CUNA Comment Letter
CUNA Supports Electronic Conversion of Corporate Checks
January 31, 2003
Mr. William Colbert
Network Services Manager
NACHA The Electronic Payments Association
13665 Dulles Technology Drive
Herndon, Virginia 20171
Dear Mr. Colbert:
Credit Union National Association (CUNA) appreciates the opportunity to comment on a proposal issued by NACHA that would allow certain automated clearing house items (ACH) to be created from the electronic conversion of corporate checks that do not contain an auxiliary on-us field in the MICR line. CUNA, a national trade association, represents more than 90 percent of the nations 10,000 state and federal credit unions.
Summary of CUNA's Views
The proposal would change the NACHA Operating Rules in numerous ways. It would allow the conversion of corporate checks; limit the maximum amount of share drafts/checks eligible for conversion to $25,000; eliminate the requirement that an Originator (usually a merchant) retain a copy of the back of the Receivers (consumer or corporate that pays the ACH debit) share draft for two years; and establish a requirement that the receiving depository financial institution (RDFI) send or make available to the Receivers the check serial number for certain applications.
- In general, CUNA supports allowing the conversion of corporate checks into ARC entries (ACH items created from check bill payments), POP entries (ACH items created from a check at the point of sale), and RCK entries (ACH items created from bounced checks) as long as they do not contain an auxiliary on-us field.
- CUNA also believes that the maximum amount for share drafts/checks eligible for conversion under ARC, POP and RCK applications should be set at $25,000.
- CUNA supports the proposal that would eliminate the requirement that Originators of ARC entries retain a copy of the back of the Receivers check for two years, as long as the Originator must retain the front.
- CUNA also supports requiring RDFIs to send a periodic statement to non-consumer accounts that contain the check serial number for each ARC, POP and RCK entry.
- CUNA believes that the proposed September 2003 date should be delayed to allow additional time for demand deposit account (DDA) and ACH systems to be integrated for stop payments as well as for corporations to change their check stocks to opt out of truncations.
CUNA supports the proposal that would allow for the electronic conversion of corporate checks into ARC, POP and RCK entries. As a result of this proposal, NACHA would allow corporate Receivers to use the extended 60-day return time for unauthorized items that consumers currently use. NACHAs proposal would increase the number of checks that could be transmitted electronically, without burdening corporate entities that are not yet prepared to have their checks converted.
CUNA also supports the new $25,000 maximum for share drafts/checks that are eligible for conversion under ARC, POP and RCK applications. The proposed higher limit encompasses the majority of all check payments while mitigating the risks related to the truncation/conversion of large value payments. In addition, this limit would not burden RDFIs or originating depository financial institutions (ODFIs) since the ACH Operator would automatically return any ARC, POP or RCK entry that exceeds the limit.
CUNA also agrees with adding a new ODFI warranty to require ODFIs to transmit RCKs in a manner as to make those entries available to the RDFI before 2:00 p.m. This modification would allow NACHA to increase the limit on RCK entries from $2,500 to $25,000 and keep the return time frame under Regulation CC consistent with ACH return times. Regulation CC requires that a paying bank return a check over $2,500 or more within time to provide notice of non-payment to the depositary bank by 4:00 p.m. If the ODFI were allowed to return the item to the RDFI later, the Regulation CC deadline may not be met.
CUNA supports elimination of the requirement that the ARC Originator retain a copy of the back of the Receivers source document for two years. The Originator would still need to maintain a copy of the front of the Receivers initial share draft or check. CUNA believes that there is no legal or business reason for retaining the back, as long as third party checks are ineligible for truncation into ARC entries.
This proposal would also require RDFIs to place the check serial number numbers for ARC, POP and RCK entries on periodic statements for non-consumer accounts. This requirement will help Receivers identify transactions that occur on their accounts, which will reduce the number of inquiries to RDFIs.
CUNA does not agree with the proposed September 2003 implementation date. Some credit unions may need additional time to ensure that their demand deposit accounts (DDA) and ACH systems are integrated for stop payments. Moreover, those financial institutions that want to allow their corporate accounts to opt-out may need time to change their check stock so that corporate checks have the auxiliary on us field.
CUNA commends NACHA for examining ways to increase the usage of the ACH network. If you have any further questions about these comments on this proposal, 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