(Approved November 2, 2011 – Effective January 1, 2012 and March 16, 2012)
SUmmary
These two amendments change the NACHA Operating Rules (Rules) to (1) eliminate the ODFI requirement to establish a separate exposure limit on Originators or Third-Party Senders of WEB Entries, and (2) permit the use of ARC for the conversion of checks tendered in person for the payment of a bill at a manned location. These issues were identified in the rule-making process as “pain points;” these amendments respectively eliminate a requirement that no longer adds value to ACH Network users, and improve ACH processing efficiency. The changes to WEB implements on January 1, 2012, while the change to ARC implements on March 16, 2012.
January 1, 2012 Implementation Date
KEy cOmPOnEnTS Of rUlE amEnDmEnT
Elimination of WEB Exposure Limits
This amendment removes the requirement that ODFIs establish separate WEB exposure limits for Originators and Third-Party Senders initiating WEB entries. The implementation of the Risk Management and Assessment Rule in June 2010 effectively superseded the requirements for WEB-specific exposure limits by requiring ODFIs to establish exposure limits for all Originators and Third-Party Senders that take into account the Originator’s or Third-Party Sender’s ACH activity and the risk it presents. Accordingly, the exposure limit provision related only to WEB entries is duplicative of the newer and broader risk management rules.
In addition to the change above, there were two places where the newly adopted risk management rule language was not aligned with the WEB-specific language: 1) that the exposure limit and related procedures be “implemented” in addition to “established,” and 2) that the exposure limit be periodically reviewed. This amendment also makes these corresponding changes so that the newer language addresses implementation and periodic review.
TEcHnIcal SUmmary
The changes to the Rules language, as noted below, represent modifications to the 2012 NACHA Operating Rules. However, because the January 1, 2012 effective date of this amendment coincides with the effective date of the 2012 rules set, the Rules do not contain markings to specifically highlight this new language.
• Article Two, Subsection 2.2.2 (ODFI Risk Management) – incorporates language addressing
“implementation” and “review” of exposure limits established by the ODFI.
• Article Two, Subsection 2.5.17.4(c) (Additional ODFI Warranties for WEB Entries – ODFI Exposure Limits) – removes the ODFI warranty regarding the establishment of a specific exposure limit on an Originator’s initiation of WEB Entries.
• Appendix Eight, Parts 8.4 (c) and (d) (Audit Requirements for ODFIs) – incorporates language addressing “implementation” and “review” of exposure limits into part (c) and deletes the specific audit requirement addressing exposure limits for WEB entries under part (d).
2012 OPERATING RULES ORxliii March 16, 2012 Implementation Date
KEy cOmPOnEnTS Of rUlE amEnDmEnT
Modification of Accounts Receivable (ARC) Entries to Permit the Conversion of Checks Tendered In Person for the Payment of a Bill at a Manned Location
This amendment modifies the scope of the ARC application to permit the conversion of checks tendered in person for the payment of a bill at a manned location.
Under the current Rules, Originators of ARC entries may only convert checks received via U.S. Mail or at a drop box location. This limitation can create front- and back-end processing challenges for billers with mail-in/dropbox payments whose customers may also present a check payment during a service center contact. Instead of being able to personally accept the hand-delivered check, billers currently using the ARC application have to direct their customers to deposit their checks in a dropbox, which interrupts the flow of the service interaction. If billers desire to accept checks at their service windows, these checks currently need to be handled separately and processed as Back Office Conversion (BOC) Entries, which have additional authorization and processing requirements. In addition to increased processing and compliance costs, operating these two different processing streams can result in customer confusion.
Permitting the use of ARC for bill payment checks received through any delivery channel – mail, lockbox, and in-person at manned locations – will result in improved efficiency for some Originators, who will no longer have to maintain separate work flows based on how checks are received. Billers will also benefit by being able to provide a more seamless service experience for their customers.
This rule change modifies the ARC Entry definition and general rule to permit the conversion of a check received for an in-person payment of a bill at a manned location. To conform to Regulation E, the rule also requires Originators accepting bill payments in this in-person environment to provide a copy of the authorization notice, or language that is substantially similar, to the Receiver at the time of the transaction.
As a further point of clarification for the ARC application, this amendment also expands the ARC definition to recognize checks received via courier service as equivalent to those received via U.S. Mail. The current Rules language is silent with respect to payments delivered by FedEx or UPS, for example. This update acknowledges the use of ARC for source documents received via these types of widely used delivery services.
TEcHnIcal SUmmary
Effective March 16, 2102, each section of the Rules listed below will be revised to incorporate language permitting a check presented (1) via a delivery service, or (2) in person for the payment of a bill at a manned location, to be converted to an ARC entry:
• Article Two, Subsection 2.5.1.1 (General Rule for ARC Entries).
• Article Two, Subsection 2.5.1.2 (Authorization of ARC Entries by Notification).
• Article Two, Subsection 2.5.1.3 (Eligible Source Document Required).
• Article Eight, Section 8.1 (“Accounts Receivable Entry” or “ARC Entry” or “ARC”).
• Appendix Three, Subpart 3.2.2 (Glossary of Data Elements), “Standard Entry Class Code”.
2012 OPERATING RULES OR1