One basic tenet of the Nacha Operating Rules is that an Originating Depository Financial Institution (ODFI) assumes responsibility for many warranties and indemnifications to each Receiving Depository Financial Institution (RDFI) and ACH Operator. Until now, the Nacha Rules did not put a time limit on claims based on those warranties and indemnities. As a result, breach of warranty claims could be brought as long as permitted by statute of limitations, which vary from state-to-state.
On June 30, 2021, that changes as the Limitation on Warranty Claims Rule becomes effective for the ACH Network.
This Rule establishes specific time periods for RDFIs to make claims based on unauthorized entries and brings the ACH Network in line with other payment systems that have time limits.
According to Jeanette Hait Blanco, Nacha General Counsel, the new Rule provides distinct time periods for two basic types of entries. For an entry to a non-consumer account, the RDFI can make a claim based on an unauthorized entry against the ODFI for one year from the settlement day. For an entry to a consumer account, the time limit is two years. In addition, for an entry to a consumer account, a second time period applies allowing an RDFI may make a claim to the ODFI for entries made within the first 95 calendar days from the settlement date of the first unauthorized entry, even if the entry(ies) settled more than two years ago. This allows RDFIs to make claims against ODFIs for any claims that they might have responsibility for under Regulation E.
Blanco said the Rule was adopted to provide ODFIs and ACH Originators with greater certainty about their liability under the Nacha Rules when originating ACH debits.
For example, if a consumer claims there are five years of monthly, unauthorized transactions, the RDFI would be able to make a breach of warranty against the ODFI for only the entries that settled within the last two years, plus any entries that settled within the first 95 days of the first unauthorized entry.
This is simply a limit on when an RDFI can make claims of unauthorized entries to the ODFI under the Nacha Rules, and that the Rule does not address any procedures RDFIs or ODFIs use to determine what claims they will or won’t pay. Blanco said Nacha suggests that banks and credit unions consult their legal counsel to see what this means for their own internal procedures.