NACHA - The Electronic Payments Association has issued two proposals intended to reduce risk and reduce exceptions that would improve the safety, security, and integrity of Automated Clearing House (ACH) Network.
Specifically, these proposals would amend the NACHA Operating Rules (NACHA Rules) regarding several areas:
1. Proposed Changes on ACH Network Risk and Enforcement – The first proposal aims to improve NACHA’s ability to identify and enforce rules against “outlier” Originators responsible for the highest levels of exceptions. This proposal would:
• Reduce the existing return rate threshold for unauthorized debits from 1.0 percent to 0.5 percent;
• Establish a return rate threshold for account data quality returns (i.e., administrative returns with return reason codes R03, R04, or R20) at 3.0 percent, and an overall debit return rate threshold (for all return reason codes) at 15.0 percent;
• Clarify the definition of a reinitiated entry (i.e., resubmission of a returned entry) by incorporating NACHA Operations Bulletin #3-2013, by specifically prohibiting against reinitiating a transaction that was returned as unauthorized, and by specifying entries that are not considered reinitiations;
• Explicitly apply certain risk management rules to third-party senders; and
• In addition, expand NACHA’s authority to initiate enforcement proceedings for a potential violation of the NACHA Rules based on the origination of unauthorized transactions. Currently, NACHA has more limited authority to initiate enforcement proceedings.
2. Proposed Changes to Improve Network Quality by Reducing Exceptions – The second proposal aims to reduce exceptions by establishing a system of economic incentives for Originating Depository Financial Institutions (ODFIs) to improve the quality of the ACH transactions they originate. An ODFI would pay fees based on exceptions to partially offset the Receiving Depository Financial Institution's (RDFI’s) costs for exception processing and customer service, under these circumstances:
• A return due to erroneous data - An RDFI returns an ACH transaction to an ODFI due to incorrect account data within the transaction (proposed flat fee range of $.10 to $.40 paid by the ODFI per return);
• An NOC - An RDFI corrects information within an ACH transaction and sends the correction back to the ODFI (proposed flat fee range of $.25 to $.75 paid by the ODFI per Notification of Change (NOC)); or
• A return due to an unauthorized entry - An RDFI returns an ACH transaction to an ODFI due to a problem with the Receiver’s authorization (proposed flat fee range of $1.50 to $2.50 paid by the ODFI per authorization-related return).
• Regarding effective dates, the first proposal’s proposed effective date for the return rate and reinitiation changes would be March 20, 2015, while the proposed effective date for the changes related to third-party senders and NACHA’s enforcement authority would be September 19, 2014. For the second proposal on network quality, the proposed effective date is March 20, 2015.