Notification of Change (NOC) is a method available to financial institutions to notify a Federal agency to correct or 

change account information in an entry the Federal agency processed through the Automated Clearing House (ACH). In 

certain circumstances, a financial institution may receive a payment file with erroneous information on it; however, they 

are able to identify the payment and post it to the correct account. In such cases, the financial institution may issue an 

NOC to correct the erroneous information. A financial institution may also issue a NOC when it merges with another 

bank and a change in routing number results. NOCs are used for Federal government (both civilian and military) 

payments that are made on a recurring basis. Examples are: 

• Social Security Administration 

• Railroad Retirement Board 

• Supplemental Security Income 

• Department of Veteran Affairs 

• Office of Personnel Management 

• Federal salary 

• Treasury Direct 

• Vendor and miscellaneous 

NOCs should not be used to change title/ownership of an account, change interest of the recipient or beneficiary in the 

account, change accounts from one financial institution to the other, or for one time payments, such as an IRS tax refund. 

In these circumstances, a new enrollment form must be processed and/or the payee should be directed to contact the 

agency directly. 

The use of NOCs prevents delays often associated with returned ACH payments. If a financial institution is able to correct an 

error on an ACH payment file, they will often accept and post the entry as an exception item instead of returning the entry. 

The financial institution consequently sends the NOC, with the correct information needed for automated processing, back to 

the originating agency so that its master payment record can be updated with the correct bank information prior to the next 

payment. 

Treasury has become aware that, in certain circumstances, federal agencies do not react timely to NOCs sent by financial 

institutions. According to Chapter 6 of FMS’ Green Book (Guide to Federal ACH Payments and Collections), “NOCs will be 

processed for the next ACH transaction. (Due to operation limitations, it may take two payment cycles for some NOCs to be 

processed).” Despite this guidance, a significant number of NOC requests are unaddressed by federal agencies and result in 

frustration for both the recipient and the financial institution. Ultimately, the financial 

institution is often forced to return payments that could otherwise have been posted had the 

Federal Agency acted timely upon the NOC, thereby causing a significant delay in recipients 

receiving their Federal payment. 

Upon receiving an NOC, agencies should take measures to ensure that the erroneous 

payment file information is corrected before submitting the next payment by ACH. 

If your agency received an NOC, you should ensure that the party responsible for updating 

your accounts receivable records receives a copy. This is customarily staff that works in your 

agency’s accounting area or payment certification area. NACHA has an approved list of NOC 

change codes that indicate any changes that need to be made to your payment file, prior to the 

Notifications of Change—The Agency’s Perspective 

Financial Management Service 

Winter 2008/2009 Philadelphia Financial Center 

PFC Journal 

Inside this issue: 

Notifications of Change 

(NOCs) 

2 

Direct Express © 3 

ACH Returns 4-5 

Administrative Wage 

Garnishment (AWG) 

5 
Notifications of Change—The Agency’s Perspective (continued) 

Page 2 

Winter 2008/2009 

next payment cycle. Some of the more common codes are listed below: 

 C01—Incorrect Account Number 

 C02—Incorrect Routing Number (RTN) 

 C03—Incorrect RTN and Account Number 

 C05—Incorrect Transaction Code (Checking/Savings Account) 

 C09—Incorrect Individual Identification Number 

For nearly all federal agencies, the NOC is provided on a paper report detailing a recently posted payment, with all of the 

necessary updates required for the next payment cycle. Below is an example of an NOC, with explanations for each of the 

fields located on the form: 

The Philadelphia Financial Center (PFC) has recently undertaken multiple initiatives to facilitate the improvement of the NOC 

process. First, PFC has developed a cover letter that will be included with subsequent mailings of the NOCs. This document 

provides guidance on how to handle the NOC appropriately. Secondly, PFC will be emailing an NOC Survey to their 

customer agencies to confirm several components of the process, namely the correct mailing address and point of contact for 

each agency, and also to provide a venue to offer feedback and suggestions on potential improvements to the process. 

Additionally, it is important to note that agencies may have the option to receive these notifications electronically. If you are 

interested in exploring an electronic alternative to paper, or are receiving NOCs and are unsure how to address them, please 

contact Lisa Andre, Accredited ACH Professional (AAP), at (215) 516-8142. For more information on NOCs, please refer to 

the Green Book, Chapter 6, Notifications of Change at http://www.fms.treas.gov/greenbook. Specific questions regarding 

NOCs can be directed to the Philadelphia Financial Center’s Customer Service Branch Help Desk at 215-516-8154 or emailed to philly@fms.treas.gov. 
The Financial Management Service (FMS), a bureau of U.S. Department of the Treasury, is encouraging the approximately 

four million Social Security Administration (SSA) and Supplemental Security Income (SSI) benefit recipients who do not have 

a bank account to sign up for the Direct Express® card. These un-banked recipients currently receive benefits by check. The 

cashing of these checks causes considerable hardship and costs to the recipient while at the same time incurring costs related to 

the printing, processing and mailing of checks for the Federal Government. 

