CUNA Comment Letter

ACH Audit Requirements

August 15, 2002

Mr. William Colbert
Network Services Manager
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 the proposed reforms to the automated clearing house (ACH) audit compliance rules proposed by NACHA. CUNA, a national trade association, represents more than 90 percent of the nation’s 10,300 state and federal credit unions.

Summary of CUNA's Views
CUNA has the following comments on the changes to the audit rules that would affect originating depository financial institutions (ODFIs) and receiving depository financial institutions (RDFIs):


CUNA supports verifying that accurate records of entries are retained, and can be retrieved and reproduced as necessary. The NACHA Operating Rules currently require that depository financial institutions retain records of entries for six years from the date the entry is transmitted, and that these records or adequate copies can be retrieved if requested. CUNA supports the additional measure that would require that ODFIs and RDFIs verify that they can retain and retrieve records in compliance with the NACHA Operating Rules. Earlier this year, NACHA allowed records to be obtained and retained electronically. CUNA supports this latest measure that would require ODFIs and RDFIs to verify the accuracy of these electronic records and their ability to reproduce electronic records for later reference.

CUNA supports the requirement that financial institutions ensure compliance with general funds availability rules for ACH credit entries. The amendment to the rules would require that RDFIs verify that they are providing funds availability for all credit entries by making funds available for withdrawal on the settlement date. Currently, the audit requirements focus on making funds available for only certain types of ACH entries.

CUNA supports the requirements that RDFIs confirm that their periodic statements contain required data for accounts receivable and point- of-purchase ACH entries, as well as other statement data required within the NACHA Operating Rules. Accounts receivable entries, ACH entries created from share drafts used to pay bills, are supposed to have the check serial number of the entry printed on the consumer’s statement. In addition, recent amendments to point-of-purchase rules require the inclusion of the state and city of the point-of-purchase terminal on the statement.

CUNA supports verifying that copies of written statements under penalty of perjury are provided to ODFIs when requested and that such written statements are obtained for all appropriate return reason codes. The NACHA Operating Rules currently require that an RDFI provide a consumer’s copy of a written statement under penalty of perjury to the ODFI within sixty days after receiving a written request for such a copy from the ODFI. The rule amendment would update the return reason codes requiring written statements under penalty of perjury and include, as part of the audit, a requirement that the RDFI ensure that it is providing these copies in a timely manner. CUNA believes that this rule section should simply direct auditors to verify that RDFIs have appropriate procedures in place to instruct employees how to handle ODFI requests for copies of written statements from consumers. As part of that process, this section should direct the auditor to verify that employees are following these procedures.

CUNA supports an audit requirement that would require a financial institution to review its procedures to ensure compliance with Regulation E; however, this review should be limited to ACH transactions. Regulation E applies to ACH transactions as well as non-ACH transactions. An extension of the scope beyond ACH transactions is unnecessary because financial institutions already are examined for compliance with Regulation E by federal regulators, and financial institutions must comply with Regulation E by law anyway. Therefore, if a rule section is added that requires a review of internal procedures and customer agreements to ensure compliance with Regulation E, then that section should clarify that this requirement applies only to procedures and agreements related to ACH transactions.

CUNA supports an audit requirement to verify that stop payment orders are being properly conducted. The amendment would expand the audit rules to require that ODFIs and RDFIs verify that they are acting on stop payment orders placed by their customers in compliance with the NACHA Operating Rules. CUNA believes that the proposed change should require that auditors check to make sure that procedures for handling stop payment orders exist and are being followed by employees. The proposed working in this section should be clarified and simplified as follows: “For all consumer entries except ARC, POP, RCK, TEL, and Single Entry WEBs, ensure the RDFI has proper stop payment procedures in place and that these procedures are being followed.--

CUNA commends NACHA for examining ways to strengthen and update the audit requirements for ACH. If you have any further questions, please contact CUNA's Senior Vice President and Associate General Counsel Mary Dunn or me at (202) 638-5777.


Michelle Q. Profit
Assistant General Counsel