CUNA Comment Letter
NCUAs Proposed Rule and Guidance on Response Programs for Unauthorized Access to Member Information
January 9, 2004
Ms. Maribel Bondoc
Network Services Assistant
NACHA The Electronic Payments Association
13665 Dulles Technology Drive
Herndon, Virginia 20171
Dear Ms. Bondoc:
The Credit Union National Association (CUNA) appreciates the opportunity to comment on the concept of charging fees to originating depository financial institutions (ODFIs) when they return certain automated clearing house (ACH) entries. CUNA, a national trade association, represents more than 90 percent of the nations 10,000 state and federal credit unions. CUNA opposes this concept because there are alternative concepts that are less burdensome that could help reduce the return rate.
The request for comment presents the concept of possibly charging fees for certain ACH entries that are returned. There are no fees currently imposed for return entries. The concept presented by NACHA would work in the following way:
- NACHA would charge fees to ODFIs for all Unauthorized (R07, R10, and R29) and Invalid Account (R03 and R04) ACH debit entries that are returned by RDFIs.
- These fees would be distributed to receiving depository financial institutions (RDFIs).
- The fees that all RDFIs receive would be discounted by the percentage of times that all RDFIs cause returns. For instance, if RDFIs were determined to cause 20% of Unauthorized returns, then RDFIs in the system would only receive 80% of the fee.
Summary of CUNA's Views
- CUNA strongly opposes the concept of charging fees to all ODFIs for the following reasons:
- This approach represents a complex, global solution that affects all ACH participants.
- This approach encourages ACH participants to change their behavior in ways that could increase the number and cost of processing ACH returns.
- The fees impose administrative burdens on RDFIs and ODFIs.
- The fees would be passed to consumers.
CUNA strongly opposes the introduction of fees into the ACH system because more limited alternatives, directed to responsible participants seem to have worked in the past. For instance, NACHA has been able to dramatically lower returns for TEL entries, ACH entries created over the telephone, by working with ODFIs and originators that create a disproportionate number of the returns. A better alternative would be for NACHA to work with those ODFIs and originators that are creating disproportionate returns rather than impose a complex, costly system on every ACH stakeholder.
Similarly, NACHA should continue to pursue other recent risk reduction measures. These measures have included ACH operations bulletins on risk management, streamlining NACHAs rules enforcement mechanism, providing industry education, and providing briefings and other assistance for federal consumer protection and financial regulatory agencies. We believe these measures have been effective and practicable for all participants, and should help make the ACH system more effective.
CUNA strongly opposes this proposal because it may encourage institutions to change their behavior in detrimental ways that increase the cost of processing ACH returns. For instance, RDFIs may research an entry. If RDFIs received fees for returns, then they may stop posting ACH debits with incorrect account information and just return these items instead. If institutions changed their behavior in this manner, then the number of ACH returns in the system would increase. On the other hand, this proposal may encourage ODFIs to request affidavits more frequently, when an ACH item is returned. This modification would increase the burden of handling returns for ODFIs and RDFIs. The behavioral changes prompted by the proposal could outweigh any of the perceived benefits.
Similarly, CUNA opposes this proposal because establishment of a fee system would impose administrative burdens on RDFIs and ODFIs. In particular, establishing a fee system would require ODFIs and RDFIs to hire additional staff to monitor the payment and collection of fees, and to track ACH return experiences for the purpose of establishing fee discounts in the future. In addition, tracking ACH return experiences would be especially costly because it would likely require time-consuming and labor-intensive follow-up with RDFIs and consumers to determine and document which party was at fault for the return. Both ODFIs and RDFIs would have to expend resources to monitor and validate the accuracy of such a fee system as well as attempt to track and substantiate return experiences to justify future discount percentages.
Finally, CUNA believes that the imposition of fees would make this proposal more expensive for consumers to use the ACH system because ODFIs would pass these fees along to the originators and possibly to consumers.
For all the reasons cited above, CUNA strongly opposes this proposal to introduce return fees into the ACH network. CUNA urges NACHA to develop and expand successful initiatives already in place before proposing new risk management initiatives, especially ones that would impose costly administrative burdens on the ACH network and ACH stakeholders. If you have any further questions, please contact CUNA's Senior Vice President and Associate General Counsel Mary Dunn or me at (202) 638-5777.
Michelle Q. Profit
Assistant General Counsel