In 2007, a one year long pilot debit card program was conducted by FMS in Chicago and rural Illinois with JP Morgan Chase 

as the financial agent. A telephonic customer satisfaction survey of this pilot program revealed a high level of satisfaction and 

acceptance among users. In the January, 2008, FMS selected Comerica Bank as the financial agent to manage the debit card 

program because of its experience with the prepaid card services for state government benefit recipients. 

The Direct Express® card program was first introduced April 2008 in 10 states (Alabama, Arkansas, Florida, Georgia, 

Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina and Texas) where there is a high incidence of un-banked 

check recipients. The Direct Express® marketing initiative has since been rolled out on a nationwide scale. To date, over 

207,000 recipients have enrolled for this new FMS product. Recipients may sign up for the card by calling toll-free 1-877-

212-9991 or visiting www.USDirectExpress.com. 

When a recipient enrolls in Direct Express®, they will receive a debit MasterCard® with a Direct Express® logo. Payments 

will be automatically deposited to the benefit recipient’s Direct Express® card account each month. The recipient will then 

have immediate access to these funds. The cardholder will also have access to live or interactive voice response (IVR) 

customer service for accessing balance and transaction history. 

The goal of the Direct Express© program is to provide a safer, more reliable, cost effective payment option to un-banked 

federal benefit check recipients. The Direct Express® card is expected to be a low cost alternative to receiving a check for 

benefit recipients, especially when they are educated on how to avoid fees and surcharges by using the card efficiently. 

Additionally, FMS estimates considerable annual savings for the Government by converting current check recipients to the 

Direct Express® card. 

Benefits of the Direct Express® card: 

• Federal benefit payment funds are FDIC-insured up to the maximum amount allowed by law, and afforded the consumer 

protections of Regulation E and MasterCard Zero Liability. 

• Cardholders may use their cards to make over the counter debit purchases, as well as to make cash withdrawals at 

automated teller machines (ATMs). 

• The Direct Express® card has personal identification number (PIN) protection which is required for all ATM transactions 

and cash back at the point of sale. 

• Cardholders may use the debit card in a variety of places, including grocery stores, convenience stores and virtually 

anywhere MasterCard® debit is accepted. 

• Eliminates the cost of printing, processing and mailing checks. 

• Account transaction history is available online or by phone. 

• Direct Express® assesses no fees for account maintenance and over the counter debit transactions. Cardholders are 

allowed one free ATM cash withdrawal per deposit. 

Beginning September 29, 2008, the Social Security Administration (SSA) made changes to its enrollment process to allow 

beneficiaries to sign up for the Direct Express® card when first applying for federal benefits. As of October 31, 2008, SSA 

has enrolled approximately 25,000 people in Direct Express®, averaging over 1,100 enrollments per day. There are currently 

over 207,000 people enrolled in Direct Express®. 

For more information about the Direct Express® card, please visit: http://www.fms.treas.gov/directexpresscard or 

contact the project lead, Nevelyn Jones, at 202-874-9602. 

Direct Express© — Continued Success in Direct Deposit 

Page 3 

Winter 2008/2009 
Financial institutions can utilize the Automated Clearing House (ACH) system to return electronic Federal benefit 

payments back to federal agencies. Financial institutions return ACH payments that cannot be posted to a recipient’s 

account for a variety of reasons, for example, if a recipient’s account is closed or the recipient is deceased. The ACH 

system is governed by the National ACH Association (NACHA), who regulates the use of ACH transactions and sets 

guidelines for proper system usage. The Financial Management Service’s (FMS) Green Book (Guide to Federal ACH 

Payments and Collections), Chapter Four, Returns, outlines proper usage of the ACH Return function as is relates to 

Federal payments. 

FMS is committed to educating financial Institutions on the proper use of ACH return reason codes. The ACH return 

reason code assists federal agencies, such as the Social Security Administration (SSA) or the Veterans Administration 

(VA), in determining how to update a recipient’s payment information. Utilizing acceptable ACH return reason codes 

plays a critical role in an agency being able to reissue a payment in a timely fashion by correcting or updating data in 

their payment file. 

Statistics revealed that in 2007 financial institutions frequently returned Federal ACH payments with return codes that 

are not appropriate for the Federal Government. These included both Receiving Depository Financial Institution (RDFI) 

return reason codes, as well as codes reserved only for ACH Operators. Although the FMS system has the capability of 

accepting all NACHA approved return reason codes, financial institutions are encouraged to use only those codes 

prescribed in the Green Book, Chapter 4 (Returns), Section 2, so that agencies can make the appropriate changes to their 

payment file records. Listed below are the codes that are deemed acceptable by the Federal Government: 

• R02 – Account Closed: A previously open account has been closed by the customer or the RDFI. 

