CUNA Comment Letter
Back Office Conversions
January 31, 2006
Manager Network Rules
NACHA The Electronic Payments Association
13665 Dulles Technology Drive
Herndon, Virginia 20171
Re: Back Office Conversion
Dear Ms. Bondoc,
The Credit Union National Association (CUNA) is pleased to respond to NACHAs proposal on Back Office Conversion. This letter was prepared under the auspices of CUNAs Payment Systems Subcommittee, which is chaired by Ralph Jones, Executive Vice President of the Georgia Credit Union Affiliates, Georgia. By way of background, CUNA is the largest credit union trade association, representing approximately 90% of our nations nearly 8,900 state and federal credit unions, which serve nearly 87 million members.
Summary of CUNAs Position
- CUNA supports allowing back office conversion of checks in amounts of $25,000.00 or less and without Auxiliary On-Us fields, which are typically used for business checks.
- CUNA believes the proposed definition of a new Point of Purchase (POP) entry, called POP Entry Processed in the Back Office conflicts with the recent final amendments to Regulation E and should be amended to clarify that the Receiver does not have to provide the check solely to effect a transfer through subsequent conversion to an ACH debit entry during back office processing.
- CUNA supports the requirement of Originators to provide each Receiver with a receipt at the point of purchase.
- CUNA supports the proposed requirement for the ODFI to employ commercially reasonable procedures to verify the identity of each Originator or Third-Party Sender of POP Entries Processed in the Back Office.
- CUNA supports requiring the merchants customer service phone number to be printed on the Receivers bank statement.
Discussion of CUNAs Views
We support allowing the back office conversion of checks in amounts of $25,000.00 or less and without Auxiliary On-Us fields, which identifies corporate or business checks. We believe this will be consistent with the new rules governing the conversion of business checks and will make it easier for merchants to implement.
NACHA is proposing to use the POP Standard Entry Class Code to address the requirements for a back-office conversion. This type of POP Entry, referred to in the rules provisions as this type of Point of Purchase entry would be called POP Entry Processed in the Back Office and defined as a single-entry debit initiated by an Originator to effect a transfer of funds from an account of the Receiver through subsequent conversion to an ACH debit entry during back-office processing. We believe the proposed definition conflicts with the recent final amendments to Regulation E. Recent final amendments to Regulation E allow Originators to obtain authorizations for checks to be processed either as source documents for ACH transactions or as checks by providing notice that checks received either will be used to initiate electronic check conversion transactions or will be processed as checks. NACHAs proposed definition could be interpreted as only permissible when the Originator has provided notice that checks received will be used to initiate ACH debit entries. We encourage NACHA to amend the proposed definition in Section 12.1.43 to clarify that the Receiver does not have to provide the check solely to effect a transfer through subsequent conversion to an ACH debit entry during back office processing.
The proposed rule would require Originators to provide each Receiver with a receipt at the point of purchase. We believe this requirement will help consumers understand what they are authorizing when they provide checks for payment at the point of purchase and support amending the proposed rules to include sample language. We believe requiring Originators to use substantially similar language would enable Originators to provide consistent notice to consumers. We believe that language in the ACH Rules should either match or provide more consumer protection than the model language in the recent final amendments to Regulation E.
It is important that prudent risk management practices are implemented and we believe that the proposed requirement for the ODFI to employ commercially reasonable procedures to verify the identity of each Originator or Third-Party Sender of POP Entries Processed in the Back Office would satisfy these practices. Additionally, maintaining specific information on each Originator originating these entries will allow NACHA to act quickly to limit the activities of any Originators who are originating unacceptably high numbers of unauthorized entries.
We support requiring the merchants customer service phone number to be printed on the Receivers bank statement. We believe that the inclusion of the customer service phone number on statements will benefit Receivers. Consumers are likely to lose receipts that they receive at point of sale terminals; however, we believe they are less likely to lose account statements. Further, consumers can request a copy of their statements from their financial institutions, which will memorialize these customer service phone number months after the transactions.
CUNA generally supports NACHAs proposal on back office conversion. If you have any questions, please contact me at (202) 638-5777.