[Federal Register Volume 81, Number 230 (Wednesday, November 30, 2016)]
[Proposed Rules]
[Pages 86302-86312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28671]
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DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 210
RIN 1510-AB32
Federal Government Participation in the Automated Clearing House
AGENCY: Bureau of the Fiscal Service, Treasury.
ACTION: Notice of proposed rulemaking with request for comment.
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SUMMARY: The Department of the Treasury, Bureau of the Fiscal Service
(Fiscal Service) is proposing to amend its regulation governing the use
of the Automated Clearing House (ACH) Network by Federal agencies. Our
regulation adopts, with some exceptions, the NACHA Operating Rules
developed by NACHA--The Electronic Payments Association (NACHA) as the
rules governing the use of the ACH Network by Federal agencies. We are
issuing this proposed rule to address changes that NACHA has made to
the NACHA Operating Rules since the publication of the 2013 NACHA
Operating Rules & Guidelines book. These changes include amendments set
forth in the 2014, 2015, and 2016 NACHA Operating Rules & Guidelines
books.
DATES: Comments on the proposed rule must be received by January 30,
2017.
ADDRESSES: Comments on this rule, identified by docket FISCAL-2016-
0001, should only be submitted using the following methods:
Federal eRulemaking Portal: www.regulations.gov. Follow
the instructions on the Web site for submitting comments.
Mail: Ian Macoy, Bureau of the Fiscal Service, 401 14th
Street SW., Room 400B, Washington, DC 20227.
The fax and email methods of submitting comments on rules to Fiscal
Service have been decommissioned.
Instructions: All submissions received must include the agency name
(Bureau of the Fiscal Service) and docket number FISCAL-2016-0001 for
this rulemaking. In general, comments received will be published on
Regulations.gov without change, including any business or personal
information provided. Comments received, including attachments and
other supporting materials, are part of the public record and subject
to public disclosure. Do not disclose any information in your comment
or supporting materials that you consider confidential or inappropriate
for public disclosure.
You can download this proposed rule at the following Web site:
https://www.fiscal.treasury.gov/fsservices/instit/pmt/ach/ach_home.htm.
You may also inspect and copy this proposed rule at: Treasury
Department Library, Freedom of Information Act (FOIA) Collection, Room
1428, Main Treasury Building, 1500 Pennsylvania Avenue NW., Washington,
DC 20220. Before visiting, you must call (202) 622-0990 for an
appointment.
In accordance with the U.S. government's eRulemaking Initiative,
Fiscal Service publishes rulemaking information on www.regulations.gov.
Regulations.gov offers the public the ability to comment on, search,
and view publicly available rulemaking materials, including comments
received on rules.
FOR FURTHER INFORMATION CONTACT: Ian Macoy, Director of Settlement
Services, at (202) 874-6835 or [email protected]; or
Natalie H. Diana, Senior Counsel, at (202) 874-6680 or
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background
Title 31 CFR part 210 (Part 210) governs the use of the ACH Network
by Federal agencies. The ACH Network is a nationwide electronic fund
transfer (EFT) system that provides for the inter-bank clearing of
electronic credit and debit transactions and for the exchange of
payment-related information among participating financial institutions.
Part 210 incorporates the NACHA Operating Rules, with certain
exceptions. From time to time the Fiscal Service amends Part 210 in
order to address changes that NACHA periodically makes to the NACHA
Operating Rules or to revise the regulation as otherwise appropriate.
Currently, Part 210 incorporates the NACHA Operating Rules as set
forth in the 2013 NACHA Operating Rules & Guidelines book. NACHA has
adopted a number of changes to the NACHA Operating Rules since the
publication of the 2013 NACHA Operating Rules & Guidelines book. We are
proposing to incorporate in Part 210 most, but not all, of these
changes. We are also proposing two changes to Part 210, related to
reversals and prepaid cards, that do not stem from a change to the
NACHA Operating Rules.
We are requesting public comment on all the proposed amendments to
Part 210.
II. Summary of Proposed Rule Changes
A. 2014 NACHA Operating Rules & Guidelines Book Changes
The 2014 edition of the NACHA Operating Rules & Guidelines contains
changes related to the following amendments:
Person-to-Person Payments via ACH;
IAT Modifications; Proof of Authorization for Non-Consumer
Entries;
Dishonored Returns and Contested Dishonored Returns
Related to an Unintended Credit to a Receiver;
Reclamation Entries--Corrections to Rules Governing
Authorizations;
Incomplete Transaction Clarification;
Use of Tilde as Data Segment Terminator;
Editorial Clarification--Non-Consumer Receiver's
Obligation to Credit Originator's Account;
Prenotification Entries--Reduction in Waiting Period for
Live Entries;
Notification of Change (NOC)--Removal of Change Code C04
(Incorrect Individual Name/Receiving Company Name); and
ACH Operator Edit for Returns.
We are proposing to incorporate in Part 210 all of the foregoing
amendments, which are summarized below, except the amendment relating
to reclamation entries.
1. Person-to-Person Payments via ACH
This amendment standardized the use of the ACH Network for Person-
to-Person (P2P) Entries by expanding the Internet-Initiated/Mobile
(WEB) SEC Code to accommodate credit Entries transmitted between
consumers (P2P
[[Page 86303]]
transactions). A P2P Entry is defined as ``a credit Entry initiated by
or on behalf of a holder of a Consumer Account that is intended for a
Consumer Account of a Receiver.'' The amendment also modified the
definition of a Customer Initiated Entry (CIE) to ``a credit Entry
initiated by or on behalf of the holder of a Consumer Account to the
Non-Consumer Account of a Receiver.'' These definitional changes ensure
there is a clear differentiation between WEB credit and CIE--i.e., CIE
for a bill payment from a consumer to a business, and WEB credit for a
P2P transaction from one consumer to another or between consumer
accounts belonging to the same person. In addition, this amendment
clarified the treatment of NOCs related to credit WEB Entries and CIE
Entries.
We are proposing to accept this amendment.
2. IAT Modifications
This amendment revised the NACHA Operating Rules to update the
rules and formatting of the International ACH Transaction (IAT) in
order to facilitate more accurate screening and compliance with OFAC
sanctions policies. This modification requires a Gateway to identify
within an Inbound IAT Entry (1) the ultimate foreign beneficiary of the
funds transfer when the proceeds from a debit Inbound IAT Entry are for
further credit to an ultimate foreign beneficiary that is a party other
than the Originator of the debit IAT Entry, or (2) the foreign party
ultimately funding a credit Inbound IAT Entry when that party is not
the Originator of the credit IAT Entry. This amendment revised the
description of the Payment Related Information Field as it relates to
the IAT Remittance Addenda Record to establish specific formatting
requirements for inclusion of the ultimate foreign beneficiary's/
payer's name, street address, city, state/province, postal code, and
ISO Country Code. The amendment also requires an Originator, Third-
Party Sender, Originating Depository Financial Institution (ODFI), or
Gateway transmitting an IAT Entry to identify any country named within
the IAT Entry by that country's 2-digit alphabetic ISO Country Code, as
defined by the International Organization for Standardization's (ISO)
3166-1-alpha-2 code list.
We are proposing to accept this amendment.
3. Proof of Authorization for Non-Consumer Entries
This amendment established a minimum standard for proof of
authorization for Non-Consumer Entries to aid in the resolution of
unauthorized or fraudulent debits to businesses, particularly those
where no trading partner relationship/agreement exists between the
Originator and Receiver. This change permits a Receiving Depository
Financial Institution (RDFI) to request proof of a Non-Consumer
Receiver's authorization for a CCD, CTX, or an Inbound IAT Entry to a
Non-Consumer Account. The ODFI must provide the required information to
the RDFI at no charge within ten banking days of receiving a written
request for such information from the RDFI. The amendment also requires
the Originator to provide such proof of authorization to the ODFI for
its use or for use by the RDFI.
