June 01, 2021

For ACH Originators, New Warranty Claims Rule Brings More Certainty

Few things are certain in life, but an upcoming change to the Nacha Operating Rules should make the timing of warranty claims more certain, especially for businesses and other organizations that originate ACH payments.

A new Limitation on Warranty Claims Rule takes effect June 30, 2021, and a key goal is “to give Originators more certainty on the time they may face claims on entries that they put into the ACH Network,” said Jeanette Hait Blanco, Nacha General Counsel.  

“Currently, unlike the rules of other payments networks, the Nacha Rules do not limit the time that a financial institution in the ACH Network can make a claim against the financial institution that sent the entry, that the entry is unauthorized. The new Rule changes that and establishes time limits for the RDFI (Receiving Depository Financial Institution) to make that claim against an ODFI (Originating Depository Financial Institution),” said Blanco.   

For non-consumer accounts, the time limit is one year from settlement date; for consumer accounts, claims may be made for two years from the settlement date. 

“In order to allow for possible claims under Regulation E, this two-year limit on claims for consumer accounts does not apply to entries within 95 days of the consumer’s first unauthorized debit entries. So, for those entries, Originators may see returns beyond the two-year time limit,” said Blanco.

She offered the hypothetical example of a consumer who notices that a gym has been taking a $20 monthly fee from their primary deposit account by ACH for the past five years. In this case the gym is the Originator, and the consumer is the Receiver.

At some point the consumer calls his/her bank (the RDFI) saying they’ve been charged $20 a month for five years, and that they never authorized it.

Under the new rule, the RDFI would not be permitted to make a claim against the ODFI’s authorization warranty for any of these recurring entries that settled more than two years ago, with the exception of those within the first 95 days. In this example, then, the gym has much greater certainty that ACH debits that are more than two years old will not be returned as unauthorized.  

“This Rule gives Originators more certainty about the time within which claims can come back through the ACH Network,” said Blanco, stressing that this strictly covers claims through the ACH Network. For example, in the gym scenario, if the consumer wants to pursue a case against the gym outside the ACH Network that’s their right. 

To learn more about the new Rule effective June 30, 2021, visit the Limitation on Warranty Claims page on Nacha.org.