[Federal Register Volume 82, Number 174 (Monday, September 11, 2017)]
[Rules and Regulations]
[Pages 42597-42609]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-19135]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 210

RIN 1510-AA14


Federal Government Participation in the Automated Clearing House

AGENCY: Bureau of the Fiscal Service, Treasury.

ACTION: Final rule.

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SUMMARY: The Department of the Treasury, Bureau of the Fiscal Service 
(Fiscal Service) is amending its regulation governing the use of the 
Automated Clearing House (ACH) Network by Federal agencies. Our 
regulation adopts, with some exceptions, the NACHA Operating Rules 
developed by NACHA--The Electronic Payments Association (NACHA) as the 
rules governing the use of the ACH Network by Federal agencies. We are 
issuing this rule to address changes that NACHA has made to the NACHA 
Operating Rules since the publication of the 2013 NACHA Operating Rules 
& Guidelines book. These changes include amendments set forth in the 
2014, 2015, and 2016 NACHA Operating Rules & Guidelines books.

DATES: Effective date: September 11, 2017.
    Applicability date: The amendment to Sec.  210.5 is applicable 
beginning on April 1, 2018. The incorporation by reference of certain 
publications listed in the rule is approved by the Director of the 
Federal Register as of September 11, 2017.

FOR FURTHER INFORMATION CONTACT: Matt Helfrich, Senior Program Analyst, 
at 215-516-8022 or <a href="/cdn-cgi/l/email-protection#5f123e2b2b373a2871173a33392d363c371f39362c3c3e33712b2d3a3e2c2a2d2671383029"><span class="__cf_email__" data-cfemail="175a7663637f7260395f727b71657e747f57717e6474767b39636572766462656e39707861">[email protected]</span></a>; or Natalie H. 
Diana, Senior Counsel, at (202) 874-6680 or 
<a href="/cdn-cgi/l/email-protection#9af4fbeefbf6f3ffb4fef3fbf4fbdafcf3e9f9fbf6b4eee8fffbe9efe8e3b4fdf5ec"><span class="__cf_email__" data-cfemail="3856594c5954515d165c51595659785e514b5b5954164c4a5d594b4d4a41165f574e">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: 

[[Page 42598]]

I. Proposed Rulemaking and Comments Received

A. Background

    We published a Notice of Proposed Rulemaking (NPRM) on November 30, 
2016, requesting comment on a number of proposed amendments to title 31 
CFR part 210 (part 210). 81 FR 86302. Part 210 governs the use of the 
ACH Network by Federal agencies. The ACH Network is a nationwide 
electronic fund transfer (EFT) system that provides for the inter-bank 
clearing of electronic credit and debit transactions and for the 
exchange of payment-related information among participating financial 
institutions. Part 210 incorporates the NACHA Operating Rules, with 
certain exceptions. From time to time the Fiscal Service amends part 
210 in order to address changes that NACHA periodically makes to the 
NACHA Operating Rules or to revise the regulation as otherwise 
appropriate.
    Currently, part 210 incorporates the NACHA Operating Rules as set 
forth in the 2013 NACHA Operating Rules & Guidelines book. NACHA has 
adopted a number of changes to the NACHA Operating Rules since the 
publication of the 2013 NACHA Operating Rules & Guidelines book. We 
proposed to incorporate in part 210 most, but not all, of these 
changes. We also proposed two changes to part 210, related to reversals 
and prepaid cards, that do not stem from a change to the NACHA 
Operating Rules.
    We received three comment letters on the NPRM. Two of the 
commenters were industry trade associations and the third was NACHA. 
Commenters were generally pleased that Fiscal Service proposed to adopt 
most of the 2014, 2015 and 2016 amendments to the NACHA Operating 
Rules, but commented that three of the exceptions to the NACHA 
Operating Rules proposed in the NPRM are inappropriate and should not 
be adopted. Commenters also stated that Fiscal Service's approach to 
adopting Same Day ACH should be modified. Finally, commenters urged 
Fiscal Service to be more timely in addressing NACHA Rule changes.

B. Summary of Comments

Unauthorized Entry Fee
    In the 2015 amendments to the NACHA Operating Rules, NACHA added a 
new Section 1.11 to provide for the payment of an ``Unauthorized Entry 
Fee.'' Under this section, when an originating depository financial 
institution (``ODFI'') originates a debit Entry to a receiving 
depository financial institution (``RDFI'') to transfer funds from the 
account of a Receiver to an account of an Originator, and the Entry is 
returned on the basis that it is unauthorized, the ODFI agrees to pay 
an Unauthorized Entry Fee to the RDFI. In the NPRM, we proposed not to 
adopt the Unauthorized Entry Fee provisions of the NACHA Operating 
Rules because part 210 does not incorporate the provisions of the NACHA 
Operating Rules dealing with enforcement for noncompliance, and the 
government does not as a general matter subject itself to fines for 
violations of the NACHA Operating Rules.
    Two of the commenters opposed Fiscal's Service's proposal to exempt 
the government from paying Unauthorized Entry Fees, arguing that the 
fees are not fines or penalties but service fees intended to compensate 
RDFIs for costs incurred by the RDFI in handling unauthorized Entries. 
NACHA commented that unlike a fine imposed for noncompliance, the fee 
is not imposed as a result of an enforcement process by NACHA, is not 
paid to NACHA (Fines and penalties imposed by NACHA pursuant to its 
enforcement process are paid by the participant that violated the NACHA 
Operating Rules directly to NACHA. See NACHA Operating Rules, App. Ten, 
Subpart 10.4.7.1.) and is not set at a level that is punitive in 
nature. Rather, it is based upon a NACHA cost study that assessed the 
burden that unauthorized entries place on RDFIs. According to NACHA, 
this allocation of cost to the party in the best position to mitigate 
the cost (i.e., through improvements to origination practices) provides 
an incentive to improve the quality of the network by reducing the 
number of unauthorized Entries that are initiated. NACHA also pointed 
out that the Unauthorized Entry Fee is specifically set at a level 
below actual RDFI cost in order to avoid creating a disincentive to 
ODFI participation in the network, and that nothing in the materials 
accompanying the development, balloting and adoption of the 
Unauthorized Entry Fee in any way characterized the fee as a fine or 
penalty. In short, NACHA asserts that the Unauthorized Entry Fee is no 
different from any other fees that the government would pay for 
services in which it participates and accordingly that the exclusion of 
the Unauthorized Entry Fees may amount to an improper taking of 
property without just compensation, in violation of the Takings Clause 
of the Fifth Amendment to the U.S. Constitution.
    Based on this analysis we agree with the conclusion that the 
Unauthorized Entry Fee is in the nature of a fee for services rather 
than a fine or penalty and that it is appropriate for the government to 
pay the fee when it is the Originator of an Unauthorized Entry. 
Accordingly, we are accepting the Unauthorized Entry Fee provisions for 
government ACH transactions.
Return Rate Levels
    In 2015, the NACHA Operating Rules were amended to establish an 
inquiry process as a starting point to evaluate the origination 
activity of Originators and Third-Party Senders that reach the new 
administrative return and overall debit return rate levels. The 
identification of an Originator or Third-Party Sender with a return 
rate that is higher than the respective return rate level may trigger a 
review of the Originator's or Third-Party Sender's ACH origination 
procedures. At the conclusion of the inquiry, NACHA may determine that 
no further action is required, or it may take the next step and 
recommend to the ACH Rules Enforcement Panel that the ODFI be required 
to reduce the Originator's or Third-Party Sender's overall or 
administrative return rate below the established level.
    As discussed above, Fiscal Service generally takes the position 
that it will not be subject to the enforcement provisions of the NACHA 
Operating Rules for noncompliance, including fines for violations of 
the provisions of the NACHA Operating Rules. Because the return rate 
level reporting provisions of the NACHA Rules are a basis for 
enforcement, Fiscal Service proposed not to adopt the return rate level 
reporting provisions. NACHA commented that Fiscal Service's concern 
with reporting return rate levels is misplaced because Section 2.17 is 
not an enforcement rule and that the provisions for enforcement of 
Section 2.17 are set forth at Appendix 10 to the NACHA Operating Rules, 
which is separately exempted from part 210.
    Because the Federal government is the largest single participant in 
the ACH Network, NACHA indicated that information concerning the 
Federal government's return rate levels could be invaluable in 
connection with analyzing elevated return rates. NACHA asserted that 
this benefit far outweighs the minimal additional burden to the 
government of complying with the return rate reporting requirements and 
therefore requested that Fiscal Service modify the Proposed Rule to 
delete from part 210 the exclusion of Section 2.17 of the NACHA 
Operating Rules or, in the alternative, to limit the exclusion to 
Sections 2.17.2.2 through 2.17.2.6 of the amended NACHA Operating 
Rules.

