Compliance Center: NACHA Passes Two Rules to Increase ACH Network Quality

Late last month, the voting membership of NACHA, the Electronic Payments Association has approved ballots for two upcoming rules for the Automated Clearing House (ACH) Network.

The ACH Network Risk and Enforcement Rule aims to improve NACHA’s ability to identify and enforce the rules against “outlier” originators that may be responsible for the highest, most disproportionate levels of exceptions and returns. Such returns impose costs on Receiving Depository Financial Institutions (RDFI) and can impact consumers.

The rule:

  • Establishes an inquiry process that allows NACHA to research the facts behind an originator’s ACH activity;
  • Lowers the existing return threshold for unauthorized transactions and expands NACHA’s authority to enforce rules related to unauthorized transactions; and
  • Defines permissible practices for use of the ACH Network to collect transactions returned for insufficient funds and other reasons.

The amendments related to NACHA’s enforcement authority will become effective Jan. 1, 2015, and the amendments related to return rate levels and reinitiated transactions will become effective Sept. 18, 2015.

The ACH Network Quality Rule defines the methodology for establishing an unauthorized entry fee to be paid by an Originating Depository Financial Institution (ODFI) to a RDFI for the return of an unauthorized transaction. It goes into effect Oct. 3, 2016.

The fee is meant to provide an incentive for ODFIs to implement processes and tools to reduce the number of unauthorized transactions, as well as provide partial cost recovery to RDFIs for handling unauthorized transactions costs.

Compliance Question of the Week

Can a credit union consider the marital status of a Washington resident when underwriting a loan?

Yes. Although the Equal Credit Opportunity Act states that when an applicant applies for individual unsecured credit, the credit union is prohibited from inquiring about the applicant’s marital status, there are two exceptions. A credit union can consider the applicant’s marital status if the applicant resides in a community property state or is relying on property located in such a state as a basis for repayment of the credit requested.  Washington is a community property state. If an application is for other than individual unsecured credit, a credit union may inquire about the applicant’s marital status, but may use only the terms married, unmarried, and separated.

A community property state requires that any property acquired after marriage by either spouse, is owned equally by each spouse. Community property law prohibits a spouse from creating community debt without the consent of the other spouse.  A spouse cannot buy or sell community real property without the other spouse joining in the transaction.  Further, a spouse cannot create a security interest in any community household goods, furnishings, appliances or a community mobile home unless the other spouse joins in executing the agreement.  Therefore, a credit union can require the signature of both spouses in order to make the community property available to satisfy the loan in the event of default. Otherwise, the applicant has to have sufficient separate property (property acquired before marriage, gifts or inheritance) to qualify for the loan without regard to community property.

Oregon is not a community property state, so credit unions would not inquire about marital status.

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Legal Briefs

National Credit Union Administration (NCUA)

The NCUA has released its agenda for this week’s Board Meeting.

The NCUA announced that it will team with AARP to promote financial literacy and consumer education.

He NCUA released its 2014 Second Quarter U.S. Map Review.

The NCUA issued a new guide to assist groups with starting a Federal Credit Union.

The NCUA reminded credit union managers and directors that there is still time to register for its 2014 Leadership Boot Camp sessions.

Consumer Financial Protection Bureau (CFPB)

The CFPB has issued a final rule that allows it to supervise large, non-bank providers of international remittance transfers.

The CFPB, along with the FRB, updated the dollar thresholds found in Reg Z and Reg M for exempt consumer credit and lease transactions for 2015.

The CFPB has released a blog post to remind consumers of actions they can take if their information is compromised.

CFPB Director Cordray delivered prepared remarks at the Consumer Advisory Board Meeting.

CFPB Director Cordray delivered prepared remarks to Federal Credit Unions at the National Associations of Federal Credit Unions.

CFPB Director Cordray also delivered written testimony to the Senate Committee Banking on Banking, Housing and Urban Affairs.

Federal Reserve Board (FRB)

The FRB has released two papers on payment cards regarding Millennials with Money and Should Defaults be Forgotten?

Financial Crimes Enforcement Network (FinCEN)

FinCEN released an advisory to help financial institutions identify transactions related to human smuggling and trafficking.

Federal Trade Commission (FTC)

The FTC has released a new campaign titled “Pass it On” to help encourage older adults to talk to their families about various fraud scams.

The FTC has released information on its blog about scams, credit report freezes, and data breaches. 

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of September 12, 2014. The last update prior to this was September 11, 2014.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance, Federal, NCUA.