Stop Payment Rules -- NACHA Rules and Regulation E

VIA: Email: mbondoc@nacha.org

June 30, 2008

Maribel Bondoc
Manager, Network Rules
NACHA – The Electronic Payments Association
13450 Sunrise Valley Drive, Suite 100
Herndon, VA 20171

RE: Stop Payment Issues – NACHA Rules and Regulation E

Dear Ms. Bondoc:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on NACHA’s Request for Comment on its rules regarding stop payment issues. This comment letter was developed under the auspices of the CUNA Payments Policy Subcommittee, which is chaired by Terry West, President and CEO of VyStar Credit Union, Jacksonville, Florida. By way of background, CUNA is the largest credit union trade organization in this country, representing approximately 90 percent of our nation’s approximately 8,300 state and federal credit unions, which serve more than 90 million members.

Summary of CUNA’s Views

NACHA is proposing amendments to its rules on stop payment authorizations to re-align them with the Federal Reserve Board’s official staff commentary on stop payments of pre-authorized electronic debits. A summary of CUNA’s views is below:

Discussion of CUNA’s Views

NACHA is proposing to revise the requirements for the application of stop payment orders to automated clearing house (ACH) entries to consumer accounts to make them consistent with the Board’s official staff commentary on stop payments of pre-authorized electronic debits.

Currently, NACHA Operating Rules (Rules) allow a consumer receiving ACH debits to place a stop payment order on a single debit entry, similar to the placement of a stop payment order on a check in the check collection system. If a Receiver wishes to stop all debits from a specific Originator, he/it must revoke authorization by contacting the Originator. The stop payment is in effect for six months from the date of the stop payment order, until the debit entry has been stopped, or until the Receiver withdraws the stop payment order, whichever occurs first.

NACHA is proposing to eliminate the six-month time period after which a stop payment order lapses, and expand the language addressing the number of entries to which a stop payment order would apply.

We believe these amendments would facilitate the ability of an RDFI to reconcile better its obligations under both the Rules and Regulation E. The Board’s official staff commentary on Regulation E states that a consumer’s right to stop payment of preauthorized electronic debits applies to all future debits from a specific Originator if that is the consumer’s intent, and that the financial institution must make arrangements so that no future debits are posted to the consumer’s account.

Additionally, the proposed amendments clarify that the stop payment order would remain in effect until all entries related to the Receiver’s stop payment instructions have been stopped, whether it is one entry, multiple entries, or all future entries related to a specific authorization, which facilitate compliance with both the Rules and Regulation E.

Further, permitting an RDFI to require a copy of the correspondence regarding the revocation of authorization between the Receiver and Originator would further assist the RDFI in understanding the stop payment instruction.

Thank you for the opportunity to express our views on the proposed revisions regarding stop payment orders to certain ACH entries. If you have questions about our letter, please do not hesitate to give Senior Vice President and Deputy General Counsel Mary Dunn or me a call at 202-508-6733.

Sincerely,

Lilly Thomas
Assistant General Counsel