Federal Government Participation in the Automated Clearing House
| Published date | 03 January 2020 |
| Citation | 85 FR 265 |
| Record Number | 2019-27261 |
| Section | Proposed rules |
| Court | Fiscal Service |
Federal Register, Volume 85 Issue 2 (Friday, January 3, 2020)
[Federal Register Volume 85, Number 2 (Friday, January 3, 2020)]
[Proposed Rules]
[Pages 265-271]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27261]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 210
[FISCAL-2019-0001]
RIN 1510-AB32
Federal Government Participation in the Automated Clearing House
AGENCY: Bureau of the Fiscal Service, Treasury.
ACTION: Notice of proposed rulemaking with request for comment.
-----------------------------------------------------------------------
SUMMARY: The Department of the Treasury, Bureau of the Fiscal Service
(Fiscal Service) is proposing to amend 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, formerly known as
[[Page 266]]
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 the 2016 Nacha
Operating Rules & Guidelines book. These changes include amendments set
forth in the 2017, 2018, and 2019 Nacha Operating Rules & Guidelines
books, including supplements thereto, with an effective date on or
before June 30, 2021.
DATES: Comments on the proposed rule must be received by February 3,
2020.
ADDRESSES: Comments on this rule, identified by docket FISCAL-2019-
0001, should only be submitted using the following methods:
Federal eRulemaking Portal: www.regulations.gov. Follow
the instructions on the website for submitting comments.
Mail: Ian Macoy, Bureau of the Fiscal Service, 3201 Pennsy
Drive, Building E, Landover, MD 20785.
The fax and email methods of submitting comments on rules to Fiscal
Service have been decommissioned.
Instructions: All submissions received must include the agency name
(Bureau of the Fiscal Service) and docket number FISCAL-2019-0001 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 website: https://www.fiscal.treasury.gov/ach/.
In accordance with the U.S. government's eRulemaking Initiative,
Fiscal Service publishes rulemaking information on www.regulations.gov.
Regulations.gov offers the public the ability to comment on, search,
and view publicly available rulemaking materials, including comments
received on rules.
FOR FURTHER INFORMATION CONTACT: Ian Macoy, Director of Settlement
Services, at (202) 874-6835 or [email protected]; or
Natalie H. Diana, Senior Counsel, at (202) 874-6680 or
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background
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 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. Rights and
obligations among participants in the ACH Network are governed by the
Nacha Operating Rules, which Part 210 incorporates by reference, 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 2016 Nacha Operating Rules & Guidelines book. Nacha has
adopted a number of changes to the Nacha Operating Rules since the
publication of the 2016 Nacha Operating Rules & Guidelines book, as
reflected in the 2019 Nacha Operating Rules & Guidelines book (2019
Rule Book) and supplements thereto. We are proposing to incorporate in
Part 210 most, but not all, of these changes. We are also proposing one
change to Part 210, related to reclamations, that does not stem from a
change to the Nacha Operating Rules, and several non-substantive
changes to reflect the renumbering of certain Nacha rules and
appendices.
We are requesting public comment on all the proposed amendments to
Part 210.
II. Summary of Proposed Rule Changes
A. 2017 Nacha Operating Rules & Guidelines Book (2017 Rules Book)
Changes
The 2017 Rules Book contains a new rule, the Third-Party Sender
Rule, which requires every Originating Depository Financial Institution
(ODFI) either to register its Third-Party Sender customers with Nacha
or to provide Nacha with a statement that it has no such customers. The
rule, which became effective on September 29, 2017, establishes
deadlines for the initial provision and updating of registration
information, and provides that Nacha may request from an ODFI certain
additional information regarding a Third-Party Sender.
A Third-Party Sender is a type of third-party service provider that
acts as an intermediary in transmitting entries between an Originator
and an ODFI. Federal agencies and Fiscal Service do not utilize Third-
Party Senders. Although Fiscal Service uses fiscal and financial agents
(Federal Reserve Banks and depository financial institutions,
respectively) in its ACH payments and collections operations, those
entities are not providing services in a capacity as Third-Party
Senders. Accordingly, the rule will not affect the Federal government.
We are proposing to incorporate in Part 210 the Third-Party Sender
Rule.
