Federal Government Participation in the Automated Clearing House, 86302-86312 [2016-28671]

Agencies

• Fiscal Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 81, Number 230 (Wednesday, November 30, 2016)]
[Proposed Rules]
[Pages 86302-86312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28671]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 210

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.

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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--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 2013 NACHA 
Operating Rules & Guidelines book. These changes include amendments set 
forth in the 2014, 2015, and 2016 NACHA Operating Rules & Guidelines 
books.

DATES: Comments on the proposed rule must be received by January 30, 
2017.

ADDRESSES: Comments on this rule, identified by docket FISCAL-2016-
0001, should only be submitted using the following methods:
     Federal eRulemaking Portal: www.regulations.gov. Follow 
the instructions on the Web site for submitting comments.
     Mail: Ian Macoy, Bureau of the Fiscal Service, 401 14th 
Street SW., Room 400B, Washington, DC 20227.
    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-2016-0001 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 Web site: 
https://www.fiscal.treasury.gov/fsservices/instit/pmt/ach/ach_home.htm. 
You may also inspect and copy this proposed rule at: Treasury 
Department Library, Freedom of Information Act (FOIA) Collection, Room 
1428, Main Treasury Building, 1500 Pennsylvania Avenue NW., Washington, 
DC 20220. Before visiting, you must call (202) 622-0990 for an 
appointment.
    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 ian.macoy@fiscal.treasury.gov; or 
Natalie H. Diana, Senior Counsel, at (202) 874-6680 or 
natalie.diana@fiscal.treasury.gov.

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 (EFT) 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. 
Part 210 incorporates the NACHA Operating Rules, 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 2013 NACHA Operating Rules & Guidelines book. NACHA has 
adopted a number of changes to the NACHA Operating Rules since the 
publication of the 2013 NACHA Operating Rules & Guidelines book. We are 
proposing to incorporate in Part 210 most, but not all, of these 
changes. We are also proposing two changes to Part 210, related to 
reversals and prepaid cards, that do not stem from a change to the 
NACHA Operating Rules.
    We are requesting public comment on all the proposed amendments to 
Part 210.

II. Summary of Proposed Rule Changes

A. 2014 NACHA Operating Rules & Guidelines Book Changes

    The 2014 edition of the NACHA Operating Rules & Guidelines contains 
changes related to the following amendments:
     Person-to-Person Payments via ACH;
     IAT Modifications; Proof of Authorization for Non-Consumer 
Entries;
     Dishonored Returns and Contested Dishonored Returns 
Related to an Unintended Credit to a Receiver;
     Reclamation Entries--Corrections to Rules Governing 
Authorizations;
     Incomplete Transaction Clarification;
     Use of Tilde as Data Segment Terminator;
     Editorial Clarification--Non-Consumer Receiver's 
Obligation to Credit Originator's Account;
     Prenotification Entries--Reduction in Waiting Period for 
Live Entries;
     Notification of Change (NOC)--Removal of Change Code C04 
(Incorrect Individual Name/Receiving Company Name); and
     ACH Operator Edit for Returns.
    We are proposing to incorporate in Part 210 all of the foregoing 
amendments, which are summarized below, except the amendment relating 
to reclamation entries.
1. Person-to-Person Payments via ACH
    This amendment standardized the use of the ACH Network for Person-
to-Person (P2P) Entries by expanding the Internet-Initiated/Mobile 
(WEB) SEC Code to accommodate credit Entries transmitted between 
consumers (P2P

[[Page 86303]]

