CUNA Regulatory Comment Call
October 18, 2002
Electronic Bounced Check Fee
(A MAJOR RULE)EXECUTIVE SUMMARY
NACHA-The Electronic Payments Association has issued a request for comments on a proposal that would allow collection of a bounced check fee by obtaining a consumer’s authorization through notice instead of through a written signature. Comments on the proposal are due by December 5, 2002. The NACHA proposal would:
- Add a two-step notification process to serve as the consumer’s authorization in lieu of a signature:
- The first notice would be displayed at the point of sale or on a bill statement. This notice would have to be provided to the consumer in advance of receiving the consumer’s check. It would clearly and conspicuously state that the merchant might send an electronic service fee for share drafts that are not honored.
- A second notice would be provided to the checkwriter, at least ten banking days before the debit was to be posted to the checkwriter’s account. This notice would inform the consumer of the intent to collect the fee electronically and provide the consumer with specific information related to the debit entry.
- There would a stipulation that the merchant and originating depository financial institution (ODFI) could not collect or attempt to collect the share draft service fee before the underlying transaction had been paid.
- The PPD Standard Entry Class Code would be used with a unique identifier, CHKSRVCFEE.
- The proposed implementation date would be March 14, 2003.
Please send your comments to CUNA by November 27, 2002. Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Assistant General Counsel Michelle Profit at mprofit@cuna.com; or mail them to Michelle c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, D.C. 20004.
In addition, CUNA recommends that all credit unions respond directly to NACHA because NACHA tabulates results to its surveys. If you would like to respond directly to NACHA and copy CUNA you may do so by using the NACHA survey form at www.nacha.org. Comments sent directly to NACHA should be sent to William Colbert, Network Services Manager, NACHA, 13665 Dulles Technology Drive, Suite 300, Herndon, VA 20171, fax: (703) 787-0996 or email: wcolbert@nacha.org, no later than Wednesday, December 5, 2002. Please provide CUNA a copy by sending your comments to Michelle Profit at mprofit@cuna.com.
BACKGROUND
This proposal allows merchants to use the PPD Standard Entry Class Code to transmit an ACH debit to collect a check service fee. The ACH debit fee would be subject to the requirements in the NACHA Operating Rules, the Electronic Fund Transfer Act, and the Federal Reserve Board’s Regulation E.
This proposal changes the ways that a merchant may obtain authorization from the consumer to collect a check service fee. Currently, the merchant has to obtain a written or oral authorization from the consumer, before they collect the electronic check service fee through the ACH system. The proposal would allow the merchant to use a two-step notice procedure as a method for obtaining a consumer’s authorization. Before the merchant receives the check, the merchant would have to display a notice that states that a check service fee may be collected electronically. In addition, the merchant would have to provide a second written notice to the checkwriter at least ten banking days before the intended date of the debit to the checkwriter’s account. This second notice would have to advise the consumer of the merchant’s intent to collect the service fee electronically and to provide the consumer with specific information related to the fee.
The second notice would provide extensive information, including the following:
- The serial number of the check;
- The amount of the check;
- An identification of the merchant;
- The consumer’s truncated account numbers;
- The consumer’s financial institution routing number;
- The amount of the debit entry to collect the service fee;
- The scheduled date of the debit entry to collect the service fee;
- The reason for the fee;
- Other methods by which the consumer may pay the service fee; and
- A telephone number to call if the checkwriter has questions related to the transaction or other fee-related questions.
Financial institutions that receive these entries would have a shorter or longer time to return the item depending on the circumstances for the return. Usually, returns would need to be received by the receiving financial institution’s ACH Operator by its deposit deadline for the return to be made available to the ODFI no later than the opening of business on the second banking day following the settlement date of the original entry. An extended return time is provided for the following limited cases:
- One of the notices was not provided by the merchant;
- The checkwriter has paid the service fee by another means;
- The service fee was collected prior to payment of the underlying obligation; or
- The check related to the RCK entry was ineligible for truncation.
These circumstances allow a return to be transmitted by its deposit deadline for the return to be made available to the ODFI no later than the opening of business on the banking day following the sixtieth calendar day following the settlement date of the original entry. To accommodate these changes, NACHA proposes a new return reason code.
This proposal requires two formatting changes for the ACH file. First, the proposal requires that a unique descriptive statement, “CHKSRVC,” be included in the Company Entry Description Field of the Company/Batch Header Record to identify this type of payment. This field would have to be included on the consumer’s periodic statement. In addition, the check serial number must be included in the Individual Identification Number Field of the PPD. While NACHA does not require that the Individual Identification Number Field be printed on the consumer’s periodic statement, the receiving financial institutions are encouraged to include this information on the consumer’s periodic statement.
The proposal does not allow a merchant to collect a service fee until the underlying obligation has been paid. This prevents numerous fees to the consumer’s account. As a result, the proposal requires ODFIs to warrant that the merchant did not initiate or attempt to initiate a debit entry to collect a service fee until the underlying obligation had been paid.
For all these changes, the proposed effective date is March 14, 2003.
QUESTIONS REGARDING THE PROPOSAL
- Does your organization agree with the proposed usage of the PPD Standard Entry Class code? Why or why not?
- Would your organization prefer that the proposed application use a new Standard Entry Class Code specific to the collection of service fees related to RCK entries?
- If the service fee is put on a PPD entry, does your organization believe that a specific identifier, “CHKSRVCFEE” included in the Company Entry Description Field, is needed to differentiate these entries from other PPD entries that use traditional authorization methods?
- Do you believe that that the check serial number should be included in the entry? Should the check serial number be required on the consumer’s periodic statement? Please explain.
- The proposal recommends that the merchant’s phone number be on the second notice that is sent to the consumer prior to the debit being initiated. Does your organization believe the merchant’s phone number also should be included in the ACH entry for customer service issues? If yes, what field do you believe should be utilized for this information to make it accessible to the consumer? Please explain.
- Does you organization agree that the second notice should be sent ten banking day prior to the debit date? If not, what time frame would be better, 5, 7, 15 or 30 days before the transaction? Please explain.
- Does your organization support the inclusion of additional items or exclusion of some items from the second notice to the consumer? Please explain.
- Does your organization agree with the proposal that the service fee should not be collected prior to the underlying debt being paid first?
- Would this proposal result in costs or benefits to your organization? Please explain.
- Please submit your address and phone number.
|
Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com |
