CUNA Regulatory Comment Call
May 15, 2001
ACH Rules for Payments to Federal Agencies
(NOT A MAJOR RULE)
The Department of Treasury (Treasury) proposes to revise the ACH rules that affect federal agencies when they attempt to convert check payments made to them into ACH debits. These rules would govern check payments made to a federal agency onsite, at a lockbox location, and over the Internet. These rules are similar to the ACH rules proposed for private institutions. However, there are a few differences, which are listed below. Comments on this proposal are due to Treasury by July 31, 2001.
- For point-of-purchase check conversions Treasury proposes to adopt the NACHA rules with the following exceptions:
- Treasury would not require a separate, written authorization for the customer to initiate an ACH debit. Treasury would provide notice. Consumers would be notified by signs at the point-of-purchase, as well as by disclosure on receipts and/or literature provided at the point-of-purchase, that presenting a completed, signed check for payment constitutes authorization to convert the check to an ACH debit.
- Treasury would eliminate the prohibition on converting corporate checks to ACH debits, so corporations could start to utilize this payment method.
- Treasury would adopt NACHA's rule for converting checks mailed to lockboxes into ACH debits with the following exceptions:
- Treasury would eliminate the requirement that a consumers' consent must include an opportunity for them to opt-in or pt-out of the process.
- Treasury would provide notice that the checks will be converted and convert all checks received.
- Treasury would allow agencies to originate ACH debits to corporate accounts.
- Treasury would adopt NACHA's rules to allow payors to use ACH debits to pay over the Internet for products, with the following exceptions:
- Treasury would eliminate the requirement that Treasury, as an originating financial institution, establish exposure limits for the federal agencies.
- Treasury would also allow the agencies to originate ACH Internet debits drawn on corporate accounts.
Please send your comments to CUNA by June 29. Please feel free to fax your responses to CUNA at 202-371-8240; e-mail them to Associate General Counsel Mary Dunn at firstname.lastname@example.org or to Assistant General Counsel Michelle Profit at email@example.com; or mail them to Mary or Michelle c/o CUNAs Regulatory Advocacy Department, 805 15th Street, NW, Suite 300, Washington, DC 20005. For a copy of this proposal, which was published in the Federal Register on April 12th, please press here.
Treasury issued a proposed rule to allow the federal agencies to utilize the ACH network to process payments. This proposed rule would adopt NACHA rules that have created new ACH applications, but it would modify the rules in certain respects. The three NACHA rules Treasury proposes to adopt, and the changes that Treasury proposes are described below.
Treasury proposes to adopt the NACHA rule that allows a merchant to use a consumer's check as a source document to initiate a one-time ACH debit entry to the consumer's account for a purchase made in person, using Standard Entry Class (SEC) code POP (Pont-of-Purchase Entry). Under the current NACHA rule, corporate checks may not be converted. Also, the merchant must obtain written authorization from the consumer prior to initiating the transaction and also provide the consumer with a copy of the authorization as well as a receipt containing specific information relating to both the merchant and the transaction. The merchant voids the consumer's check, scans it and returns the voided check to the consumer. The captured information is used to initiate an ACH debit entry against the consumer's account. The merchant must either retain the original or a copy of the consumer authorization for two years.
Regulation E provides the rules for this pilot.
Treasury would adopt this rule with two amendments: it would not require a separate written authorization from the consumer and it would not prohibit conversion of corporate checks to ACH debits. Treasury would notify consumers by disclosure on receipts and/or literature provided at the point-of-purchase that the signed check constitutes authorization to convert the check.
Accounts Receivable Check Conversion
Treasury would adopt the NACHA rule that allows merchants to convert checks, which are received through the mail in payment for goods or services, to ACH debit entries. The rule requires the merchant to provide the consumer with notice of the check conversion policy before it receives the first check payment, and the rules require that consumers provide authorization through an opt-in or opt-out process. This model only allows consumer checks to be converted if they are mailed to lockboxes. Treasury would change the rule so consumers would not need to provide consent through an opt-in or opt-out process. Consent would be obtained by notice. Also, Treasury would allow conversion of corporate checks.
ACH Debits Over the Internet
Treasury would adopt the NACHA rule that allows consumers to make ACH payments for goods over the Internet. The ACH rules allow a merchant to use a SEC code, WEB, to initiate ACH debit entries to consumer accounts for purchases made over the Internet. NACHA's Internet ACH debit rule requires that each originating financial institution that transmits web entries on behalf of it merchants assume additional warranties in addition to the general warranties that cover transmission of all ACH entries. This proposal would not require Treasury to establish exposure limits for federal agencies, and it would not prohibit agencies from originating WEB entries to corporate accounts.
- Do you believe that the proposal presents any issues or problems for consumers? Please explain why or why not.
- Is a posted notice at the point-of-purchase either alone or in combination with paper disclosures handed to consumers, sufficient to
ensure that consumers understand that by presenting a check for payment, they are authorizing the conversion of the check to an ACH debit?
- Would your credit union experience any consequences if Treasury started converting corporate checks into ACH debits? Would the
conversion of corporate checks have consequences for receiving depositary financial institutions? For example, would corporate check
conversion be affected by debit filtering or positive pay technology and would that raise any issues for your credit union?
- Would consumers be disadvantaged in the lockbox pilot, if their checks were converted without making available an opt-in, opt-out
Is posting the notice of the conversion of checks at lock boxes helpful for consumers? What is the best means of providing notice to consumers? According to Treasury, providing notice to payers represents an additional burden to agencies in that forms may need to be redesigned and reprinted. Also, at times, payers may send checks to lockbox locations without having received an invoice. In this situation, payors will not receive prior notice that their check will be converted.
- Treasury asks for comments on the issues raised by using the PPD SEC code for both consumer and corporate check conversions.
Currently, RDFIs have 60 days to return an ACH debit if the consumer claims it was unauthorized. This protection would be extended to
corporate claims, since an RDFI would not be able to distinguish between a consumer and a corporate ACH debit. Therefore, recredit and
adjustment protections reserved for consumers would be extended to businesses as well. Do you agree with this approach? Please explain.
- Do you have comments on other aspects of the proposed lockbox rule?
- Please state how to make this proposed rule clearer. For example, is the material clear, organized and easy to comprehend? Do you have
any other comments?
Eric Richard General Counsel (202) 508-6742 firstname.lastname@example.org |
Mary Mitchell Dunn SVP & Associate General Counsel (202) 508-6736 email@example.com
Jeffrey Bloch Assistant General Counsel (202) 508-6732 firstname.lastname@example.org
Catherine Orr Senior Regulatory Counsel (202) 508-6743 email@example.com