The amendment provides two methods by which an ODFI can comply with
the RDFI's request for proof of authorization. The first is to provide
an accurate record of the authorization. The second is to provide the
Originator's contact information that can be used for inquiries about
authorization of Entries. At a minimum, this contact information must
include (1) the Originator's name, and (2) the Originator's phone
number or email address for inquiries regarding authorization of
Entries.
We are proposing to accept this amendment.
4. Dishonored Returns and Contested Dishonored Returns Related to an
Unintended Credit to a Receiver
This amendment established the right of an ODFI to dishonor the
Return of a debit Erroneous Entry if the Return Entry results in an
unintended credit to the Receiver because (1) the Return Entry relates
to a debit Erroneous Entry, (2) the ODFI has already originated a
credit Reversing Entry to correct the Erroneous Entry, and (3) the ODFI
has not received a Return of that credit Reversing Entry.
Similarly, under this amendment an ODFI may dishonor the Return of
a debit Reversing Entry if the Return Entry results in an unintended
credit to the Receiver because (1) the Return Entry relates to a debit
Reversing Entry that was intended to correct a credit Erroneous Entry,
and (2) the ODFI has not received a Return of that credit Erroneous
Entry. The amendment requires an ODFI dishonoring a debit Return Entry
under either of these conditions to warrant that it originated a
Reversal in an effort to correct the original erroneous transaction and
therefore is dishonoring the Return of the debit Erroneous Entry or the
debit Reversing Entry, either of which causes an unintended credit to
the Receiver. The amendment also establishes the right of an RDFI to
contest this type of dishonored Return if either of the following
conditions exists: (1) The RDFI returned both the Erroneous Entry and
the related Reversal; or (2) the RDFI is unable to recover the funds
from the Receiver.
We are proposing to accept this amendment.
5. Reclamation Entries--Corrections to Rules Governing Authorization
This amendment made several corrections to the rules governing the
authorization of Reclamation Entries. These changes address technical
and drafting discrepancies between Reversing Entries and Reclamation
Entries in the NACHA Operating Rules and make the rules related to
Reclamation Entries consistent with those for Reversing Entries to the
extent possible.
We are proposing not to incorporate this amendment in Part 210.
Part 210 generally excludes all NACHA Operating Rules relating to the
reclamation of benefit payments because Part 210 contains specific
provisions on the reclamation of Federal benefit payments. No revision
to the text of Part 210 is required to exclude this amendment from Part
210 because the amendment modifies Section 2.10 of the NACHA Operating
Rules, which is already inapplicable to the government under Sec.
210.2(d)(2).
6. Incomplete Transaction Clarifications
The Incomplete Transaction Clarifications amendment recognizes
certain ARC, BOC, and POP Entries to Non-Consumer Accounts as eligible
for return under the Incomplete Transaction Rule. This change
streamlines RDFIs' processing of ARC, BOC, and POP returns and improves
their ability to comply with the NACHA Operating Rules by eliminating
different processing requirements for unauthorized/improper consumer
and non-consumer ARC, BOC, and POP Entries, which share the same
Standard Entry Class Code. The change restores the RDFI's ability to
rely solely on the Standard Entry Class Code when determining handling
requirements for specific types of Entries. This amendment also added
specific references to ``consumer'' Receivers, where appropriate, to
add clarity regarding the scope of the Incomplete Transaction Rules.
This amendment modifies Article Three, Subsection 3.12.3
(Incomplete Transaction) to add the word ``consumer'' to clarify that
the Receiver
[[Page 86304]]
of an Incomplete Transaction is generally the owner of a consumer
account, with one specific exception. The amendment also adds language
to this subsection to state that an ARC, BOC, or POP Entry may also be
considered an Incomplete Transaction regardless of whether the account
that is debited is a Consumer Account or a Non-Consumer Account. The
amendment made corresponding changes to the definition of an Incomplete
Transaction in Article Eight, Section 8.50 and clarified that a Written
Statement of Unauthorized Debit must be accepted for any Incomplete
Transaction involving any ARC, BOC, or POP Entry.
We are proposing to accept this amendment.
7. Use of Tilde as Data Segment Terminator
This amendment corrected two IAT field descriptions, ``Originator
City and State/Province'' and ``Receiver City and State/Province,'' to
clarify that the tilde (``~'') is a valid data segment terminator.
We are proposing to accept this amendment.
8. Editorial Clarification--Non-Consumer Receiver's Obligation to
Credit Originator's Account
This amendment revised the text and title of Article Three,
Subsection 3.3.1.3 (Non-Consumer Receiver Must Credit Originator's
Account) to make the section's intent clearer and easier to understand
for ACH Network participants. This change was editorial in nature only.
We are proposing to accept this amendment.
9. Prenotification Entries--Reduction in Waiting Period for Live
Entries
This amendment reduced the six banking-day waiting period between
initiation of a Prenotification and ``live'' Entries for Originators
choosing to originate Prenotes. This amendment also modified the NACHA
Operating Rules related to Notifications of Change to clarify the
Originator's obligations with respect to an NOC received in response to
a Prenote. This change permits an Originator that has originated a
Prenotification Entry to a Receiver's account to initiate subsequent
Entries to the Receiver's account as soon as the third Banking Day
following the Settlement Date of the Prenotification Entry, provided
that the ODFI has not received a return or NOC related to the
Prenotification.
We are proposing to accept this amendment.
10. Notification of Change--Removal of Change Code C04 (Incorrect
Individual Name/Receiving Company Name)
This amendment removed the Notification of Change Code--C04
(Incorrect Individual Name/Receiving Company Name) from the NACHA
Operating Rules. Change Code C04 (Incorrect Individual Name/Receiving
Company Name) had been used by RDFIs to request a correction to the
name of the Receiver indicated in an ACH Entry. As with any
Notification of Change, the RDFI that transmitted an NOC with this
change code warranted the accuracy of the corrected data (in this case,
the Receiver's name). The Originator was then obligated to make the
requested change within six banking days or prior to initiating a
subsequent Entry, whichever is later.
In certain scenarios, the use of C04 created compliance and
liability challenges for the Originator, ODFI, and RDFI. Generally
speaking, an ACH transaction involves a mutual customer of both the
Originator and the RDFI. In the event that the Receiver's name on a
debit Entry was different from the name on the account, most RDFIs
would either post the Entry based solely on the account number or
return the transaction using Return Reason Code R03 (No Account/Unable
to Locate Account). In some cases, RDFIs transmitted NOCs using Change
Code C04 to instruct the Originator to change the Receiver's name on
future Entries. The use of C04 presented additional risk to the RDFI
and the ODFI and/or the Originator because the RDFI was warranting that
the name change is accurate, but it did not always reflect the party
with whom the Originator has the relationship. As a result, Originators
were typically unable or unwilling to make the changes in accordance
with their obligations under the NACHA Operating Rules. An Originator
continuing to debit its customer without making the change warranted by
the RDFI did so in violation of the current Rules, creating challenges
and conflict for all parties. Eliminating Change Code C04 (Incorrect
Individual Name/Receiving Company Name) removed the challenges and
potential rules violations that Originators faced when they receive a
request for a name change that they were unable to make. Under the
amendment, an Originator can rely on its own contracts and records to
properly identify the name of the Receiver being credited or debited
without being in violation of the NACHA Operating Rules because of the
failure to respond to an NOC.
Eliminating Change Code C04 (Incorrect Individual Name/Receiving
Company Name) lessens the risk to the RDFI as it warrants that
information contained in an NOC is correct. A change as significant as
a name change should be accomplished through communication of the
Receiver with the Originator so that the authorization held by the
Originator is accurate. The RDFI that identifies a name mismatch can
post the Entry based solely on the account number, return the Entry as
R03, or choose to assist its Receiver by communicating directly with
the ODFI/Originator. Any of these options should cause the Originator
and the Receiver to communicate relating to needed changes while
relieving the RDFI of the warranty that the information is correct.
We are proposing to accept this amendment.
