Source: https://www.federalregister.gov/documents/2013/12/12/2013-29202/federal-government-participation-in-the-automated-clearing-house
Timestamp: 2017-08-18 01:40:36
Document Index: 751391335

Matched Legal Cases: ['art 210', 'art 210', 'art 210', 'art 210', 'art 210', 'art 210', 'art 210', 'art 210', 'art 210', 'art 210', 'art 210', 'art 210', 'art 210', 'art 210', '§\u2009210', '§\u2009210', '§\u2009210', '§\u2009210', 'art 1005', '§\u2009210', '§\u2009210', 'art 51']

A Proposed Rule by the Fiscal Service on 12/12/2013
Comments on the proposed rule must be received by February 10, 2014.
75528-75534 (7 pages)
https://www.federalregister.gov/d/2013-29202 https://www.federalregister.gov/d/2013-29202
Start Preamble Start Printed Page 75528
The Department of the Treasury, Bureau of the Fiscal Service (Service) is proposing to amend its regulation governing the use of the Automated Clearing House (ACH) system 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 proposed rule to address changes that NACHA has made to the NACHA Operating Rules since the publication of NACHA's 2009 ACH Rules book. These changes include amendments set forth in NACHA's 2010, 2011, 2012 and 2013 Operating Rules books.
Comments on this rule, identified by docket FISCAL-FMS-2013-0002, should only be submitted using the following methods:
The fax and email methods of submitting comments on rules to the Service have been decommissioned.
Instructions: All submissions received must include the agency name (Bureau of the Fiscal Service) and docket number FISCAL-FMS-2013-0002 for this rulemaking. In general, comments received will be published on Regulations.gov without change, including any business or personal information provided. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not disclose any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure.
You can download this proposed rule at the following Web site: http://www.fms.treas.gov/​ach. You may also inspect and copy this proposed rule at: Treasury Department Library, Freedom of Information Act (FOIA) Collection, Room 1428, Main Treasury Building, 1500 Pennsylvania Avenue NW., Washington, DC 20220. Before visiting, you must call (202) 622-0990 for an appointment.
Ian Macoy, Supervisory Financial Program Specialist, at (202) 874-6835 or ian.macoy@fms.treas.gov; or Natalie H. Diana, Senior Counsel, at (202) 874-6680 or natalie.diana@fms.treas.gov.
Title 31 CFR part 210 (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 we amend 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 2009 NACHA Operating Rules book. NACHA has adopted a number of changes to the NACHA Operating Rules since the publication of the 2009 NACHA Operating Rules book. We are proposing to incorporate in Part 210 most, but not all, of these changes.
This NACHA Operating Rules amendment revised the requirements for obtaining a Receiver's authorization for an ACH payment and modified the processes by which Receiving Depository Financial Institutions (RDFIs) handle Receivers' claims of unauthorized debits. Specifically, the amendment (1) clarified the requirements for authorization of ACH entries, adopting the language of Regulation E that an authorization must be “clear and readily understandable;” (2) clarified that a purported authorization that is not clear and readily understandable is not considered a valid authorization; (3) eliminated the requirement that Receiver's written statement regarding an unauthorized debit be made under penalty of perjury; (4) established minimum information requirements for and revised timing requirements related to the written statement; and (5) expanded the use of R39 (Improper Source Document) for duplicate check/check conversion payments. We are proposing to accept this amendment.
This amendment revised specific language within the NACHA Operating Rules regarding the application and expiration of a stop payment order so as to re-align the NACHA Operating Rules with the requirements of Regulation E. The amendment (1) eliminated the six-month time period after which a stop payment order placed by a consumer lapses; (2) provided that, where the stop payment order applies to more than one debit entry, the order remains in effect until all such entries have been stopped; (3) provided that RDFIs may require, in cases where the Receiver desires to block all future payments related to a specific authorization/Originator, that the Receiver confirm in writing that the Receiver revoked the authorization; and (4) simplified the description of Return Reason Code R08 (Payment Stopped). We are proposing to accept this amendment.
This amendment modified the NACHA Operating Rules to require Originating Depository Financial Institutions (ODFIs) to register their Direct Access status with NACHA, and imposed certain requirements in connection with registration of Direct Access status. We are proposing to accept this amendment.
This amendment updated the NACHA Operating Rules to codify additional risk management, due diligence and monitoring practices that ODFIs must follow with respect to Originators and Third-Party Senders. We are proposing not to incorporate this amendment in Part 210, since the Federal government's origination of entries through the ACH Start Printed Page 75529Network does not involve the conventional roles of Originator/ODFI and does not present the risks that this amendment seeks to address.