[[Page 42599]]

    In light of the value of the government's return rate levels for 
the ACH Network, Fiscal Service is accepting in the final rule the 
reporting requirement of Section 2.17 and limiting the exclusion to 
Sections 2.17.2.2 through 2.17.2.6.
Notification of Reversals
    In the NPRM we proposed to amend part 210 to address a requirement 
in the ACH Rules (NACHA Operating Rule 2.9.1) that requires that the 
Originator of a Reversing Entry make a reasonable attempt to notify the 
Receiver of the Reversing Entry and the reason for the Reversing Entry 
no later than the settlement date of the Entry. Fiscal Service has had 
experience with this requirement, which is not new, and has found that 
in attempting to contact Receivers regarding the reversal of a 
duplicate or erroneous Entry on behalf of federal agencies, efforts to 
reach Receivers, typically through the RDFI, are often unsuccessful. 
Adhering to the notification requirement impedes the timeliness and 
efficiency of originating reversals, which is disadvantageous both for 
Fiscal Service and for Receivers. Accordingly, we proposed to exclude 
this requirement from incorporation in part 210.
    All of the commenters urged Fiscal Service to reconsider the 
proposed exclusion. Commenters noted that the purpose of the 
requirement is to ensure that, in the case of a credit Entry, the 
Receiver does not remove the funds received as a result of the 
Erroneous Entry before it can be reversed, and in the case of a debit 
Entry, the Receiver is notified quickly that funds were removed from 
their account in error and that the error will be reversed. Commenters 
pointed out that Section 2.9.1 does not impose an absolute requirement 
that an Originator notify the Receiver of the Reversing Entry, but only 
requires that the Originator make a ``reasonable attempt'' to do so. 
The commenters argued that the fact that Fiscal Service may find that 
despite its reasonable efforts it frequently is unable to reach the 
applicable Receiver does not undermine the importance and value of 
making the effort, because of the benefit that results in those 
instances where reasonable efforts are successful.
    NACHA also observed that the obligation to make reasonable efforts 
to notify the Receiver should have no effect on the timeliness or 
efficiency of originating Reversing Entries because notice to the 
Receiver is not a prerequisite for initiating a Reversing Entry. Thus, 
the obligation to make a reasonable attempt to notify the Receiver 
should not prevent the initiation of a Reversing Entry.
    In view of the fact that only a reasonable effort to notify the 
Receiver is required, and because Fiscal Service recognizes the value 
of notifying consumers of reversals when possible, Fiscal Service is 
not adopting the proposal to opt out of the reversal notification 
requirement.
Same Day ACH
    In 2016 NACHA adopted an amendment that allows for same-day 
processing of ACH payments. Previously, the standard settlement period 
for ACH transactions was one or two business days after processing. The 
Same-Day ACH amendment enables Originators that desire same-day 
processing have the option to send Same Day ACH Entries to accounts at 
any RDFI. All RDFIs are required to receive Same-Day ACH Entries, which 
gives ODFIs and Originators the certainty of being able to send same 
day ACH Entries to accounts at all RDFIs in the ACH Network. The 
amendment includes a ``Same-Day Entry fee'' on each Same-Day ACH 
transaction to help mitigate RDFI costs for supporting Same-Day ACH.
    The amendment has a phased implementation period, spreading from 
2016 to 2018, with the following effective dates:
    <bullet> Phase 1--September 23, 2016: ACH credits became eligible 
to be processed during two new Same-Day ACH windows with submission 
deadlines at 10:30 a.m. ET and 2:45 p.m. ET, with settlement occurring 
at 1:00 p.m. ET and 5:00 p.m. ET, respectively. RDFIs are required to 
provide funds availability by the end of the RDFI's processing day. 
Applicable to ACH credits only and non-monetary Entries, with funds 
availability due at the end of the RDFI's processing day.
    <bullet> Phase 2--September 15, 2017: ACH debits will become 
eligible for same-day processing during the two new Same-Day windows.
    <bullet> Phase 3--March 16, 2018: RDFIs will be required to provide 
funds availability for same day credits no later than 5:00 p.m. at the 
RDFI's local time.
    In the NPRM we proposed to accept NACHA's 2016 Same-Day amendments 
but with delayed implementation until August 30, 2017 of NACHA's Phase 
1 implementation date where the government is receiving Same-Day credit 
Entries. The delayed implementation date reflects coding and reporting 
changes and testing that must be undertaken to enable the processing of 
incoming Same-Day credit Entries by Fiscal Service's ACH credit 
processing systems. We did not propose to delay the government's 
implementation of the NACHA Same-Day ACH amendment's Phase 2 or Phase 3 
implementation dates.
    NACHA commented that it would be inequitable for the Fiscal Service 
to reserve the right to require RDFIs to process Same Day Entries 
originated by the government, but refuse to process Same Day Entries 
that are received by the government. By doing so, the government would 
receive the benefit of the new rules, without having to accept any of 
the obligations with which all other Participating DFIs must comply. 
For this reason, NACHA recommended that the NPRM be revised to provide 
that the government will not originate Same Day Entries until it is 
ready to receive Same Day Entries, regardless of the effective date of 
a final rule on part 210.
    Second, NACHA requested that the final rule provide a date certain 
by which the government will begin receiving Same Day Entries, stating 
that the NPRM preamble indicated only that the government will 
implement Phase 1 for purposes of receiving Same Day Entries ``no 
earlier than'' August 30, 2017.
    In the final rule we are providing a date certain of September 15, 
2017 for implementation, and applying that date to both the origination 
and receipt of Same Day entries, as requested.
Fiscal Service's Review Process
    With respect to Fiscal Service's rulemaking process to review ACH 
Rules generally, NACHA commented that by waiting in some cases until 
after a rules change has been implemented, the current process can be 
disruptive to other participants and may cause them to incur additional 
and unnecessary costs. NACHA urged Fiscal Service to establish a 
process to review amendments to the NACHA Operating Rules on at least 
an annual basis, arguing that because Fiscal Service actively 
participates in the NACHA rulemaking process, the government has ample 
opportunity to understand and evaluate NACHA rule proposals well in 
advance of their respective effective dates.
    We understand that the delay in the government's review and 
adoption of ACH rule changes may inconvenience ACH network 
participants. However, Fiscal Service cannot address ACH rule changes 
other than through the notice-and-comment rulemaking process required 
under the Administrative Procedure Act. The rulemaking process is 
inherently cumbersome and time-consuming, typically taking a year to

[[Page 42600]]

move through the process of developing and publishing a proposed rule, 
ultimately followed by a final rule. Fiscal Service will work toward 
addressing ACH rule changes on as timely a basis as possible in light 
of regulatory and resource limitations.

II. Final Rule

    In the Final Rule we are adopting all of the amendments to part 210 
that were proposed in the NPRM, as follows:

A. 2014 NACHA Operating Rules & Guidelines Book Changes

    The 2014 edition of the NACHA Operating Rules & Guidelines contains 
changes related to the following amendments:
    <bullet> Person-to-Person Payments via ACH;
    <bullet> IAT Modifications; Proof of Authorization for Non-Consumer 
Entries;
    <bullet> Proof of Authorization for Non-Consumer Entries;
    <bullet> Dishonored Returns and Contested Dishonored Returns 
Related to an Unintended Credit to a Receiver;
    <bullet> Reclamation Entries--Corrections to Rules Governing 
Authorizations;
    <bullet> Incomplete Transaction Clarification;
    <bullet> Use of Tilde as Data Segment Terminator;
    <bullet> Editorial Clarification--Non-Consumer Receiver's 
Obligation to Credit Originator's Account;
    <bullet> Prenotification Entries--Reduction in Waiting Period for 
Live Entries;
    <bullet> Notification of Change (NOC)--Removal of Change Code C04 
(Incorrect Individual Name/Receiving Company Name); and
    <bullet> ACH Operator Edit for Returns.
    We are incorporating in part 210 all of the foregoing amendments, 
which are summarized below, except the amendment relating to 
reclamation entries.
1. Person-to-Person Payments via ACH
    This amendment standardized the use of the ACH Network for Person-
to-Person (P2P) Entries by expanding the Internet-Initiated/Mobile 
(WEB) SEC Code to accommodate credit Entries transmitted between 
consumers (P2P transactions). A P2P Entry is defined as ``a credit 
Entry initiated by or on behalf of a holder of a Consumer Account that 
is intended for a Consumer Account of a Receiver.'' The amendment also 
modified the definition of a Customer Initiated Entry (CIE) to ``a 
credit Entry initiated by or on behalf of the holder of a Consumer 
Account to the Non-Consumer Account of a Receiver.'' These definitional 
changes ensure there is a clear differentiation between WEB credit and 
CIE--i.e., CIE for a bill payment from a consumer to a business, and 
WEB credit for a P2P transaction from one consumer to another or 
between consumer accounts belonging to the same person. In addition, 
this amendment clarified the treatment of NOCs related to credit WEB 
Entries and CIE Entries.
    We are accepting this amendment.
2. IAT Modifications
    This amendment revised the NACHA Operating Rules to update the 
rules and formatting of the International ACH Transaction (IAT) in 
order to facilitate more accurate screening and compliance with OFAC 
sanctions policies. This modification requires a Gateway to identify 
within an Inbound IAT Entry (1) the ultimate foreign beneficiary of the 
funds transfer when the proceeds from a debit Inbound IAT Entry are for 
further credit to an ultimate foreign beneficiary that is a party other 
than the Originator of the debit IAT Entry, or (2) the foreign party 
ultimately funding a credit Inbound IAT Entry when that party is not 
the Originator of the credit IAT Entry. This amendment revised the 
description of the Payment Related Information Field as it relates to 
the IAT Remittance Addenda Record to establish specific formatting 
requirements for inclusion of the ultimate foreign beneficiary's/
payer's name, street address, city, state/province, postal code, and 
ISO Country Code. The amendment also requires an Originator, Third-
Party Sender, ODFI, or Gateway transmitting an IAT Entry to identify 
any country named within the IAT Entry by that country's 2-digit 
alphabetic ISO Country Code, as defined by the International 
Organization for Standardization's (ISO) 3166-1-alpha-2 code list.
    We are accepting this amendment.
3. Proof of Authorization for Non-Consumer Entries
    This amendment established a minimum standard for proof of 
authorization for Non-Consumer Entries to aid in the resolution of 
unauthorized or fraudulent debits to businesses, particularly those 
where no trading partner relationship/agreement exists between the 
Originator and Receiver. This change permits an RDFI to request proof 
of a Non-Consumer Receiver's authorization for a CCD, CTX, or an 
Inbound IAT Entry to a Non-Consumer Account. The ODFI must provide the 
required information to the RDFI at no charge within ten banking days 
of receiving a written request for such information from the RDFI. The 
amendment also requires the Originator to provide such proof of 
authorization to the ODFI for its use or for use by the RDFI.
    The amendment provides two methods by which an ODFI can comply with 
the RDFI's request for proof of authorization. The first is to provide 
an accurate record of the authorization. The second is to provide the 
Originator's contact information that can be used for inquiries about 
authorization of Entries. At a minimum, this contact information must 
include (1) the Originator's name, and (2) the Originator's phone 
number or email address for inquiries regarding authorization of 
Entries.
    We are accepting this amendment.
4. Dishonored Returns and Contested Dishonored Returns Related to an 
Unintended Credit to a Receiver
    This amendment established the right of an ODFI to dishonor the 
Return of a debit Erroneous Entry if the Return Entry results in an 
unintended credit to the Receiver because (1) the Return Entry relates 
to a debit Erroneous Entry, (2) the ODFI has already originated a 
credit Reversing Entry to correct the Erroneous Entry, and (3) the ODFI 
has not received a Return of that credit Reversing Entry.
    Similarly, under this amendment an ODFI may dishonor the Return of 
a debit Reversing Entry if the Return Entry results in an unintended 
credit to the Receiver because (1) the Return Entry relates to a debit 
Reversing Entry that was intended to correct a credit Erroneous Entry, 
and (2) the ODFI has not received a Return of that credit Erroneous 
Entry. The amendment requires an ODFI dishonoring a debit Return Entry 
under either of these conditions to warrant that it originated a 
Reversal in an effort to correct the original erroneous transaction and 
therefore is dishonoring the Return of the debit Erroneous Entry or the 
debit Reversing Entry, either of which causes an unintended credit to 
the Receiver. The amendment also establishes the right of an RDFI to 
contest this type of dishonored Return if either of the following 
conditions exists: (1) The RDFI returned both the Erroneous Entry and 
the related Reversal; or (2) the RDFI is unable to recover the funds 
from the Receiver.
    We are accepting this amendment.
5. Reclamation Entries--Corrections to Rules Governing Authorization
    This amendment made several corrections to the rules governing the 
authorization of Reclamation Entries. These changes address technical 
and

