CUNA Regulatory Comment Call


April 25, 2003

(NOT A MAJOR RULE)

ACH Arbitration Procedures

EXECUTIVE SUMMARY

NACHA-The Electronic Payments Association has issued a request for comments on its proposal to modify arbitration procedures for automated clearing house (ACH) participants that choose arbitration under the NACHA Operating Rules. Comments on the proposal are due by May 30, 2003. The proposal would classify disputes into three categories and apply three sets of arbitration rules as follows:

Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Associate General Counsel Mary Dunn at mdunn@cuna.com and to Assistant General Counsel Michelle Profit at mprofit@cuna.com; or mail them to Mary and Michelle in c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, D.C. 20004-2601. You may also click here for a copy of NACHA’s request for comments.

NACHA asks that credit unions complete a survey to provide comments on this rule change. If you would like to respond directly to NACHA and copy CUNA you may do so by using their survey form.

Comments sent directly to NACHA should be sent to William Colbert, Network Services Manager, NACHA, 13665 Dulles Technology Drive, Suite #300, Herndon, VA 20171, fax: (703) 787-0996 or email:
wcolbert@nacha.org, no later than Friday, May 30, 2003. Please provide CUNA a copy by sending your comments to Michelle Profit at mprofit@cuna.com.

BACKGROUND

In April 1988, an amendment to the NACHA Operating Rules became effective that incorporated rules and procedures for the arbitration and settlement of disputes between parties involved in ACH transactions. In March 1999, NACHA made changes so that both parties had to agree to submit a dispute to arbitration before the arbitration procedure could be used. To date, only a few ACH disputes have been handled under NACHA’s arbitration process, and no additional disputes have been submitted since the procedures were revised in 1999.

NACHA has proposed that arbitration be made mandatory at the request of one party for small amounts below $100,000. NACHA reasons that settling those disputes through the courts may be prohibitive. These options eliminate court fees and eliminate or reduce legal fees.

The rule amendment will require the selection of one arbitrator for Arbitration Procedure A and recommends the selection of three arbitrators to hear cases under Arbitration Procedures B and C. The existing procedures for selection of arbitrators, as described below, will continue to be used.

One arbitrator would be chosen to hear claims subject to Arbitration Procedure A. The arbitrator will continue to be selected by the following method:

(1) NACHA mails each party the same list of five arbitrators from among those on the Arbitration Board who are not affiliated with either party to the dispute;

(2) Each party is given ten days from the date the list is mailed to review the list, delete two names, and mail or deliver the remaining names to NACHA;

(3) NACHA compares the two lists and selects one arbitrator not deleted from either list to decide the case; and

(4) If either list is not returned within the time limit specified above, NACHA selects the arbitrator to decide the case from among the names not deleted on the list returned, or, if neither list is returned within the time limit, from among the names on the lists as mailed to each party.

Three arbitrators are chosen to hear claims subject to Arbitration Procedure B and C. Arbitrators will continue to be selected by the following method:

(1) NACHA mails each party the same list of ten arbitrators from among those on the Arbitration Board who are not affiliated with either party to the dispute;

(2) Each party has ten days from the date the list is mailed to review the list, delete three names, and mail or deliver the remaining names to NACHA;

(3) NACHA compares the two lists and selects three arbitrators not deleted from either list to decide the case; and

(4) If either list is not returned within the time limit specified above, NACHA selects the arbitrators to decide the case from among the names not deleted on the list returned, or, if neither list is returned within that time limit, from among the names on the list as mailed to each party.

QUESTIONS REGARDING THE PROPOSAL

  1. Does your credit union agree with the three levels of classification based on the dollar threshold for Arbitration Procedures A, B, and C: $250 to less than $10,0000, $10,000 to less than $100,000 and $100,000 or more? If not, what should the thresholds for Arbitration Procedures A, B, and C be? Please describe them.













  2. Does your credit union agree with the suggested modification to the NACHA Operating Rules to make Arbitration Procedures A and B mandatory as long as one party requests that? Why or why not?













  3. Does your credit union agree with the suggested modification to the NACHA Operating Rules to have one arbitrator decide cases under Arbitration Procedure A and three arbitrators decide cases under Arbitration Procedures B and C? Why or why not?













  4. Does your credit union agree with the suggested modification to the NACHA Operating Rules to extend the deadline for submitting an arbitration claim to three years from the date of the violation(s) asserted? The current deadline is one year.













  5. Are there any specific concerns that your organization has regarding the rule amendment proposed?













  6. Would this proposal be beneficial, detrimental or neutral for your credit union? Please explain.













  7. Please submit your name and address:













Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com