transactions). A P2P Entry is defined as ``a credit Entry initiated by 
or on behalf of a holder of a Consumer Account that is intended for a 
Consumer Account of a Receiver.'' The amendment also modified the 
definition of a Customer Initiated Entry (CIE) to ``a credit Entry 
initiated by or on behalf of the holder of a Consumer Account to the 
Non-Consumer Account of a Receiver.'' These definitional changes ensure 
there is a clear differentiation between WEB credit and CIE--i.e., CIE 
for a bill payment from a consumer to a business, and WEB credit for a 
P2P transaction from one consumer to another or between consumer 
accounts belonging to the same person. In addition, this amendment 
clarified the treatment of NOCs related to credit WEB Entries and CIE 
Entries.
    We are proposing to accept this amendment.
2. IAT Modifications
    This amendment revised the NACHA Operating Rules to update the 
rules and formatting of the International ACH Transaction (IAT) in 
order to facilitate more accurate screening and compliance with OFAC 
sanctions policies. This modification requires a Gateway to identify 
within an Inbound IAT Entry (1) the ultimate foreign beneficiary of the 
funds transfer when the proceeds from a debit Inbound IAT Entry are for 
further credit to an ultimate foreign beneficiary that is a party other 
than the Originator of the debit IAT Entry, or (2) the foreign party 
ultimately funding a credit Inbound IAT Entry when that party is not 
the Originator of the credit IAT Entry. This amendment revised the 
description of the Payment Related Information Field as it relates to 
the IAT Remittance Addenda Record to establish specific formatting 
requirements for inclusion of the ultimate foreign beneficiary's/
payer's name, street address, city, state/province, postal code, and 
ISO Country Code. The amendment also requires an Originator, Third-
Party Sender, Originating Depository Financial Institution (ODFI), or 
Gateway transmitting an IAT Entry to identify any country named within 
the IAT Entry by that country's 2-digit alphabetic ISO Country Code, as 
defined by the International Organization for Standardization's (ISO) 
3166-1-alpha-2 code list.
    We are proposing to accept this amendment.
3. Proof of Authorization for Non-Consumer Entries
    This amendment established a minimum standard for proof of 
authorization for Non-Consumer Entries to aid in the resolution of 
unauthorized or fraudulent debits to businesses, particularly those 
where no trading partner relationship/agreement exists between the 
Originator and Receiver. This change permits a Receiving Depository 
Financial Institution (RDFI) to request proof of a Non-Consumer 
Receiver's authorization for a CCD, CTX, or an Inbound IAT Entry to a 
Non-Consumer Account. The ODFI must provide the required information to 
the RDFI at no charge within ten banking days of receiving a written 
request for such information from the RDFI. The amendment also requires 
the Originator to provide such proof of authorization to the ODFI for 
its use or for use by the RDFI.
    The amendment provides two methods by which an ODFI can comply with 
the RDFI's request for proof of authorization. The first is to provide 
an accurate record of the authorization. The second is to provide the 
Originator's contact information that can be used for inquiries about 
authorization of Entries. At a minimum, this contact information must 
include (1) the Originator's name, and (2) the Originator's phone 
number or email address for inquiries regarding authorization of 
Entries.
    We are proposing to accept this amendment.
4. Dishonored Returns and Contested Dishonored Returns Related to an 
Unintended Credit to a Receiver
    This amendment established the right of an ODFI to dishonor the 
Return of a debit Erroneous Entry if the Return Entry results in an 
unintended credit to the Receiver because (1) the Return Entry relates 
to a debit Erroneous Entry, (2) the ODFI has already originated a 
credit Reversing Entry to correct the Erroneous Entry, and (3) the ODFI 
has not received a Return of that credit Reversing Entry.
    Similarly, under this amendment an ODFI may dishonor the Return of 
a debit Reversing Entry if the Return Entry results in an unintended 
credit to the Receiver because (1) the Return Entry relates to a debit 
Reversing Entry that was intended to correct a credit Erroneous Entry, 
and (2) the ODFI has not received a Return of that credit Erroneous 
Entry. The amendment requires an ODFI dishonoring a debit Return Entry 
under either of these conditions to warrant that it originated a 
Reversal in an effort to correct the original erroneous transaction and 
therefore is dishonoring the Return of the debit Erroneous Entry or the 
debit Reversing Entry, either of which causes an unintended credit to 
the Receiver. The amendment also establishes the right of an RDFI to 
contest this type of dishonored Return if either of the following 
conditions exists: (1) The RDFI returned both the Erroneous Entry and 
the related Reversal; or (2) the RDFI is unable to recover the funds 
from the Receiver.
    We are proposing to accept this amendment.
5. Reclamation Entries--Corrections to Rules Governing Authorization
    This amendment made several corrections to the rules governing the 
authorization of Reclamation Entries. These changes address technical 
and drafting discrepancies between Reversing Entries and Reclamation 
Entries in the NACHA Operating Rules and make the rules related to 
Reclamation Entries consistent with those for Reversing Entries to the 
extent possible.
    We are proposing not to incorporate this amendment in Part 210. 
Part 210 generally excludes all NACHA Operating Rules relating to the 
reclamation of benefit payments because Part 210 contains specific 
provisions on the reclamation of Federal benefit payments. No revision 
to the text of Part 210 is required to exclude this amendment from Part 
210 because the amendment modifies Section 2.10 of the NACHA Operating 
Rules, which is already inapplicable to the government under Sec.  
210.2(d)(2).
6. Incomplete Transaction Clarifications
    The Incomplete Transaction Clarifications amendment recognizes 
certain ARC, BOC, and POP Entries to Non-Consumer Accounts as eligible 
for return under the Incomplete Transaction Rule. This change 
streamlines RDFIs' processing of ARC, BOC, and POP returns and improves 
their ability to comply with the NACHA Operating Rules by eliminating 
different processing requirements for unauthorized/improper consumer 
and non-consumer ARC, BOC, and POP Entries, which share the same 
Standard Entry Class Code. The change restores the RDFI's ability to 
rely solely on the Standard Entry Class Code when determining handling 
requirements for specific types of Entries. This amendment also added 
specific references to ``consumer'' Receivers, where appropriate, to 
add clarity regarding the scope of the Incomplete Transaction Rules.
    This amendment modifies Article Three, Subsection 3.12.3 
(Incomplete Transaction) to add the word ``consumer'' to clarify that 
the Receiver

