CUNA Comment Letter

Modifications to the NACHA Operating Rules Related to Revisions to Regulation E

July 31, 2006

Maribel Bondoc
Manager Network Rules
NACHA – The Electronic Payments Association
13665 Dulles Technology Drive
Suite 300
Herndon, Virginia 20171

Dear Ms. Bondoc,

The Credit Union National Association (CUNA) is pleased to respond to NACHA’s modifications to its Operating Rules related to Regulation E revisions. This letter was prepared under the auspices of CUNA’s 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 nation’s nearly 8,900 state and federal credit unions, which serve nearly 87 million members.

Summary of CUNA’s Position

Discussion of CUNA’s Views

We support NACHA’s proposal to modify its Operating Rules so that they are consistent with the mandatory changes required by Regulation E. Merchants that use information from a check to initiate a one-time electronic fund transfer (EFT) must obtain authorization from the consumer. Authorization is obtained when the merchant provides a notice to the consumer that the check will be converted to an EFT and the consumer proceeds with the transaction. Under the current Regulation E, a merchant must disclose on the notice that it may collect the payment either as an electronic fund transfer or process it as a check transaction. The notice must be posted in a prominent and conspicuous location at the point of sale and a copy of the notice must be provided to the consumer at the time of the transaction. For account receivable (ARC) transactions, this notice will typically be provided on a billing statement or invoice.

NACHA is proposing to modify the current rules regarding the notice requirement for ARC entries to incorporate the Regulation E’s Safe Harbor language. A specific requirement to the NACHA Rules would be added that the Originator of ARC and POP entries must provide notice that payment by check authorizes an ACH debit to the Receiver’s account. We support this modification as it maintains consistency and clarity for consumers as well as aides consumer understanding of electronic check conversion ACH transactions. In addition, consistency between the recent Regulation E changes and the Rules improves the ability of depository institutions and Originators to comply with the various rules governing ACH transactions.

We also fully support NACHA’s proposed modifications to the authorization requirements for point of purchase (POP) entries incorporating the Regulation E safe harbor language for required notices. NACHA’s modifications would clarify to consumers that funds will clear their account quickly with EFT payments.

This proposal would also make minor changes to the rules regarding a Receiver’s right to recredit and a receiving depository institution’s right to adjustment for ARC, POP and Back Office Conversion entries (BOC). The changes would include language that clarifies that ARC and BOC entries that are converted even though a Receiver opted out would be unauthorized and could be returned for up to sixty days. We support these modifications but note that the likelihood of duplicate transactions may increase and research may take longer since checks and ACH transactions are cleared through separate payment systems.


CUNA supports NACHA’s proposal to modify its Operating Rules to incorporate changes necessary to ensure compliance with the recent Regulation E revisions. These changes would make the Federal Reserve regulations and NACHA Operating Rules more consistent, which would clarify rules for both consumers and financial institutions. If you have any questions, please contact me at (202) 638-5777.


Lilly Thomas