[[Page 42601]]

drafting discrepancies between Reversing Entries and Reclamation 
Entries in the NACHA Operating Rules and make the rules related to 
Reclamation Entries consistent with those for Reversing Entries to the 
extent possible.
    We are not incorporating this amendment in part 210. Part 210 
generally excludes all NACHA Operating Rules relating to the 
reclamation of benefit payments because part 210 contains specific 
provisions on the reclamation of Federal benefit payments. No revision 
to the text of part 210 is required to exclude this amendment from part 
210 because the amendment modifies Section 2.10 of the NACHA Operating 
Rules, which is already inapplicable to the government under Sec.  
210.2(d)(2).
6. Incomplete Transaction Clarifications
    The Incomplete Transaction Clarifications amendment recognizes 
certain ARC, BOC, and POP Entries to Non-Consumer Accounts as eligible 
for return under the Incomplete Transaction Rule. This change 
streamlines RDFIs' processing of ARC, BOC, and POP returns and improves 
their ability to comply with the NACHA Operating Rules by eliminating 
different processing requirements for unauthorized/improper consumer 
and non-consumer ARC, BOC, and POP Entries, which share the same 
Standard Entry Class Code. The change restores the RDFI's ability to 
rely solely on the Standard Entry Class Code when determining handling 
requirements for specific types of Entries. This amendment also added 
specific references to ``consumer'' Receivers, where appropriate, to 
add clarity regarding the scope of the Incomplete Transaction Rules.
    This amendment modifies Article Three, Subsection 3.12.3 
(Incomplete Transaction) to add the word ``consumer'' to clarify that 
the Receiver of an Incomplete Transaction is generally the owner of a 
consumer account, with one specific exception. The amendment also adds 
language to this subsection to state that an ARC, BOC, or POP Entry may 
also be considered an Incomplete Transaction regardless of whether the 
account that is debited is a Consumer Account or a Non-Consumer 
Account. The amendment made corresponding changes to the definition of 
an Incomplete Transaction in Article Eight, Section 8.50 and clarified 
that a Written Statement of Unauthorized Debit must be accepted for any 
Incomplete Transaction involving any ARC, BOC, or POP Entry.
    We are accepting this amendment.
7. Use of Tilde as Data Segment Terminator
    This amendment corrected two IAT field descriptions, ``Originator 
City and State/Province'' and ``Receiver City and State/Province,'' to 
clarify that the tilde (``~'') is a valid data segment terminator.
    We are accepting this amendment.
8. Editorial Clarification--Non-Consumer Receiver's Obligation to 
Credit Originator's Account
    This amendment revised the text and title of Article Three, 
Subsection 3.3.1.3 (Non-Consumer Receiver Must Credit Originator's 
Account) to make the section's intent clearer and easier to understand 
for ACH Network participants. This change was editorial in nature only.
    We are accepting this amendment.
9. Prenotification Entries--Reduction in Waiting Period for Live 
Entries
    This amendment reduced the six banking-day waiting period between 
initiation of a Prenotification and ``live'' Entries for Originators 
choosing to originate Prenotes. This amendment also modified the NACHA 
Operating Rules related to Notifications of Change to clarify the 
Originator's obligations with respect to an NOC received in response to 
a Prenote. This change permits an Originator that has originated a 
Prenotification Entry to a Receiver's account to initiate subsequent 
Entries to the Receiver's account as soon as the third Banking Day 
following the Settlement Date of the Prenotification Entry, provided 
that the ODFI has not received a return or NOC related to the 
Prenotification.
    We are accepting this amendment.
10. Notification of Change--Removal of Change Code C04 (Incorrect 
Individual Name/Receiving Company Name)
    This amendment removed the Notification of Change Code--C04 
(Incorrect Individual Name/Receiving Company Name) from the NACHA 
Operating Rules. Change Code C04 (Incorrect Individual Name/Receiving 
Company Name) had been used by RDFIs to request a correction to the 
name of the Receiver indicated in an ACH Entry. As with any 
Notification of Change, the RDFI that transmitted an NOC with this 
change code warranted the accuracy of the corrected data (in this case, 
the Receiver's name). The Originator was then obligated to make the 
requested change within six banking days or prior to initiating a 
subsequent Entry, whichever is later.
    In certain scenarios, the use of C04 created compliance and 
liability challenges for the Originator, ODFI, and RDFI. Generally 
speaking, an ACH transaction involves a mutual customer of both the 
Originator and the RDFI. In the event that the Receiver's name on a 
debit Entry was different from the name on the account, most RDFIs 
would either post the Entry based solely on the account number or 
return the transaction using Return Reason Code R03 (No Account/Unable 
to Locate Account). In some cases, RDFIs transmitted NOCs using Change 
Code C04 to instruct the Originator to change the Receiver's name on 
future Entries. The use of C04 presented additional risk to the RDFI 
and the ODFI and/or the Originator because the RDFI was warranting that 
the name change is accurate, but it did not always reflect the party 
with whom the Originator has the relationship. As a result, Originators 
were typically unable or unwilling to make the changes in accordance 
with their obligations under the NACHA Operating Rules. An Originator 
continuing to debit its customer without making the change warranted by 
the RDFI did so in violation of the current Rules, creating challenges 
and conflict for all parties. Eliminating Change Code C04 (Incorrect 
Individual Name/Receiving Company Name) removed the challenges and 
potential rules violations that Originators faced when they receive a 
request for a name change that they were unable to make. Under the 
amendment, an Originator can rely on its own contracts and records to 
properly identify the name of the Receiver being credited or debited 
without being in violation of the NACHA Operating Rules because of the 
failure to respond to an NOC.
    Eliminating Change Code C04 (Incorrect Individual Name/Receiving 
Company Name) lessens the risk to the RDFI as it warrants that 
information contained in an NOC is correct. A change as significant as 
a name change should be accomplished through communication of the 
Receiver with the Originator so that the authorization held by the 
Originator is accurate. The RDFI that identifies a name mismatch can 
post the Entry based solely on the account number, return the Entry as 
R03, or choose to assist its Receiver by communicating directly with 
the ODFI/Originator. Any of these options should cause the Originator 
and the Receiver to communicate relating to needed changes while 
relieving the RDFI of the warranty that the information is correct.
    We are accepting this amendment.

[[Page 42602]]

11. ACH Operator Edit for Returns
    This amendment incorporated an additional ACH Operator edit within 
the listing of ACH Operator file/batch reject edit criteria specified 
within Appendix Two of the NACHA Operating Rules. Specifically, this 
edit requires ACH Operators to reject any batch of Return Entries in 
which RDFI returns and ACH Operator returns are commingled. By 
definition, different parties are responsible for generating each type 
of return, and each must be separately identified within the Company/
Batch Header Record as the sender of the batch. This ACH Operator edit 
codifies this fact within the NACHA Operating Rules and ensures 
consistent processing of return batches by all ACH Operators.
    We are accepting this amendment.

