Minor Rules Topics

These rules amend the NACHA Operating Rules (Rules) to address a variety of minor topics. Minor changes to the Rules have little-to-no impact on ACH participants and no significant economic impact. These changes became effective upon approval on August 18, 2016. 
 

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Detailed Information

Clarification of Reinitiation – Standard Entry Description; RCK; and Returns for R03/R04

These amendments revise the recently-adopted rules governing the reinitiation of returned entries to make clarifications on formatting requirements and scope of coverage:

  • (1) The recently effective changes to the reinitiation rules require the use of a specific company entry description (“RETRY PYMT”). In any case where an entry is returned and subsequently reinitiated, the rule intended the description “RETRY PYMT” to supersede the original content of the Company Entry Description field. However, the language did not expressly state how this requirement applies to the reinitiation of original entries that bear other, rules-mandated entry descriptions (e.g., “REDEPCHECK”, “RETURN FEE”, etc.). This amendment clarifies that the RETRY PYMT descriptive statement applies to all cases of reinitiation and supersedes any other company entry description, including other Rules-mandated company entry descriptions for original entries. 
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  • (2) Questions have been received from industry participants as to whether the recent changes to reinitiation requirements are applicable to the reinitiation of RCK entries. The definition of a Reinitiated Entry does not exempt RCK from its scope, and the recent modifications to reinitiation requirements related to formatting, etc., were not intended to exclude RCK entries. Because the circumstances under which a returned RCK entry can be reinitiated have always been more limited than other SEC Codes, the differences for RCK were listed separately under the rule provisions specific to RCK. This amendment clarifies the reinitiation rules as applicable to RCK Entries by eliminating the separate section on reinitiated RCK entries and re-locating RCK-specific details to within the general rule on reinitiated entries.
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  • (3) NACHA continues to receive on-going inquiries as to whether entries that have been returned due to invalid or incorrect routing and account information (i.e., R03/R04) are considered to be reinitiated entries when corrected and subsequently transmitted into the ACH Network. By definition, ​a Reinitiated Entry is an entry to the same Receiver’s account. In these cases, a new entry with corrected routing and/or account number would be the first presentment to the correct Receiver’s account and should not be identified as a reinitiated entry. To identify these corrected entries as reinitiations would cause confusion to the Receiver since there was no previous attempt at presentment of the entry to the account.​

Rules Enforcement Monitoring - Class 2 Violations 

This amendment revises the description of a Class 2 Rules Violation within Appendix Ten (Rules Enforcement) to allow evaluation of the timing of a recurring violation in relation to the resolution date for the immediately preceding violation when determining its status as a Class 2 Rules Violation.
 
Under this change, the Rules re-define a Class 2 rules violation as the fourth or subsequent recurrence of a rule violation, where that fourth or subsequent recurrence takes place within one year of the resolution date of the immediately preceding infraction.

Protection of the National Association from Liability for Enforcement of the Rules

This amendment expands the rules enforcement provisions within the NACHA Operating Rules to include express protections for NACHA and its committees when engaged in their roles related to rules enforcement.

Rules Enforcement - Appeal Process for Suspension from the Network

This amendment expands Appendix Ten (Rules Enforcement) to define a process by which an ODFI may appeal the suspension of its Originator or Third-Party Sender customer when suspension has been mandated by the ACH Rules Enforcement Panel as the penalty for a Class 3 rules violation.
 
The Rules currently provide that suspension of an Originator or Third-Party Sender is a sanction that may be imposed by the ACH Rules Enforcement Panel in the event of the most serious type of Rules infraction – a Class 3 Rules Violation. Suspension is a remedy to be used only in extreme cases. The Rules do not contain any provision for appeal of such a decision.
 
