules include reducing administrative requirements associated with obligations to obtain or provide payment-related documentation and adopting a specific timeline for financial institutions to handle claims of unauthorized payments. 

“These new rules should be useful to the many thousands of businesses and other organizations that enable consumers to conduct transactions using new technologies and channels,” says Michael Herd, senior vice president, ACH Network Administration in a prepared statement. 

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