CUNA Comment Letter

Proposed Limit of Three Presentments Per ACH Item Returned NSF

July 17, 2001

Mr. William Colbert
Network Services Associate
NACHA – The Electronic Payments Association
13665 Dulles Technology Drive
Suite 300
Herndon, Virginia 20171

Dear Mr. Colbert:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on NACHA’s proposed rule to limit automated clearinghouse (ACH) items to three presentments. As a national trade association, CUNA represents more than 90 percent of the nation’s 10,600 state and federal credit unions. This letter reflects the opinions of those credit unions and was developed under the auspices of CUNA’s Payment Systems Subcommittee, chaired by Terry West, President and CEO of Jax Navy Federal Credit Union, Jacksonville, Florida. In summary, CUNA supports the proposal and recommends that it be adopted as early as possible.

Under this rule, any ACH file or related item could only be presented for payment three times. Certain ACH items, including the RCK and PPD Accounts Receivable entries, already are limited to three presentments. This proposal would extend that limit to all standard entry class (SEC) codes, and would become effective on March 15, 2002. Receiving depository financial institutions (RDFIs) would not need to modify their software to comply with the proposal.

CUNA supports the proposal and asks NACHA to clarify that the proposal does not expand the circumstances under which an ACH return may be represented. The current NACHA Operating Rules (Rules) permit the reinitiation of ACH entries only when 1) the entry was returned for insufficient or uncollected funds, 2) the entry was returned for stop payment and the consumer has authorized reinitiation, or 3) the originating depository financial institution has taken corrective action to remedy the reason for the return. Thus, this rule should only apply to NSF or uncollected funds returns. If an ACH item does not fit within the current three reasons, then it should not be returned. And the Rules should not be interpreted to allow three returns for any reason other than NSF.

CUNA believes that NACHA should limit all types of ACH entries to a total of three presentments. The absence of a limit for some SEC codes creates inconsistency and harms consumers and RDFIs. Consumers are harmed when items are presented multiple times because they are charged a non-sufficient funds (NSF) fee for each return and multiple returns create numerous NSF fees. Their credit unions are also harmed because credit unions in turn receive consumer complaints, which they must handle and research. This rule would reduce these problems and improve the ACH system for credit unions and their members.

Because there are benefits to RDFIs and consumers from this proposal, CUNA requests that NACHA implement this rule as quickly as possible. An implementation date before March 15, 2002 would be preferable. In fact, NACHA should implement this change at its next routine date for rule changes, which could be as soon as September 2001.

CUNA also asks that you distribute for consideration a proposed time limit on reinitiation of returns. Credit unions have seen ACH returns presented again after six months or even after a year. By this time, financial institutions may have destroyed the original file and these late representments are even more expensive and time consuming. As checks are considered stale dated after six months, CUNA requests that NACHA ask ACH participants whether this should be the case for ACH items as well.

For the reasons stated above, CUNA supports the proposal in its current form. CUNA also commends NACHA for initiating this positive change to the ACH system that will benefit consumers and RDFIs. Such beneficial changes add credibility to the ACH system that benefits all ACH participants. To supplement these positive changes, CUNA urges NACHA to proceed to address the lack of a time limit on ACH reinitiation. If you have any further questions, please contact CUNA Assistant General Counsel Michelle Profit at (202) 682-4200.


Michelle Q. Profit
Assistant General Counsel