Posted November 9, 2007
Issued: November 9, 2007
Effective: May 5, 2008
This ACH Operations Bulletin describes a written interpretation (“Interpretation”) of the NACHA Operating Rules (“Rules”) approved by the NACHA Board of Directors on November 7, 2007. The Interpretation provides that:
This interpretation is issued in accordance with Section 13.3 (Interpretative Rules) of the Rules. As a written interpretation, this Interpretation is as binding as any other provision of the Rules. The Interpretation is effective on May 5, 2008.
NACHA was requested to issue an interpretation of the NACHA Operating Rules (“Rules”) on 1) the identification of the appropriate Standard Entry Class (SEC) code for certain ACH transactions initiated at the point-of-sale with an access device such as a debit card; and 2) the practice of aggregating multiple transactions into a single ACH debit entry.
Proper Use of SEC Codes
NACHA was asked to issue an interpretation that ACH transactions initiated with an access device at a point-of-sale terminal should use the Point-of-Sale (POS) SEC Code. In order to adequately rule on the proper SEC Code, NACHA had to consider the variety of ways in which transactions can be initiated with an access device – i.e., also at an ATM, on the Internet, and over the telephone.
The general principle applied in the Interpretation is that the manner of enrollment for an ACH product should govern the allocation of the SEC code, unless there is a more specific code that is applicable because of the manner in which the product is used by the consumer to initiate individual transactions.
Aggregation of Transactions
NACHA was asked to issue an interpretation on the practice of aggregating multiple point-of-sale transactions that occur during a single day, or over multiple days, into a single ACH entry. Again, NACHA had to consider the variety of ways in which transactions can be initiated, as well as aggregation of transactions initiated across multiple merchants (e.g., transactions at multiple point-of-sale locations) and multiple transaction types (e.g., point-of-sale transactions and ATM withdrawals).
Because the Interpretation covers transactions in which the Originator of an ACH Entry is not the payee of the underlying transaction, NACHA also considered the information needs of RDFIs and Receivers for these transactions. NACHA applied the principle that consumers are better served by having more, rather than less, information about their transactions.
The Rules do not permit aggregation of transactions under the POS or MTE SEC codes. Each time an ACH-linked card or other similar ACH service that can be used at multiple payees is used by a consumer at an electronic terminal in a retail location, in the case of the POS code, or at an ATM in the case of the MTE code, the ODFI must submit a separate ACH entry that is properly formatted using the POS or MTE codes, respectively. Multiple transactions at one or more electronic terminals may not be aggregated in a single POS or MTE entry.
Transactions may be aggregated under the PPD or WEB SEC codes for a properly authorized ACH transaction that represents a single payment on a separate account regardless of whether there have been multiple charges by the consumer to that account (i.e., for a bill payment), provided that each such account covers at least fourteen (14) days of transactions. If the original enrollment for such an ACH service was performed on the Internet, the WEB code would be used; otherwise the PPD code would be used.
This fourteen (14) day window provides a clear dividing line between payments on an account, such as monthly bill payments (e.g., the monthly payment of a charge card bill), and transactions that are effectively pass-through debits to a deposit account at an RDFI. Additional guidance is included in the full Interpretation.
An “SEC Code Allocation Chart” developed in conjunction with this Interpretation provides additional guidance on the appropriate SEC Code to use in connection with transactions based on how an ACH service is being used and how the original authorization for that service was obtained.
Finally, in order to provide appropriate information to the RDFI and NACHA, the party identified in the “Company Name” field of the ACH Entry in each of these cases should be the party to which the funds ultimately will be transferred. For example, with an ACH-linked card, the ultimate payee is the merchant or owner of the ATM where the card is used, not the Originator that issues the card. Similarly, in a bill payment service, the ultimate payee is the biller, not the provider of the bill payment service.
The following documents are included in this ACH Operations Bulletin:
NACHA Rules Interpretation – November 7, 2007
SEC Code Allocation Chart – November 7, 2007
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Questions about this ACH Operations Bulletin should be submitted via firstname.lastname@example.org.