Effective March 18th, 2005, the NACHA Operating Rules have been amended to reactivate Return Reason Code R05. Reason Code R05 may be used to return any unauthorized entry transmitted to a consumer account, when that entry is incorrectly bearing a corporate Standard Entry Class Code (SEC Code) (e.g. CCD, CTX or CBR). The rule change will enable the Receiving Depository Financial Institution (RDFI) to return this type of entry within the same time frame that applies to any unauthorized debit to a consumer account, despite the erroneous usage of a corporate SEC Code. In essence, returns can be made within 60 days of the settlement date of the original entry, so long as the RDFI obtains a written statement under penalty of perjury from the consumer.
Prior to this rule change, the RDFI was bound by the rules and time frames associated with the SEC code included in an entry. The rules obligated the RDFI to rely on the warranty made by the Originating Depository Financial Institution (ODFI), that the SEC Code was correct. If an Originator erroneously transmitted an entry to a consumer account with a corporate SEC Code, the RDFI had to return the entry within two banking days of the settlement date of the original entry. In most cases, the window in which the entry was eligible for return had closed before the consumer had time to receive his bank statement and notify the RDFI that the debit was unauthorized.
Impact to Participants
Originators need to be aware that they may see returns coded with Reason Code R05 for CCD, CTX and CBR entries, and that these entries can be returned for up to 60 days from the settlement date of the original entry. For any entry returned with Reason Code R05, the RDFI warrants that it has obtained a written statement under penalty of perjury from the consumer, attesting that the entry is unauthorized. Originators may request copies of these statements from their ODFIs, who must obtain the statements from the RDFIs. In addition, Originators must update their procedures and software packages to accommodate the use of this reason code. Originators should implement procedures to distinguish consumer transactions from corporate transactions, in order to apply the correct SEC Code.
ODFIs need to be aware that they may see returns coded with Reason Code R05 for CCD, CTX and CBR entries, and these entries can be returned for up to 60 days from the settlement date of the original entry. ODFIs need to understand that RDFIs will be required to obtain a written statement under penalty of perjury from consumers for any entry returned using Reason Code R05, and the originator may request the ODFI to obtain copies of these statements from the RDFI. In addition, ODFIs should modify their ACH software to identify and process return entries bearing this Return Reason Code.
RDFIs need to be aware that they will be permitted to return unauthorized entries to consumer accounts, incorrectly bearing a corporate SEC Code, for up to 60 days from the settlement date of the original entry. The RDFIs need to establish procedures to obtain a written statement under penalty of perjury from the consumers. In addition, RDFIs should update their ACH software to process the transmission of entries using this Return Reason Code.