In light of the impact of a suspension order on the subject Originator or Third-Party Sender, the rules enforcement process will be modified to provide for an appeals process with the imposition of a suspension order, that a Participating DFI may appeal a suspension order to a panel comprised of at least three individuals who are on the list of arbitrators maintained by NACHA. As members of the Appeals Panel, these individuals will not be acting as arbitrators, but rather will act together as an appellate body for enforcement cases to review the suspension decision of the ACH Rules Enforcement Panel. Because suspension orders relate to circumstances that pose serious risk to the ACH Network, the process of such an appeal would be expedited, and the decision of the Appeals Panel would be final.

IAT Entries - Originating DFI Identification

This amendment revises the description of the Originating DFI Identification field for IAT entries to reflect a current business practice.
 
For Outbound IAT Entries, the Rules currently require the Originating DFI Identification field within the 4th IAT Addenda record to contain the routing number of the U.S. ODFI as the source of funding for the outbound Entry. However, in certain business models, the funding for an Outbound IAT Entry comes from a financial institution in another country. In these cases, the current requirement to include the U.S. ODFI in this field will result in the identification of the wrong financial institution as the ultimate source of funds for the payment transaction. This change enables the correct identification of either the U.S. ODFI or a foreign financial institution, whichever is responsible for providing funds for the Outbound IAT Entry.

For example, a Canadian Bank uses its U.S. subsidiary bank to send Canadian payments from Canada to Mexico for its Canadian customers using the FedGlobal ACH Service. Funds are moved from the Canadian customer's account to an account at the U.S. subsidiary bank, and then the U.S. subsidiary bank originates an IAT to the receiver in Mexico. In this example, the funding for the outbound IAT originated in Canada, and the Canadian bank would be identified in 4th IAT Addenda Record as the foreign funding bank. The U.S. subsidiary bank would be identified in the IAT Company/Batch Header Record as the Originating DFI.

 

Clarification of Reinitiation – Standard Entry Description; RCK; and Returns for R03/R04  

This amendment revises the rules on Reinitiated Entries by (1) clarifying expectations surrounding the use of the entry description “RETRY PYMT”; (2) consolidating RCK-specific requirements into the general rules addressing Reinitiated Entries; and (3) distinguishing R03/R04 returns in the context of reinitiation. The following specific sections of the Rules is impacted:

  • Article Two, Subsection 2.5.13.7 (Reinitiation of Returned RCK Entries)
  • Article Two, Subsection 2.12.4.1 (General Rule for Reinitiated Entries)
  • Article Two, Subsection 2.12.4.2 (Formatting Requirements for Reinitiated Entries)
  • Appendix Three, Subpart 3.2.2 (Glossary of Data Elements)

    • Company Entry Description

Rules Enforcement Monitoring - Class 2 Violations

This amendment revises Appendix Ten of the Rules to define a recurrence of a Class 2 rule violation as the same rules infraction having been committed four or more times by the same parties, each within one year of the date of the resolution date of the immediately preceding infraction.

  • Appendix Ten, Subpart 10.4.7.4 (Class 2 Rules Violation)

Protection of the National Association from Liability for Enforcement of the Rules 

This amendment revises Appendix Ten (Rules Enforcement) to establish a new subsection 10.4.7.7 (Protection of the National Association from Liability for Enforcement of the Rules) to hold NACHA and its agents harmless from liability when acting in their official capacity to enforce the NACHA Operating Rules.

Rules Enforcement - Appeal Process for Suspension from the Network 

This amendment revises Appendix Ten (Rules Enforcement), Subsection 10.4.7.6 (Suspension) to establish a specific process by which an ODFI may appeal a suspension decision, and to describe the composition and function of the Appeals Panel.

IAT Entries - Originating DFI Identification 

This amendment revises the description of the Originating DFI Identification field as it relates to Outbound IAT Entries to include the possibility that the financial institution identified as the source of the funds is located in a foreign country.

  • Appendix Three, Subpart 3.2.2 (Glossary of Data Elements)

    • Originating DFI Identification 

These changes have a little-to-no impact on ACH participants and no significant economic impact. 

 

All topics became effective upon approval on August 18, 2016.