[[Page 86304]]

of an Incomplete Transaction is generally the owner of a consumer 
account, with one specific exception. The amendment also adds language 
to this subsection to state that an ARC, BOC, or POP Entry may also be 
considered an Incomplete Transaction regardless of whether the account 
that is debited is a Consumer Account or a Non-Consumer Account. The 
amendment made corresponding changes to the definition of an Incomplete 
Transaction in Article Eight, Section 8.50 and clarified that a Written 
Statement of Unauthorized Debit must be accepted for any Incomplete 
Transaction involving any ARC, BOC, or POP Entry.
    We are proposing to accept this amendment.
7. Use of Tilde as Data Segment Terminator
    This amendment corrected two IAT field descriptions, ``Originator 
City and State/Province'' and ``Receiver City and State/Province,'' to 
clarify that the tilde (``~'') is a valid data segment terminator.
    We are proposing to accept this amendment.
8. Editorial Clarification--Non-Consumer Receiver's Obligation to 
Credit Originator's Account
    This amendment revised the text and title of Article Three, 
Subsection 3.3.1.3 (Non-Consumer Receiver Must Credit Originator's 
Account) to make the section's intent clearer and easier to understand 
for ACH Network participants. This change was editorial in nature only.
    We are proposing to accept this amendment.
9. Prenotification Entries--Reduction in Waiting Period for Live 
Entries
    This amendment reduced the six banking-day waiting period between 
initiation of a Prenotification and ``live'' Entries for Originators 
choosing to originate Prenotes. This amendment also modified the NACHA 
Operating Rules related to Notifications of Change to clarify the 
Originator's obligations with respect to an NOC received in response to 
a Prenote. This change permits an Originator that has originated a 
Prenotification Entry to a Receiver's account to initiate subsequent 
Entries to the Receiver's account as soon as the third Banking Day 
following the Settlement Date of the Prenotification Entry, provided 
that the ODFI has not received a return or NOC related to the 
Prenotification.
    We are proposing to accept this amendment.
10. Notification of Change--Removal of Change Code C04 (Incorrect 
Individual Name/Receiving Company Name)
    This amendment removed the Notification of Change Code--C04 
(Incorrect Individual Name/Receiving Company Name) from the NACHA 
Operating Rules. Change Code C04 (Incorrect Individual Name/Receiving 
Company Name) had been used by RDFIs to request a correction to the 
name of the Receiver indicated in an ACH Entry. As with any 
Notification of Change, the RDFI that transmitted an NOC with this 
change code warranted the accuracy of the corrected data (in this case, 
the Receiver's name). The Originator was then obligated to make the 
requested change within six banking days or prior to initiating a 
subsequent Entry, whichever is later.
    In certain scenarios, the use of C04 created compliance and 
liability challenges for the Originator, ODFI, and RDFI. Generally 
speaking, an ACH transaction involves a mutual customer of both the 
Originator and the RDFI. In the event that the Receiver's name on a 
debit Entry was different from the name on the account, most RDFIs 
would either post the Entry based solely on the account number or 
return the transaction using Return Reason Code R03 (No Account/Unable 
to Locate Account). In some cases, RDFIs transmitted NOCs using Change 
Code C04 to instruct the Originator to change the Receiver's name on 
future Entries. The use of C04 presented additional risk to the RDFI 
and the ODFI and/or the Originator because the RDFI was warranting that 
the name change is accurate, but it did not always reflect the party 
with whom the Originator has the relationship. As a result, Originators 
were typically unable or unwilling to make the changes in accordance 
with their obligations under the NACHA Operating Rules. An Originator 
continuing to debit its customer without making the change warranted by 
the RDFI did so in violation of the current Rules, creating challenges 
and conflict for all parties. Eliminating Change Code C04 (Incorrect 
Individual Name/Receiving Company Name) removed the challenges and 
potential rules violations that Originators faced when they receive a 
request for a name change that they were unable to make. Under the 
amendment, an Originator can rely on its own contracts and records to 
properly identify the name of the Receiver being credited or debited 
without being in violation of the NACHA Operating Rules because of the 
failure to respond to an NOC.
    Eliminating Change Code C04 (Incorrect Individual Name/Receiving 
Company Name) lessens the risk to the RDFI as it warrants that 
information contained in an NOC is correct. A change as significant as 
a name change should be accomplished through communication of the 
Receiver with the Originator so that the authorization held by the 
Originator is accurate. The RDFI that identifies a name mismatch can 
post the Entry based solely on the account number, return the Entry as 
R03, or choose to assist its Receiver by communicating directly with 
the ODFI/Originator. Any of these options should cause the Originator 
and the Receiver to communicate relating to needed changes while 
relieving the RDFI of the warranty that the information is correct.
    We are proposing to accept this amendment.
11. ACH Operator Edit for Returns
    This amendment incorporated an additional ACH Operator edit within 
the listing of ACH Operator file/batch reject edit criteria specified 
within Appendix Two of the NACHA Operating Rules. Specifically, this 
edit requires ACH Operators to reject any batch of Return Entries in 
which RDFI returns and ACH Operator returns are commingled. By 
definition, different parties are responsible for generating each type 
of return, and each must be separately identified within the Company/
Batch Header Record as the sender of the batch. This ACH Operator edit 
codifies this fact within the NACHA Operating Rules and ensures 
consistent processing of return batches by all ACH Operators.
    We are proposing to accept this amendment.

