CUNA Regulatory Comment Call


June 29, 2007

Proposal on Transaction Origin Identification

EXECUTIVE SUMMARY

Please feel free to fax your responses to CUNA at 202-638-7052; Assistant General Counsel Lilly Thomas at lthomas@cuna.com; or mail them to Lilly c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, D.C. 20004. Click here for a copy of this Request for Comment.

BACKGROUND

This proposal is the second initiative under NACHA’s comprehensive risk management strategy for which comments are requested. The first proposal was issued for comment on February 20, 2007 and addressed the highest risk uses and users of the ACH Network by expanding the enforcement procedures and establishing a process to monitor excessive unauthorized ACH payments. Go to CUNA’s website for more information

This proposal is intended to improve the quality of ACH transactions and reduce the number of transactions that are returned by providing better information to Receivers.

An examination of a sample of ACH debits shows that a small percentage contains Originator identifications that are not likely to be readily identifiable by consumers when appearing on their account statements. These transactions would more likely lead to customer service calls to Receiving Depository Financial Institutions (RDFIs) and could be returned as unauthorized if not recognized by the consumer.

DISCUSSION OF PROPOSAL

NACHA is proposing to amend its Operating Rules to enable Receivers to more easily identify Originators of ACH transactions. The proposal would require that the Company Name Field in the Company/Batch Header record contain the name by which the Originator is known to and readily recognized by the Receiver for any Standard Entry Class Code (SEC code) of the entry. For example, this name would be the payor’s/payee’s "Doing Business As" (DBA) name or "trading as" name.

Currently, the rules for the contents of the Company Name Field do not specifically state that the field must contain the Originator’s actual name and are vague. The value of the field must be established by the Originator for purposes of identifying the source of the entry and for descriptive purposes. As a result, many ACH transactions are transmitted with telephone numbers or descriptive statements rather than the Originator’s name.

If a Third-Party Sender, involved in third-party bill payment processing arrangements, is involved in the origination of an ACH transaction on behalf of and at the direction of an accountholder, the Third-Party Sender has the contractual agreement with the ODFI and is the point of entry into the Network. As a result, NACHA is proposing to define a new ACH participant for these situations, a "Payment Intermediary," which would be defined as "a Third-Party Sender who initiates a single entry to a third party payee at the direction of an accountholder that is funded by a separate entry involving the accountholder’s account."

The name of the Payment Intermediary would be required to be included within the ACH record in order to identify the source of entry into the Network. It would be required on the Company/Batch Control Record in a new field titled, "Transaction Origin". The new field would be located in positions 65-79. This formatting change would apply universally to all SEC codes/batches.

If more than one Payment Intermediary is involved, the name of the Payment Intermediary that authorized the ODFI to transmit the entry for the Third-Party Sender’s account would be required in the Transaction Origin field. If there is no Payment Intermediary, the Transaction Origin field would contain the name of the payor or payee identified in the Company Name Field of the Company/Batch Header Record.

A new ODFI warranty would be added to the Rules that would require Originators to maintain a working customer service telephone number that must be answered during the Originator’s normal business hours. This number would be used for Receiver inquiries regarding any domestic transaction. This customer service telephone number would have to be included within the Company/Batch Control Record for all domestic SEC Codes and batches. The Company/Batch Control Record would be revised to add a new field in positions 55-64, titled Customer Service Telephone Number.

QUESTIONS REGARDING THE PROPOSAL

  1. Do you support requiring changing the Company Name Field description to require clear identification of the Originator?

    a. Yes _____
    b. No _____

    Please explain.










  2. Do you support requiring the Originator to maintain a customer service telephone number for Receiver inquiries about ACH transactions?

    a. Yes _____
    b. No _____

    Please explain.







  3. Do you agree with requiring the identification of Third-Party Senders involved in the origination of a transaction?

    a. Yes _____
    b. No _____

    If you answered “no”, please identify specific fields you believe are not necessary for processing an ACH transaction and that could be re-defined for the customer service telephone number.










  4. This proposal does not require RDFIs to provide a customer service telephone number to Receivers. Do you believe that an RDFI should send or make available to each of its Receivers the contents of the Customer Service Telephone Number Field?










  5. Do you support the following replacing two existing fields (the Message Authentication Code Field and a Reserved field) being placed within the Company/Batch Control Record:

    a. Customer Service Telephone Number? Yes _____ No _____
    b. Transaction Origin Field? Yes _____ No _____










  6. Would you support an ODFI audit requirement to ensure that the Originator maintains a working telephone number for Receiver inquiries?

    a. Yes _____
    b. No _____

    Please explain.










  7. Do you agree with an implementation date of September 19, 2008?

    a. Yes _____
    b. No _____

    Amendments to the NACHA Operating Rules with software changes may be implemented in March and September. If you do not agree with the proposed implementation date, which date do you feel is more appropriate?

    a. March 2008 _____
    b. March 2009 _____
    c. September 2009 _____










  8. Please provide any additional comments.










Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Deputy General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Lilly Thomas • Assistant General Counsel • (202) 508-6733 • lthomas@cuna.com
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com