11. ACH Operator Edit for Returns
This amendment incorporated an additional ACH Operator edit within
the listing of ACH Operator file/batch reject edit criteria specified
within Appendix Two of the NACHA Operating Rules. Specifically, this
edit requires ACH Operators to reject any batch of Return Entries in
which RDFI returns and ACH Operator returns are commingled. By
definition, different parties are responsible for generating each type
of return, and each must be separately identified within the Company/
Batch Header Record as the sender of the batch. This ACH Operator edit
codifies this fact within the NACHA Operating Rules and ensures
consistent processing of return batches by all ACH Operators.
We are proposing to accept this amendment.
B. 2015 NACHA Operating Rules & Guidelines Book Changes
The 2015 edition of the NACHA Operating Rules contains changes
related to the following amendments: \1\
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\1\ The 2015 Rules & Guidelines book also included two
amendments addressed in the 2014 Rules & Guidelines book that had
effective dates in 2015: (1) Dishonored Returns and Contested
Dishonored Returns Related to an Unintended Credit to a Receiver and
(2) Notification of Change--Removal of Change Code C04. Because
those amendments are addressed in Section A above, we are not
including them in Section B.
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ACH Network Risk and Enforcement;
Improving ACH Network Quality--Unauthorized Entry Fee;
Clarification on Company Identification for P2P WEB Credit
Entries;
Point-of-Sale Entries--Clarification of General Rule;
Return Fee Entry Formatting Requirements;
[[Page 86305]]
Entry Detail Record for Returns--Clarification Regarding
POP Entries;
Clarification of RDFI's Obligation to Recredit Receiver;
Clarification on Prenotification Entries and Addenda
Records; and
ACH Operator Edit for Returns.
We are proposing to incorporate in Part 210 all of the foregoing
amendments, which are summarized below, other than some provisions of
the amendment relating to ACH Network Risk and Enforcement and the
amendment on Improving ACH Network Quality--Unauthorized Entry Fee.
1. ACH Network Risk and Enforcement
This amendment expanded existing rules regarding ODFIs' and Third-
Party Senders' requirements for risk management and origination
practices, such as return rate levels. It also expanded NACHA's
authority to initiate enforcement proceedings for a potential violation
of the NACHA Operating Rules related to unauthorized Entries.
Return Rate Levels
The amendment reduced the threshold for unauthorized debit Entries
(Return Reason Codes R05, R07, R10, R29, and R51) from 1.0 percent to
0.5 percent and also established two new return rate levels for other
types of returns. First, a return rate level of 3.0 percent will apply
to debit entries returned due to administrative or account data errors
(Return Reason Codes R02--Account Closed; R03--No Account/Unable to
Locate Account; and R04--Invalid Account Number Structure). Second, a
return rate level of 15.0 percent will apply to all debit entries
(excluding RCK entries) that are returned for any reason.
The amendment also established an inquiry process, which is
separate and distinct from an enforcement proceeding, as a starting
point to evaluate the origination activity of Originators and Third-
Party Senders that reach the new administrative return and overall
debit return rate levels. The identification of an Originator or Third-
Party Sender with a return rate that is higher than the respective
return rate level may trigger a review of the Originator's or Third-
Party Sender's ACH origination procedures. At the conclusion of the
inquiry, NACHA may determine that no further action is required, or it
may take the next step and recommend to the ACH Rules Enforcement Panel
that the ODFI be required to reduce the Originator's or Third-Party
Sender's overall or administrative return rate below the established
level.
In this new role, the ACH Rules Enforcement Panel will be the final
authority in deciding, after the completion of the inquiry, whether the
ODFI should be required to reduce the Originator's or Third-Party
Sender's overall or administrative return rate. After reviewing NACHA's
recommendation, the Panel can decide either to take no action, at which
point the case would be closed, or to have NACHA send a written
directive to the ODFI, which would require the reduction of the
Originator's or Third-Party Sender's administrative or overall return
rate.
We are proposing not to incorporate in Part 210 the provisions of
the amendment relating to return rate levels. No change to the text of
Part 210 is required to exclude these provisions because Part 210
already excludes Section 2.17 and Appendix 10, which is where the
return rate level changes have been addressed in the NACHA Operating
Rules.
Reinitiation of Entries
This amendment explicitly prohibited the reinitiation of Entries
outside of the express limited circumstances under which they are
permitted under the NACHA Operating Rules. The amendment also added a
specific prohibition against reinitiating a transaction that was
returned as unauthorized. The amendment further included an anti-
evasion provision, specifying that any other Entry that NACHA
reasonably believes represents an attempted evasion of the defined
limitations will be treated as an improper reinitiation. The ACH Rules
Enforcement Panel will have final authority in deciding whether a
specific case involves an attempted evasion of the limitations on
reinitiation.
To avoid unintended consequences from these clarifications, the
amendment included two categories of Entries that will not be
considered reinitiations. First, the amendment clarified that a debit
Entry in a series of preauthorized recurring debit Entries will not be
treated as a reinitiated Entry, even if the subsequent debit Entry
follows a returned debit Entry, as long as the subsequent Entry is not
contingent upon whether an earlier debit Entry in the series has been
returned. Second, the amendment expressly stated that a debit Entry
will not be considered a ``reinitiation'' if the Originator obtains a
new authorization for the debit Entry after the receipt of the Return.
The amendment requires a reinitiated Entry to contain identical
content in the following fields: Company Name, Company ID, and Amount.
Further, the amendment permits modification to other fields only to the
extent necessary to correct an error or facilitate processing of an
Entry. This change allows reinitiations to correct administrative
errors, but prohibits reinitiation of Entries that may be attempts to
evade the limitation on the reinitiation of returned Entries by varying
the content of the Entry. Finally, the amendment addressed certain
technical issues associated with the reinitiation requirements.
We are proposing to accept the reinitiation provisions of the
amendment.
Third-Party Sender Issues
The amendment added a direct obligation on Third-Party Senders to
monitor, assess and enforce limitations on their customer's origination
and return activities in the same manner the NACHA Operating require of
ODFIs. Prior to this amendment, the NACHA Operating Rules required
ODFIs to establish, implement, periodically review and enforce exposure
limits for their Originators and Third-Party Senders. The ODFI was
required to monitor each Originator's and Third-Party Sender's
origination and return activity across multiple Settlement Dates,
enforce restrictions on the types of Entries that may be originated and
enforce the exposure limit. If an ODFI enters into a relationship with
a Third-Party Sender that processes Entries such that the ODFI itself
cannot or does not perform these monitoring and enforcement tasks with
respect to the Originators serviced by the Third-Party Sender, the
Third-Party Sender must do so. The amendment added a specific statement
of this obligation.
We are proposing to accept the Third-Party Sender provisions of the
amendment.
NACHA's Enforcement Authority
The amendment provided NACHA with the express authority to bring an
enforcement action based on the origination of unauthorized entries. To
ensure the judicious use of the expanded authority, the amendment
requires the ACH Rules Enforcement Panel to validate the materiality of
this type of enforcement case before NACHA can initiate any such
proceeding. In addition, the amendment encourages RDFIs to voluntarily
provide to NACHA information, such as return data, that may be
indicative of a potential Rules violation for improper authorization
practices by other ACH Network participants, even if the RDFI is not
interested in itself initiating a Rules
[[Page 86306]]
enforcement proceeding. Such early sharing of information regarding
unusual return rates or unauthorized transactions can help eliminate
improper activities more quickly.
We are proposing not to incorporate in Part 210 the provisions of
the amendment that relate to NACHA's enforcement authority. Part 210
excludes the government from the risk investigation and enforcement
provisions of the NACHA Operating Rules. Fiscal Service tracks
unauthorized return rates for Federal agencies and will use the new
unauthorized return limits and reinitiation limitations in overseeing
agency ACH origination activity. No change to the text of Part 210 is
required to exclude these provisions because Part 210 already excludes
Appendix Ten of the NACHA Operating Rules, which governs rules
enforcement.