B. 2015 NACHA Operating Rules & Guidelines Book Changes

    The 2015 edition of the NACHA Operating Rules contains changes 
related to the following amendments: \1\
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    \1\ The 2015 Rules & Guidelines book also included two 
amendments addressed in the 2014 Rules & Guidelines book that had 
effective dates in 2015: (1) Dishonored Returns and Contested 
Dishonored Returns Related to an Unintended Credit to a Receiver and 
(2) Notification of Change--Removal of Change Code C04. Because 
those amendments are addressed in Section A above, we are not 
including them in Section B.
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     ACH Network Risk and Enforcement;
     Improving ACH Network Quality--Unauthorized Entry Fee;
     Clarification on Company Identification for P2P WEB Credit 
Entries;
     Point-of-Sale Entries--Clarification of General Rule;
     Return Fee Entry Formatting Requirements;

[[Page 86305]]

     Entry Detail Record for Returns--Clarification Regarding 
POP Entries;
     Clarification of RDFI's Obligation to Recredit Receiver;
     Clarification on Prenotification Entries and Addenda 
Records; and
     ACH Operator Edit for Returns.
    We are proposing to incorporate in Part 210 all of the foregoing 
amendments, which are summarized below, other than some provisions of 
the amendment relating to ACH Network Risk and Enforcement and the 
amendment on Improving ACH Network Quality--Unauthorized Entry Fee.
1. ACH Network Risk and Enforcement
    This amendment expanded existing rules regarding ODFIs' and Third-
Party Senders' requirements for risk management and origination 
practices, such as return rate levels. It also expanded NACHA's 
authority to initiate enforcement proceedings for a potential violation 
of the NACHA Operating Rules related to unauthorized Entries.
Return Rate Levels
    The amendment reduced the threshold for unauthorized debit Entries 
(Return Reason Codes R05, R07, R10, R29, and R51) from 1.0 percent to 
0.5 percent and also established two new return rate levels for other 
types of returns. First, a return rate level of 3.0 percent will apply 
to debit entries returned due to administrative or account data errors 
(Return Reason Codes R02--Account Closed; R03--No Account/Unable to 
Locate Account; and R04--Invalid Account Number Structure). Second, a 
return rate level of 15.0 percent will apply to all debit entries 
(excluding RCK entries) that are returned for any reason.
    The amendment also established an inquiry process, which is 
separate and distinct from an enforcement proceeding, as a starting 
point to evaluate the origination activity of Originators and Third-
Party Senders that reach the new administrative return and overall 
debit return rate levels. The identification of an Originator or Third-
Party Sender with a return rate that is higher than the respective 
return rate level may trigger a review of the Originator's or Third-
Party Sender's ACH origination procedures. At the conclusion of the 
inquiry, NACHA may determine that no further action is required, or it 
may take the next step and recommend to the ACH Rules Enforcement Panel 
that the ODFI be required to reduce the Originator's or Third-Party 
Sender's overall or administrative return rate below the established 
level.
    In this new role, the ACH Rules Enforcement Panel will be the final 
authority in deciding, after the completion of the inquiry, whether the 
ODFI should be required to reduce the Originator's or Third-Party 
Sender's overall or administrative return rate. After reviewing NACHA's 
recommendation, the Panel can decide either to take no action, at which 
point the case would be closed, or to have NACHA send a written 
directive to the ODFI, which would require the reduction of the 
Originator's or Third-Party Sender's administrative or overall return 
rate.
    We are proposing not to incorporate in Part 210 the provisions of 
the amendment relating to return rate levels. No change to the text of 
Part 210 is required to exclude these provisions because Part 210 
already excludes Section 2.17 and Appendix 10, which is where the 
return rate level changes have been addressed in the NACHA Operating 
Rules.
Reinitiation of Entries
    This amendment explicitly prohibited the reinitiation of Entries 
outside of the express limited circumstances under which they are 
permitted under the NACHA Operating Rules. The amendment also added a 
specific prohibition against reinitiating a transaction that was 
returned as unauthorized. The amendment further included an anti-
evasion provision, specifying that any other Entry that NACHA 
reasonably believes represents an attempted evasion of the defined 
limitations will be treated as an improper reinitiation. The ACH Rules 
Enforcement Panel will have final authority in deciding whether a 
specific case involves an attempted evasion of the limitations on 
reinitiation.
    To avoid unintended consequences from these clarifications, the 
amendment included two categories of Entries that will not be 
considered reinitiations. First, the amendment clarified that a debit 
Entry in a series of preauthorized recurring debit Entries will not be 
treated as a reinitiated Entry, even if the subsequent debit Entry 
follows a returned debit Entry, as long as the subsequent Entry is not 
contingent upon whether an earlier debit Entry in the series has been 
returned. Second, the amendment expressly stated that a debit Entry 
will not be considered a ``reinitiation'' if the Originator obtains a 
new authorization for the debit Entry after the receipt of the Return.
    The amendment requires a reinitiated Entry to contain identical 
content in the following fields: Company Name, Company ID, and Amount. 
Further, the amendment permits modification to other fields only to the 
extent necessary to correct an error or facilitate processing of an 
Entry. This change allows reinitiations to correct administrative 
errors, but prohibits reinitiation of Entries that may be attempts to 
evade the limitation on the reinitiation of returned Entries by varying 
the content of the Entry. Finally, the amendment addressed certain 
technical issues associated with the reinitiation requirements.
    We are proposing to accept the reinitiation provisions of the 
amendment.
Third-Party Sender Issues
    The amendment added a direct obligation on Third-Party Senders to 
monitor, assess and enforce limitations on their customer's origination 
and return activities in the same manner the NACHA Operating require of 
ODFIs. Prior to this amendment, the NACHA Operating Rules required 
ODFIs to establish, implement, periodically review and enforce exposure 
limits for their Originators and Third-Party Senders. The ODFI was 
required to monitor each Originator's and Third-Party Sender's 
origination and return activity across multiple Settlement Dates, 
enforce restrictions on the types of Entries that may be originated and 
enforce the exposure limit. If an ODFI enters into a relationship with 
a Third-Party Sender that processes Entries such that the ODFI itself 
cannot or does not perform these monitoring and enforcement tasks with 
respect to the Originators serviced by the Third-Party Sender, the 
Third-Party Sender must do so. The amendment added a specific statement 
of this obligation.
    We are proposing to accept the Third-Party Sender provisions of the 
amendment.
NACHA's Enforcement Authority
    The amendment provided NACHA with the express authority to bring an 
enforcement action based on the origination of unauthorized entries. To 
ensure the judicious use of the expanded authority, the amendment 
requires the ACH Rules Enforcement Panel to validate the materiality of 
this type of enforcement case before NACHA can initiate any such 
proceeding. In addition, the amendment encourages RDFIs to voluntarily 
provide to NACHA information, such as return data, that may be 
indicative of a potential Rules violation for improper authorization 
practices by other ACH Network participants, even if the RDFI is not 
interested in itself initiating a Rules

