The Department of Treasury, Bureau of Fiscal Service (Fiscal Service) is proposing to amend Title 31 CFR Part 210, which governs the ACH Network by Federal agencies, by incorporating the amendments made to the National Automated Clearing House Association (NACHA) Operating Rules and Guidelines (Rules) in years 2017, 2018, and 2019. The Bureau is proposing to incorporate the following amendments:
- In 2017, NACHA implemented the new Third-Party Sender Rule that requires every Originating Depository Financial Institution (ODFI) to register its third-party senders with NACHA or to indicate they do not have such customers. Federal agencies and the Fiscal Service do not utilize third-party senders, so this new rule does not affect the federal government.
- In 2018, NACHA made several amendments to the Rules, as follows, among other minor edits and clarifications:
- First, Receiving Depository Financial Institution’s (RDFI) may now use Return Reason Code 017-File Record Edit Criteria to indicate that the RDFI believes that an ACH entry contains invalid account information due to questionable, suspicious, or anomalous circumstances. This return code differentiates between returns that appear to be suspicious and returns due to routine account number issues allowing agencies greater insight to whether transactions are returned because they are suspicious or questionable.
- Second, Originators of internet-initiated, or WEB, debit entries must now validate an account number as part of their “commercially reasonable fraudulent detection system” that is required via NACHA’s current screening requirement. This is proposed to be incorporated in hopes to reduce unauthorized debits originated by agencies and resulting fraud loss to the government. NACHA’s effective date for this rule is March 19, 2021; however, due to the cost of implementation of this “account validation,” the Fiscal Service expects to delay its effective date beyond NACHA’s.
- Third, NACHA is expanding its current ACH Security Framework, which requires Financial Institutions, Originators, Third-Party Service Providers, and Third-Party Senders to establish, implement, and update security policies and procedures related to initiation, processing, and storage of ACH entries, by requiring large non-financial institution Originators, Third-Party Service Providers, and Third-Party Senders to protect account numbers used in the initiation of ACH entries by rendering them unreadable when stored electronically. NACHA makes this rule effective in phases: (1) any of the above-named parties that originate more than 6 million or more ACH transactions in 2019 will need to be compliant by June 30, 2020, and (2) any of the above-named parties that originate more than 2 million or more ACH transactions in 2020 will need to be compliant by June 30, 2021.
- In 2019, NACHA made several amendments related to funds availability and Same Day ACH entries:
- First, NACHA created the Faster Funds Availability rule that states that funds from non-Same Day ACH credits that are made available to the RDFI by 5:00p.m. RDFI local time on the banking day before settlement will be available to the receiving customer for withdrawal on the Settlement Date by 9:00 a.m. RDFI local time. This would impact recipients that receive non-Same Day ACH payments by providing them earlier access to their funds from their financial institutions.
- Second, NACHA increased the per-transaction dollar amount for Same Day transactions from $25,000 to $100,000. This rule will become effective in NACHA on March 20, 2020.
- Third, NACHA created a new Same Day processing window that allows ODFIs to submit Same Day ACH entries to ACH Operators until 4:45 p.m. EST. If the RDFIs receive and settle these entries timely, then they will need to make funds available by the end of the processing for that Settlement Date. This rule will allows the federal government to originate Same Day ACH payment later in the day than what is currently available. NACHA’s effective date is March 19, 2021.
- In 2019, NACHA also re-purposed return reason code R11 that will be used when a receiving customer claims that there was an error with an otherwise authorized payment. NACHA will make this effective on April 1, 2020.
The Fiscal Service is also requesting comment to its proposal to amend sections in 31 CFR Part 210 Subpart B, which governs the reclamation of post-death Federal benefit payments from financial institutions. The Fiscal Service proposes to apply the definition for “actual or constructive knowledge of death” to agencies as well as RDFIs (currently the definition only applies to RDFIs). Also, the Bureau proposes to require an agency to investigate and determine whether to initiate a reclamation within 120 days following the first missed payment if that agency has stopped certifying recurring payments to a recipient they believe to be deceased.
The Fiscal Service is accepting comments on the proposed rule until February 3, 2020. The notice of proposed rulemaking can be found here.