2. Improving ACH Network Quality--Unauthorized Entry Fee
This amendment requires an ODFI to pay a fee to the RDFI for each
ACH debit that is returned as unauthorized (return reason codes R05,
R07, R10, R29 and R51). RDFIs will be compensated for a portion of the
costs they bear for handling unauthorized transactions, and will
experience reduced costs due to a reduction in unauthorized
transactions over time. The amendment provides that ODFIs and RDFIs
authorize debits and credits to their accounts for the collection and
distribution of the fees. IAT transactions are not covered by the fee,
but could be included in the future. The amendment defines a
methodology by which NACHA staff will set and review every three years
the amount of the Unauthorized Entry Fee. In setting the amount of the
fee, NACHA staff will apply several stated principles, including the
review of RDFI cost surveys. Based on the results of the current data
collection on RDFIs' costs for handling unauthorized transactions,
NACHA has estimated that the fee amount will be in the range of $3.50-
$5.50 per return.
We are proposing not to incorporate this amendment in Part 210.
Part 210 does not incorporate those provisions of the NACHA Operating
Rules dealing with enforcement for noncompliance and the government
therefore is not subject to fines for violation of the provisions of
the ACH Rules. See 31 CFR part 210.2(d)(2), (3). Fiscal Service works
with agencies to achieve Government-wide compliance with all ACH Rule
requirements and tracks compliance, including returns of unauthorized
debit entries. The number of such returns is low in relation to
originated entries: in calendar year 2015, approximately 73,000 ACH
debits originated by agencies were returned as unauthorized. Based on
an estimated fee of $3.50-$5.50, the resulting cost to the government
would be approximately $255,500-$401,500 per year. We do not believe it
is in the public interest to subject the Treasury General Account to
fines of this nature. Rather, we propose to work with agencies to
monitor and reduce the number of unauthorized debit entries.
3. Clarification of Company Identification for Person-to-Person WEB
Credit Entries
This amendment added language to the Company Identification field
description to clarify content requirements for Person-to-Person (P2P)
WEB credit Entries. For P2P WEB credit Entries, the Company/Batch
Header Record identifies the P2P service provider (i.e., the consumer
Originator's own financial institution or a third-party service
provider) rather than the consumer Originator. Prior to the amendment,
the NACHA Operating Rules specifically defined service provider content
requirements for the Company Name field, but omitted the same
clarification for the Company Identification, which is a related field.
The purpose of the amendment was to eliminate any potential confusion
over proper formatting of this field.
We are proposing to accept this amendment.
4. Point-of-Sale (POS) Entries--Clarification of General Rule
This amendment re-aligned the general rule for POS Entries with the
definition of POS Entries in Article Eight. A POS Entry is generally
considered to be a debit Entry initiated at an electronic terminal by a
consumer to pay an obligation incurred in a point-of-sale transaction.
However, a POS Entry can also be an adjusting or other credit Entry
related to the debit Entry, transfer of funds, or obligation (for
example, a credit to refund a previous point-of-sale transaction).
Prior to the amendment, the definition of POS within the NACHA
Operating Rules recognized these Entries as both debits and credits,
but the general rule for POS identified POS Entries only as debits.
This amendment corrected the discrepancy.
We are proposing to accept this amendment.
5. Return Fee Entry Formatting Requirements
This amendment modified the description of the Individual Name
Field in a PPD Return Fee Entry related to a returned ARC, BOC, or POP
Entry to require that it contain the same information identified within
the original ARC, BOC, or POP Entry. The Individual Name Field is
optional for ARC, BOC, and POP; therefore, this field (1) may include
the Receiver's name, (2) may include a reference number, identification
number, or code that the merchant needs to identify the particular
transaction or customer, or (3) may be blank.
The name of the Receiver must be included in all PPD Entries. With
ARC, BOC, or POP Entries, where a reading device must be used to
capture the Receiver's routing number, account number, and check serial
number, it is difficult for the Originator to capture the Receiver's
name in an automated fashion. For this reason, the NACHA Operating
Rules do not require Originators to include the Receiver's name in the
ARC, BOC, or POP Entry Detail Record. Originators are permitted the
choice of including either the Receiver's name, or a reference number,
identification number, or code necessary to identify the transaction,
or the field may be left blank. Because information contained within
the returned ARC, BOC, or POP Entry is typically used to create a
related Return Fee Entry, the Receiver's name is likely not readily
available to the Originator for use in the Return Fee Entry, especially
when the Receiver's authorization for the Return Fee Entry was obtained
by notice. This amendment established consistent formatting
requirements with respect to the Receiver's name for check conversion
entries and related return fees.
We are proposing to accept this amendment.
6. Entry Detail Record for Returns--Clarification Regarding POP Entries
This amendment added a footnote to the Entry Detail Record for
Return Entries to clarify the specific use of positions 40-54 with
respect to the return of a POP Entry. On a forward POP Entry, positions
40-54 represent three separate fields to convey (1) the check serial
number (positions 40-48); (2) the truncated name or abbreviation of the
city or town in which the electronic terminal is located (positions 49-
52); and (3) the state in which the electronic terminal is located
(positions 53-54). However, these three fields are not explicitly
identified in the Entry Detail Record for Return Entries, which caused
some confusion among users as to how to map such information from
[[Page 86307]]
the original forward Entry into the Return Entry format.
We are proposing to accept this amendment.
7. Clarification of RDFI's Obligation to Recredit Receiver
This amendment clarified that an RDFI's obligation to recredit a
Receiver for an unauthorized or improper debit Entry is generally
limited to Consumer Accounts, with certain exceptions for check
conversion and international transactions. Prior to the NACHA Operating
Rules simplification initiative in 2010, the rules governing a
Receiver's right to recredit for unauthorized debit entries clearly
limited this provision to debit Entries affecting Consumer Accounts,
except as expressly provided for ARC, BOC, IAT, and POP Entries (which
can affect both consumer and business accounts). However, when rules
language was combined and revised during the simplification process
into a general discussion on recredit, some of this clarity was lost,
resulting in language that was somewhat ambiguous and the cause of
confusion for some ACH participants. This change more clearly defines
the intent of the rule requirement for an RDFI to recredit a Receiver.
We are proposing to accept this amendment.
8. Clarification of Prenotification Entries and Addenda Records
This amendment revised the NACHA Operating Rules to clarify that,
with the exception of IAT Entries, a prenotification Entry is not
required to include addenda records that are associated with a
subsequent live Entry. Generally speaking, the format of a
Prenotification Entry must be the same as the format of a live dollar
Entry. There are, however, some differences between Prenotes and live
Entries to which the Prenotes relate:
The dollar amount of a Prenotification Entry must be zero;
a Prenotification Entry is identified by a unique
transaction code; and
addenda records associated with a live Entry are not
required with Prenotes (unless the Prenote relates to an IAT Entry).
While the first two formatting criteria above for Prenotification
Entries are clearly defined within the technical standards and are
commonly understood by industry participants, the issue of whether
Prenotification Entries require addenda records was somewhat ambiguous.
The amendment eliminated that ambiguity.
We are proposing to accept this amendment.
9. ACH Operator Edit for Returns
This amendment incorporated an additional ACH Operator edit within
the listing of ACH Operator file/batch reject edit criteria specified
within Appendix Two of the NACHA Operating Rules. Specifically, this
edit requires ACH Operators to reject any batch of Return Entries in
which RDFI returns and ACH Operator returns are commingled. By
definition, different parties are responsible for generating each type
of return, and each must be separately identified within the Company/
Batch Header Record as the sender of the batch. This ACH Operator edit
codifies this fact and ensures consistent processing of return batches
by all ACH Operators.
We are proposing to accept this amendment.
C. 2016 NACHA Operating Rules & Guidelines Book Changes
The 2016 edition of the NACHA Operating Rules & Guidelines contains
changes related to the following amendments: \2\
---------------------------------------------------------------------------
\2\ The 2016 Rule Book also codified changes related to the rule
NACHA adopted in 2015 on Improving ACH Network Quality (Unauthorized
Entry Fee), which is addressed above in Section B--2015 NACHA
Operating Rule Book Changes.