[[Page 86306]]

enforcement proceeding. Such early sharing of information regarding 
unusual return rates or unauthorized transactions can help eliminate 
improper activities more quickly.
    We are proposing not to incorporate in Part 210 the provisions of 
the amendment that relate to NACHA's enforcement authority. Part 210 
excludes the government from the risk investigation and enforcement 
provisions of the NACHA Operating Rules. Fiscal Service tracks 
unauthorized return rates for Federal agencies and will use the new 
unauthorized return limits and reinitiation limitations in overseeing 
agency ACH origination activity. No change to the text of Part 210 is 
required to exclude these provisions because Part 210 already excludes 
Appendix Ten of the NACHA Operating Rules, which governs rules 
enforcement.
2. Improving ACH Network Quality--Unauthorized Entry Fee
    This amendment requires an ODFI to pay a fee to the RDFI for each 
ACH debit that is returned as unauthorized (return reason codes R05, 
R07, R10, R29 and R51). RDFIs will be compensated for a portion of the 
costs they bear for handling unauthorized transactions, and will 
experience reduced costs due to a reduction in unauthorized 
transactions over time. The amendment provides that ODFIs and RDFIs 
authorize debits and credits to their accounts for the collection and 
distribution of the fees. IAT transactions are not covered by the fee, 
but could be included in the future. The amendment defines a 
methodology by which NACHA staff will set and review every three years 
the amount of the Unauthorized Entry Fee. In setting the amount of the 
fee, NACHA staff will apply several stated principles, including the 
review of RDFI cost surveys. Based on the results of the current data 
collection on RDFIs' costs for handling unauthorized transactions, 
NACHA has estimated that the fee amount will be in the range of $3.50-
$5.50 per return.
    We are proposing not to incorporate this amendment in Part 210. 
Part 210 does not incorporate those provisions of the NACHA Operating 
Rules dealing with enforcement for noncompliance and the government 
therefore is not subject to fines for violation of the provisions of 
the ACH Rules. See 31 CFR part 210.2(d)(2), (3). Fiscal Service works 
with agencies to achieve Government-wide compliance with all ACH Rule 
requirements and tracks compliance, including returns of unauthorized 
debit entries. The number of such returns is low in relation to 
originated entries: in calendar year 2015, approximately 73,000 ACH 
debits originated by agencies were returned as unauthorized. Based on 
an estimated fee of $3.50-$5.50, the resulting cost to the government 
would be approximately $255,500-$401,500 per year. We do not believe it 
is in the public interest to subject the Treasury General Account to 
fines of this nature. Rather, we propose to work with agencies to 
monitor and reduce the number of unauthorized debit entries.
3. Clarification of Company Identification for Person-to-Person WEB 
Credit Entries
    This amendment added language to the Company Identification field 
description to clarify content requirements for Person-to-Person (P2P) 
WEB credit Entries. For P2P WEB credit Entries, the Company/Batch 
Header Record identifies the P2P service provider (i.e., the consumer 
Originator's own financial institution or a third-party service 
provider) rather than the consumer Originator. Prior to the amendment, 
the NACHA Operating Rules specifically defined service provider content 
requirements for the Company Name field, but omitted the same 
clarification for the Company Identification, which is a related field. 
The purpose of the amendment was to eliminate any potential confusion 
over proper formatting of this field.
    We are proposing to accept this amendment.
4. Point-of-Sale (POS) Entries--Clarification of General Rule
    This amendment re-aligned the general rule for POS Entries with the 
definition of POS Entries in Article Eight. A POS Entry is generally 
considered to be a debit Entry initiated at an electronic terminal by a 
consumer to pay an obligation incurred in a point-of-sale transaction. 
However, a POS Entry can also be an adjusting or other credit Entry 
related to the debit Entry, transfer of funds, or obligation (for 
example, a credit to refund a previous point-of-sale transaction). 
Prior to the amendment, the definition of POS within the NACHA 
Operating Rules recognized these Entries as both debits and credits, 
but the general rule for POS identified POS Entries only as debits. 
This amendment corrected the discrepancy.
    We are proposing to accept this amendment.
5. Return Fee Entry Formatting Requirements
    This amendment modified the description of the Individual Name 
Field in a PPD Return Fee Entry related to a returned ARC, BOC, or POP 
Entry to require that it contain the same information identified within 
the original ARC, BOC, or POP Entry. The Individual Name Field is 
optional for ARC, BOC, and POP; therefore, this field (1) may include 
the Receiver's name, (2) may include a reference number, identification 
number, or code that the merchant needs to identify the particular 
transaction or customer, or (3) may be blank.
    The name of the Receiver must be included in all PPD Entries. With 
ARC, BOC, or POP Entries, where a reading device must be used to 
capture the Receiver's routing number, account number, and check serial 
number, it is difficult for the Originator to capture the Receiver's 
name in an automated fashion. For this reason, the NACHA Operating 
Rules do not require Originators to include the Receiver's name in the 
ARC, BOC, or POP Entry Detail Record. Originators are permitted the 
choice of including either the Receiver's name, or a reference number, 
identification number, or code necessary to identify the transaction, 
or the field may be left blank. Because information contained within 
the returned ARC, BOC, or POP Entry is typically used to create a 
related Return Fee Entry, the Receiver's name is likely not readily 
available to the Originator for use in the Return Fee Entry, especially 
when the Receiver's authorization for the Return Fee Entry was obtained 
by notice. This amendment established consistent formatting 
requirements with respect to the Receiver's name for check conversion 
entries and related return fees.
    We are proposing to accept this amendment.
6. Entry Detail Record for Returns--Clarification Regarding POP Entries
    This amendment added a footnote to the Entry Detail Record for 
Return Entries to clarify the specific use of positions 40-54 with 
respect to the return of a POP Entry. On a forward POP Entry, positions 
40-54 represent three separate fields to convey (1) the check serial 
number (positions 40-48); (2) the truncated name or abbreviation of the 
city or town in which the electronic terminal is located (positions 49-
52); and (3) the state in which the electronic terminal is located 
(positions 53-54). However, these three fields are not explicitly 
identified in the Entry Detail Record for Return Entries, which caused 
some confusion among users as to how to map such information from