This rule established a framework for mobile-initiated ACH debit entries. It expanded the definition of Internet-Initiated Entries (WEB) to include ACH debits authorized or initiated via wireless networks. In addition, it applied all the provisions of the WEB SEC Code to mobile debit entries. The purpose of the rule was to provide clear information on how the NACHA Operating Rules apply to mobile payments and to create a more stable environment within which to develop payment products and services. We are proposing to accept this rule.
This amendment eliminated the requirement that Originators of Accounts Receivable Entries (ARC) and Back Office Conversion Entries (BOC) establish and maintain procedures to enable Receivers to opt out of check conversion activity. The amendment reflected the fact that opt out rates were generally 0.1 percent or lower, indicating that consumer concern about check conversion either did not exist or had dissipated over time. We are proposing to accept this amendment.
This rule amendment established a Return Fee Entry as a specific type of ACH entry, to be used only for the purpose of collecting return fees for certain ACH debits to consumer accounts that are returned for insufficient funds or other qualifying checks that are returned NSF/UCF. The rule allows Originators to obtain authorization for a Return Fee Entry by providing the Receiver/check writer with notice that conforms to the requirements of Regulation E.
Part 210 currently provides that agencies with authority to collected returned item services fees may do so by originating an ACH debit entry following notice to the Receiver. We are proposing to accept this rule change, which will enable agencies with authority to collect returned item fees by utilizing the Return Fee Entry.
This amendment expanded the scope of the Destroyed Check Entry (XCK) application to permit its use for certain damaged checks that cannot be imaged, or for other check images that cannot be processed. The expanded scope allows use of XCK for (1) a check that is missing part of the MICR line but that can be sufficiently repaired to create an ACH debit; (2) a check that, in whole or in part, is unreadable, obscured or mutilated in a manner that prevents automated check processing or creating of an image that may be used to produce a “substitute check” under the Check 21 Act, but has an intact MICR line; and (3) a check that does not pass standard quality tests for creation of an image that may be used to produce a substitute check under Check 21. We are proposing to accept this rule change.
This amendment revised the definition of, and the general rule for, TEL Entries to allow both one-time (Single Entry) and recurring debit Entries authorized orally via the telephone. Prior to the amendment, only Single Entries were permitted to be authorized via the telephone. The amendment expanded the specific authorization language to address authorization requirements for recurring TEL Entries in conformance to the requirements of Regulation E. Under the amendment, authorizations for recurring TEL Entries must meet the writing and signature requirements of Regulation E for preauthorized transfers, which can be done by conforming to the e-Sign Act. We are proposing to accept this rule change.
Effective September 18, 2009, the NACHA Operating Rules were amended to require ODFIs and Gateway Operators to identify all international payment transactions transmitted via the ACH Network for any portion of the money trail as International ACH Transactions using a new Standard Entry Class Code (IAT). IAT transactions must include the specific data elements defined within the Bank Secrecy Act's (BSA) “Travel Rule” so that all parties to the transaction have the information necessary to comply with U.S. law, including the laws administered by OFAC. We accepted the IAT rule for Federal payments, except that we delayed the effective date for certain government transactions and excluded tax payments from the IAT rule.
Since that time, NACHA has made a number of changes clarify and enhance the Rules where appropriate to support more efficient processing of IAT Entries. We are proposing to accept, except as to tax payments, all of these changes, which include the following:
This amendment clarified that a Participating Depository Financial Institution (DFI) must process each IAT Entry in accordance with all requirements of the NACHA Operating Start Printed Page 75530Rules. A DFI is excused from its obligation to comply with specific requirements under the NACHA Operating Rules only when the processing of an IAT Entry would cause the DFI to be in violation of U.S. law. The DFI must, therefore, comply with its obligations under the NACHA Operating Rules unless it identifies an IAT as a suspect transaction. For domestic RDFIs that receive inbound IATs, these obligations include the timely provision of funds and the timely transmission of returns.
This amendment also incorporated clearer Originator/ODFI obligations with respect to authorization requirements for the origination of Outbound IAT Entries, noting that, while such payments must be authorized under the Rules, the form and content of such an authorization are governed by the laws and payment system rules of the foreign receiving country. The amendment also clarified that the Gateway for an Outbound IAT Entry assumes specific responsibilities and warranties of an RDFI, but that the Rules do not govern the Gateway's rights and obligations with respect to the foreign Receiver of the Outbound IAT Entry.
This amendment broadened the scope of Return Reason Code R84 (Entry Not Processed by Gateway) to accommodate a Gateway's return of an Outbound IAT Entry when it is unable to process the transaction because the payment system in the foreign receiving country does not Start Printed Page 75531support a particular rule or function defined as part of the domestic ACH Network.
These NACHA Operating Rules changes include editorial changes to grammar, clarifications of intent, changes that involve minor software modifications and so forth, including the following:
We are proposing to accept all the foregoing minor impact changes.