---------------------------------------------------------------------------
Same-Day ACH: Moving Payments Faster;
Disclosure Requirements for POS Entries;
Recrediting Receiver--Removal of Fifteen Calendar Day
Notification Time Frame;
Clarification of RDFI Warranties for Notifications of
Change; and
Minor Rules Topics.
We are proposing to incorporate in Part 210 all of the foregoing
amendments except that we are proposing to delay our implementation of
Same-Day ACH as discussed below.
1. Same-Day ACH: Moving Payments Faster
This amendment will allow for same-day processing of ACH payments.
Currently, the standard settlement period for ACH transactions is one
or two business days after processing. The Same-Day ACH amendment will
enable the option for same-day processing and settlement of ACH
payments through new ACH Network functionality without affecting
existing ACH schedules and capabilities. Originators that desire same-
day processing will have the option to send Same Day ACH Entries to
accounts at any RDFI. All RDFIs will be required to receive Same-Day
ACH Entries, which gives ODFIs and Originators the certainty of being
able to send same day ACH Entries to accounts at all RDFIs in the ACH
Network. The amendment includes a ``Same-Day Entry fee'' on each Same-
Day ACH transaction to help mitigate RDFI costs for supporting Same-Day
ACH.
The amendment has a phased implementation period, spreading from
2016 to 2018, with the following effective dates:
Phase 1--September 23, 2016: ACH credits will be eligible
to be processed during two new Same-Day ACH windows with submission
deadlines at 10:30 a.m. ET and 2:45 p.m. ET, with settlement occurring
at 1:00 p.m. ET and 5:00 p.m. ET, respectively. RDFIs will be required
to provide funds availability by the end of the RDFI's processing day.
Applicable to ACH credits only and non-monetary Entries, with funds
availability due at the end of the RDFI's processing day.
Phase 2--September 15, 2017: ACH debits will become
eligible for same-day processing during the two new Same-Day windows.
Phase 3--March 16, 2018: RDFIs will be required to provide
funds availability for same day credits no later than 5:00 p.m. at the
RDFI's local time.
The existing next-day ACH settlement window of 8:30 a.m. ET will
not change. With the addition of the new Same-Day ACH processing
windows, the ACH Network will provide three opportunities for ACH
settlement each day.
Payment Eligibility
Virtually all types of ACH payments will be eligible for same-day
processing by the end of the implementation period. The only ACH
transactions ineligible for same-day processing will be IAT
transactions and individual transactions over $25,000.
In addition to credits and debits, the ACH Network supports a
number of transaction types that do not transfer a dollar value. Non-
monetary transactions include Prenotifications; Notifications of Change
(NOCs); Zero Dollar Entries that convey remittance information using
CCDs and CTXs; and Death Notification Entries. With the exception of
Prenotifications for future debit Entries, these non-monetary
transactions will be eligible for same-day processing from the outset.
Automated Enrollment Entries (ENRs) do not use Effective Entry Dates.
Since there will not be a way to distinguish same day ENR Entries from
next-day Entries, ENRs will not be processed as same day transactions.
[[Page 86308]]
Identification of Same-Day Transactions via the Effective Entry Date
Same-Day ACH transactions will be identified by the ODFI and its
Originator by using the current day's date in the Effective Entry Date
field of the Company/Batch Header Record. (Note: The NACHA Operating
Rules define the Effective Entry Date as ``the date specified by the
Originator on which it intends a batch of Entries to be settled.'') In
addition, transactions intended for same-day processing that carry a
current day Effective Entry Date will need to meet an ACH Operator's
submission deadline for same-day processing. For example, transactions
originated on Monday, October 10, 2016 that are intended for same-day
processing must have an Effective Entry Date of ``161010'' in the
Company/Batch Header Record and be submitted to an ACH Operator no
later than the 2:45 p.m. ET deadline to ensure same-day settlement. Any
Entry carrying the current day's date in the Effective Entry Date field
that is submitted prior to an ACH Operator's same-day processing
submission deadline will be handled as a Same-Day ACH transaction and
assessed the Same-Day Entry fee.
Stale or Invalid Effective Entry Dates
In the current processing environment, any batch of Entries
submitted to an ACH Operator that contains an Effective Entry Date that
is invalid or stale (in the past) is processed at the next settlement
opportunity, which is currently the next banking day. With the arrival
of same-day processing, the same protocol will apply. ACH transactions
submitted to an ACH Operator with stale or invalid Effective Entry
Dates will be settled at the earliest opportunity, which could be the
same-day. If the transactions are submitted prior to the close of the
second same-day processing window at 2:45 p.m. ET, the Entries will be
settled the same-day and the Same-Day Entry fee will apply. If the
transactions are submitted to the ACH Operator after 2:45 p.m. ET, the
Entries will be settled the next day and the Same-Day Entry fee will
not apply.
Return Entry Processing
The amendment allows same-day processing of return Entries at the
discretion of the RDFI, whether or not the forward Entry was a Same-Day
ACH transaction. Any return Entry will be eligible for settlement on a
same-day basis; the $25,000 per transaction limit and IAT restriction
will not apply. Because returns are initiated and flow from RDFI to
ODFI, return Entries processed on a same-day basis will not be subject
to the Same-Day Entry fee. RDFIs will not be required to process
returns on the same-day that the forward Entry is received. The
existing return time frame (the return Entry must be processed in such
time that it is made available to the ODFI no later than the opening of
business on the second banking day following the Settlement Date of the
original Entry) will still be applicable. RDFIs will have the option of
using any of the available settlement windows for returns, as long as
the existing return time frame is met.
Same-Day Entry Fee
In order to ensure universal reach to any account at any RDFI, all
RDFIs must implement Same-Day ACH. To assist RDFIs in recovering costs
associated with enabling same-day transactions, the amendment includes
a fee paid from the ODFI to the RDFI for each Same-Day ACH Entry. The
fee provides a mechanism to help RDFIs mitigate investment and
operating expenses and provide a fair return on their required
investments. The initial Same-Day Entry fee is set at 5.2 cents per
Same Day Entry. The fee will be assessed and collected by the ACH
Operators through their established monthly billing. The Rule includes
a methodology to measure the effectiveness of the Same-Day Entry fee at
five, eight and ten full years after implementation. After each review,
the Same-Day Entry fee could be maintained or lowered, but not
increased.
We are proposing to accept the Same-Day amendment but with delayed
implementation of NACHA's Phase 1 implementation date where the
government is receiving Same-Day credit Entries. Fiscal Service plans
to enable agencies to originate Same-Day Entries in appropriate
situations and will work with agencies to develop and publish guidance
outlining the criteria and procedures to be used for originating Same-
Day Entries. Fiscal Service believes that Same-Day credit Entries may
be useful to agencies that need to make certain emergency or time-
sensitive payments, including payments not exceeding $25,000 that are
currently made by Fedwire. We believe that the majority of ACH credit
Entries originated by the government are not suitable for same-day
processing in light of the fee payable for Same-Day Entries, and
therefore we anticipate that the government's origination of Same-Day
Entries will be limited. We plan to publish guidance for agencies that
will set forth both the criteria and the procedure for certifying a
Same-Day ACH transaction. That guidance will indicate whether agencies
should indicate their intent for same-day processing and settlement
solely by utilizing the Effective Entry Date, or may also utilize the
optional standardized content in the Company Descriptive Date field as
a same-day transaction indicator.
With regard to Same-Day ACH credit Entries received by the Federal
Government, we are proposing to begin processing those Same-Day Entries
on a same-day basis beginning no earlier than August 30, 2017 rather
than on NACHA's Phase 1 implementation date of September 23, 2016. This
delayed implementation date reflects coding and reporting changes and
testing that must be undertaken to enable the processing of incoming
Same-Day credit Entries by Fiscal Service's ACH credit processing
systems. Any ACH credit Entry received by the U.S. government prior to
August 30, 2017, will not be eligible for same-day settlement and will
continue to settle on a future date (typically the next banking day)
regardless of submission date and time. We are not proposing any delay
to the NACHA Same-Day ACH amendment's Phase 2 or Phase 3 implementation
dates for the Government's same-day processing.