[[Page 86307]]

the original forward Entry into the Return Entry format.
    We are proposing to accept this amendment.
7. Clarification of RDFI's Obligation to Recredit Receiver
    This amendment clarified that an RDFI's obligation to recredit a 
Receiver for an unauthorized or improper debit Entry is generally 
limited to Consumer Accounts, with certain exceptions for check 
conversion and international transactions. Prior to the NACHA Operating 
Rules simplification initiative in 2010, the rules governing a 
Receiver's right to recredit for unauthorized debit entries clearly 
limited this provision to debit Entries affecting Consumer Accounts, 
except as expressly provided for ARC, BOC, IAT, and POP Entries (which 
can affect both consumer and business accounts). However, when rules 
language was combined and revised during the simplification process 
into a general discussion on recredit, some of this clarity was lost, 
resulting in language that was somewhat ambiguous and the cause of 
confusion for some ACH participants. This change more clearly defines 
the intent of the rule requirement for an RDFI to recredit a Receiver.
    We are proposing to accept this amendment.
8. Clarification of Prenotification Entries and Addenda Records
    This amendment revised the NACHA Operating Rules to clarify that, 
with the exception of IAT Entries, a prenotification Entry is not 
required to include addenda records that are associated with a 
subsequent live Entry. Generally speaking, the format of a 
Prenotification Entry must be the same as the format of a live dollar 
Entry. There are, however, some differences between Prenotes and live 
Entries to which the Prenotes relate:
     The dollar amount of a Prenotification Entry must be zero;
     a Prenotification Entry is identified by a unique 
transaction code; and
     addenda records associated with a live Entry are not 
required with Prenotes (unless the Prenote relates to an IAT Entry).
    While the first two formatting criteria above for Prenotification 
Entries are clearly defined within the technical standards and are 
commonly understood by industry participants, the issue of whether 
Prenotification Entries require addenda records was somewhat ambiguous. 
The amendment eliminated that ambiguity.
    We are proposing to accept this amendment.
9. ACH Operator Edit for Returns
    This amendment incorporated an additional ACH Operator edit within 
the listing of ACH Operator file/batch reject edit criteria specified 
within Appendix Two of the NACHA Operating Rules. Specifically, this 
edit requires ACH Operators to reject any batch of Return Entries in 
which RDFI returns and ACH Operator returns are commingled. By 
definition, different parties are responsible for generating each type 
of return, and each must be separately identified within the Company/
Batch Header Record as the sender of the batch. This ACH Operator edit 
codifies this fact and ensures consistent processing of return batches 
by all ACH Operators.
    We are proposing to accept this amendment.
C. 2016 NACHA Operating Rules & Guidelines Book Changes
    The 2016 edition of the NACHA Operating Rules & Guidelines contains 
changes related to the following amendments: \2\
---------------------------------------------------------------------------

    \2\ The 2016 Rule Book also codified changes related to the rule 
NACHA adopted in 2015 on Improving ACH Network Quality (Unauthorized 
Entry Fee), which is addressed above in Section B--2015 NACHA 
Operating Rule Book Changes.
---------------------------------------------------------------------------