B. 2018 Nacha Operating Rules & Guidelines Book (2018 Rules Book)
Changes
Nacha did not publish any new rules in the 2018 Rules Book. The
2018 Rule Book contains revisions related to the implementation of
Phase 2 of Same Day ACH, which we adopted in 2017 (See 82 FR 42597),
and the Third-Party Sender Rule discussed in Section A above.
C. 2019 Nacha Operating Rules & Guidelines Book (2019 Rules Book)
Changes
The 2019 Rules Book contains changes related to the following
amendments:
Faster Funds Availability;
Same Day ACH Dollar Limit Increase; and
New Same Day ACH Processing Window.
We are proposing to incorporate in Part 210 all of the foregoing
amendments.
1. Faster Funds Availability
The Faster Funds Availability rule will provide faster funds
availability for many ACH credits. Funds from Same Day ACH credits
processed in the first Same Day processing window will be made
available to the Receiver for withdrawal by 1:30 p.m., Receiving
Depository Financial Institution (RDFI) local time. Funds from all non-
Same Day ACH credits that are made available to the RDFI by 5:00 p.m.,
RDFI local time, on the banking day before Settlement Date will be
available to the Receiver for withdrawal by 9:00 a.m., RDFI local time,
on Settlement Date.
Currently, funds from non-Same Day ACH credits are required to be
made available to the Receiver for withdrawal by the end of the
Settlement Date, which can be at any hour before the RDFI's close of
business or by the end of day at an ATM. One exception is for
Prearranged Payment and Deposit (PPD) credits made available to the
RDFI by 5:00 p.m., RDFI local time, on the banking day before
Settlement Date. The RDFI must provide funds availability for these
credits by the opening of business on Settlement Date. This exception
will now be the standard practice for any ACH credit made available to
the RDFI by 5:00 p.m., RDFI local time, on the
[[Page 267]]
banking day before Settlement Date. This rule change also establishes a
firm time of 9:00 a.m., RDFI local time, for such availability and
eliminates references to ``opening of business.''
Receivers will have earlier funds availability for a large portion
of ACH credits:
Funds from non-Same Day ACH credits made available to the
RDFI by 5:00 p.m., RDFI local time, on the banking day before
settlement will be available to the Receiver for withdrawal on
Settlement Date by 9:00 a.m., RDFI local time;
Funds from Same Day credits received in the first Same Day
ACH processing window will be available to the Receiver for withdrawal
by 1:30 p.m., RDFI local time; and
Funds from Same Day credits received in the second Same
Day ACH processing window will be available to the Receiver for
withdrawal by 5:00 p.m., RDFI local time.
This Nacha rule became effective on September 20, 2019. We are
proposing to accept this amendment. Because the government is not a
depository institution, the rule will not affect the government's
receipt of ACH payments, but will mean that some recipients of
government Same Day and non-Same Day ACH payments will have earlier
access to their funds from their financial institutions.
2. Same Day ACH Dollar Limit Increase
The Same Day ACH Dollar Limit Increase rule will increase the per-
transaction dollar limit for Same Day transactions from $25,000 to
$100,000. At implementation, both Same Day ACH credits and Same Day ACH
debits will be eligible for Same Day processing up to $100,000 per
transaction. Nacha's rule will become effective on March 20, 2020.
We are proposing to accept this rule. Acceptance of this rule will
enable individuals and entities to make Same Day ACH payments of up to
$100,000 to the government, and will enable Federal agencies to make
Same Day ACH payments of up to $100,000.
3. New Same Day ACH Processing Window
The New Same Day ACH Processing Window rule will create a new
processing window that will enable ODFIs and their customers to
originate Same Day transactions for an additional two hours each
banking day. The new window will allow Same Day ACH files to be
submitted to the ACH Operators until 4:45 p.m. ET. RDFIs will receive
files from this third window by 5:30 p.m. ET, with interbank settlement
occurring at 6:00 p.m. ET. RDFIs will need to make funds available for
credits processed in the new window by the end of their processing for
that Settlement Date. All credits and debits, and all returns, will be
eligible to be processed in the new Same Day ACH window, with the
exception of International ACH Transactions (IATs), Automated
Enrollment Entries (ENRs), and forward entries in excess of the per-
transaction dollar limit.