This amendment extended the deadline by which an audit of compliance with the NACHA Operating Rules must be completed. We are proposing not to accept this amendment because the compliance and audit requirements of the NACHA Operating Rules are not incorporated in Part 210.
Modification of Accounts Receivable (ARC) Entries to Permit the Conversion of Checks Tendered in Person for the Payment of a Bill at a Manned Location. This amendment modified the scope of the ARC application to permit the conversion of checks tendered in person for the payment of a bill at a manned location. The rule also requires Originators accepting bill payments in this in-person environment to provide a copy of the authorization notice to the Receiver at the time of the transaction. We are proposing to accept this rule change.
Several amendments to the IAT rule were enacted in the 2013 NACHA Operating Rules book. We are proposing to adopt all the amendments, as follows:
This amendment established two new codes—one Return Reason Code and one Change Code—for use by Gateways to advise ODFIs and Originators that funds related to a domestically-coded Entry (i.e., PPD, CCD, etc.) are being moved out of the country and that the Entry should have been formatted as an IAT Entry. LIST NEW CODES The new codes enable the Gateway to process or return the payment, depending on its risk tolerance, while conveying critical payment information back to the ODFI.
Effective September 20, 2013, the NACHA Operating Rules will be amended to incorporate two additional conditions under which a stop order relating to a debit entry to a non-Consumer account would lapse. Under the amendment, a stop order would expire if withdrawn by the Receiver or if the debit entry to which the order relates is returned. The amendment, which we are proposing to accept, incorporates current industry practice into the NACHA Operating Rules.
Effective September 20, 2013, the NACHA Operating Rules will be amended to make optional the Originator's response to Notifications of Change for Single Entry payments. Specifically, Originators will no longer be required to make changes requested within Notifications of Change identified as Single Entry items. We are proposing to accept this amendment.
Effective September 20, 2013, the NACHA Operating Rules will be amended to support health plans' and health care providers' use of the ACH Network by adopting processing enhancements that address requests made by the health care industry, as well as specific transaction identification and formatting requirements for health care claim payments. The amendments operate in combination with health care industry operating rules for electronic funds transfers (EFT) and electronic remittance advice (ERA) developed by the Council on Affordable Quality Healthcare (CAQH) Committee on Operating Rules for Information Exchange (CORE), in collaboration with NACHA, and the designation by the Department of Health and Human Services (HHS) of the CCD entry as the health care EFT standard transaction. Taken together, these sets of rules provide for the efficient and standardized electronic payment of health care claims, and the reassociation of the payments with health care remittance information (“reassociation”), resulting in administrative simplification by health plans and health care providers.
The NACHA Rule amendments will enable financial institutions to be ready to send and receive health care CCD entries for health plans and health care providers, which in turn will be working toward implementation of HHS' January IFC and August IFC by their January 1, 2014 compliance deadline. Originators and ODFIs could begin using the transaction identification and formatting standards within this Rules earlier than the effective date; use of the standards will not cause any processing problems for RDFIs and Receivers. Similarly, RDFIs that do not do so already could begin offering an electronic option for the delivery or provision of payment related information as soon as they are ready.
Delivery of Payment Related Information (Reassociation Number)Start Printed Page 75532
We are proposing to accept all of the NACHA Operating Rules changes related to Health Care EFTs.
Requiring non-consumer Originators, Participating DFIs, Third Party Service Providers, and Third-Party Senders to establish, implement, and, as appropriate, update security policies, procedures, and systems related to the initiation, processing, and storage of Entries. These policies, procedures, and systems must:
○ Protect the confidentiality and integrity of Protected Information;
○ Protect against anticipated threats or hazards to the security or integrity of Protected information; and
○ Protect against unauthorized use of Protected Information that could result in substantial harm to a natural person
We are proposing not to accept the Security Framework requirements in Part 210 because Part 210 does not incorporate the rules compliance and audit requirements that the Security Framework expands. Federal agencies are subject to various Federal requirements governing data and systems security and the protection of sensitive information, such that additional NACHA Operating Rules requirements would be unduly burdensome and unnecessary.
This amendment prohibited sharing of certain customer information by Originators, Third-Party Service Providers and ODFIs for the purpose of initiating debit Entries that are not covered by the original authorization. We are proposing to accept this amendment.
This amendment reduced the ODFI Return Rate Reporting period from 60 days to 30 days for reducing return rates below the return rate threshold before initiation of a NACHA Operating Rules enforcement proceeding. This amendment does not affect Federal agencies because Part 210 does not incorporate the NACHA Operating Rules enforcement provisions.
This amendment allows the return of a debit Entry to a Consumer Account within 60 days of the Settlement Date for an “Incomplete Transaction,” which is defined as a transaction for which a Third Party Sender debits a consumer's account to collect funds, but does not complete the corresponding payment to the party to which payment is owed. We are proposing to accept this amendment.
