Federal Reserve Board: Proposed Changes on Payment System Risk Policy and Related Reg J Changes

Executive Summary

 

•   The Federal Reserve Board (Fed) has recently proposed changes to its Payment System Risk (PSR) Policy, and related changes to Regulation J. The Fed has noted these proposed changes are intended to align current operations and processing times with the PSR posting rules, account for technology and processing changes, and strategically position the rules for faster clearing and settlement in the future. The PSR Policy establishes posting rules for the settlement of debits and credits to depository institutions’ accounts at the Fed Banks for different payment types, and would determine an institution’s intraday account balance and whether it has incurred a negative balance or a daylight overdraft.

•   Specifically, under the proposed PSR changes, the posting times for automated clearing house (ACH) debit and commercial check transactions would be earlier.

        1. ACH Debits – The proposal would move the posting of ACH debits processed by the Fed Banks' FedACH service overnight to 8:30 a.m. Eastern Time (ET) from 11:00 a.m. ET to align with the posting of ACH credits. (The Fed previously proposed but did not adopt this change for ACH debits in 2008.)

        2. Commercial Checks – The proposal would move the posting time for receiving most commercial check credits for deposits and debits for presentments to 8:30 a.m. ET, and establish two other posting times at 1:00 p.m. ET and 5:30 p.m. ET. Also, the Fed proposes to move the settlement of large-value credit corrections and adjustments to begin at 8:30 a.m. and hourly thereafter on the half-hour; and proposes to post large-value debit corrections at the same time as large-value debit adjustments after the close of Fedwire Funds Service. Currently, the posting times do not begin crediting or debiting for checks deposited and presented until 11:00 a.m. ET.

•   CUNA is interested in how these proposed changes would affect credit union operations, payments processing, and account management with the Fed Banks.

•   Comments for the proposed rules are due to the Fed by February 10, 2014; please submit your comments to CUNA by February 3, 2014.

•   If you have any questions or comments, please contact CUNA Assistant General Counsel for Regulatory Research Dennis Tsang at dtsang@cuna.com.

•   Also, the Fed is proposing related amendments to Reg J to implement these changes with the Fed Banks. First, the proposal would permit the Fed Banks to require paying banks that receive presentment of checks from the Fed Banks to make proceeds of settlement for checks available to the Fed Banks as soon as one half-hour after receiving the checks. Second, Fed Banks would be permitted to obtain settlement from paying banks by as early as 8:30 a.m. ET for checks that Fed Banks present.

•   Regarding effective dates, the proposed effective date of these changes is six months after the issuance of the final rules for the PSR Policy and Reg J changes.

•   For further details, please see the Fed’s proposed PSR Policy and Reg J changes.

•   Further, to complement the four current PSR principles, the Fed is proposing a new set of principles for establishing future posting rules that apply to any new same-day ACH posting rules, including the Fed Banks' same-day ACH service and potential rules from NACHA – The Electronic Payments Association. The Fed would generally not request public comment on posting changes that conform to these new principles, which are:

     1. For each same-day ACH transmission deadline, the Fed Banks will establish expected distribution times for the same-day ACH files.

      •   The Fed Banks will post settlement for same-day ACH debit transactions no earlier than 15 minutes after the Fed Banks’ expected distribution times for the associated same-day ACH file.

      •   The Fed Banks will post settlement for ACH credit and debit transactions associated with a particular same-day ACH file distribution time at the same time.

     2. The Fed Banks will not post settlement for same-day ACH transactions between 6:30 p.m. and 8:30 a.m. the next processing day.

     3. The Fed Banks will post settlement for same-day ACH transactions exchanged with another operator to support universal same-day ACH during the operating hours for the Fed Banks’ National Settlement Service (NSS).


Questions to Consider Regarding the Proposals
1. Does your credit union support the proposed Payment System Risk Policy changes to post ACH debits processed by the Fed Banks' FedACH service overnight at 8:30 a.m. ET? Do you have any comments about potential costs, benefits, and impact on funds availability for your members?
2. Also, does your credit union support the proposed posting time for receiving most commercial check credits for deposits and debits for presentments at 8:30 a.m. ET, and two other posting times at 1:00 p.m. ET and 5:30 p.m. ET? Any comments on the proposed changes to large-value credit corrections and adjustments, and to large-value debit corrections? Do you have any comments about potential costs, benefits, and impact on funds availability for your members?
3. Do you have any concerns with potential impacts on corporate credit unions or others involved in payments processing for credit unions?
4. Regarding effective dates, the proposed effective date of these changes is six months after the issuance of the final rules. If the Fed finalizes the rules, what is an appropriate effective date after the issuance of the final rules?
5. For the related Reg J changes on the timing of when paying banks settle for checks presented to them by the Fed Banks, do you have any comments or concerns?
6. On the proposed set of new principles for establishing future posting rules for same-day ACH services, do you have any comments or concerns?
7. Any other concerns, comments, or suggestions?
8. (Optional) What is your credit union's asset size?
9. (Optional) Please provide information about yourself and your credit union.
Thank you for your input and time - CUNA Regulatory Advocacy Team