Currently, ODFIs can submit Same Day ACH files to the ACH Operators
until 2:45 p.m. ET. ODFI processing arrangements that use payment
processors and correspondent institutions have earlier deadlines. ACH
end-users may have even earlier deadlines to submit Same Day ACH files
to their ODFIs. These timing requirements can make it impractical for
many ODFIs to offer, or for ACH end-users to adopt, Same Day ACH
payments. Adding a third, later Same Day ACH processing window will
provide greater access for all ODFIs and their customers.
Nacha's rule will become effective on March 19, 2021. We are
proposing to accept this rule, which will give more individuals and
entities the opportunity to pay the government by Same Day ACH. It will
also make it possible for the government to originate Same Day ACH
payments later in the day than is currently possible.
D. Supplement #2-2018 to the Nacha Operating Rules Changes
On November 2, 2018, the Nacha Voting Membership approved nine
amendments to the Nacha Operating Rules. Because the nine amendments
were approved just prior to publication of the 2019 Rules Book, the
amendments are included in the rule book as a separate supplement
rather than within the main body of the publication.
1. Return for Questionable Transaction
Before adoption of this amendment, an RDFI could return an ACH
entry for any reason, except as otherwise provided in Article Three,
Subsection 3.8.1 (Restrictions on RDFI's Right to Transmit Return
Entries) of the Nacha Operating Rules. Defined return reasons included,
among others, entries that were deemed unauthorized by the Receiver or
those with an invalid account number or no account at the RDFI. If an
RDFI wanted to return an entry that did not have a valid account number
and appeared to be questionable, suspicious, or anomalous in some way,
the RDFI did not have a defined return reason code to communicate this
information to the ODFI and Originator. Nacha guidance allowed RDFIs to
use R17 to return questionable transactions that would otherwise be
returned using a standard administrative return reason (R03--No
Account/Unable to Locate Account or R04--Invalid Account Number
Structure). However, none of these options enabled an ODFI or its
Originator to differentiate questionable transactions from other
routine account number errors.
Under the Return for Questionable Transaction rule, RDFIs are able
(but not required) to use Return Reason Code R17--File Record Edit
Criteria to indicate that the RDFI believes the entry containing
invalid account information was initiated under questionable
circumstances. This use of R17 is optional at the discretion of the
RDFI. Those RDFIs that elect to use R17 for this purpose are required
to use the description ``QUESTIONABLE'' in the Addenda Information
field of the return. This description in an R17 return differentiates
returns that appear to be suspicious to the RDFI from those due to
routine account number issues.
This rule became effective on June 21, 2019. We are proposing to
accept this amendment, which may give agencies greater insight into
transactions that are returned because they are suspicious or
questionable.
2. Supplementing Fraud Detection Standards for WEB Debits
Under existing rules, Originators of internet-initiated (WEB) debit
entries must use a ``commercially reasonable fraudulent transaction
detection system'' to screen WEB debits for fraud. This requirement is
intended to help prevent fraudulent payments from being introduced into
the ACH Network, and to help protect RDFIs from posting fraudulent or
otherwise incorrect or unauthorized payments.
With the implementation of the Supplementing Fraud Detection
Standards for WEB Debits rule, the current screening requirement will
be enhanced to make it explicit that ``account validation'' is part of
a ``commercially reasonable fraudulent transaction detection system.''
The supplemental requirement will apply to the first use of an account
number, or changes to the account number. For existing WEB debit
authorizations, the rule will be effective on a going forward basis.
Originators will have to perform account validations as there are
updates to account numbers in existing authorizations.
Nacha's rule will become effective on March 19, 2021. We are
proposing to
[[Page 268]]
accept this rule, which can be expected to reduce unauthorized debits
originated by agencies and resulting fraud losses to the government.
However, the implementation of account validation will be costly for
the government due to the need for systems changes, program changes at
originating Federal agencies, and transactional fees for validation
services incurred for the origination of WEB debits. Acceptance of the
rule would not only result in significant additional costs to the
government in the origination of WEB debits but could also have the
unintended consequence of incenting agencies to encourage or restrict
the public to use payment methods other than ACH that represent lower
cost to the government or offer greater transaction certainty at a
comparable cost. An initial assessment indicates the costs for WEB
debit origination with account validation would approach the costs for
acceptance of payment by debit cards, for example, which provide both
account and funds availability validation through the authorization
process. Given the anticipated costs of implementation, we are
considering delaying the effective date of our acceptance of this Nacha
rule change beyond Nacha's March 19, 2021 effective date.