In order to incorporate in Part 210 the NACHA Rule changes that we are accepting, we are replacing references to the 2009 ACH Rules book with references to the 2013 NACHA Operating Rules and Guidelines book. For those NACHA Rule changes that we are not incorporating (specifically, amendments to the rules enforcement provisions), Part 210 already provides that the rules enforcement provisions of Appendix 11 of the NACHA Operating Rules do not apply to Federal agency ACH transactions. See § 210.2(d)(3) The reference to Appendix 11 is being replaced with a reference to Appendix 10 to reflect numbering changes to the rule.
We are proposing to amend the definition of “applicable ACH Rules” at § 210.2(d) to reference the rules published in NACHA's 2013 Rules book rather than the rules published in NACHA's 2009 Rules book. The definition has been updated to reflect the reorganization and renumbering of the NACHA Operating Rules. The changes to the definition are not substantive except:
(3) The elimination of a temporary exclusion from the IAT rules for debit entries originated by agencies and for certain entries delivered to Mexico, Canada and Panama through the FedGlobal SM ACH Payment Service. Those references have been deleted because the temporary exclusion has now expired.
We are proposing to amend the definition of “Service” at § 210.2(p) to reflect the renaming of the Financial Management Service to the Bureau of the Fiscal Service.
We are proposing to amend § 210.3(b) by replacing the references to the ACH Rules as published in the 2009 Rules book with references to the ACH Rules as published in the 2013 NACHA Operating Rules and Guidelines book.
References to ACH Rules 2.2.3, 2.4.5, 2.5.2, 4.2 and 8.7.2 have been replaced by references to Subsections 2.4.4, 2.8.4, 4.3.5, 2.92, 3.2.2, and 3.13.3 to reflect re-numbering of the NACHA Operating Rules.
Subsection (h), which addressed return item service fees, has been revised. This subsection currently provides that an agency that had authority to collect returned item service fees can do so by originating an ACH debit entry to collect a one-time service fee in connection with an ARC, POP or BOC entry that is returned due to insufficient funds, provided a notice was given to the receiver. Prior to 2011, the NACHA Operating Rules did not permit return item fees to be collected without the receiver's written authorization. In 2011, the NACHA Operating Rules were amended to include a new Entry type, Return Fee Entry, that may be used to collect return fees for certain ACH debits and qualifying checks that are returned NSF, subject to the provision of notice to the Receiver [ACH Rule 2.14]. Subsection (h) is revised to reflect this change.
The references to ACH Rules 2.2.3, 2.4.5, 2.5.2, 4.2, and 8.7.2 have been replaced with references to ACH Rules Start Printed Page 75533Subsections 2.4.4, 2.8.4, 4.8.5, 2.9.2, 3.2.2, and 3.13.3 to reflect re-numbering of the ACH Rules. In addition, the regulatory citation to Regulation E has been updated to reflect its re-codification at 12 CFR Part 1005.
Executive Order 12866 requires each agency in the Executive branch to write regulations that are simple and easy to understand. We invite comment on how to make the proposed rule clearer. For example, you may wish to discuss: (1) Whether we have organized the material to suit your needs; (2) whether the requirements of the rule are clear; or (3) whether there is something else we could do to make these rule easier to understand.
It is hereby certified that the proposed rule will not have a significant economic impact on a substantial number of small entities. The proposed 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. The proposed 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.
2. Revise § 210.2, paragraph (d) to read as follows:
(d) Applicable ACH Rules means the ACH Rules with an effective date on or before September 21, 2013, as published in “2013 NACHA Operating Rules and Guidelines: A Complete Guide to Rules Governing the ACH Network” and supplements thereto, except:
3. Revise § 210.3, paragraph (b) to read as follows:
(1) This part incorporates by reference the applicable ACH Rules, including rule changes with an effective date on or before September 21, 2013, as published in the “2013 NACHA Operating Rules and Guidelines: A Complete Guide to Rules Governing the ACH Network,” and supplements thereto. The Director of the Federal Register approves this incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Copies of the “2013 NACHA Operating Rules and Guidelines” are available from NACHA—The Electronic Payments Association, 13450 Sunrise Valley Drive, Suite 100, Herndon, Virginia 20171. Copies also are available for public inspection at the Office of the Federal Register, 800 North Capitol Street NW., Suite 700, Washington, DC 20002; and the Bureau of the Fiscal Service, 401 14th Street SW., Room 400A, Washington, DC 20227.
Notwithstanding any provision of the ACH Rules, including Subsections 2.4.4, 2.8.4, 4.3.5, 2.92, 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.
(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 Start Printed Page 75534with this part. The agency's liability shall be limited to the amount of the entry(ies).
[FR Doc. 2013-29202 Filed 12-11-13; 8:45 am]