CUNA Comment Letter

ACH Network Quality Survey

Sent via Facsimile

March 15, 2000

Debbie Barr, AAP
Assistant Director
NACHA - The Electronic Payments Association
13665 Dulles Technology Drive
Suite 300
Herndon, Virginia 20171

Dear Ms. Barr:

The Credit Union National Association (CUNA) is pleased to comment on the ACH Network Quality Survey. As a national trade association, CUNA represents more than 90 percent of the nation's 11,000 state and federal credit unions and solicits the opinions of these credit unions on relevant matters. The following comments were developed by CUNA with input from credit unions and the Payment Systems Subcommittee (Subcommittee), led by Mr. Stan Hollen, President and CEO of The Golden 1 Credit Union in Sacramento, California. This Subcommittee includes officials from credit unions that provide ACH services to their credit union members.

CUNA distributed questions to credit unions and members of the Subcommittee, responses to these questions mentioned that a few practices decrease the quality of the ACH network. These factors and possible solutions are discussed below.

According to numerous credit unions and Subcommittee members, multiple presentments of ACH items are the most serious concern detracting from the quality of the ACH network. A few credit unions stated that they have seen merchants present an ACH item six or seven times. This practice is very expensive for credit union members, who incur additional charges every time an item is presented in an account without funds. Credit unions report that across the board, for represented check, point of purchase pilots and other ACH items, they see multiple presentments. CUNA recommends that NACHA limit the number of times that any ACH item may be presented to a total of three times. Currently, represented check entries are limited to a total of three presentments, whereas the Consumer-as-Keeper pilot has no limit on presentments. A clear limit that covers all ACH items would produce one rule on the number of presentments that, hopefully, would reduce confusion among merchants and help them comply with the rule.

Numerous credit unions also found that ACH quality was affected because checks that have had a stop payment order placed on them are cleared as ACH items. If a share draft item is returned to a merchant because a member has placed a stop payment on it, then truncation of the share draft should be an explicit rules violation. Sometimes a merchant may not know that a stop payment order has been placed on a check. As a result, CUNA also recommends that the existing rules and new rules become consistent about locating the check number at the same place in the ACH file for all ACH items, so that software systems can readily identify the share draft. Without consistency, credit unions will be forced to continue manual exception processing for all share drafts subject to stop payment orders.

Several other merchant practices were mentioned as factors that decrease the overall quality of the ACH network. Merchants sometimes neglect to notify or advise members that their checks may be truncated. And some merchants add fees to their ACH items or process checks after the ACH item has been presented. All of these actions are already violations of the ACH rules; however, NACHA should encourage educational efforts to ensure that merchants comply with these rules.

Another factor that may detract from ACH quality is the inaccessibility of merchants and originators. Credit unions need to contact a company representative when a company continues to send debits after a member has withdrawn authorization or when a company has an ACH item that needs to be corrected. Credit unions, however, often have trouble finding the correct contact person. CUNA and credit unions suggest that ACH participants be listed online so that companies and financial institutions are able to resolve these ACH network problems among themselves.

CUNA believes that the quality of the ACH network may be improved by encouraging all network participants to work together to resolve problems and by educating merchants about the ACH rules mentioned above.

CUNA also recommends that NACHA delay introduction of more pilots until the rules for existing pilots are final, so that credit unions and other financial institutions have time to implement some solutions. For example, some credit unions will be able to implement new systems in the fall to help them cross reference checks with stop payments to a corresponding ACH item. New software for some of the pilots, however, cannot be effectively implemented until the final rules for some of the new truncation pilots are in place.

CUNA and credit unions would also like to state that the regional ACH associations are essential to maintaining the quality of the ACH network. These associations provide training and information to many credit union employees.

In closing, CUNA commends NACHA for conducting this review of ACH network quality and appreciates the opportunity to provide our comments. CUNA has completed a NACHA survey, which is enclosed. Please do not hesitate to call Mary Mitchell Dunn, Senior Vice President and Associate General Counsel or Michelle Q. Profit, Assistant General Counsel at (202) 682-4200, if you have any questions.


Stanley C. Hollen
Payments Systems Subcommittee Chair