The 2016 NACHA Operating Rules incorporate in the rule text only
those provisions of the Same-Day ACH amendment that have effective
dates in 2016. However, in order to provide advance notice of the
impact of the Phase 2 and 3 implementations, the 2016 Rules Book sets
forth the sections of the NACHA Operating Rules affected by the Same-
Day ACH amendment as they will read upon implementation in 2017 and
2018.
We are proposing to incorporate in Part 210 the future changes
relating to the Same-Day ACH amendment's Phase 2 and 3 implementation
provisions scheduled for 2017 and 2018 as they appear in the 2016 NACHA
Operating Rules & Guidelines book.
2. Disclosure Requirements for POS Entries
This amendment established an Originator/Third-Party Service
Provider obligation to provide consumer Receivers with certain
disclosures when providing those consumers with cards used to initiate
ACH Point of Sale (POS) Entries. The amendment requires Originators or
Third-Party Service Providers that issue ACH cards (or their virtual,
non-card equivalent, collectively referred to as ``ACH Cards'') to make
the following disclosures in written or electronic, retainable form to
a consumer prior to activation:
[[Page 86309]]
The ACH Card is not issued by the consumer's Depository
Financial Institution.
POS Entries made with the ACH Card that exceed the balance
in the consumer's financial institution account may result in
overdrafts and associated fees, regardless of whether the consumer has
opted to allow overdrafts with respect to debit cards issued by the
Depository Financial Institution that holds the consumer's account.
Benefits and protections for transactions made using the
ACH Card may vary from those available through debit cards issued by
the consumer's Depository Financial Institution.
The amendment included sample language for Originators or Third-
Party Service Providers to consider in designing an ACH Card disclosure
for purposes of compliance with the NACHA Operating Rules. This
amendment will not affect Agencies because they do not issue ACH Cards.
We are proposing to accept this amendment.
3. Recrediting Receiver--Removal of Fifteen Calendar Day Notification
Time Frame
This amendment removed the fifteen calendar day notification period
associated with an RDFI's obligation to promptly recredit a consumer
account for an unauthorized debit Entry, and aligned the RDFI's
recredit obligation with its ability to transmit an Extended Return
Entry. Because of the extended return window for unauthorized consumer
debits under the NACHA Operating Rules, prior to the amendment many
RDFIs found the reference to the fifteen calendar day timing to be a
source of confusion and misunderstanding. The amendment revised the
NACHA Operating Rules to align the provision for prompt recredit with
the RDFI's receipt of a Written Statement of Unauthorized Debit from
the consumer and the RDFI's ability to transmit an Extended Return
Entry (i.e., transmitted to the ACH Operator so that the Extended
Return Entry is made available to the ODFI no later than opening of
business on the banking day following the sixtieth calendar day
following the settlement date of the original Entry). This change
applies to unauthorized/improper entries bearing Standard Entry Class
Codes (SECs) that are classified as consumer entries, as well as those
that can be both consumer and non-consumer entries (ARC, BOC, POP, and
IAT debit entries).
We are proposing to accept this amendment.
4. Clarification of RDFI Warranties for Notifications of Change
This amendment modified the NACHA Operating Rules with respect to
Notifications of Change (NOCs) to clarify aspects of: (1) The RDFI's
warranties made with respect to its transmission of a Notification of
Change or Corrected Notification of Change; and (2) the ODFI's
warranties made with respect to usage of the corrected data within
subsequent transactions. Specifically, the amendment clarified that the
RDFI's warranty for information contained in a Notification of Change
or Corrected Notification of Change is applicable only to the corrected
information supplied by the RDFI.
This modification removed from the RDFI's warranty on NOCs the
specific statement that the Receiver has authorized the change
identified in the NOC, if the Receiver's authorization is required.
This subsection has been misinterpreted to mean that it supersedes the
ODFI's warranty that a subsequent Entry is properly authorized by the
Receiver. The RDFI does not warrant that the Entry itself has been
properly authorized by the Receiver, but only that the data supplied in
the Corrected Data field is accurate. The warranty that any Entry
(including a subsequent Entry that uses corrected data from an NOC) is
properly authorized still lies with the ODFI per Article Two,
Subsection 2.4.1.1 (The Entry is Authorized by the Originator and
Receiver).
We are proposing to accept this amendment.
5. Minor Rules Topics
These amendments changed four areas of the NACHA Operating Rules to
address minor topics. Minor changes to the NACHA Operating Rules have
little-to-no impact on ACH participants and no significant economic
impact.
i. Clarification of ODFI Periodic Statement Requirements for CIE and
WEB Credits
This amendment made minor, editorial clarifications to the language
within Article Two, Subsections 2.5.4.2 (ODFI to Satisfy Periodic
Statement Requirement) and 2.5.17.6 (ODFI to Satisfy Periodic Statement
Requirement for Credit WEB Entries) to clarify the intent of language
governing an ODFI's periodic statement obligations with respect to the
origination of CIE and credit WEB Entries by consumers.
Periodic statement requirements typically are an obligation of the
RDFI for the receipt of Entries to a consumer account. For CIE and WEB
credits, however, the Originator of the ACH credit also is a consumer,
thus putting periodic statement requirements on the ODFI as well for
these entries. These clarifications do not affect the substance of the
ODFI's obligation to identify on the consumer Originator's periodic
statement the date, amount, and description of a transaction involving
the consumer's account; rather, they simply recognize that the debiting
of the consumer's account to provide funds for the CIE or WEB credit
could be accomplished by something other than an ACH debit.
We are proposing to accept this amendment.
ii. Clarifying the Commercially Reasonable Encryption Standard
The NACHA Operating Rules require ACH participants to utilize a
commercially reasonable standard of encryption technology when
transmitting any banking information related to an Entry via an
Unsecured Electronic Network. This amendment removed the reference to
128-bit encryption technology as the minimum acceptable commercially
reasonable standard, but retained the general reference to using a
commercially reasonable level of encryption. The amendment also
clarified that a commercially reasonable level of security must comply
with current, applicable regulatory guidelines, which already impose
more rigorous encryption obligations.
Prior to the amendment the NACHA Operating Rules established a
minimum for this commercially reasonable encryption standard at the
128-bit RC4 encryption technology level. A task force of NACHA's former
Internet Council, comprised of technology expert members, recommended
that the specific reference to 128-bit RC4 encryption be removed, on
the grounds that it is now out of date as a commercially reasonable
standard.
We are proposing to accept this amendment.
iii. Definition of Zero-Dollar Entry
This amendment reintroduced the definition of a Zero-Dollar Entry
within Article Eight (Definitions of Terms Used in These Rules) to
correspond to unique technical references in the Appendices of the
NACHA Operating Rules. Zero Dollar Entries are unique in that, although
their dollar amount is zero, they bear remittance data that must be
provided to the Receiver in an identical manner as ``live'' entries
that transfer funds. The definition was removed in 2010 when the
definition of a ``Non-
[[Page 86310]]
Monetary Entry'' was introduced into the NACHA Operating Rules.
We are proposing to accept this amendment.
iv. Expansion of Permissible Criteria for ODFI Requests for Return
In addition to being able to request the return of an Erroneous
Entry, as permitted by the NACHA Operating Rules, this amendment
revised the NACHA Operating Rules to permit an ODFI to request that an
RDFI return any Entry that the ODFI claims was originated without the
authorization of the Originator. This amendment also expanded the
description of Return Reason Code R06 (Returned per ODFI's Request) to
include Entries returned by the RDFI for this reason. This newly
permissible circumstance reflects actual current industry practice with
regard to the recovery of funds related to unauthorized credit
origination.
