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CUNA Regulatory Comment Call

May 20, 2008

EXECUTIVE SUMMARY

• NACHA is proposing amendments to its rules on stop payment authorizations to re-align with the Federal Reserve Board’s official staff commentary on stop payments of pre-authorized electronic debits.
• The proposed amendments would eliminate the six-month time period after which a stop payment order lapses.
• The number of entries to which a stop payment order would apply would be expanded to remain in effect until all entries instructed by the Receiver are stopped.
• The Receiving Depository Financial Institution (RDFI) would be permitted to require a copy of the Receiver’s correspondence revoking authorization directly with the Originator.
• NACHA is proposing an effective date of September 18, 2009.j,
• Please submit your comments to CUNA by June 11, 2008. Comments are due to the NACHA by June 27, 2008.

Please feel free to send your comments to CUNA SVP & Deputy General Counsel Mary Dunn at mdunn@cuna.com or to Assistant General Counsel Lilly Thomas at lthomas@cuna.com; or mail them to Lilly c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, D.C. 20004. Click here for a copy of this Request for Comment.

BACKGROUND

NACHA Operating Rules (Rules) currently allow a consumer receiving ACH debits to place a stop payment order on a single debit entry, similar to the way a stop payment order can be placed on a particular check in the check collection system. The ACH stop payment order and remains in effect for either six months, until the entry is stopped or until the Receiver withdraws the order, whichever occurs first.

If a Receiver wishes to stop all debits from a specific Originator, it must revoke authorization with the Originator. This rule is not consistent with the Federal Reserve Board’s official staff commentary on Regulation E that state that a consumer’s right to stop payment of preauthorized electronic debits applies to all future debits from a specific Originator if that is the consumer’s intent. The commentary, which became effective in early 2007, further states that a financial institution may not wait for the Originator to cease origination of the debits.

DISCUSSION OF PROPOSALS

NACHA is proposing amendments that would re-align its Rules with the requirements of Regulation E with respect to the intent of and processing requirements for, stop payment orders on ACH transactions.

The revisions would be made to the requirements in Article Eight of NACHA’s rules for the stop payment orders to ACH entries to consumer accounts. The proposed rule would:

Specifically, the proposed rule would:

• eliminate the six-month time period after which a stop payment order lapses;
• expand the language addressing the number of entries to which a stop payment order would apply; and
• permit the RDFI to require a copy of the Receiver’s correspondence revoking authorization directly with the Originator.

In its proposal, NACHA clarifies that the stop payment order would remain in effect until all entries related to the Receiver’s stop pay instruction have been stopped. This would include whether it is one entry, multiple entries, or all future entries related to a specific authorization.

Additionally, the RDFI would be permitted to require a copy of the revocation of authorization with the Originator when the Receiver wishes to block all future payments with a specific Originator.

The proposal would remove redundant language regarding the lapse of a stop payment order in the description of Return Reason Code used for stopping payments (R08 Payment Stopped).

1. Do you agree with the proposed changes to the NACHA Rules?
   
   Yes ________    No_______
   
   Please explain
   
   

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2. Do you believe this will eliminate the inconsistencies between the NACHA rules and Regulation E regarding stop payments?
   
   Yes ________    No_______
   
   Please explain
   
   

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3. Do you have the ability to flag and stop all future transactions from a specific originator?
   
   Yes ________    No_______
   
   Please explain
   
   

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4. Do you have a system that has the ability to distinguish between a selected groups of payments from a particular Originator, which would enable you to place a stop payment on future transactions of a particular authorization?
   
   Yes ________    No_______
   
   Please explain
   
   

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5. Would this proposal require you to revise your annual disclosures or stop payment forms?
   
   Yes ________    No_______
   
   Please explain
   
   

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6. Would you need to make changes to your systems/software?
   
   Yes ________    No_______
   
   Please explain
   
   

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7. Do you support an implementation date of September 18, 2009?
   
   Yes ________    No_______
   
   If not, what date would be more appropriate?
   _______ September 2008
   _______ March 2009
   _______ March 2010
   _______ Other (please specify)
   
   

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8. Please provide any additional comments.
   
   

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