NACHA Rule Changes

Effective: 2020-04-01

This rule better differentiates among types of unauthorized return reasons for consumer debits. This differentiation will give ODFIs and their Originators clearer and better information when a customer claims that an error occurred with an authorized payment, as opposed to when a customer claims there was no authorization for a payment. ODFIs and their Originators should be able to react differently to claims of errors, and potentially could avoid taking more significant action with respect to such claims.

Details

The rule re-purposes 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 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.”

Effective date: Phase 1 – April 1, 2020; effective date Phase 2 – April 1, 2021

Technical

Return Reason Code R10 will be defined as “Customer Advises Originator is Not Known to Receiver and/or Originator is Not Authorized by Receiver to Debit Receiver’s Account” and used for:

Receiver does not know the identity of the Originator

Receiver has no relationship with the Originator

Receiver has not authorized the Originator to debit the account

For ARC and BOC entries, the signature on the source document is not authentic or authorized

For POP entries, the signature on the written authorization is not authentic or authorized

Return Reason Code R11 will be defined as “Customer Advises Entry Not in Accordance with the Terms of the Authorization.” It will be used by the RDFI to return an entry for which the Originator and Receiver have a relationship, and an authorization to debit exists, but there is an error or defect in the payment such that the entry does not conform to the terms of the authorization. This includes:

The debit Entry is for an incorrect amount

The debit Entry was debited earlier than authorized

The debit Entry is part of an Incomplete Transaction

The debit Entry was improperly reinitiated

For ARC, BOC, or POP entries:

The source document was ineligible

Notice was not provided to the Receiver

The amount of the entry was not accurately obtained from the source document

R11 returns will have many of the same requirements and characteristics as an R10 return, and be considered unauthorized under the Rules

Incorrect EFTs are subject to the same error resolution procedures under Regulation E as unauthorized EFTs

RDFIs’ effort to handle the customer claim and obtain a WSUD remain the same as with the current obligations for R10 returns

The RDFI will be required to obtain the Receiver’s Written Statement of Unauthorized Debit

The return timeframe is 60 days

R11 returns will be included within the definition of Unauthorized Entry Return Rate

R11 returns will be covered by the existing Unauthorized Entry Fee

The new definition and use of R11 does not include disputes about goods and services, just as with the current definition and use of R10

A key difference between R10 and R11 would be that with an R11 return an Originator would be permitted to correct the underlying error, if possible, and submit a new Entry without being required to obtain a new authorization.

The new Entry must be Originated within 60 days of the Settlement Date of the R11 Return Entry

Any new Entry for which the underlying error is corrected is subject to the same ODFI warranties and indemnification made in Section 2.4 (i.e., the ODFI warrants that the corrected new Entry is authorized)

Organizational changes have been made to language on RDFI re-credit obligations and written statements to align with revised return reasons, and to help clarify uses

No changes to substance or intent of these rules other than new R10/R11 definitions

Section 3.12 Written Statement of Unauthorized Debit

Relocates introductory language regarding an RDFI’s obligation to accept a WSUD from a Receiver

Subsection 3.12.1 Unauthorized Debit Entry/Authorization for Debit Has Been Revoked

Includes invalid/inauthentic signatures for check conversion entries within description of an unauthorized debit;

Removes references to amount different than or settlement earlier than authorized

Includes “authorization revoked” (Note: continues to use return reason code R07)

Subsection 3.12.2 Debit Entry Not in Accordance with the Terms of the Authorization

Describes instances in which authorization terms are not met

Incorporates most existing language regarding improper ARC/BOC/POP entries; incomplete transactions; and improperly reiniated debits

Incorporates language related to amounts different than or initiated for settlement earlier than authorized

Subsection 3.12.3 – Retains separate grouping of return situations involving improperly-originated RCK entries that use R51

Renumbering of other subsections

Corrects a reference regarding RDFI’s obligation to provide copy of WSUD to “Settlement Date” rather than date of initiation

Section 3.11 RDFI Obligation to Re-credit Receiver

Syncs language regarding an RDFI’s obligation to re-credit with re-organized language of Section 3.12

Replaces individual references to incomplete transaction, improper ARC/BOC/ POP, and improperly reinitiated debit with a more inclusive, but general, term “not in accordance with the terms of the authorization”

Section 8.117 Written Statement of Unauthorized Debit definition

Syncs language regarding the use of a WSUD with new wording of Section 3.12

Effective date: Phase 1 – April 1, 2020; effective date Phase 2 – April 1, 2021

Effective Date: 2020-04-01 12:00 am