CUNA Comment Letter
Consumer Opt Out for Conversion of Checks to ACH
December 2, 2003
Ms. Maribel Bondoc
Network Services Assistant
NACHA The Electronic Payments Association
13665 Dulles Technology Drive
Suite 300 Herndon, Virginia 20171
Dear Ms. Bondoc:
The Credit Union National Association (CUNA) appreciates the opportunity to comment on the proposal by NACHA to require that merchants provide consumers with the option to choose not to convert their share drafts or checks to automated clearing house (ACH) items. CUNA, a national trade association, represents more than 90 percent of the nations 10,000 state and federal credit unions. CUNA supports the proposed changes because choice would enhance the legitimacy of the consumers authorization and minimize consumer complaints.
The request for comment proposes to modify the NACHA Operating Rules in the following ways:
- The proposal would require that the merchant (Originator) provide the consumer of Accounts Receivable Entries (ARC entries) with notice that the consumer has the option to choose not to convert their share draft to an ARC. An ARC entry is created when a merchant converts a check that is mailed or delivered to a drop box to pay bills into an ACH item.
- The notification would be provided to the consumer prior to the receipt of the first source document and at least once in each subsequent 12-month period. Those merchants or billers who already have an ARC program would not have to provide the initial notice to the consumer, but would need to provide an opt-out notice at least once in every 12- month period.
- The implementation date for the proposal would be March 12, 2004.
Summary of CUNA's Views
- CUNA supports the modification of the NACHA Operating Rules to require that the biller provide the consumer with notice that the consumer has the ability to choose not to allow the biller to convert his or her share draft into an ACH item.
- CUNA supports a one-time notice about this option and opposes the proposed requirement for more frequent notification.
CUNA supports notification and consumer choice because such requirements provide more credibility to the authorization process. If consumers are provided with a choice, credit unions believe they will ultimately claim fewer unauthorized entries and will contact credit unions less frequently to inquire about ARC transactions. This would improve the current process, whereby consumers have no option, and complain if they do not understand or accept the conversion. According to NACHA, consumers have complained to financial institutions, billers, financial institution regulators, and state and Federal legislatures.
CUNA supports a one-time notice requirement and opposes more frequent notification requirements because they are unduly burdensome. A one-time notice to a consumer before the first ARC is initiated is sufficient. If consumers have complaints, they will opt out initially or after seeing the first periodic statement. CUNA opposes a requirement to provide such a notice on an annual or periodic basis thereafter. The consumers who would choose to opt out have probably already done so. The benefits of sending subsequent notices do not justify the costs to print and mail such notices.
CUNA opposes the addition of a sunset provision to the proposal. This rule was changed because of legitimate concerns; therefore, the rule should not be eliminated unless those concerns are addressed. NACHA should first review this rule to make that determination and consider the impact of its rescission before actually rescinding it. If the Check Clearing for the 21st Century Act and other changes make this rule unnecessary, then NACHA can change the rule with its normal procedures.
CUNA supports the proposal that allows the receiving depository financial institution (RDFI) to return an ARC using the Return Reason Code R10 (Notice Not Provided), when a consumer does not receive the opt-out notice. However, while CUNA believes that R10 is sufficient in that case, CUNA believes that a new return reason code should be created to indicate when an ARC transaction is being returned because the Receiver chose not to have his check converted to an ARC entry. Creating a return reason code for this purpose would alert billers to the true reason for an ARC return and enable them to act appropriately.
CUNA supports the proposal to provide consumers with a choice regarding whether their share drafts should be converted to an ARC. 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