Reinitiation Topics
 
Clarifications on Reinitiation – Standard Entry Description
 
Q: If an Entry contains a rules-mandated entry description (e.g., REDEPCHECK or RETURN FEE) and is being reinitiated, what content should be included in the Company Entry Description Field?
A: The RETRY PYMT descriptive statement applies to all cases of reinitiation and supersedes any other company entry description, including other Rules-mandated company entry descriptions for original entries
 
Clarifications on Reinitiation - RCK 
 
Q: Do the recently-adopted rules governing the reinitiation of returned entries apply to RCK Entries?
A: Yes. The reinitiation rules are applicable to RCK Entries. This is clarified by eliminating the separate section on reinitiated RCK entries and re-locating RCK-specific details to within the general rule on reinitiated entries.
 
Clarifications on Reinitiation – Returns for R03/R04 
 
Q: Do the recently-adopted rules governing the reinitiation of returned entries apply to entries returned using R03 or R04?
A: No. An entry that has been returned due to invalid or incorrect routing and account information (i.e., R03/R04) is not considered to be a reinitiated entry once corrected and ​subsequently transmitted into the ACH Network. By definition, a Reinitiated Entry is an entry to the same Receiver’s account. In these cases, a new entry with corrected routing and/or account number would be the first presentment to the correct Receiver’s account and should not be identified as a reinitiated entry. To identify these corrected entries as reinitiations would cause confusion to the Receiver since there was no previous attempt at presentment of the entry to the account.
 
Rules Enforcement
 
Rules Enforcement Monitoring – Class 2 Violations 
 
Q: What is the purpose of this change?
A: The Rules have re-defined a Class 2 rules violation as the fourth or subsequent recurrence of a rule violation, where that fourth or subsequent recurrence takes place within one year of the resolution date of the immediately preceding infraction. This change enables NACHA and the Rules Enforcement Panel to consider the most recent history of any issue where there is an ongoing series of related violations that go unresolved, helping to ensure better ACH Network quality through more effective rules enforcement.

Protection of the National Association from Liability for Enforcement of the Rules 
 
Q: What is the purpose of this change?
A: This Rule expands the rules enforcement provisions within the NACHA Operating Rules to include express protections for NACHA and its committees when engaged in their roles related to rules enforcement. 

Rules Enforcement - Appeal Process for Suspension from the Network 
 
Q: What is the purpose of this change?
A: This Rule expands Appendix Ten (Rules Enforcement) to define a process by which an ODFI may appeal the suspension of its Originator or Third-Party Sender customer when suspension has been mandated by the ACH Rules Enforcement Panel as the penalty for a Class 3 rules violation.
 
IAT Entries
 
IAT Entries - Originating DFI Identification 
 
Q: What is the purpose of this change?
A: This rule revises the description of the Originating DFI Identification field for IAT entries to reflect a current business practice. For Outbound IAT Entries, the Rules currently require the Originating DFI Identification field within the 4th IAT Addenda record to contain the routing number of the U.S. ODFI as the source of funding for the outbound Entry.
 
However, in certain business models, the funding for an Outbound IAT Entry comes from a financial institution in another country. In these cases, the current requirement to include the U.S. ODFI in this field would result in the identification of the wrong financial institution as the ultimate source of funds for the payment transaction. This change enables the correct identification of either the U.S. ODFI or a foreign financial institution, whichever is responsible for providing funds for the Outbound IAT Entry.
 
Q: Can you provide an example for this situation?
A: For example, a Canadian bank uses its U.S. subsidiary bank to send Canadian payments from Canada to Mexico for its Canadian customers using the FedGlobal ACH Service. Funds are moved from the Canadian customer’s account to an account at the U.S. subsidiary bank, and then the U.S. subsidiary bank originates an IAT to the Receiver in Mexico. In this example, the funding for the outbound IAT originated in Canada, and the Canadian bank would be identified in 4th IAT ​Addenda Record as the foreign funding bank. The U.S. subsidiary bank would be identified in the IAT Company/Batch Header Record as the Originating DFI.