B. 2015 NACHA Operating Rules & Guidelines Book Changes

    The 2015 edition of the NACHA Operating Rules contains changes 
related to the following amendments: \1\
---------------------------------------------------------------------------

    \1\ The 2015 Rules & Guidelines book also included two 
amendments addressed in the 2014 Rules & Guidelines book that had 
effective dates in 2015: (1) Dishonored Returns and Contested 
Dishonored Returns Related to an Unintended Credit to a Receiver and 
(2) Notification of Change--Removal of Change Code C04. Because 
those amendments are addressed in Section A above, we are not 
including them in Section B.
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    <bullet> ACH Network Risk and Enforcement;
    <bullet> Improving ACH Network Quality--Unauthorized Entry Fee;
    <bullet> Clarification on Company Identification for P2P WEB Credit 
Entries;
    <bullet> Point-of-Sale Entries--Clarification of General Rule;
    <bullet> Return Fee Entry Formatting Requirements;
    <bullet> Entry Detail Record for Returns--Clarification Regarding 
POP Entries;
    <bullet> Clarification of RDFI's Obligation to Recredit Receiver;
    <bullet> Clarification on Prenotification Entries and Addenda 
Records; and
    <bullet> ACH Operator Edit for Returns.
    We are incorporating in part 210 all of the foregoing amendments, 
which are summarized below, other than some provisions of the amendment 
relating to ACH Network Risk and Enforcement.
1. ACH Network Risk and Enforcement
    This amendment expanded existing rules regarding ODFIs' and Third-
Party Senders' requirements for risk management and origination 
practices, such as return rate levels. It also expanded NACHA's 
authority to initiate enforcement proceedings for a potential violation 
of the NACHA Operating Rules related to unauthorized Entries.
Return Rate Levels
    The amendment reduced the threshold for unauthorized debit Entries 
(Return Reason Codes R05, R07, R10, R29, and R51) from 1.0 percent to 
0.5 percent and also established two new return rate levels for other 
types of returns. First, a return rate level of 3.0 percent will apply 
to debit entries returned due to administrative or account data errors 
(Return Reason Codes R02--Account Closed; R03--No Account/Unable to 
Locate Account; and R04--Invalid Account Number Structure). Second, a 
return rate level of 15.0 percent will apply to all debit entries 
(excluding RCK entries) that are returned for any reason.
    The amendment also established an inquiry process, which is 
separate and distinct from an enforcement proceeding, as a starting 
point to evaluate the origination activity of Originators and Third-
Party Senders that reach the new administrative return and overall 
debit return rate levels. The identification of an Originator or Third-
Party Sender with a return rate that is higher than the respective 
return rate level may trigger a review of the Originator's or Third-
Party Sender's ACH origination procedures. At the conclusion of the 
inquiry, NACHA may determine that no further action is required, or it 
may take the next step and recommend to the ACH Rules Enforcement Panel 
that the ODFI be required to reduce the Originator's or Third-Party 
Sender's overall or administrative return rate below the established 
level.
    In this new role, the ACH Rules Enforcement Panel will be the final 
authority in deciding, after the completion of the inquiry, whether the 
ODFI should be required to reduce the Originator's or Third-Party 
Sender's overall or administrative return rate. After reviewing NACHA's 
recommendation, the Panel can decide either to take no action, at which 
point the case would be closed, or to have NACHA send a written 
directive to the ODFI, which would require the reduction of the 
Originator's or Third-Party Sender's administrative or overall return 
rate.
    We are incorporating in part 210 the provisions of the amendment 
relating to return rate level reporting at section 2.17. We are not 
accepting the provisions for enforcement of Section 2.17 that are set 
forth at Appendix 10 to the NACHA Operating Rules, which is separately 
exempted from part 210. The exclusion from Section 2.17 in the 
regulation text is limited to Sections 2.17.2.2 through 2.17.2.6.
Reinitiation of Entries
    This amendment explicitly prohibited the reinitiation of Entries 
outside of the express limited circumstances under which they are 
permitted under the NACHA Operating Rules. The amendment also added a 
specific prohibition against reinitiating a transaction that was 
returned as unauthorized. The amendment further included an anti-
evasion provision, specifying that any other Entry that NACHA 
reasonably believes represents an attempted evasion of the defined 
limitations will be treated as an improper reinitiation. The ACH Rules 
Enforcement Panel will have final authority in deciding whether a 
specific case involves an attempted evasion of the limitations on 
reinitiation.
    To avoid unintended consequences from these clarifications, the 
amendment included two categories of Entries that will not be 
considered reinitiations. First, the amendment clarified that a debit 
Entry in a series of preauthorized recurring debit Entries will not be 
treated as a reinitiated Entry, even if the subsequent debit Entry 
follows a returned debit Entry, as long as the subsequent Entry is not 
contingent upon whether an earlier debit Entry in the series has been 
returned. Second, the amendment expressly stated that a debit Entry 
will not be considered a ``reinitiation'' if the Originator obtains a 
new authorization for the debit Entry after the receipt of the Return.
    The amendment requires a reinitiated Entry to contain identical 
content in the following fields: Company Name, Company ID, and Amount. 
Further, the amendment permits modification to other fields only to the 
extent necessary to correct an error or facilitate processing of an 
Entry. This change allows reinitiations to correct administrative 
errors, but prohibits reinitiation of Entries that may be attempts to 
evade the limitation on the reinitiation of returned Entries by varying 
the content of the Entry. Finally, the amendment addressed certain 
technical issues associated with the reinitiation requirements.
    We are accepting the reinitiation provisions of the amendment.
Third-Party Sender Issues
    The amendment added a direct obligation on Third-Party Senders to 
monitor, assess and enforce limitations on their customer's origination 
and return activities in the same manner the NACHA Operating Rules 
require of ODFIs. Prior to this amendment, the NACHA Operating Rules 
required

[[Page 42603]]

ODFIs to establish, implement, periodically review and enforce exposure 
limits for their Originators and Third-Party Senders. The ODFI was 
required to monitor each Originator's and Third-Party Sender's 
origination and return activity across multiple Settlement Dates, 
enforce restrictions on the types of Entries that may be originated and 
enforce the exposure limit. If an ODFI enters into a relationship with 
a Third-Party Sender that processes Entries such that the ODFI itself 
cannot or does not perform these monitoring and enforcement tasks with 
respect to the Originators serviced by the Third-Party Sender, the 
Third-Party Sender must do so. The amendment added a specific statement 
of this obligation.
    We are accepting the Third-Party Sender provisions of the 
amendment.
NACHA's Enforcement Authority
    The amendment provided NACHA with the express authority to bring an 
enforcement action based on the origination of unauthorized entries. To 
ensure the judicious use of the expanded authority, the amendment 
requires the ACH Rules Enforcement Panel to validate the materiality of 
this type of enforcement case before NACHA can initiate any such 
proceeding. In addition, the amendment encourages RDFIs to voluntarily 
provide to NACHA information, such as return data, that may be 
indicative of a potential rules violation for improper authorization 
practices by other ACH Network participants, even if the RDFI is not 
interested in itself initiating a rules enforcement proceeding. Such 
early sharing of information regarding unusual return rates or 
unauthorized transactions can help eliminate improper activities more 
quickly.
    We are not incorporating in part 210 the provisions of the 
amendment that relate to NACHA's enforcement authority. Part 210 
excludes the government from the risk investigation and enforcement 
provisions of the NACHA Operating Rules. Fiscal Service tracks 
unauthorized return rates for Federal agencies and will use the new 
unauthorized return limits and reinitiation limitations in overseeing 
agency ACH origination activity. No change to the text of part 210 is 
required to exclude these provisions because part 210 already excludes 
Appendix Ten of the NACHA Operating Rules, which governs rules 
enforcement.
2. Improving ACH Network Quality--Unauthorized Entry Fee
    This amendment requires an ODFI to pay a fee to the RDFI for each 
ACH debit that is returned as unauthorized (Return Reason Codes R05, 
R07, R10, R29 and R51). RDFIs will be compensated for a portion of the 
costs they bear for handling unauthorized transactions, and will 
experience reduced costs due to a reduction in unauthorized 
transactions over time. The amendment provides that ODFIs and RDFIs 
authorize debits and credits to their accounts for the collection and 
distribution of the fees. IAT transactions are not covered by the fee, 
but could be included in the future. The amendment defines a 
methodology by which NACHA staff will set and review every three years 
the amount of the Unauthorized Entry Fee. In setting the amount of the 
fee, NACHA staff will apply several stated principles, including the 
review of RDFI cost surveys. Based on the results of the current data 
collection on RDFIs' costs for handling unauthorized transactions, 
NACHA has estimated that the fee amount will be in the range of $3.50-
$5.50 per return.
    We are accepting the Unauthorized Entry Fee provisions of the 
amendment.
3. Clarification of Company Identification for Person-to-Person WEB 
Credit Entries
    This amendment added language to the Company Identification field 
description to clarify content requirements for Person-to-Person (P2P) 
WEB credit Entries.
    For P2P WEB credit Entries, the Company/Batch Header Record 
identifies the P2P service provider (i.e., the consumer Originator's 
own financial institution or a third-party service provider) rather 
than the consumer Originator. Prior to the amendment, the NACHA 
Operating Rules specifically defined service provider content 
requirements for the Company Name field, but omitted the same 
clarification for the Company Identification, which is a related field. 
The purpose of the amendment was to eliminate any potential confusion 
over proper formatting of this field.
    We are accepting this amendment.
4. Point-of-Sale (POS) Entries--Clarification of General Rule
    This amendment re-aligned the general rule for POS Entries with the 
definition of POS Entries in Article Eight. A POS Entry is generally 
considered to be a debit Entry initiated at an electronic terminal by a 
consumer to pay an obligation incurred in a point-of-sale transaction. 
However, a POS Entry can also be an adjusting or other credit Entry 
related to the debit Entry, transfer of funds, or obligation (for 
example, a credit to refund a previous point-of-sale transaction). 
Prior to the amendment, the definition of POS within the NACHA 
Operating Rules recognized these Entries as both debits and credits, 
but the general rule for POS identified POS Entries only as debits. 
This amendment corrected the discrepancy.
    We are accepting this amendment.
5. Return Fee Entry Formatting Requirements
    This amendment modified the description of the Individual Name 
Field in a PPD Return Fee Entry related to a returned ARC, BOC, or POP 
Entry to require that it contain the same information identified within 
the original ARC, BOC, or POP Entry. The Individual Name Field is 
optional for ARC, BOC, and POP; therefore, this field (1) may include 
the Receiver's name, (2) may include a reference number, identification 
number, or code that the merchant needs to identify the particular 
transaction or customer, or (3) may be blank.
    The name of the Receiver must be included in all PPD Entries. With 
ARC, BOC, or POP Entries, where a reading device must be used to 
capture the Receiver's routing number, account number, and check serial 
number, it is difficult for the Originator to capture the Receiver's 
name in an automated fashion. For this reason, the NACHA Operating 
Rules do not require Originators to include the Receiver's name in the 
ARC, BOC, or POP Entry Detail Record. Originators are permitted the 
choice of including either the Receiver's name, or a reference number, 
identification number, or code necessary to identify the transaction, 
or the field may be left blank. Because information contained within 
the returned ARC, BOC, or POP Entry is typically used to create a 
related Return Fee Entry, the Receiver's name is likely not readily 
available to the Originator for use in the Return Fee Entry, especially 
when the Receiver's authorization for the Return Fee Entry was obtained 
by notice. This amendment established consistent formatting 
requirements with respect to the Receiver's name for check conversion 
entries and related return fees.
    We are accepting this amendment.
6. Entry Detail Record for Returns--Clarification Regarding POP Entries
    This amendment added a footnote to the Entry Detail Record for 
Return Entries to clarify the specific use of positions 40-54 with 
respect to the return of a POP Entry. On a forward POP Entry, positions 
40-54 represent