Use of the ODFI Request for Return process is always optional on
the part of both ODFIs and RDFIs. An RDFI will continue to be able to
make its own business decision about whether to agree to return an
Entry that the ODFI claims was originated without the authorization of
the Originator. An RDFI responding to a request for the return of such
an Entry will be indemnified under the NACHA Operating Rules against
loss or liability by the ODFI.
We are proposing to accept this amendment.
D. Notification of Reversals
NACHA Operating Rule 2.9.1 requires that the Originator of a
Reversing Entry make a reasonable attempt to notify the Receiver of the
Reversing Entry and the reason for the Reversing Entry no later than
the settlement date of the Entry. In attempting to contact Receivers
regarding the reversal of a duplicate or erroneous Entry on behalf of
federal agencies, Fiscal Service has found that efforts to reach
Receivers, typically through the RDFI, are often unsuccessful. Adhering
to the notification requirement also impedes the timeliness and
efficiency of originating reversals, which is disadvantageous both for
Fiscal Service and for Receivers. Accordingly, we are proposing to
exclude this requirement from incorporation in Part 210.
We request comment on whether this exclusion raises any concerns
for Receivers or RDFIs.
E. Prepaid Cards
In 2010, Fiscal Service amended Part 210 to establish requirements
that prepaid cards receiving Federal payments must meet. 75 FR 80335.
To be eligible to receive Federal payments, a prepaid card must meet
four conditions: (1) The card account must be held at an insured
financial institution; (2) the account be set up to meet the
requirements for pass through deposit or share insurance under 12 CFR
part 330 or 12 CFR part 745; (3) the account may not be attached to a
line of credit or loan agreement under which repayment from the card
account is triggered by delivery of the Federal payment; and (4) the
issuer of the card must comply with all of the requirements, and
provide the Federal payment recipient with the same consumer
protections, that apply to a payroll card under regulations
implementing the Electronic Fund Transfer Act, 15 U.S.C. 1693a(1). See
31 CFR 210.5(b)(5)(i).
We required that prepaid cards provide Regulation E payroll card
protections because when our prepaid rule was issued in 2010,
Regulation E did not cover any prepaid cards other than payroll cards.
However, on October 5, 2016, the Consumer Financial Protection Bureau
(CFPB) released its final rule to amend Regulation E to cover prepaid
accounts. We are therefore proposing to amend our prepaid rule to
replace the reference in 210.5(b)(5)(i)(D) to ``payroll card'' with a
reference to ``prepaid account,'' so that the requirement would read:
``The issuer of the card complies with all of the requirements, and
provides the holder of the card with all of the consumer protections,
that apply to a prepaid account under the rules implementing the
Electronic Fund Transfer Act, as amended.'' We would also delete the
definition of ``payroll card account'' from the rule because it would
be unnecessary. These changes would be effective on the effective date
of the CFPB's final rule. We request comment on this proposed
amendment.
III. Section-by-Section Analysis
In order to incorporate in Part 210 the NACHA Operating Rule
changes that we are accepting, we are replacing references to the 2013
NACHA Rules & Guidelines book with references to the 2016 NACHA
Operating Rules & Guidelines book. Several of the NACHA Operating Rule
amendments that we are not proposing to incorporate are modifications
to provisions of the NACHA Operating Rules that are already excluded
under Part 210. Other than replacing the references to the 2013 NACHA
Operating Rules & Guidelines book, no change to Part 210 is necessary
to exclude those amendments.
Sec. 210.2
We are proposing to amend the definition of ``applicable ACH
Rules'' at Sec. 210.2(d) to reference the rules published in NACHA's
2016 Rules & Guidelines book rather than the rules published in NACHA's
2013 Rules & Guidelines book. The definition has been updated to
reflect the reorganization and renumbering of the NACHA Operating
Rules. A reference to Section 1.11 of the NACHA Operating Rules is
added to Sec. 210.2(d)(1) in order to exclude from Part 210 the
imposition of fees for ACH debits that are returned as unauthorized.
The reference in Sec. 210.2(d)(6) to the NACHA Operating Rule
governing International ACH Transactions section has been updated by
replacing an obsolete reference to ACH Rule 2.11 with the correct
reference to Section 2.5.8. A new paragraph (7) is added to Sec.
210.2(d) to exclude from Part 210 the requirement to make a reasonable
attempt to notify the Receiver of a Reversing Entry under Subsection
2.9.1 of the NACHA Operating Rules. A new paragraph (8) is added to
exclude from Part 210, until July 1, 2017, the provisions of Subsection
3.3.1.1, Section 8.99 and Appendix Three (definition of Effective Entry
Date) that require an RDFI to make the amount of a credit Same-Day
Entry available no later than the completion for that Settlement Date.
Sec. 210.3(b)
We are proposing to amend Sec. 210.3(b) by replacing the
references to the ACH Rules as published in the 2013 Rules & Guidelines
book with references to the ACH Rules as published in the 2016 NACHA
Operating Rules & Guidelines book.
Sec. 210.6
In Sec. 210.6 we are proposing to replace the reference to ACH
Rule 2.4.4 with a reference to ACH Rule 2.4.5 to reflect the re-
numbering of ACH Rule 2.4.4. This change is not substantive.
Sec. 210.8
In Sec. 210.8(b) we are proposing to replace the reference to ACH
Rule 2.4.4 with a reference to ACH Rule 2.4.5 to reflect the re-
numbering of ACH Rule 2.4.4. This change is not substantive.
IV. Incorporation by Reference
In this rule, Fiscal Service is proposing to incorporate by
reference the 2016 NACHA Operating Rules & Guidelines book. The Office
of Federal Register (OFR) regulations require that agencies discuss in
the preamble of a proposed rule ways that the materials the agency
proposes to incorporate by
[[Page 86311]]
reference are reasonably available to interested parties or how it
worked to make those materials reasonably available to interested
parties. In addition, the preamble of the proposed rule must summarize
the material. 1 CFR 51.5(a). In accordance with OFR's requirements, the
discussion in the Supplementary Information section summarizes the 2016
NACHA Operating Rules. Financial institutions utilizing the ACH Network
are bound by the NACHA Operating Rules and have access to the NACHA
Operating Rules in the course of their everyday business. The NACHA
Operating Rules are available as a bound book or in online form from
NACHA--The Electronic Payments Association, 2550 Wasser Terrace, Suite
400, Herndon, Virginia 20171, tel. 703-561-1100, [email protected].
V. Procedural Analysis
Request for Comment on Plain Language
Executive Order 12866 requires each agency in the Executive branch
to write regulations that are simple and easy to understand. We invite
comment on how to make the proposed rule clearer. For example, you may
wish to discuss: (1) Whether we have organized the material to suit
your needs; (2) whether the requirements of the rule are clear; or (3)
whether there is something else we could do to make the rule easier to
understand.
Regulatory Planning and Review
The proposed rule does not meet the criteria for a ``significant
regulatory action'' as defined in Executive Order 12866. Therefore, the
regulatory review procedures contained therein do not apply.
Regulatory Flexibility Act Analysis
It is hereby certified that the proposed rule will not have a
significant economic impact on a substantial number of small entities.
The proposed rule imposes on the Federal government a number of changes
that NACHA--The Electronic Payments Association, has already adopted
and imposed on private sector entities that utilize the ACH Network.
The proposed rule does not impose any additional burdens, costs or
impacts on any private sector entities, including any small entities.
Accordingly, a regulatory flexibility analysis under the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.) is not required.
Unfunded Mandates Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C.
1532 (Unfunded Mandates Act), requires that the agency prepare a
budgetary impact statement before promulgating any rule likely to
result in a Federal mandate that may result in the expenditure by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100 million or more in any one year. If a budgetary
impact statement is required, section 205 of the Unfunded Mandates Act
also requires the agency to identify and consider a reasonable number
of regulatory alternatives before promulgating the rule. We have
determined that the proposed rule will not result in expenditures by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100 million or more in any one year. Accordingly,
we have not prepared a budgetary impact statement or specifically
addressed any regulatory alternatives.
List of Subjects in 31 CFR Part 210
Automated Clearing House, Electronic funds transfer, Financial
institutions, Fraud, and Incorporation by reference.
