So many things that we need to sign today we can handle online. Nacha’s Risk Management Portal is now making it happen for Letters of Indemnity (LOIs). As of Feb. 28, 2022, Originating Depository Financial Institutions (ODFIs) are able to use the Portal to safely provide LOIs to Receiving Depository Financial Institutions (RDFIs).
To understand what’s coming, it’s helpful to have a little background. In January 2019, Nacha issued Operations Bulletin 1-2019, which introduced the “Indemnification Agreement - Request for Return of Funds from ACH Entry” form.
The Bulletin noted that “Nacha has become aware that many financial institutions require an additional written indemnification agreement to be completed in connection with requested ACH returns.” Therefore, Nacha created an agreement “to serve as a standard written request and indemnification agreement that can be used in cases when such additional indemnification is desired by an RDFI.”
It’s been available as a PDF, to be completed by the ODFI and sent to the RDFI from which it was requesting the return of funds in the case of an erroneous entry or unauthorized credit entry using an indemnification agreement (i.e., LOI).
Now, Nacha is using technology to integrate these two existing tools—the standardized LOI and the ACH Contact Registry—to enable Financial Institutions to handle exception resolution more efficiently.
The ODFI is able to generate and send the form in the Risk Management Portal. Registered ODFI administrators and users log in to the Portal and go to the Secure Email module to begin the process of completing the LOI and selecting contacts at the RDFI.
The Portal uses a secure document handling service to move the form from one FI to another. The RDFI will be notified by the Portal that the LOI is available. No LOI is retained in the Portal itself.
“It’s a secure, standardized way of communicating between FIs,” said Jeanette A. Fox, AAP, Nacha Senior Director, Risk Investigations & ACH Network Risk Management.
ODFIs should first contact the RDFI to request assistance before using the new LOI service. But should the ODFI encounter a problem contacting the RDFI, the ACH Contact Registry can help.
“Because the ACH Contact Registry is also in the Risk Management Portal, you’ll be able to enter the routing number of the FI you want to reach, and that will bring up their information from the ACH Contact Registry,” said Fox.
Fox said there are more than 41,000 contacts entered in the ACH Contact Registry, and she reminded FIs to ensure they are compliant by not only having the required information entered, but also keeping it up to date. In August, Nacha began enforcing Rules violations for noncompliance.
More about the ACH Contact Registry can be found on the Rules section of Nacha.org.