[[Page 42604]]

three separate fields to convey (1) the check serial number (positions 
40-48); (2) the truncated name or abbreviation of the city or town in 
which the electronic terminal is located (positions 49-52); and (3) the 
state in which the electronic terminal is located (positions 53-54). 
However, these three fields are not explicitly identified in the Entry 
Detail Record for Return Entries, which caused some confusion among 
users as to how to map such information from the original forward Entry 
into the Return Entry format.
    We are accepting this amendment.
7. Clarification of RDFI's Obligation To Recredit Receiver
    This amendment clarified that an RDFI's obligation to recredit a 
Receiver for an unauthorized or improper debit Entry is generally 
limited to Consumer Accounts, with certain exceptions for check 
conversion and international transactions. Prior to the NACHA Operating 
Rules simplification initiative in 2010, the rules governing a 
Receiver's right to recredit for unauthorized debit entries clearly 
limited this provision to debit Entries affecting Consumer Accounts, 
except as expressly provided for ARC, BOC, IAT, and POP Entries (which 
can affect both consumer and business accounts). However, when rules 
language was combined and revised during the simplification process 
into a general discussion on recredit, some of this clarity was lost, 
resulting in language that was somewhat ambiguous and the cause of 
confusion for some ACH participants. This change more clearly defines 
the intent of the rule requirement for an RDFI to recredit a Receiver.
    We are accepting this amendment.
8. Clarification of Prenotification Entries and Addenda Records
    This amendment revised the NACHA Operating Rules to clarify that, 
with the exception of IAT Entries, a prenotification Entry is not 
required to include addenda records that are associated with a 
subsequent live Entry. Generally speaking, the format of a 
Prenotification Entry must be the same as the format of a live dollar 
Entry. There are, however, some differences between Prenotes and live 
Entries to which the Prenotes relate:
    <bullet> The dollar amount of a Prenotification Entry must be zero;
    <bullet> a Prenotification Entry is identified by a unique 
transaction code; and
    <bullet> addenda records associated with a live Entry are not 
required with Prenotes (unless the Prenote relates to an IAT Entry).
    While the first two formatting criteria above for Prenotification 
Entries are clearly defined within the technical standards and are 
commonly understood by industry participants, the issue of whether 
Prenotification Entries require addenda records was somewhat ambiguous. 
The amendment eliminated that ambiguity.
    We are accepting this amendment.
9. ACH Operator Edit for Returns
    This amendment incorporated an additional ACH Operator edit within 
the listing of ACH Operator file/batch reject edit criteria specified 
within Appendix Two of the NACHA Operating Rules. Specifically, this 
edit requires ACH Operators to reject any batch of Return Entries in 
which RDFI returns and ACH Operator returns are commingled. By 
definition, different parties are responsible for generating each type 
of return, and each must be separately identified within the Company/
Batch Header Record as the sender of the batch. This ACH Operator edit 
codifies this fact and ensures consistent processing of return batches 
by all ACH Operators.
    We are accepting this amendment.

C. 2016 NACHA Operating Rules & Guidelines Book Changes

    The 2016 edition of the NACHA Operating Rules & Guidelines contains 
changes related to the following amendments: \2\
---------------------------------------------------------------------------

    \2\ The 2016 Rule Book also codified changes related to the rule 
NACHA adopted in 2015 on Improving ACH Network Quality (Unauthorized 
Entry Fee), which is addressed above in Section B--2015 NACHA 
Operating Rule Book Changes.
---------------------------------------------------------------------------

    <bullet> Same-Day ACH: Moving Payments Faster;
    <bullet> Disclosure Requirements for POS Entries;
    <bullet> Recrediting Receiver--Removal of Fifteen Calendar Day 
Notification Time Frame;
    <bullet> Clarification of RDFI Warranties for Notifications of 
Change; and
    <bullet> Minor Rules Topics.
    We are incorporating in part 210 all of the foregoing amendments 
except that we are delaying our implementation of Same-Day ACH as 
discussed below.
1. Same-Day ACH: Moving Payments Faster
    This amendment allows for same-day processing of ACH payments. 
Previously, the standard settlement period for ACH transactions is one 
or two business days after processing. The Same-Day ACH amendment 
enables the option for same-day processing and settlement of ACH 
payments through new ACH Network functionality without affecting 
existing ACH schedules and capabilities. Originators that desire same-
day processing have the option to send Same Day ACH Entries to accounts 
at any RDFI. All RDFIs are required to receive Same-Day ACH Entries, 
which gives ODFIs and Originators the certainty of being able to send 
same day ACH Entries to accounts at all RDFIs in the ACH Network. The 
amendment includes a ``Same-Day Entry fee'' on each Same-Day ACH 
transaction to help mitigate RDFI costs for supporting Same-Day ACH.
    The amendment has a phased implementation period, spreading from 
2016 to 2018, with the following effective dates:
    <bullet> Phase 1--September 23, 2016: ACH credits became eligible 
to be processed during two new Same-Day ACH windows with submission 
deadlines at 10:30 a.m. ET and 2:45 p.m. ET, with settlement occurring 
at 1:00 p.m. ET and 5:00 p.m. ET, respectively. RDFIs are required to 
provide funds availability by the end of the RDFI's processing day. 
Applicable to ACH credits only and non-monetary Entries, with funds 
availability due at the end of the RDFI's processing day.
    <bullet> Phase 2--September 15, 2017: ACH debits will become 
eligible for same-day processing during the two new Same-Day windows.
    <bullet> Phase 3--March 16, 2018: RDFIs will be required to provide 
funds availability for same day credits no later than 5:00 p.m. at the 
RDFI's local time.
    The existing next-day ACH settlement window of 8:30 a.m. ET will 
not change. With the addition of the new Same-Day ACH processing 
windows, the ACH Network will provide three opportunities for ACH 
settlement each day.
Payment Eligibility
    Virtually all types of ACH payments will be eligible for same-day 
processing by the end of the implementation period. The only ACH 
transactions ineligible for same-day processing will be IAT 
transactions and individual transactions over $25,000. In addition to 
credits and debits, the ACH Network supports a number of transaction 
types that do not transfer a dollar value. Non-monetary transactions 
include Prenotifications; Notifications of Change (NOCs); Zero Dollar 
Entries that convey remittance information using CCDs and CTXs; and 
Death Notification Entries. With the exception of Prenotifications for 
future debit Entries, these non-monetary transactions are eligible for 
same-day processing from the outset. Automated Enrollment Entries 
(ENRs) do not use Effective Entry Dates. Since

[[Page 42605]]