3. Supplementing Data Security Requirements
The existing ACH Security Framework requires Financial
Institutions, Originators, Third-Party Service Providers, and Third-
Party Senders to establish, implement and update security policies,
procedures and systems related to the initiation, processing and
storage of ACH 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.
The Supplementing Data Security Requirements rule expands the
existing ACH Security Framework to explicitly require large, non-
financial institution Originators, Third-Party Service Providers, and
Third-Party Senders to protect account numbers used in the initiation
of ACH entries by rendering them unreadable when stored electronically.
The rule aligns with existing language contained in Payment Card
Industry (PCI) requirements, thus industry participants are expected to
be reasonably familiar with the manner and intent of the requirement.
The rule applies only to account numbers collected for or used in
ACH transactions and does not apply to the storage of paper
authorizations. The rule also does not apply to depository financial
institutions when acting as internal Originators, as they are covered
by existing Federal Financial Institutions Examination Council (FFIEC)
and similar data security requirements and regulations.
The amendment has a phased implementation period, with the
following effective dates:
Phase 1: Nacha Operating Rules language will become
effective on June 30, 2020. Any Originator, Third-Party Service
Provider, or Third-Party Sender that originates six million or more ACH
transactions in calendar year 2019 will need to be compliant by June
30, 2020.
Phase 2: Nacha Operating Rules language will become
effective on June 30, 2021. Any Originator, Third-Party Service
Provider, or Third-Party Sender that originates two million or more ACH
transactions in calendar year 2020 will need to be compliant by June
30, 2021.
Going forward after calendar year 2020, any Originator, Third-Party
Service Provider, or Third-Party Sender that originates two million or
more ACH transactions in any calendar year will need to be compliant
with the rule by June 30 of the following calendar year.
Fiscal Service supports the expansion of existing security
requirements to require large non-financial institution Originators to
protect account numbers used to initiate ACH transactions by rendering
them unreadable while stored electronically. We are proposing to accept
this amendment.
4. ACH Rules Compliance Audit Requirements
Effective January 1, 2019, Nacha consolidated all requirements for
an annual rules compliance audit within one section of the Nacha
Operating Rules. Prior to the rule change, the general obligation for
Participating Depository Financial Institutions (and certain Third-
Party Service Providers and Third-Party Senders) to conduct an audit
was located within Article One, Section 1.2.2 (Audits of Rules
Compliance). However, the details pertaining to that audit obligation
were separately located within Appendix Eight (Rules Compliance Audit
Requirements). This amendment retained and combined the core audit
obligation with the general administrative requirements for completion
of such an audit into Article One of the Nacha Operating Rules.
Under 31 CFR 210.2(d), the rule compliance audit requirements are
not applicable to Federal agencies. We are therefore proposing not to
adopt this amendment.
5. Minor Rules Topics
These amendments change five specific areas of the Nacha Operating
Rules to address minor issues. Minor changes to the Nacha Operating
Rules have little-to-no impact on ACH participants and no significant
economic impact. Nacha's minor rule amendments became effective on
January 1, 2019.
i. ACH Operator Edits
The ACH Operator Edits amendment modifies edit criteria to permit
ACH Operators to ``pend'' files as an alternative to rejecting files
under various error conditions, primarily related to duplicate file
detection. The rule incorporates language to clarify that ACH Operator
edits defined within Appendix Two of the Nacha Operating Rules
represent minimum standards required by the Nacha Operating Rules, and
that additional edits can be adopted by each ACH Operator as part of
its service agreement with its customers.
We are proposing to accept this amendment.
ii. Clarification of Telephone-Initiated Entry (TEL) Authorization
Requirements
This amendment clarifies that the general rules governing the form
of authorization for all consumer debits apply to the authorization of
TEL entries, including the obligation to include revocation language.
