NACHA Rule Changes

Effective: 2016-03-18

This Rule establishes 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.

NACHA continues to receive feedback from some financial institutions that they experience customer service calls and contacts regarding so-called ACH cards (i.e., cards issued by third-parties – generally non-financial institutions – that initiated debits to a consumer’s account via the ACH). These financial institutions report that customers sometimes are confused with regard to the applicability of overdraft protection opt-in coverage and card network “zero liability” programs for transactions initiated with card-network branded cards.

In 2010, Nacha issued an ACH Operations Bulletin describing the applicability of the Federal Reserve’s Overdraft Opt-In Rule (now administered and promulgated by the CFPB) on RDFIs and ACH Payments. See https://www.nacha.org/news/impact-federal-reserve-overdraft-opt-rule-rdf…. In the case of an ACH card, because the RDFI did not issue the card, the Overdraft Opt-in rule should not apply to the resulting ACH transactions (which use the “POS” SEC Code).

Although the Overdraft Opt-In Rule should not apply to ACH POS entries, consumers using ACH cards at the point of sale may not be aware of the differences between an ACH card and a debit card issued by a financial institution. Therefore, the Rule requires certain disclosures to the consumer by the issuers of ACH cards. The purpose of this change is to avoid confusion by consumers, especially with respect to whether overdraft-opt-in programs and card network zero liability programs apply to transactions using ACH cards.

Specifically, this Rule 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:
• The ACH card is not issued by the consumer’s Depository Financial Institution.
• 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.
• Benefits and protections for transactions made using the ACH card may vary from those available through debit cards issued by the consumer’s Depository Financial Institution.

Effective Date: 2016-03-18 12:00 am