     Same-Day ACH: Moving Payments Faster;
     Disclosure Requirements for POS Entries;
     Recrediting Receiver--Removal of Fifteen Calendar Day 
Notification Time Frame;
     Clarification of RDFI Warranties for Notifications of 
Change; and
     Minor Rules Topics.
    We are proposing to incorporate in Part 210 all of the foregoing 
amendments except that we are proposing to delay our implementation of 
Same-Day ACH as discussed below.
1. Same-Day ACH: Moving Payments Faster
    This amendment will allow for same-day processing of ACH payments. 
Currently, the standard settlement period for ACH transactions is one 
or two business days after processing. The Same-Day ACH amendment will 
enable the option for same-day processing and settlement of ACH 
payments through new ACH Network functionality without affecting 
existing ACH schedules and capabilities. Originators that desire same-
day processing will have the option to send Same Day ACH Entries to 
accounts at any RDFI. All RDFIs will be required to receive Same-Day 
ACH Entries, which gives ODFIs and Originators the certainty of being 
able to send same day ACH Entries to accounts at all RDFIs in the ACH 
Network. The amendment includes a ``Same-Day Entry fee'' on each Same-
Day ACH transaction to help mitigate RDFI costs for supporting Same-Day 
ACH.
    The amendment has a phased implementation period, spreading from 
2016 to 2018, with the following effective dates:
     Phase 1--September 23, 2016: ACH credits will be eligible 
to be processed during two new Same-Day ACH windows with submission 
deadlines at 10:30 a.m. ET and 2:45 p.m. ET, with settlement occurring 
at 1:00 p.m. ET and 5:00 p.m. ET, respectively. RDFIs will be required 
to provide funds availability by the end of the RDFI's processing day. 
Applicable to ACH credits only and non-monetary Entries, with funds 
availability due at the end of the RDFI's processing day.
     Phase 2--September 15, 2017: ACH debits will become 
eligible for same-day processing during the two new Same-Day windows.
     Phase 3--March 16, 2018: RDFIs will be required to provide 
funds availability for same day credits no later than 5:00 p.m. at the 
RDFI's local time.
    The existing next-day ACH settlement window of 8:30 a.m. ET will 
not change. With the addition of the new Same-Day ACH processing 
windows, the ACH Network will provide three opportunities for ACH 
settlement each day.
Payment Eligibility
    Virtually all types of ACH payments will be eligible for same-day 
processing by the end of the implementation period. The only ACH 
transactions ineligible for same-day processing will be IAT 
transactions and individual transactions over $25,000.
    In addition to credits and debits, the ACH Network supports a 
number of transaction types that do not transfer a dollar value. Non-
monetary transactions include Prenotifications; Notifications of Change 
(NOCs); Zero Dollar Entries that convey remittance information using 
CCDs and CTXs; and Death Notification Entries. With the exception of 
Prenotifications for future debit Entries, these non-monetary 
transactions will be eligible for same-day processing from the outset. 
Automated Enrollment Entries (ENRs) do not use Effective Entry Dates. 
Since there will not be a way to distinguish same day ENR Entries from 
next-day Entries, ENRs will not be processed as same day transactions.

[[Page 86308]]