there will not be a way to distinguish same day ENR Entries from next-
day Entries, ENRs will not be processed as same day transactions.
Identification of Same-Day Transactions via the Effective Entry Date
    Same-Day ACH transactions are identified by the ODFI and its 
Originator by using the current day's date in the Effective Entry Date 
field of the Company/Batch Header Record. (Note: The NACHA Operating 
Rules define the Effective Entry Date as ``the date specified by the 
Originator on which it intends a batch of Entries to be settled.'') In 
addition, transactions intended for same-day processing that carry a 
current day Effective Entry Date must meet an ACH Operator's submission 
deadline for same-day processing. For example, transactions originated 
on Tuesday, October 10, 2017 that are intended for same-day processing 
must have an Effective Entry Date of ``171010'' in the Company/Batch 
Header Record and be submitted to an ACH Operator no later than the 
2:45 p.m. ET deadline to ensure same-day settlement. Any Entry carrying 
the current day's date in the Effective Entry Date field that is 
submitted prior to an ACH Operator's same-day processing submission 
deadline will be handled as a Same-Day ACH transaction and assessed the 
Same-Day Entry fee.
Stale or Invalid Effective Entry Dates
    ACH transactions submitted to an ACH Operator with stale or invalid 
Effective Entry Dates will be settled at the earliest opportunity, 
which could be the same day. If the transactions are submitted prior to 
the close of the second same-day processing window at 2:45 p.m. ET, the 
Entries will be settled the same day and the Same-Day Entry fee will 
apply. If the transactions are submitted to the ACH Operator after 2:45 
p.m. ET, the Entries will be settled the next day and the Same-Day 
Entry fee will not apply.
Return Entry Processing
    The amendment allows same-day processing of return Entries at the 
discretion of the RDFI, whether or not the forward Entry was a Same-Day 
ACH transaction. Any return Entry is eligible for settlement on a same-
day basis; the $25,000 per transaction limit and IAT restriction will 
not apply. Because returns are initiated and flow from RDFI to ODFI, 
return Entries processed on a same-day basis will not be subject to the 
Same-Day Entry fee.
    RDFIs are not required to process returns on the same day that the 
forward Entry is received. The return Entry must be processed in such 
time that it is 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. RDFIs have the option of using any of the available 
settlement windows for returns, as long as the existing return time 
frame is met.
Same-Day Entry Fee
    In order to ensure universal reach to any account at any RDFI, all 
RDFIs must implement Same-Day ACH. To assist RDFIs in recovering costs 
associated with enabling same-day transactions, the amendment includes 
a fee paid from the ODFI to the RDFI for each Same-Day ACH Entry. The 
fee provides a mechanism to help RDFIs mitigate investment and 
operating expenses and provide a fair return on their required 
investments. The initial Same-Day Entry fee is set at 5.2 cents per 
Same Day Entry. The fee is assessed and collected by the ACH Operators 
through their established monthly billing. The amendment includes a 
methodology to measure the effectiveness of the Same-Day Entry fee at 
five, eight and ten full years after implementation. After each review, 
the Same-Day Entry fee could be maintained or lowered, but not 
increased.
    We are accepting the Same-Day amendment but with delayed 
implementation of NACHA's Phase 1 implementation date until September 
15, 2017. Fiscal Service plans to enable agencies to originate Same-Day 
Entries in appropriate situations and is working with agencies to 
develop and publish guidance outlining the criteria and procedures to 
be used for originating Same-Day Entries. Fiscal Service believes that 
Same-Day credit Entries may be useful to agencies that need to make 
certain emergency or time-sensitive payments, including payments not 
exceeding $25,000 that are currently made by Fedwire. We believe that 
the majority of ACH credit Entries originated by the government are not 
suitable for same-day processing in light of the fee payable for Same-
Day Entries, and therefore we anticipate that the government's 
origination of Same-Day Entries will be limited. We plan to publish 
guidance for agencies that will set forth both the criteria and the 
procedure for certifying a Same-Day ACH transaction. That guidance will 
indicate whether agencies should indicate their intent for same-day 
processing and settlement solely by utilizing the Effective Entry Date, 
or may also utilize the optional standardized content in the Company 
Descriptive Date field as a same-day transaction indicator.
    The delayed implementation date reflects coding and reporting 
changes and testing that are underway to enable the processing of 
incoming Same-Day credit Entries by Fiscal Service's ACH credit 
processing systems. The U.S. government will not originate Same-Day 
entries prior to September 15, 2017 and any ACH Entry received by the 
government prior to that date will not be eligible for same-day 
settlement and will continue to settle on a future date (typically the 
next banking day) regardless of submission date and time. We are not 
delaying the government's implementation of the NACHA Same-Day ACH 
amendment's Phase 2 or Phase 3 implementation dates.
    The 2016 NACHA Operating Rules incorporate in the rule text only 
those provisions of the Same-Day ACH amendment that have effective 
dates in 2016. However, in order to provide advance notice of the 
impact of the Phase 2 and 3 implementations, the 2016 Rules Book sets 
forth the sections of the NACHA Operating Rules affected by the Same-
Day ACH amendment as they will read upon implementation in 2017 and 
2018.
    We are incorporating in part 210 the future changes relating to the 
Same-Day ACH amendment's Phase 2 and 3 implementation provisions 
scheduled for 2017 and 2018 as they appear in the 2016 NACHA Operating 
Rules & Guidelines book.
2. Disclosure Requirements for POS Entries
    This amendment established an Originator/Third-Party Service 
Provider obligation to provide consumer Receivers with certain 
disclosures when providing those consumers with cards used to initiate 
ACH Point of Sale (POS) Entries. The amendment requires Originators or 
Third-Party Service Providers that issue ACH cards (or their virtual, 
non-card equivalent, collectively referred to as ``ACH Cards'') to make 
the following disclosures in written or electronic, retainable form to 
a consumer prior to activation:
    <bullet> The ACH Card is not issued by the consumer's Depository 
Financial Institution.
    <bullet> POS Entries made with the ACH Card that exceed the balance 
in the consumer's financial institution account may result in 
overdrafts and associated fees, regardless of whether the consumer has 
opted to allow overdrafts with respect to debit cards issued by the 
Depository Financial Institution that holds the consumer's account.
    <bullet> Benefits and protections for transactions made using the 
ACH Card may vary from those available through

[[Page 42606]]

debit cards issued by the consumer's Depository Financial Institution.
    The amendment included sample language for Originators or Third-
Party Service Providers to consider in designing an ACH Card disclosure 
for purposes of compliance with the NACHA Operating Rules. This 
amendment will not affect Agencies because they do not issue ACH Cards.
    We are accepting this amendment.
3. Recrediting Receiver--Removal of Fifteen Calendar Day Notification 
Time Frame
    This amendment removed the fifteen calendar day notification period 
associated with an RDFI's obligation to promptly recredit a consumer 
account for an unauthorized debit Entry, and aligned the RDFI's 
recredit obligation with its ability to transmit an Extended Return 
Entry. Because of the extended return window for unauthorized consumer 
debits under the NACHA Operating Rules, prior to the amendment many 
RDFIs found the reference to the fifteen calendar day timing to be a 
source of confusion and misunderstanding. The amendment revised the 
NACHA Operating Rules to align the provision for prompt recredit with 
the RDFI's receipt of a Written Statement of Unauthorized Debit from 
the consumer and the RDFI's ability to transmit an Extended Return 
Entry (i.e., transmitted to the ACH Operator so that the Extended 
Return Entry is made available to the ODFI no later than opening of 
business on the banking day following the sixtieth calendar day 
following the settlement date of the original Entry). This change 
applies to unauthorized/improper entries bearing Standard Entry Class 
Codes (SECs) that are classified as consumer entries, as well as those 
that can be both consumer and non-consumer entries (ARC, BOC, POP, and 
IAT debit entries).
    We are accepting this amendment.
4. Clarification of RDFI Warranties for Notifications of Change
    This amendment modified the NACHA Operating Rules with respect to 
Notifications of Change (NOCs) to clarify aspects of: (1) The RDFI's 
warranties made with respect to its transmission of a Notification of 
Change or Corrected Notification of Change; and (2) the ODFI's 
warranties made with respect to usage of the corrected data within 
subsequent transactions. Specifically, the amendment clarified that the 
RDFI's warranty for information contained in a Notification of Change 
or Corrected Notification of Change is applicable only to the corrected 
information supplied by the RDFI.
    This modification removed from the RDFI's warranty on NOCs the 
specific statement that the Receiver has authorized the change 
identified in the NOC, if the Receiver's authorization is required. 
This subsection has been misinterpreted to mean that it supersedes the 
ODFI's warranty that a subsequent Entry is properly authorized by the 
Receiver. The RDFI does not warrant that the Entry itself has been 
properly authorized by the Receiver, but only that the data supplied in 
the Corrected Data field is accurate. The warranty that any Entry 
(including a subsequent Entry that uses corrected data from an NOC) is 
properly authorized still lies with the ODFI per Article Two, 
Subsection 2.4.1.1 (The Entry is Authorized by the Originator and 
Receiver).
    We are accepting this amendment.
5. Minor Rules Topics
    These amendments changed four areas of the NACHA Operating Rules to 
address minor topics. Minor changes to the NACHA Operating Rules have 
little-to-no impact on ACH participants and no significant economic 
impact.
i. Clarification of ODFI Periodic Statement Requirements for CIE and 
WEB Credits
    This amendment made minor, editorial clarifications to the language 
within Article Two, Subsections 2.5.4.2 (ODFI to Satisfy Periodic 
Statement Requirement) and 2.5.17.6 (ODFI to Satisfy Periodic Statement 
Requirement for Credit WEB Entries) to clarify the intent of language 
governing an ODFI's periodic statement obligations with respect to the 
origination of CIE and credit WEB Entries by consumers.
    Periodic statement requirements typically are an obligation of the 
RDFI for the receipt of Entries to a consumer account. For CIE and WEB 
credits, however, the Originator of the ACH credit also is a consumer, 
thus putting periodic statement requirements on the ODFI as well for 
these entries. These clarifications do not affect the substance of the 
ODFI's obligation to identify on the consumer Originator's periodic 
statement the date, amount, and description of a transaction involving 
the consumer's account; rather, they simply recognize that the debiting 
of the consumer's account to provide funds for the CIE or WEB credit 
could be accomplished by something other than an ACH debit.
    We are accepting this amendment.
ii. Clarifying the Commercially Reasonable Encryption Standard
    The NACHA Operating Rules require ACH participants to utilize a 
commercially reasonable standard of encryption technology when 
transmitting any banking information related to an Entry via an 
Unsecured Electronic Network. This amendment removed the reference to 
128-bit encryption technology as the minimum acceptable commercially 
reasonable standard, but retained the general reference to using a 
commercially reasonable level of encryption. The amendment also 
clarified that a commercially reasonable level of security must comply 
with current, applicable regulatory guidelines, which already impose 
more rigorous encryption obligations.
    Prior to the amendment the NACHA Operating Rules established a 
minimum for this commercially reasonable encryption standard at the 
128-bit RC4 encryption technology level. A task force of NACHA's former 
Internet Council, comprised of technology expert members, recommended 
that the specific reference to 128-bit RC4 encryption be removed, on 
the grounds that it is now out of date as a commercially reasonable 
standard.
    We are accepting this amendment.
iii. Definition of Zero-Dollar Entry
    This amendment reintroduced the definition of a Zero-Dollar Entry 
within Article Eight (Definitions of Terms Used in These Rules) to 
correspond to unique technical references in the Appendices of the 
NACHA Operating Rules. Zero Dollar Entries are unique in that, although 
their dollar amount is zero, they bear remittance data that must be 
provided to the Receiver in an identical manner as ``live'' entries 
that transfer funds. The definition was removed in 2010 when the 
definition of a ``Non-Monetary Entry'' was introduced into the NACHA 
Operating Rules.
    We are accepting this amendment.
iv. Expansion of Permissible Criteria for ODFI Requests for Return
    In addition to being able to request the return of an Erroneous 
Entry, as permitted by the NACHA Operating Rules, this amendment 
revised the NACHA Operating Rules to permit an ODFI to request that an 
RDFI return any Entry that the ODFI claims was originated without the 
authorization of the Originator. This amendment also expanded the 
description of Return Reason Code R06 (Returned per ODFI's Request) to 
include Entries returned by the RDFI for this reason. This newly

[[Page 42607]]

permissible circumstance reflects actual current industry practice with 
regard to the recovery of funds related to unauthorized credit 
origination.
    Use of the ODFI Request for Return process is always optional on 
the part of both ODFIs and RDFIs. An RDFI will continue to be able to 
make its own business decision about whether to agree to return an 
Entry that the ODFI claims was originated without the authorization of 
the Originator. An RDFI responding to a request for the return of such 
an Entry will be indemnified under the NACHA Operating Rules against 
loss or liability by the ODFI.
    We are accepting this amendment.