Only Accounts Receivable (ARC), Back Office Conversion (BOC), Point-of-
Purchase (POP), and Re-presented Check (RCK) entries are explicitly
exempted from the requirement to include revocation language in the
authorization. The Clarification of TEL Authorization Requirements rule
also incorporates a reference that TEL entries are consumer debits
only, consistent with the language for other consumer debits. We are
proposing to accept this amendment.
iii. Clarification of RDFI Obligation To Return Credit Entry Declined
by Receiver
This rule change reflects pre-existing practices regarding
circumstances under which an RDFI is, or is not, obligated to return a
credit entry that has been declined by a Receiver. The Clarification of
RDFI Obligation to Return Credit Entry Declined by Receiver rule
expressly identifies specific conditions under which the RDFI is
excused from its obligation to return a credit:
[[Page 269]]
--There are insufficient funds available to satisfy the return,
including due to any third party lien or security interest.
--The return is prohibited by legal requirements.
--The RDFI itself has a claim against the proceeds of the credit entry,
including by offset, lien, or security interest.
The rule change also modifies the rule language to refer to an
entry being ``declined'' (rather than ``refused'') by the Receiver.
We are proposing to accept this amendment.
iv. Clarification on Reinitiation of Return Entries
This amendment is an editorial change to the language of the
general rule on Reinitiated Entries to clarify the intent of the Rules
that reinitiation is limited to two times.
We are proposing to accept this amendment.
v. Clarification on RDFI Liability Upon Receipt of a Written Demand for
Payment
This amendment contains editorial changes regarding conditions
under which an RDFI may return a Reclamation Entry or reject a Written
Demand for Payment. These changes also clarify that an RDFI may reject
a Written Demand for Payment only if it was not properly originated by
the ODFI.
We are proposing to accept this amendment.
D. Differentiating Unauthorized Return Reasons
On April 12, 2019, Nacha Voting Membership approved Ballot #1-2019:
Differentiating Unauthorized Return Reasons. The rule repurposes an
existing, little-used return reason code (R11) that will be used when a
receiving customer claims that there was an error with an otherwise
authorized payment. Currently, return reason code R10 is used as a
catch-all for various types of underlying unauthorized return reasons,
including some for which a valid authorization exists, such as a debit
on the wrong date or for the wrong amount. In these types of cases, a
return of the debit still should be made, but the Originator and its
customer (the Receiver) might both benefit from a correction of the
error rather than the termination of the origination authorization. The
use of a distinct return reason code (R11) enables a return that
conveys this new meaning of ``error'' rather than ``no authorization.''
The rule becomes effective in two phases. On April 1, 2020, the re-
purposed return code becomes effective, and financial institutions will
use it for its new purpose. A year later, on April 1, 2021, the re-
purposed return code will become covered by the existing Unauthorized
Entry Fee.
We are proposing to accept this amendment.
E. Actual or Constructive Knowledge of Death
31 CFR part 210 Subpart B governs the reclamation of post-death
Federal benefit payments from financial institutions. Under Subpart B,
both agencies and RDFIs have obligations, rights and liabilities that
are triggered by actual or constructive knowledge of the death or
incapacity of a recipient or death of a beneficiary. See Sec.
210.10(c), (d); Sec. 210.11(a). An agency that initiates a request for
a reclamation must do so within 120 calendar days after the date that
the agency first has actual or constructive knowledge of the death or
legal incapacity of a recipient or the death of a beneficiary. However,
the definition of ``actual or constructive'' knowledge for this purpose
is not explicitly addressed in the definition at Sec. 210.2(b), which
refers only to RDFIs.
Fiscal Service is proposing to revise the definition of ``actual or
constructive knowledge of death'' at 31 CFR 210.2(b) to apply the
definition to agencies as well as RDFIs. In addition, we are proposing
to add a sentence to the definition to address a specific situation
that has arisen in recent years in which agencies sometimes stop
recurring payments to a recipient and, many months or years after
stopping the payments, initiate a reclamation. As revised, Sec.
210.2(b) would require an agency that stops certifying recurring
payments to a recipient because it has reason to believe that the
recipient is deceased to investigate and determine whether to initiate
a reclamation within 120 days following the first missed payment date.
An agency may receive information or otherwise have reason to believe
that a recipient is deceased before it takes action to stop payments.
