NACHA Rules Update

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NACHA Rules Update

• Financial EC Council
• Key West, FL
• March 27, 2000

Debbie Barr, AAP Assistant Director of Network Se
rvices NACHA - The Electronic Payments Associatio
n
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NACHA Rules Update

• NACHA Operating Rules Implementing in 2000
• New Pilot Approval Process
• Pilot Program Update

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ACH Rules Implementing in 2000

• Audit Requirements
• Cross-Border Payments
• Point-of-Purchase
• Re-presented Check Entries
• General Ledger and Loan Accounts

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ACH Rules Implementing in 2000
Audit Requirements

• Effective 12/17/99, FIs and third-party service
  providers that perform a function of ACH
  processing on behalf of DFI must perform annual
  audit of ACH rules compliance.
• First audit under amendment performed by 12/1/00

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ACH Rules Implementing in 2000
Audit Requirements

• Audit includes - Expanded general audit
  requirements - Expanded ODFI audit
  requirements - Expanded RDFI audit requirements

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ACH Rules Implementing in 2000
Cross-Border Payments

• 2 New SEC Codes CBR PBR
• New Formatting and Data Requirements, Unique
  Return Reason Codes
  
• Within U.S. Payment System, NACHA Operating Rules
  Apply
  
• Proposed Expansion to Include Debits

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Point of Purchase
Check presented at point-of-purchase
MICR Information Captured
Check and Receipt handed back to consumer
Authorization Signed by Consumer
RDFI
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ACH Rules Implementing in 2000

• Point-of-Purchase Electronic Check Transactions
• Final Rule POP SEC Code - Effective September
  15, 2000 - supersedes interim rule.
  
• Information from source document (check) which is
  voided and returned to consumer
  
• Check/sharedraft not previously negotiated, not
  voided, contains pre-printed serial number, drawn
  on consumer account.
  
• Written authorization needed

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ACH Rules Implementing in 2000

• Point-of-Purchase Electronic Check Transactions
• Receipt to consumer with information relating to
  merchant and transaction
  
• May not return using R07, Authorization Revoked
• 5000 limit for Interim Rule lifted for Final
  Rule
  
• Check serial number placed in Check Serial Number
  Field and printed on consumer statement
  
• Individual Name Field optional

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Re-presented Check Entries
Re-presented Check RCK Entry

Format and Batch for ACH
NSF
Eligible NSF Checks
Converted to Electronic Check
Merchant Collection Process


RDFI
ODFI

ACH
Merchant Deposit
Consumer Account Debited
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ACH Rules Implementing in 2000

• Re-presented Check Entries
• Final Rule RCK SEC Code - Effective September
  15, 2000 - supersedes interim rule.
  
• Eligible items for re-presentment via ACH
  Network
  
• Consumer checks below 2500
• NSF/uncollected balances

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ACH Rules Implementing in 2000

• Re-presented Check Entries (RCK SEC)
• REDEPCHECK continues in the Company Entry
  Description of Batch Header
  
• Check number in Check Serial Number Field of
  Entry Detail and must be included on consumer
  statement
  
• RCK credit entries that are not reversals will be
  returned by ACH Operator
  
• New Return Reason Codes for RCK entries

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ACH Rules Implementing in 2000
New Types of Accounts for ACH

• General Ledger Accounts
• Both Credit and Debit Entries Allowed
• Loan Accounts
• Credit Entries and Reversals Only

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Pilot Approval Process
ACH Participant
Pilot Proposal
1
2
Rules Work Group
3
Idea for Pilot
Rules Operations Committee
4
Council
Initial Decision
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Short-term Rule Pilot
Accepted Pilots
5
Board Executive Committee Association Executives
If proposal for pilot approved
Discuss Pilot
Board Approval
6
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Pilot Approval Process

Pilot is a test of a variation to the NACHA
Operating Rules. Participating ODFIs must sign
agreements with NACHA and provide monthly
statistics. Limited to one year duration.
Accepted pilot - can occur with adequate
protection without Rule change
Short-term pilot - approved as a one-year rule
amendment to provide adequate protections to all
participants
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ACH Debit Telephone Authorization Pilot

3 Pilot Scenarios
1. Consumer calls company - existing
relationship 2. Company calls consumer - existin
g relationship 3. Consumer calls company - no pr
ior relationship
No pilot scenario for call from company to
consumer with no prior relationship
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Pilot Scenarios 1 2 (Existing Relationship)

If recorded call 1. Consumer identity confirme
d 2. Checking account information obtained 3.
Verbal consumer authorization of ACH debit
- Date of ACH debit - Amount of ACH debit - C
onsumers name - Telephone number for consumer i
nquiries - Date of authorization 4. Option fo
r consumer to request written notice
of above information
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Pilot Scenarios 1 2 (Existing Relationship)

If not a recorded call 1. Same information ob
tained as a recorded call 2. Written notice to c
onsumer provided in advance of ACH debit
settlement date 3. Company informs consumer how
notice to be provided
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ACH Debit Telephone Authorization Pilot

• 30 Banks
• Over 1000 Companies
• Purchases/Bill Payments/Late Payments
• Monthly Conference Calls of Participants
• Monthly Statistics to NACHA

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ACH Debit Telephone Authorization Pilot
Participating ODFIs

ABN AMRO AFBA Industrial Bank AmSouth Bank Bank
of America Bank One Capital City Bank Chase Ma
nhattan Bank Citibank First National Bank in Bro
okings FNB of Central Texas First Premier Bank
First Regional Bank First State Bank First Tenne
ssee Bank First Union
Florida Bank Ft. Knox National Bank Legacy Bank
of Texas Mellon Bank Michigan National Norther
n Trust Company Oakland State Bank Pacific Merca
ntile Bank Peoples Alliance FCU Phillips Electr
onics FCU PNC Bank Riverway Bank Sears National
Bank US Bank Wells Fargo/Norwest
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ACH Debit Telephone Authorization Pilot

• Pilot extension through September 14, 2000
• NACHA Operating Rules Development

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Accounts Receivable Truncation Pilot
Check is read by MICR Scanner
ACH file is sent to ODFI
ODFI sends file to ACH Network
Check mailed to biller
ACH
RDFI posts to customers account
Customer sees payment on statement
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Accounts Receivable Truncation Pilot

• Short-Term Rule allows one-year test of this
  application using the PPD Standard Entry Class
  Code. Effective from December 17, 1999 through
  December 14, 2000.
• ODFI must sign agreement with National
  Association
  
• Monthly statistics to NACHA

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Accounts Receivable Truncation Pilot

• Expanded definition of PPD format.
• CHECKPAYMT must be placed in Company
  Batch/Header
  
• Check serial number with transaction but not
  required to be on consumer statement
  
• No new Return Reason Codes
• Check drawn on consumer account and less than
  2500

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Accounts Receivable Truncation Pilot
Notification/Authorization

• Originator must provide notice to consumer in
  advance of receiving the item to which the entry
  relates
  
• Consumer either
• authorizes Originator to truncate check
• provides written notice to Originator not to
  truncate check

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Accounts Receivable Truncation Pilot

• Short term rules effective 12/17/99 - 12/14/00
• Deadline to enroll September 14, 2000
• Review pilot results
• Determine next steps

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Next Steps
How can you participate in the Rule Making
Process?

• Visit www.nacha.org to sign up today to join a
  Rules Work Group
  
• Membership open to all ACH participants