• R03 – No Account/Unable to Locate Account: The account structure is valid but does not correspond to the 

individual or company listed on the entry, or the account number indicated is not a valid account 

• R04 – Invalid Account Number: The account number structure is not valid or may contain an incorrect number of 

digits 

• R06 – Returned Per Originating Depositary Financial Institution (ODFI) Request: When the RDFI agrees to 

return the ACH credit at the request of the ODFI, Article Six of the NACHA Operating Rules states that the ODFI 

must indemnify the RDFI by providing a R06 letter 

• R14 – Representative Payee Deceased or Unable to Continue in that Capacity: The representative payee is the 

person or institution authorized to receive payments on behalf of one or more persons. The person they represent 

may be a legally incapacitated adult, or a minor. The representative payee is either deceased, or alive, but unable to 

continue in that capacity. 

• R15 – Beneficiary or Account Holder (Other than a Representative Payee) Deceased: The beneficiary who may 

or may not be an account holder is the person entitled to the benefits and is deceased; or the account holder who is a 

non-representative payee is an owner of the account and is deceased

• R16 – Account Frozen: Access to the account is not allowed because of specific action taken by the RDFI or by 

legal action 

• R17 – File Record Edit Criteria (Specify): Some fields that are not edited by the ACH Operator are edited by 

RDFI. If the RDFI cannot process the entry, the fields that are causing the error must be indicated in the addenda 

record information field of the return. 

What’s in a Code? A Financial Institution’s Guide to Federal 

ACH Returns 

Page 4 

Winter 2008/2009 
Spotlight on Debt Collection: Administrative Wage Garnishment 

Page 5 

Winter 2008/2009 

Administrative Wage Garnishment (AWG) is an effective resource available to federal agencies to collect non-tax 

delinquent debt owed to the Federal Government. AWG is a process in which an employer withholds amounts from an 

employee’s wages and pays those amounts to the employee’s creditor agency in satisfaction of a withholding order. The 

Debt Collection Improvement Act of 1996 (DCIA) provides federal agencies the authority to garnish up to 15 percent of 

the disposable pay of a delinquent debtor (non-Federal Employee) without having to receive a court order. Employers 

are obligated to comply with AWG, and under federal law cannot terminate, refuse to employ, or take any disciplinary 

action against a debtor because their wages are being garnished. 

In the event that a debtor contests the debt or the terms of the proposed garnishment, the agency is obligated to hold a 

hearing and issue an associated decision within 60 days of the date of dispute. In order to implement AWG through 

FMS, agencies are required to either adopt Treasury’s rules for conducting AWG hearings or develop their own 

regulations that ensure due process to the debtors. After these rules are established, the agency must update their agency 

profile with FMS to indicate that they will permit AWG. Agencies are required to review requests from debtors to 

modify the terms of the garnishment based on claims of financial hardship due to a material change in circumstances, 

such as disability, divorce, or catastrophic illness. Unless the agency receives information that justifies a delay or 

cancellation of the withholding order, the agency will send a withholding order to the debtor’s employer with the ample 

information for the employer to comply with the order, for example, where withholding payments should be sent. 

AWG is a tool available to agencies for debt collection of wage earning debtors who are unwilling to meet their federal 

non-tax debt obligations voluntarily. AWG has been found to be a successful and a cost-effective tool for participating 

agencies. For more information about AWG, please contact Debbie Davenport at 202-874-6653. 

The Philadelphia Financial Center Newsletter entitled PFC 

Journal is presented by the Customer Service Branch and 

addresses a variety of topics of interest to individuals in the 

Federal financial community.

The PFC Journal is available exclusively on our website. 

P.O. Box 51317 

Philadelphia, PA 19115 

Phone: 215-516-8000 

Fax: 215-516-8010 

Email:philly@fms.treas.gov 

A review of Fiscal Year 2007 statistics revealed the following issues with ACH returns coding: 

• 11,827 out of 743,979 SSA returned ACH payments contained unacceptable return reason codes such as Customer 

Advises Not Authorized (R10), Credit Entry Refused by Receiver (R23), Duplicate Entry (R24), and Corporate 

Customer Advises Not Authorized (R29). 

• 5,693 out of 376,887 IRS returned ACH payments contained unacceptable return reason codes such as Insufficient 

Funds (R01), Invalid ACH Routing Number—Reserved for ACH Operator (R13), Non-Transaction Account (R20), 

and Invalid Individual Name/Company Name—Reserved for Federal Government Agency (R45). 

• 2,600 out of 133,467 VA returned ACH payments contained unacceptable return reason codes such as Uncollected 

Funds (R09), Account Sold to Another Depositary Financial Institution (R12), and Credit Entry Refused by Receiver 

(R23). 

Financial institutions are encouraged to review the Green Book, Chapter 4 (Returns) for proper codes. FMS will 

continue to review returned ACH payments for improper codes and conduct outreach to educate the financial community 

on the appropriate usage of return reason codes for Federal payments. For additional information, please contact Lisa 

Andre, Accredited ACH Professional (AAP), at (215) 516-8142 or Lisa.Andre@fms.treas.gov. 

ACH Returns (Continued)