However, we believe that the first missed payment date preceding the
initiation of a reclamation is the most apparent indicator that the
agency has information of a recipient's death that is sufficiently
reliable to warrant stopping payments. Accordingly, the phrase ``the
time [the agency] stops certifying recurring payments to a recipient''
refers to the first missed payment date.
The proposed language would not generally apply to or affect
situations in which agencies stop payments due to fraud or loss of
entitlement because in most of those cases agencies would not be
initiating a reclamation. In addition, the proposed language would not
generally affect situations in which an agency stops payments due to a
mistaken belief that the recipient was deceased, because those payments
would be reinitiated upon discovery of the mistake. Moreover, in the
event that an agency initiates a reclamation more than 120 days after
stopping payments and can prove that it stopped payments for a reason
other than actual or constructive knowledge of death, the agency can
present evidence to rebut the presumption of knowledge, in which case
the 120-day deadline would not be triggered by the date the agency
stopped payments.
Agencies have indicated that sometimes they have difficulty
obtaining definitive proof of death (i.e., a death certificate) within
120 days of receiving constructive knowledge of death, and that
therefore they may wait for a protracted period of time before
initiating a reclamation. However, the legal standard applicable to
agencies initiating a reclamation is not receipt of a death certificate
(actual knowledge), but actual or constructive knowledge. We request
comment on this proposal, including whether the proposed revisions to
Sec. 210.2(b) are clear.
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 2016
Nacha Rules & Guidelines book with references to the 2019 Nacha
Operating Rules & Guidelines book. The Nacha Operating Rule amendment
that we are not proposing to incorporate is a modification to the audit
compliance provisions of the Nacha Operating Rules, which are already
excluded under Part 210. Other than replacing the references to the
2016 Nacha Operating Rules & Guidelines book, no change to Part 210 is
necessary to exclude this amendment.
Sec. 210.2(b)
We are proposing to amend the definition of ``actual or
constructive knowledge'' in order to clarify that the definition
applies to agencies as well as to RDFIs. We are also proposing to add a
sentence to the definition to address situations in which agencies stop
recurring payments to a recipient and subsequently initiate a
reclamation. Under the revised definition, an agency is presumed to
have constructive knowledge of death or incapacity at the time it stops
certifying recurring payments to a recipient if the agency (1) does not
re-initiate payments to the
[[Page 270]]
recipient and (2) subsequently initiates a reclamation for one or more
payments made to the recipient. The presumption created under the
definition is rebuttable in cases where an agency can demonstrate that
it stopped certifying recurring payments to a recipient for a reason
other than death.
Sec. 210.2(d)
We are proposing to amend the definition of ``applicable ACH
Rules'' at Sec. 210.2(d) by replacing the reference to Nacha's 2016
Operating Rules & Guidelines with a reference to the ACH Rules with an
effective date on or before June 30, 2021, as published in ``2019 Nacha
Operating Rules & Guidelines'' and supplements thereto. We are
proposing to delete the reference to Appendix Ten in subparagraph (1)
because Appendix Eight is being removed in its entirety from the 2019
Rules Book, and Appendices Nine and Ten are being renumbered as
Appendices Eight and Nine, respectively. We are proposing to delete
subparagraph (7), which relates to the government's original adoption
of Same Day ACH in 2017, because it was in effect only until September
15, 2017, and is now obsolete.
Sec. 210.3(b)
We are proposing to amend Sec. 210.3(b) by replacing the
references to the 2016 Nacha Operating Rules & Guidelines with
references to a 2019 Nacha Operating Rules & Guidelines.
Sec. 210.6
We are proposing to amend paragraph (g) by replacing the reference
to the 2016 Nacha Operating Rules & Guidelines with a reference to a
2019 Nacha Operating Rules & Guidelines.
Sec. 210.10(b)
We are proposing to amend Sec. 210.10(b) to state that an agency
is presumed to have constructive knowledge of death or incapacity at
the time it stops certifying recurring payments to a recipient if the
agency (1) does not re-initiate payments to the recipient and (2)
subsequently initiates a reclamation for one or more payments made to
the recipient.
