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New ACH rules for P2P payments and third-party senders take effect

NACHA rule changes standardize P2P, clarify third-party sender definition

New ACH rules for P2P payments and third-party senders take effect

New NACHA rules became effective March 21 that standardize the use of the ACH Network for person-to-person (P2P) payments and clarify the definition of a third-party sender, NACHA says.

P2P via ACH—This rule provides clarity and consistency to originating depository financial institutions, receiving depository financial institutions, originators, and third parties about how to apply the rules to P2P payments. A discrete set of rules for P2P payments will enable originators and third-party service providers to implement internal processes and procedures for these entries in order to improve operations and customer service, reduce costs, reduce risk and fraud, and minimize exceptions and disputes.

Specifically, this rule:

•            Defines P2P payment in the rules.

•            Allows a credit version of the WEB Standard Entry Class (SEC) Code to be used for a P2P credit transaction sent from a consumer’s DDA.

•            Establishes standardized formatting requirements for such a WEB credit and ensures that for WEB credits—and WEB debits if used to fund P2P transactions—the Company Entry Description in the Company/Batch Header Record contains a value that lets the receiver know that the entry is a P2P transaction.

•            Clarifies in the rules how Notifications of Change (NOCs) should be handled for P2P WEB credits and for bill payment CIEs.

•            Allowed an Addenda Record for a WEB credit to include up to 80 characters of payment-related information in free form text.

Increasing the use of the ACH Network for P2P payments aligns with several overarching objectives of financial institutions for the ACH Network:

•            Replace costly cash and check payments.

•            Facilitate ACH credit origination and enable more RDFIs to become ODFIs for retail customers.

•            Enable “payments plus information.”

•            Utilize technology, such as mobile, in support of the adoption of ACH payments.

The initial phase of implementation permits the usage of the new WEB credit P2P application. This means that while originators are not mandated to utilize this new format until March 20, 2015, ACH Operators and RDFIs must be prepared to accept these transactions now. This requires the removal of any edits against a WEB credit transaction and the ability for RDFIs to provide all information on the consumer statement, as required by Regulation E. Some RDFIs may not be currently providing the information in the individual ID field for privacy reasons, therefore these institutions must be able to recognize the WEB credit transaction to extract and provide the sender’s name, as required under the regulation.

A second phase of implementation on March 20, 2015, means that all ODFIs will be required to use the WEB credit transactions for all P2P payments via ACH.

Change to Definition of a Third-Party Sender—This rules amendment revises the definition of a third-party sender to address several areas of confusion or uncertainty about the role of a third-party sender. The new definition focuses on two fundamental characteristics of the relationship among third-party senders and originators/ODFIs—(1) the third-party sender acts as an intermediary between the originator and the ODFI, including through Direct Access, and (2) the third-party sender (rather than the originator) has the origination agreement with the ODFI.

Further, the new definition clarifies that an ACH participant can act as a third-party sender or an originator for a given transaction, but cannot assume both roles for the same transaction. However, a third-party sender of entries may also be an originator of other entries in its own right. This rule will help participants reconcile a third-party’s role versus an originator’s role in a particular transaction.

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John Ginovsky

John Ginovsky is a contributing editor of ABA Banking Journal and editor of the publication’s TechTopics e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each TechTopics issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and was managing editor and staff reporter for ABA’s Bankers News. Email him at jginovsky@sbpub.com.

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