CUNA Regulatory Comment Call

October 9, 2008

EXECUTIVE SUMMARY

• NACHA is proposing to revise the requirements for a Receiver’s written statement regarding an unauthorized ACH debit.
• The proposed amendments would rename the current “Written Statement Under Penalty of Perjury” to “Written Statement of Unauthorized Debit” and replace the requirement that the statement be made under penalty of perjury with an assertion that the statement is true and correct.
• The timeframe within which a receiving institution must respond to a request to produce the statement would be reduced from 60 days to 10 banking days.
• Specific information regarding the unauthorized debit entry would be required on the statement.
• NACHA is also proposing to consolidate the three return reason codes currently used to transmit adjustments to ACH entries into one return reason code, and establish subcodes that would more effectively convey the reason for the return.
• The effective date for provisions of the proposal not impacting ACH software would be December 18, 2009. Changes that would require modifications to software would have an implementation date of March 19, 2010.
• Please submit your comments to CUNA by October 24, 2008. Comments are due to the NACHA by November 7, 2008.

Please feel free to send your comments to CUNA SVP & Deputy General Counsel Mary Dunn at mdunn@cuna.com or to Assistant General Counsel Lilly Thomas at lthomas@cuna.com; or mail them to Lilly c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, D.C. 20004. Click here for a copy of this Request for Comment.

DISCUSSION OF PROPOSAL

Written Statement Under Penalty of Perjury

• NACHA is proposing to rename the current “Written Statement Under Penalty of Perjury” to “Written Statement of Unauthorized Debit” (Statement) and replace the requirement that the statement be made under penalty of perjury with a requirement that the Receiver asserts the statement is true and correct. This would clarify that a notarization is not required.

• Under the current Rules, an originating depository financial institution (ODFI) may request a copy of the WSUPP within one year of the date of the adjustment entry, and the RDFI has 60 days to provide the copy. NACHA is proposing to reduce the timeframe within which an RDFI has to respond from 60 days to 10 banking days, which coincides with the timeframe within which an ODFI must provide a copy of an authorization to an RDFI.

• The Statement must be signed and dated on or after the Settlement Date of the entry for which recredit is being requested. If a Receiver anticipates future debits for which he wants the payment stopped, an RDFI may incorporate the stop payment order on the same form as the Statement.

• More than one unauthorized debit entry may be documented on a Statement as long as all of the required information is provided for each entry.

• The following information must be included in the Statement for each unauthorized debit entry:
  • Name on account, account number and signature of Receiver;
  • Originator as identified in the Company Name field of the entry;
  • Posting date and dollar amount of the entry;
  • Reason for the return;
  • Date of the Signature;
  • Receiver assertion that Statement is true and correct; and
  • Receiver assertion that Receiver is authorized signer or has authority to act on the account.

• An RDFI would be required to retain the Statement, or a copy, for one year after the Settlement Date of the adjustment entry. Currently, there is no retention requirement.

Return Reason Codes

• The descriptions and technical specifications regarding the use of the return reason codes for Unauthorized Debit Entry (R10) and Improper Re-presented Check Entry (R51) would be revised to include in the Addenda Information Field an appropriate subcode identifying the return reason.

• The proposed subcodes to be used with Return Reason Code, Unauthorized Debit Entry (R10) would be:
  1. Receiver Advises Entry Was Not Authorized
  2. Consumer Receiver Advises Entry Was Not Authorized, and Corporate SEC Code Was Improperly Used
  3. Corporate Receiver Advises Entry Was Not Authorized, and Consumer SEC Code Was Improperly Used
  4. Terms of Authorization Were Unclear, Deceptive or Otherwise Invalid
  5. Customer (Receiver) Does Not Recognize Name of Originator
  6. Authorization Revoked by Receiver
  7. Notice for ARC, BOC, or POP Entry Not Provided
  8. Customer (Receiver) Opted-out of Check Conversion
  9. Improper Source Document for ARC, BOC, or POP Entry
  10. Entry Amount Different Than Authorized/Not Accurately Obtained From Source Document
  11. Entry Was Debited Prior to Date Authorized

• The proposal would re-categorize into subcodes return reason codes, R05 “Unauthorized Debit to Consumer Account Using Corporate SEC Code” (to become new subcode 02)) and R07 “Authorization Revoked by Customer” (to become new subcode 06) to be used with the newly revised return reason code R10.
• The proposed subcodes to be used with Return Reason Code, Improper Re-presented Check Entry (R51) would be:
  1. Item Was Not Eligible for Re-presentment as an RCK Entry
  2. Notice for RCK Entry Was Not Provided
  3. Signature(s) Not Genuine
  4. Item Was Altered
  5. Entry Amount Not Accurately Obtained from Item

Additional Proposed Changes

• NACHA is proposing to expand the existing requirements regarding an authorization to initiate an ACH entry by stating that any purported authorization that is unclear, deceptive or otherwise invalid under applicable law is not proper authorization.
• Under current NACHA Rules, an unauthorized transaction includes a debit entry initiated in an amount “greater than” that authorized by the Receiver. NACHA is proposing to replace the term “greater than” with “different than”.

1. Do you support the proposed requirement to provide specific information on a Receiver’s Statement that a debit was unauthorized?
   Yes _____
   No _____
   Please explain
   
   

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2. Do you believe the information that would be required on a Receiver’s Statement is sufficient?
   Yes _____
   No _____
   Please explain
   
   

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3. Do you support the shorter timeframe for an RDFI to respond to a request for a copy of the Receiver’s Statement of Unauthorized Debit from 60 days to 10 banking days?
   Yes _____
   No _____
   Please explain
   
   

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4. Do you support eliminating the requirement that a Receiver’s Statement of Unauthorized Debit be made under penalty of perjury?
   Yes _____
   No _____
   Please explain
   
   

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5. Do you agree with the proposed one-year record retention requirement for a Receiver’s Statement?
   Yes _____
   No _____
   Please explain
   
   

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6. Do you support eliminating the requirement that a Receiver’s Statement of Unauthorized Debit be made under penalty of perjury?
   Yes _____
   No _____
   Please explain
   
   

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7. Do you support the consolidating the return reason codes for unauthorized entries and establishing subcodes for use in the adjustment entry’s addenda record?
   Yes _____
   No _____
   Please explain
   
   

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8. Are there subcode reasons that should be included or removed?
   Yes _____
   No _____
   Please explain
   
   

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9. Do you support an implementation date of December 18, 2009 for changes that have no ACH software impacts and March 19, 2010 for the changes that require ACH software modifications?
   Yes _____
   No _____
   If not, what date would be more appropriate?
   
   

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10. Please provide any additional comments.
    
    

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