IV. Incorporation by Reference
In this rule, Fiscal Service is proposing to incorporate by
reference the 2019 Nacha Operating Rules & Guidelines book. The Office
of Federal Register (OFR) regulations require that agencies discuss in
the preamble of a proposed 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
proposed rule must summarize the material. 1 CFR 51.5(a). In accordance
with OFR's requirements, the discussion in the SUPPLEMENTARY
INFORMATION section summarizes the 2019 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, 2550 Wasser
Terrace, Suite 400, Herndon, Virginia 20171, tel. 703-561-1100,
[email protected].
V. Procedural Analysis
Request for Comment on Plain Language
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 the rule easier to
understand.
Regulatory Planning and Review
The proposed 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.
Regulatory Flexibility Act Analysis
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 has already adopted and imposed on private sector entities
that utilize the ACH Network. 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.
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 proposed 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, and Incorporation by reference.
For the reasons set out in the preamble, we propose to amend 31 CFR
part 210 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. In Sec. 210.2, revise paragraphs (b) and (d) to read as follows:
Sec. 210.2 Definitions.
* * * * *
(b) Actual or constructive knowledge, when used in reference to an
RDFI's or agency's knowledge of the death or incapacity of a recipient
or death of a beneficiary, means that the RDFI or agency received
information, by whatever means, of the death or incapacity and has had
a reasonable opportunity to act on such information or that the RDFI or
agency would have learned of the death or incapacity if it had followed
commercially reasonable business practices. For purposes of Subpart B,
an agency is presumed to have constructive knowledge of death or
incapacity at the time it stops certifying recurring payments to a
recipient if the agency (1) does not re-initiate payments to the
recipient and (2) subsequently initiates a reclamation for one or more
payments made to the recipient.
* * * * *
(d) Applicable ACH Rules means the ACH Rules with an effective date
on or before June 30, 2021, as published in ``2019 Nacha Operating
Rules & Guidelines: A Complete Guide to Rules
[[Page 271]]
Governing the ACH Network'' and supplements thereto, except:
(1) Sections 1.2.2, 1.2.3, 1.2.4, 1.2.5 and 1.2.6; Appendix Seven;
Appendix Eight; and Appendix Nine (governing the enforcement of the ACH
Rules 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); and
(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
* * * * *
0
3. In Sec. 210.3, revise paragraph (b), redesignate paragraph (c) as
paragraph (d), and add new paragraph (c) 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, email [email protected]
or go to 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,
[email protected].
(i) ``2019 NACHA Operating Rules & Guidelines: A Complete Guide to
Rules Governing the ACH Network,'' copyright 2019. IBR approved for
Sec. 210.6
ii [Reserved]
2 [Reserved]
(c) Any amendment to the applicable ACH Rules approved by Nacha
after publication of the 2019 Nacha Operating Rules & Guidelines shall
not apply to Government entries unless the Service expressly accepts
such amendment by publishing notice of acceptance of the amendment to
this part in the Federal Register. An amendment to the ACH Rules that
is accepted by the Service shall apply to Government entries on the
effective date of the rulemaking specified by the Service in the
Federal Register notice expressly accepting such amendment.
* * * * *
0
4. In Sec. 210.6, revise paragraph (g) to read as follows:
Sec. 210.6 Agencies.
* * * * *
(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 2019 Nacha Operating Rules and 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.
* * * * *
0
5. In Sec. 210.10, revise paragraph (b) to read as follows:
Sec. 210.10 RDFI liability.
* * * * *
(b) Actual or constructive knowledge, when used in reference to an
RDFI's or agency's knowledge of the death or incapacity of a recipient
or death of a beneficiary, means that the RDFI or agency received
information, by whatever means, of the death or incapacity and has had
a reasonable opportunity to act on such information or that the RDFI or
agency would have learned of the death or incapacity if it had followed
commercially reasonable business practices. For purposes of Subpart B,
an agency is presumed to have constructive knowledge of death or
incapacity at the time it stops certifying recurring payments to a
recipient if the agency (1) does not re-initiate payments to the
recipient and (2) subsequently initiates a reclamation for one or more
payments made to the recipient.
* * * * *
Dated: December 11, 2019.
David A. Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2019-27261 Filed 1-2-20; 8:45 am]
BILLING CODE 4810-AS-P
