Upcoming ACH Rules And Resources

Written By Stephanie Lyon, Regulatory Compliance Counsel

NACHA has been fairly busy these past few years finalizing and updating rules, issuing bulletins and seeking industry comments for new rules to make ACH transactions faster. A couple of ACH rule deadlines are looming, so it is a good time to review these rules, highlight resources and give you a heads up on things you may have missed from last year.

Same Day ACH Phase 3

Most credit unions that originate ACHs are well aware of the Same Day ACH rule that was passed a couple of years ago to expedite the sending and receiving of ACHs. As of today, the deadlines for Phase 1 and Phase 2 are long gone, paving the way for the effective date of March 16, 2018 for Same Day ACH Phase 3. Folks, this is only 58 days away!

Here is a table that details the different requirements of each implementation phase, highlighting Phase 3 requirements:

As noted on the table, the current NACHA requirement under Phase 2 is that credit unions give credit for same day ACHs by the end of the credit union's processing day. You can review Phase II requirements in more detail in this previous blog. Phase 3 establishes a more streamline funds availability timeline that requires Receiving Depositary Financial Institutions (RDFIs) to make same day ACHs credits available for withdrawal by 5:00pm RDFI's local time. While becoming an ACH originator is still optional, credits unions that receive ACHs are all bound by this requirement.

To make the process of complying with Phase 3 easier, NACHA published several resources available in its Resource Center, including its revised Guidance for RDFIs on Meeting Phase 3 Requirements. The guidance is especially helpful in determining the credit union's local time in cases where the RDFI's geographic footprint is not limited to one time zone.

Third-Party Sender Customer Due Diligence

Another ACH compliance deadline that is also around the corner is the registration of Third-Party Sender members by March 1^st, 2018. This requirement became effective in September 2017 to promote consistent customer due diligence among all Originating Financial Institutions (ODFIs). The rule generally requires that all ODFIs register their Third-Party Sender members or, in the alternative, confirm that the ODFI does not have any Third-Party Sender members. See, revised NACHA Op. Rules, Art. II, 2.15.1.

NACHA rules define a Third-Party Sender as "an organization that is not an Originator that authorized an ODFI or a Third-Party Service Provider to transmit, for its account or the account of another Third-Party Sender a credit entry, debit entry, or non-monetary entry to the Receiver’s account at the RDFI." As part of the rule, NACHA expects that credit unions will have effective procedures to determine if a corporate/business member is a Third-Party Sender. If the credit union is unsure whether a member is considered a Third-Party Sender, it may want to use NACHA's Third-Party Sender Identification Tool for assistance with this determination and/or contact their counsel.

The registration process for Third-Party Sender members can be found here. Some of the information required to be disclosed will be:

• The ODFI’s name and contact information;
• the name and principal business location of the Third-Party Sender;
• the ODFI’s routing number used in ACH transactions originated for the Third-Party Sender member; and
• the company identification(s) of the Third-Party Sender. 

Note that if for some reason the credit union later discovers an unregistered Third-Party Sender member, the credit union will have 10 days from the date it discovers the member to register them in the database.

Aside from the initial registration, the NACHA rules will also require supplemental registration for Third-Party Sender members if the credit union receives a request from NACHA for additional information. See, revised NACHA Op. Rules, App. 8, Pt. 8.4. The rule only gives the credit union 10 banking days to respond to supplemental information request so the credit union may want to obtain this information for all Third-Party Sender members ahead of time to avoid having to chase down this information later on.

Among the supplemental information that can be requested by NACHA is:

• Any doing-business-as names, taxpayer identification number(s), and street and website address(es) of the Third-Party Sender;
• the name and contact information for the Third-Party Sender’s contact person;
• names and titles of the Third-Party Sender’s principals;
• the approximate number of Originators for which the Third-Party Sender transmits entries; and
• a statement as to whether the Third-Party Sender transmits debit entries, credit entries or both. 

Additional information on Third-Party Sender registration requirements can be found here and in ACH Operations Bulletin #2-2014: ACH Transactions Involving Third-Party Senders and Other Payments Intermediaries.

Recent ACH Operations Bulletins

Towards the end of the year, NACHA release a couple of Operations Bulletins that may have flown under the radar. The first one is ACH Operations Bulletin #3-2017, released September 2017. Unlike most NACHA Operations Bulletins, this was not made public because it details fraud mitigation strategies for social media schemes. Each NACHA member should have received this bulletin, but if for some reason you cannot find it, you may want to contact NACHA to get a copy.

The second Operations Bulleting was #4-2017, issued November 2017. The bulletin provides risk mitigation strategies for consumer-to-other-consumer (C2C) debits for financial institutions and their service providers. Something to note from this bulletin is that "NACHA strongly discourages ODFIs from facilitating these payments unless the ODFI is certain of its full compliance with all rules that apply to the origination of all ACH debits, regardless of the nature of the Originator." So if your credit union is considering offering C2C debits, this is a good bulletin to keep in mind when establishing internal controls.

Finally, NAFCU recently hosted a webcast on ACH Operating Rules in 2018 that is available on-demand and goes over all these rule changes as well as NACHA rule proposals and available resources.