D. Notification of Reversals

    NACHA Operating Rule 2.9.1 requires that the Originator of a 
Reversing Entry make a reasonable attempt to notify the Receiver of the 
Reversing Entry and the reason for the Reversing Entry no later than 
the settlement date of the Entry. For the reasons discussed in Section 
I above, we are accepting this amendment.

E. Prepaid Cards

    In 2010, Fiscal Service amended part 210 to establish requirements 
that prepaid accounts receiving Federal payments must meet. 75 FR 
80335. To be eligible to receive Federal payments, a card accessing a 
prepaid account must meet four conditions: (1) The card account must be 
held at an insured financial institution; (2) the account be set up to 
meet the requirements for pass through deposit or share insurance under 
12 CFR part 330 or 12 CFR part 745; (3) the account may not be attached 
to a line of credit or loan agreement under which repayment from the 
card account is triggered by delivery of the Federal payment; and (4) 
the issuer of the card must comply with all of the requirements, and 
provide the Federal payment recipient with the same consumer 
protections, that apply to a payroll card under regulations 
implementing the Electronic Fund Transfer Act, 15 U.S.C. 1693a(1). See 
31 CFR 210.5(b)(5)(i).
    We required that issuers of prepaid cards provide Regulation E 
payroll card protections because when our prepaid rule was issued in 
2010, Regulation E did not cover any prepaid cards other than payroll 
cards. However, on November 22, 2016, the Consumer Financial Protection 
Bureau (CFPB) published its final rule to amend Regulation E to cover 
prepaid accounts. 81 FR 83934. We are therefore amending our prepaid 
rule to replace the reference in Sec.  210.5(b)(5)(i)(D) to ``payroll 
card'' with a reference to ``prepaid account'' so that issuers of 
prepaid accounts are required to provide the holder of an account with 
all of the consumer protections that apply to a prepaid account under 
the rules implementing the Electronic Fund Transfer Act. We are also 
conforming the references to use the CFPB's terminology of ``prepaid 
account'' rather than ``prepaid card.'' These changes are effective on 
April 1, 2018, the effective date of the CFPB's final rule.

III. Section-by-Section Analysis

    In order to incorporate in part 210 the NACHA Operating Rule 
changes that we are accepting, we are replacing references to the 2013 
NACHA Operating Rules & Guidelines book with references to the 2016 
NACHA Operating Rules & Guidelines book. Several of the NACHA Operating 
Rule amendments that we are not incorporating are modifications to 
provisions of the NACHA Operating Rules that are already excluded under 
part 210. Other than replacing the references to the 2013 NACHA 
Operating Rules & Guidelines book, no change to part 210 is necessary 
to exclude those amendments.

Sec.  210.2

    We are amending the definition of ``applicable ACH Rules'' at Sec.  
210.2(d) to reference the rules published in NACHA's 2016 Rules & 
Guidelines book rather than the rules published in NACHA's 2013 Rules & 
Guidelines book. The definition has been updated to reflect the 
reorganization and renumbering of the NACHA Operating Rules. The 
reference in Sec.  210.2(d)(5) to Section 2.17 has been revised to read 
Section 2.17.2.2-2.17.2.6 in order to carve out the return rate level 
reporting obligation. The reference in Sec.  210.2(d)(6) to the NACHA 
Operating Rule governing International ACH Transactions section has 
been updated by replacing an obsolete reference to ACH Rule 2.11 with 
the correct reference to Section 2.5.8. A new paragraph (7) is added to 
exclude from part 210, until September 15, 2017, the provisions of 
Subsection 3.3.1.1, Section 8.99 and Appendix Three (definition of 
Effective Entry Date) relating to Same-Day Entries.

Sec.  210.3(b)

    We are amending Sec.  210.3(b) by replacing the references to the 
ACH Rules as published in the 2013 Rules & Guidelines book with 
references to the ACH Rules as published in the 2016 NACHA Operating 
Rules & Guidelines book. We are revising Sec.  210.3(b) by 
consolidating former paragraphs (b)(1) and (b)(2) into a single 
paragraph. Previously, paragraph (b)(2) stated that any amendment to 
the applicable ACH Rules approved by NACHA after publication of the 
edition of the NACHA Operating Rules & Guidelines that are incorporated 
by reference do not apply to Government entries unless Fiscal Service 
expressly accepts the amendments by publishing notice of acceptance of 
the amendment in the Federal Register. We have replaced paragraph 
(b)(2) with a sentence that states that, to enforce an edition other 
than that specified in Sec.  210.3(b), Fiscal Service must publish a 
document in the Federal Register and the material must be available to 
the public. The replacement wording is the standard sentence 
recommended by the Federal Register, and is not substantively different 
from the former paragraph (b)(2).

Sec.  210.5

    We are amending Sec.  210.5(b)(5)(i)(D) to replace the references 
to ``payroll card'' with references to ``prepaid account'' in order to 
require issuers of prepaid accounts to which Federal payments are 
delivered to provide account holders with all of the consumer 
protections that will apply to a prepaid account under the rules 
adopted by the CFPB to implement the Electronic Fund Transfer Act and 
the Truth in Lending Act. These changes are effective on April 1, 2018, 
the effective date of the CFPB's final rule.

Sec.  210.6

    In Sec.  210.6 we are replacing the reference to ACH Rule 2.4.4 
with a reference to ACH Rule 2.4.5 to reflect the re-numbering of ACH 
Rule 2.4.4. This change is not substantive.

Sec.  210.8

    In Sec.  210.8(b) we are replacing the reference to ACH Rule 2.4.4 
with a reference to ACH Rule 2.4.5 to reflect the re-numbering of ACH 
Rule 2.4.4. This change is not substantive.

IV. Incorporation by Reference

    In this rule, Fiscal Service is incorporating by reference the 2016 
NACHA Operating Rules & Guidelines book. The Office of Federal Register 
(OFR) regulations require that agencies discuss in the preamble of a 
final rule ways that the materials the agency proposes to incorporate 
by reference are reasonably available to interested parties or how it 
worked to make those materials reasonably available to interested 
parties. In addition, the preamble of the rule must summarize the 
material. 1 CFR 51.5(a). In

[[Page 42608]]

accordance with OFR's requirements, the discussion in the Supplementary 
Information section summarizes the 2016 NACHA Operating Rules. 
Financial institutions utilizing the ACH Network are bound by the NACHA 
Operating Rules and have access to the NACHA Operating Rules in the 
course of their everyday business. The NACHA Operating Rules are 
available as a bound book or in online form from NACHA--The Electronic 
Payments Association, 2550 Wasser Terrace, Suite 400, Herndon, Virginia 
20171, tel. 703-561-1100, <a href="/cdn-cgi/l/email-protection#147d7a727b547a75777c753a7b6673"><span class="__cf_email__" data-cfemail="c5acaba3aa85aba4a6ada4ebaab7a2">[email protected]</span></a>.

V. Procedural Analysis

Regulatory Planning and Review

    The rule does not meet the criteria for a ``significant regulatory 
action'' as defined in Executive Order 12866. Therefore, the regulatory 
review procedures contained therein do not apply.

Congressional Review Act (CRA)

    This rule is not a major rule pursuant to the CRA, 5 U.S.C. 801 et 
seq. It is not expected to lead to any of the results listed in 5 
U.S.C. 804(2). This rule will take effect upon publication in the 
Federal Register. The amendment to Sec.  210.5 is applicable on April 
1, 2018.

Administrative Procedure Act

    Except for the amendments to Sec.  210.5, this final rule is 
effective on September 11, 2017. Under the Administrative Procedure 
Act, a final rule may be published less than 30 days before its 
effective date ``for good cause found and published with the rule.'' 5 
U.S.C. 553(d)(3). The purpose of a delayed effective date is to permit 
regulated entities to adjust their behavior before the final rule takes 
effect. As discussed above, this rule adopts, with some exceptions, the 
NACHA Operating Rules developed by NACHA--The Electronic Payments 
Association (NACHA) as the rules governing the use of the ACH Network 
by Federal agencies. The affected industry is already prepared for 
Federal agencies to implement this rule. Therefore, the Department of 
the Treasury finds good cause to dispense with a delayed effective 
date.

Regulatory Flexibility Act Analysis

    It is hereby certified that the rule will not have a significant 
economic impact on a substantial number of small entities. The rule 
imposes on the Federal government a number of changes that NACHA--The 
Electronic Payments Association, has already adopted and imposed on 
private sector entities that utilize the ACH Network. The rule does not 
impose any additional burdens, costs or impacts on any private sector 
entities, including any small entities. Accordingly, a regulatory 
flexibility analysis under the Regulatory Flexibility Act (5 U.S.C. 601 
et seq.) is not required.

Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 
1532 (Unfunded Mandates Act), requires that the agency prepare a 
budgetary impact statement before promulgating any rule likely to 
result in a Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more in any one year. If a budgetary 
impact statement is required, section 205 of the Unfunded Mandates Act 
also requires the agency to identify and consider a reasonable number 
of regulatory alternatives before promulgating the rule. We have 
determined that the rule will not result in expenditures by State, 
local, and tribal governments, in the aggregate, or by the private 
sector, of $100 million or more in any one year. Accordingly, we have 
not prepared a budgetary impact statement or specifically addressed any 
regulatory alternatives.