Words of Issuance
For the reasons set out in the preamble, we propose to amend 31 CFR
part 210 as follows:
PART 210--FEDERAL GOVERNMENT PARTICIPATION IN THE AUTOMATED
CLEARING HOUSE
0
1. The authority citation for part 210 continues to read as follows:
Authority: 5 U.S.C. 5525; 12 U.S.C. 391; 31 U.S.C. 321, 3301,
3302, 3321, 3332, 3335, and 3720.
0
2. In Sec. 210.2, revise paragraph (d) to read as follows:
Sec. 210.2 Definitions.
* * * * *
(d) Applicable ACH Rules means the ACH Rules with an effective date
on or before March 16, 2018, as published in ``2016 NACHA Operating
Rules & Guidelines: A Complete Guide to Rules Governing the ACH
Network'' and supplements thereto, except:
(1) Section 1.11; Subsections 1.2.2, 1.2.3, 1.2.4, 1.2.5 and 1.2.6;
Appendix Seven; Appendix Eight; Appendix Nine and Appendix Ten
(governing the enforcement of the ACH Rules, including self-audit
requirements, and claims for compensation);
(2) Section 2.10 and Section 3.6 (governing the reclamation of
benefit payments);
(3) The requirement in Appendix Three that the Effective Entry Date
of a credit entry be no more than two Banking Days following the date
of processing by the Originating ACH Operator (see definition of
``Effective Entry Date'' in Appendix Three);
(4) Section 2.2 (setting forth ODFI obligations to enter into
agreements with, and perform risk management relating to, Originators
and Third-Party Senders) and Section 1.6 (Security Requirements);
(5) Section 2.17 (requiring reporting and reduction of high rates
of entries returned as unauthorized);
(6) The requirements of Section 2.5.8 (International ACH
Transactions) shall not apply to entries representing the payment of a
Federal tax obligation by a taxpayer;
(7) The requirement to make a reasonable attempt to notify the
Receiver of a Reversing Entry under Subsection 2.9.1; and
(8) Until August 30, 2017, the provisions of Subsection 3.3.1.1,
Section 8.99 and Appendix Three (definition of Effective Entry Date)
that require an RDFI to make the amount of a credit Same-Day Entry
available no later than the completion for that Settlement Date.
* * * * *
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3. In Sec. 210.3, revise paragraph (b) to read as follows:
Sec. 210.3 Governing law.
* * * * *
(b) Incorporation by reference--applicable ACH Rules.
(1) This part incorporates by reference the applicable ACH Rules,
including rule changes with an effective date on or before March 16,
2018, as published in the ``2016 NACHA Operating Rules & Guidelines: A
Complete Guide to Rules Governing the ACH Network,'' and supplements
thereto. The Director of the Federal Register approves this
incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR
part 51. Copies of the ``2016 NACHA Operating Rules & Guidelines'' are
available from NACHA--The Electronic Payments Association, 2550 Wasser
Terrace, Suite 400, Herndon, Virginia 20171, tel. 703-561-1100,
[email protected]. Copies also are available for public inspection at the
Office of the Federal Register, 800 North Capitol Street NW., Suite
700, Washington, DC 20002; and the Bureau of the Fiscal Service, 401
14th Street SW., Room 400A, Washington, DC 20227.
(2) Any amendment to the applicable ACH Rules approved by NACHA--
The Electronic Payments Association after publication of the 2016 NACHA
Operating Rules & Guidelines shall not apply to Government entries
unless the Service expressly accepts such amendment by publishing
notice of acceptance of the amendment to this
[[Page 86312]]
part in the Federal Register. An amendment to the ACH Rules that is
accepted by the Service shall apply to Government entries on the
effective date of the rulemaking specified by the Service in the
Federal Register notice expressly accepting such amendment.
* * * * *
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4. Revise Sec. 210.6 to read as follows:
Sec. 210.6 Agencies.
Notwithstanding any provision of the ACH Rules, including
Subsections 2.4.5, 2.8.4, 4.3.5, 2.9.2, 3.2.2, and 3.13.3, agencies
shall be subject to the obligations and liabilities set forth in this
section in connection with Government entries.
(a) Receiving entries. An agency may receive ACH debit or credit
entries only with the prior written authorization of the Service.
(b) Liability to a recipient. An agency will be liable to the
recipient for any loss sustained by the recipient as a result of the
agency's failure to originate a credit or debit entry in accordance
with this part. The agency's liability shall be limited to the amount
of the entry(ies).
(c) Liability to an originator. An agency will be liable to an
Originator or an ODFI for any loss sustained by the originator or ODFI
as a result of the agency's failure to credit an ACH entry to the
agency's account in accordance with this part. The agency's liability
shall be limited to the amount of the entry(ies).
(d) Liability to an RDFI or ACH association. Except as otherwise
provided in this part, an agency will be liable to an RDFI for losses
sustained in processing duplicate or erroneous credit and debit entries
originated by the agency. An agency's liability shall be limited to the
amount of the entry(ies), and shall be reduced by the amount of the
loss resulting from the failure of the RDFI to exercise due diligence
and follow standard commercial practices in processing the entry(ies).
This section does not apply to credits received by an RDFI after the
death or legal incapacity of a recipient of benefit payments or the
death of a beneficiary as governed by subpart B of this part. An agency
shall not be liable to any ACH association.
(e) Acquittance of the agency. The final crediting of the amount of
an entry to a recipient's account shall constitute full acquittance of
the Federal Government.
(f) Reversals. An agency may reverse any duplicate or erroneous
entry, and the Federal Government may reverse any duplicate or
erroneous file. In initiating a reversal, an agency shall certify to
the Service that the reversal complies with applicable law related to
the recovery of the underlying payment. An agency that reverses an
entry shall indemnify the RDFI as provided in the applicable ACH Rules,
but the agency's liability shall be limited to the amount of the entry.
If the Federal Government reverses a file, the Federal Government shall
indemnify the RDFI as provided in the applicable ACH Rules, but the
extent of such liability shall be limited to the amount of the entries
comprising the duplicate or erroneous file. Reversals under this
section shall comply with the time limitations set forth in the
applicable ACH Rules.
(g) Point-of-purchase debit entries. An agency may originate a
Point-of-Purchase (POP) entry using a check drawn on a consumer or
business account and presented at a point-of-purchase. The requirements
of ACH Rules Subsections 2.3.2.2 and 2.5.10.1 shall be met for such an
entry if the Receiver presents the check at a location where the agency
has posted the notice required by the ACH Rules and has provided the
Receiver with a copy of the notice.
(h) Return Fee Entry. An agency that has authority to collect
returned item service fees may do so by originating a Return Fee Entry
if the agency provides notice to the Receiver in accordance with the
ACH Rules.''
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5. In Sec. 210.8, revise paragraphs (a) and (b) to read as follows:
Sec. 210.8 Financial institutions.
(a) Status as a Treasury depositary. The origination or receipt of
an entry subject to this part does not render a financial institution a
Treasury depositary. A financial institution shall not advertise itself
as a Treasury depositary on such basis.
(b) Liability. Notwithstanding ACH Rules Subsections 2.4.5, 2.8.4,
4.3.5, 2.9.2, 3.2.2, and 3.13.3, if the Federal Government sustains a
loss as a result of a financial institution's failure to handle an
entry in accordance with this part, the financial institution shall be
liable to the Federal Government for the loss, up to the amount of the
entry, except as otherwise provided in this section. A financial
institution shall not be liable to any third party for any loss or
damage resulting directly or indirectly from an agency's error or
omission in originating an entry. Nothing in this section shall affect
any obligation or liability of a financial institution under Regulation
E, 12 CFR part 1005, or the Electronic Funds Transfer Act, 12 U.S.C.
1693 et seq.
* * * * *
Dated: November 23, 2016.
David A. Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2016-28671 Filed 11-29-16; 8:45 am]
BILLING CODE 4810-AS-P