NACHA Rule Change

September 2011: Enhancements to ACH Applications and New Rule Requirements

On Nov. 19, 2010, the NACHA Voting Membership, of which PNC is a part, approved several enhancements to existing ACH applications.  These enhancements were made to encourage greater use of these ACH applications by removing the barriers to use as well as conforming to the recent industry developments and regulatory changes.  These enhancements include:

  1. Expansion of the scope of the TEL application to permit recurring consumer transactions.
  2. Elimination of the requirement that Originators have opt-out procedures for ARC and BOC transactions.
  3. Establishment of authorization and identification requirements for ACH debits used to collect return fees for certain checks and ACH debits due to insufficient funds (NSF).
  4. Expansion of the scope of XCK application to permit its use for certain damaged checks.

The effective date regarding the provision for ARC and BOC opt-out procedures is March 18, 2011, while the other provisions will be effective on September 16, 2011.

  1. The TEL application was formerly restricted to single Entries to conform with the interpretation of Regulation E when it was introduced.  Therefore, billers were not able to establish recurring billing via telephone and instead had to direct consumers to its website or other means to set up recurring authorization.  This rule will expand the TEL application to allow recurring debits given sufficient oral authorization that complies with Regulation E.

If you are: using the TEL application to receive funds from your customers and/or are looking to set up recurring payment with new customers over the telephone,

Consider: setting up recurring payment option with the expanded TEL application.

  1. ARC and BOC had an opt-out provision that required the Originators of ARC and BOC Entries to have procedures in place to allow the Receivers to opt-out of the check conversion process.  The rule change will remove this requirement while still allowing the Originators to continue to have an opt-out procedure should they choose to do so.

 If you are:  currently or considering converting checks by originating ARC or BOC ACH entries,

Consider:  whether or not an opt-out procedure is appropriate for your customers.

  1. Merchants and billers will be able to use a new Entry type - a Return Fee Entry - that can be used for the purpose of collecting return fees for certain ACH debits or other qualifying checks that are returned unpaid. 

If you are:  generating ACH debits and depositing checks from your customers and looking for an efficient, inexpensive and effective way to collect return fees,

Consider: with proper authorization, using the ACH network as your primary method to collect the return fee.

  1. The ACH Network can now clear certain checks that cannot be imaged or processed but contain enough formation to clear as an ACH Entry (XCK), with certain limitations.
    Note:  Only financial institutions can originate XCK entries, but it is possible that a check that you write may be cleared as an ACH debit transaction under this rule.

The ACH Rule changes described above do not fully encompass all of the requirements when deploying the Standard Entry Class (SEC) codes in your electronic payment program.    For a more complete description of related ACH Rules requirements when utilizing TEL, ARC, BOC, and/or XCK, please contact your PNC representative.

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