List of Subjects in 31 CFR Part 210

    Automated clearing house, Electronic funds transfer, Financial 
institutions, Fraud, Incorporation by reference.

Words of Issuance

    For the reasons set out in the preamble, 31 CFR part 210 is amended 
as follows:

PART 210--FEDERAL GOVERNMENT PARTICIPATION IN THE AUTOMATED 
CLEARING HOUSE

0
1. The authority citation for part 210 continues to read as follows:

    Authority: 5 U.S.C. 5525; 12 U.S.C. 391; 31 U.S.C. 321, 3301, 
3302, 3321, 3332, 3335, and 3720.


0
2. Section 210.2 is amended by revising paragraph (d) to read as 
follows:


Sec.  210.2   Definitions.

* * * * *
    (d) Applicable ACH Rules means the ACH Rules with an effective date 
on or before March 16, 2018, as published in ``2016 NACHA Operating 
Rules & Guidelines: A Complete Guide to Rules Governing the ACH 
Network'' (incorporated by reference, see Sec.  210.3(b)) except:
    (1) Subsections 1.2.2, 1.2.3, 1.2.4, 1.2.5 and 1.2.6; Appendix 
Seven; Appendix Eight; Appendix Nine and Appendix Ten (governing the 
enforcement of the ACH Rules, including self-audit requirements, and 
claims for compensation);
    (2) Section 2.10 and Section 3.6 (governing the reclamation of 
benefit payments);
    (3) The requirement in Appendix Three that the Effective Entry Date 
of a credit entry be no more than two Banking Days following the date 
of processing by the Originating ACH Operator (see definition of 
``Effective Entry Date'' in Appendix Three);
    (4) Section 2.2 (setting forth ODFI obligations to enter into 
agreements with, and perform risk management relating to, Originators 
and Third-Party Senders) and Section 1.6 (Security Requirements);
    (5) Section 2.17.2.2-2.17.2.6 (requiring reduction of high rates of 
entries returned as unauthorized);
    (6) The requirements of Section 2.5.8 (International ACH 
Transactions) shall not apply to entries representing the payment of a 
Federal tax obligation by a taxpayer; and
    (7) Until September 15, 2017, the provisions of Subsection 3.3.1.1, 
Section 8.99 and Appendix Three (definition of Effective Entry Date) 
relating to Same-Day Entries.
* * * * *

0
3. Section 210.3 is amended by revising paragraph (b) to read as 
follows:


Sec.  210.3   Governing law.

* * * * *
    (b) Incorporation by reference. Certain material is incorporated by 
reference into this part with the approval of the Director of the 
Federal Register under 5 U.S.C. 552(a) and 1 CFR part 51. To enforce 
any edition other than that specified in this section the Service must 
publish a document in the Federal Register and the material must be 
available to the public. All approved material is available for 
inspection at the Bureau of the Fiscal Service, 401 14th Street SW., 
Room 400A, Washington, DC 20227, 202-874-6680, and is available from 
the sources listed below. It is also available for inspection at the 
National Archives and Records Administration (NARA). For information on 
the availability of this material at NARA, call 202-741-6030 or go to 
https://www.archives.gov/federal-register/cfr/ibr-locations.html.
    (1) NACHA--The Electronic Payments Association, 2550 Wasser 
Terrace, Suite 400, Herndon, Virginia 20171, tel. 703-561-1100, 
<a href="/cdn-cgi/l/email-protection#137a7d757c537d72707b723d7c6174"><span class="__cf_email__" data-cfemail="7910171f163917181a111857160b1e">[email protected]</span></a>.
    (i) ``2016 NACHA Operating Rules & Guidelines: A Complete Guide to 
Rules

[[Page 42609]]

Governing the ACH Network,'' copyright 2016.
    (ii) [Reserved]
    (2) [Reserved]
* * * * *

0
4. Section 210.5 is amended by revising paragraph (b)(5) to read as 
follows:


Sec.  210.5   Account requirements for Federal payments.

* * * * *
    (b) * * *
    (5)(i) Where a Federal payment is to be deposited to a prepaid 
account that meets the following requirements:
    (A) The account is held at an insured financial institution;
    (B) The account is set up to meet the requirements for pass-through 
deposit or share insurance such that the funds accessible through the 
card are insured for the benefit of the recipient by the Federal 
Deposit Insurance Corporation or the National Credit Union Share 
Insurance Fund in accordance with applicable law (12 CFR part 330 or 12 
CFR part 745);
    (C) The account is not attached to a line of credit or loan 
agreement under which repayment from the account is triggered upon 
delivery of the Federal payments; and
    (D) The issuer of the account complies with all of the 
requirements, and provides the holder of the account with all of the 
consumer protections, that apply to a prepaid account under the rules 
implementing the Electronic Fund Transfer Act and the Truth in Lending 
Act.
    (ii) No person or entity may issue a prepaid account that receives 
Federal payments in violation of this paragraph (b)(5), and no 
financial institution may maintain a prepaid account that receives 
Federal payments if the issuer violates this paragraph (b)(5).
    (iii) For the purposes of this paragraph (b)(5), the term--
    (A) ``Prepaid account'' means a prepaid account as defined for 
purposes of regulations implementing the Electronic Fund Transfer Act, 
as amended; and
    (B) ``Issuer'' means a person or entity that issues a prepaid 
account.
* * * * *

0
5. Section 210.6 is revised to read as follows:


Sec.  210.6  Agencies.

    Notwithstanding any provision of the ACH Rules, including 
Subsections 2.4.5, 2.8.4, 4.3.5, 2.9.2, 3.2.2, and 3.13.3, agencies 
shall be subject to the obligations and liabilities set forth in this 
section in connection with Government entries.
    (a) Receiving entries. An agency may receive ACH debit or credit 
entries only with the prior written authorization of the Service.
    (b) Liability to a recipient. An agency will be liable to the 
recipient for any loss sustained by the recipient as a result of the 
agency's failure to originate a credit or debit entry in accordance 
with this part. The agency's liability shall be limited to the amount 
of the entry(ies).
    (c) Liability to an originator. An agency will be liable to an 
Originator or an ODFI for any loss sustained by the originator or ODFI 
as a result of the agency's failure to credit an ACH entry to the 
agency's account in accordance with this part. The agency's liability 
shall be limited to the amount of the entry(ies).
    (d) Liability to an RDFI or ACH association. Except as otherwise 
provided in this part, an agency will be liable to an RDFI for losses 
sustained in processing duplicate or erroneous credit and debit entries 
originated by the agency. An agency's liability shall be limited to the 
amount of the entry(ies), and shall be reduced by the amount of the 
loss resulting from the failure of the RDFI to exercise due diligence 
and follow standard commercial practices in processing the entry(ies). 
This section does not apply to credits received by an RDFI after the 
death or legal incapacity of a recipient of benefit payments or the 
death of a beneficiary as governed by subpart B of this part. An agency 
shall not be liable to any ACH association.
    (e) Acquittance of the agency. The final crediting of the amount of 
an entry to a recipient's account shall constitute full acquittance of 
the Federal Government.
    (f) Reversals. An agency may reverse any duplicate or erroneous 
entry, and the Federal Government may reverse any duplicate or 
erroneous file. In initiating a reversal, an agency shall certify to 
the Service that the reversal complies with applicable law related to 
the recovery of the underlying payment. An agency that reverses an 
entry shall indemnify the RDFI as provided in the applicable ACH Rules, 
but the agency's liability shall be limited to the amount of the entry. 
If the Federal Government reverses a file, the Federal Government shall 
indemnify the RDFI as provided in the applicable ACH Rules, but the 
extent of such liability shall be limited to the amount of the entries 
comprising the duplicate or erroneous file. Reversals under this 
section shall comply with the time limitations set forth in the 
applicable ACH Rules.
    (g) Point-of-purchase debit entries. An agency may originate a 
Point-of-Purchase (POP) entry using a check drawn on a consumer or 
business account and presented at a point-of-purchase. The requirements 
of the 2016 NACHA Operating Rules & Guidelines, incorporated by 
reference, see Sec.  210.3(b)(2), shall be met for such an entry if the 
Receiver presents the check at a location where the agency has posted 
the notice required by the ACH Rules and has provided the Receiver with 
a copy of the notice.
    (h) Return Fee Entry. An agency that has authority to collect 
returned item service fees may do so by originating a Return Fee Entry 
if the agency provides notice to the Receiver in accordance with the 
ACH Rules.

0
6. Section 210.8 is amended by revising paragraphs (a) and (b) to read 
as follows:


Sec.  210.8   Financial institutions.

    (a) Status as a Treasury depositary. The origination or receipt of 
an entry subject to this part does not render a financial institution a 
Treasury depositary. A financial institution shall not advertise itself 
as a Treasury depositary on such basis.
    (b) Liability. Notwithstanding ACH Rules Subsections 2.4.5, 2.8.4, 
4.3.5, 2.9.2, 3.2.2, and 3.13.3, if the Federal Government sustains a 
loss as a result of a financial institution's failure to handle an 
entry in accordance with this part, the financial institution shall be 
liable to the Federal Government for the loss, up to the amount of the 
entry, except as otherwise provided in this section. A financial 
institution shall not be liable to any third party for any loss or 
damage resulting directly or indirectly from an agency's error or 
omission in originating an entry. Nothing in this section shall affect 
any obligation or liability of a financial institution under Regulation 
E, 12 CFR part 1005, or the Electronic Funds Transfer Act, 12 U.S.C. 
1693 et seq.
* * * * *

    Dated: September 5, 2017.
David Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2017-19135 Filed 9-7-17; 4:15 pm]
 BILLING CODE P


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