Identification of Same-Day Transactions via the Effective Entry Date
    Same-Day ACH transactions will be identified by the ODFI and its 
Originator by using the current day's date in the Effective Entry Date 
field of the Company/Batch Header Record. (Note: The NACHA Operating 
Rules define the Effective Entry Date as ``the date specified by the 
Originator on which it intends a batch of Entries to be settled.'') In 
addition, transactions intended for same-day processing that carry a 
current day Effective Entry Date will need to meet an ACH Operator's 
submission deadline for same-day processing. For example, transactions 
originated on Monday, October 10, 2016 that are intended for same-day 
processing must have an Effective Entry Date of ``161010'' in the 
Company/Batch Header Record and be submitted to an ACH Operator no 
later than the 2:45 p.m. ET deadline to ensure same-day settlement. Any 
Entry carrying the current day's date in the Effective Entry Date field 
that is submitted prior to an ACH Operator's same-day processing 
submission deadline will be handled as a Same-Day ACH transaction and 
assessed the Same-Day Entry fee.
Stale or Invalid Effective Entry Dates
    In the current processing environment, any batch of Entries 
submitted to an ACH Operator that contains an Effective Entry Date that 
is invalid or stale (in the past) is processed at the next settlement 
opportunity, which is currently the next banking day. With the arrival 
of same-day processing, the same protocol will apply. ACH transactions 
submitted to an ACH Operator with stale or invalid Effective Entry 
Dates will be settled at the earliest opportunity, which could be the 
same-day. If the transactions are submitted prior to the close of the 
second same-day processing window at 2:45 p.m. ET, the Entries will be 
settled the same-day and the Same-Day Entry fee will apply. If the 
transactions are submitted to the ACH Operator after 2:45 p.m. ET, the 
Entries will be settled the next day and the Same-Day Entry fee will 
not apply.
Return Entry Processing
    The amendment allows same-day processing of return Entries at the 
discretion of the RDFI, whether or not the forward Entry was a Same-Day 
ACH transaction. Any return Entry will be eligible for settlement on a 
same-day basis; the $25,000 per transaction limit and IAT restriction 
will not apply. Because returns are initiated and flow from RDFI to 
ODFI, return Entries processed on a same-day basis will not be subject 
to the Same-Day Entry fee. RDFIs will not be required to process 
returns on the same-day that the forward Entry is received. The 
existing return time frame (the return Entry must be processed in such 
time that it is made available to the ODFI no later than the opening of 
business on the second banking day following the Settlement Date of the 
original Entry) will still be applicable. RDFIs will have the option of 
using any of the available settlement windows for returns, as long as 
the existing return time frame is met.
Same-Day Entry Fee
    In order to ensure universal reach to any account at any RDFI, all 
RDFIs must implement Same-Day ACH. To assist RDFIs in recovering costs 
associated with enabling same-day transactions, the amendment includes 
a fee paid from the ODFI to the RDFI for each Same-Day ACH Entry. The 
fee provides a mechanism to help RDFIs mitigate investment and 
operating expenses and provide a fair return on their required 
investments. The initial Same-Day Entry fee is set at 5.2 cents per 
Same Day Entry. The fee will be assessed and collected by the ACH 
Operators through their established monthly billing. The Rule includes 
a methodology to measure the effectiveness of the Same-Day Entry fee at 
five, eight and ten full years after implementation. After each review, 
the Same-Day Entry fee could be maintained or lowered, but not 
increased.
    We are proposing to accept the Same-Day amendment but with delayed 
implementation of NACHA's Phase 1 implementation date where the 
government is receiving Same-Day credit Entries. Fiscal Service plans 
to enable agencies to originate Same-Day Entries in appropriate 
situations and will work with agencies to develop and publish guidance 
outlining the criteria and procedures to be used for originating Same-
Day Entries. Fiscal Service believes that Same-Day credit Entries may 
be useful to agencies that need to make certain emergency or time-
sensitive payments, including payments not exceeding $25,000 that are 
currently made by Fedwire. We believe that the majority of ACH credit 
Entries originated by the government are not suitable for same-day 
processing in light of the fee payable for Same-Day Entries, and 
therefore we anticipate that the government's origination of Same-Day 
Entries will be limited. We plan to publish guidance for agencies that 
will set forth both the criteria and the procedure for certifying a 
Same-Day ACH transaction. That guidance will indicate whether agencies 
should indicate their intent for same-day processing and settlement 
solely by utilizing the Effective Entry Date, or may also utilize the 
optional standardized content in the Company Descriptive Date field as 
a same-day transaction indicator.
    With regard to Same-Day ACH credit Entries received by the Federal 
Government, we are proposing to begin processing those Same-Day Entries 
on a same-day basis beginning no earlier than August 30, 2017 rather 
than on NACHA's Phase 1 implementation date of September 23, 2016. This 
delayed implementation date reflects coding and reporting changes and 
testing that must be undertaken to enable the processing of incoming 
Same-Day credit Entries by Fiscal Service's ACH credit processing 
systems. Any ACH credit Entry received by the U.S. government prior to 
August 30, 2017, will not be eligible for same-day settlement and will 
continue to settle on a future date (typically the next banking day) 
regardless of submission date and time. We are not proposing any delay 
to the NACHA Same-Day ACH amendment's Phase 2 or Phase 3 implementation 
dates for the Government's same-day processing.
    The 2016 NACHA Operating Rules incorporate in the rule text only 
those provisions of the Same-Day ACH amendment that have effective 
dates in 2016. However, in order to provide advance notice of the 
impact of the Phase 2 and 3 implementations, the 2016 Rules Book sets 
forth the sections of the NACHA Operating Rules affected by the Same-
Day ACH amendment as they will read upon implementation in 2017 and 
2018.
    We are proposing to incorporate in Part 210 the future changes 
relating to the Same-Day ACH amendment's Phase 2 and 3 implementation 
provisions scheduled for 2017 and 2018 as they appear in the 2016 NACHA 
Operating Rules & Guidelines book.
2. Disclosure Requirements for POS Entries
    This amendment established 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. The amendment 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:

[[Page 86309]]

     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.
    The amendment included sample language for Originators or Third-
Party Service Providers to consider in designing an ACH Card disclosure 
for purposes of compliance with the NACHA Operating Rules. This 
amendment will not affect Agencies because they do not issue ACH Cards.
    We are proposing to accept this amendment.
3. Recrediting Receiver--Removal of Fifteen Calendar Day Notification 
Time Frame
    This amendment removed the fifteen calendar day notification period 
associated with an RDFI's obligation to promptly recredit a consumer 
account for an unauthorized debit Entry, and aligned the RDFI's 
recredit obligation with its ability to transmit an Extended Return 
Entry. Because of the extended return window for unauthorized consumer 
debits under the NACHA Operating Rules, prior to the amendment many 
RDFIs found the reference to the fifteen calendar day timing to be a 
source of confusion and misunderstanding. The amendment revised the 
NACHA Operating Rules to align the provision for prompt recredit with 
the RDFI's receipt of a Written Statement of Unauthorized Debit from 
the consumer and the RDFI's ability to transmit an Extended Return 
Entry (i.e., transmitted to the ACH Operator so that the Extended 
Return Entry is made available to the ODFI no later than opening of 
business on the banking day following the sixtieth calendar day 
following the settlement date of the original Entry). This change 
applies to unauthorized/improper entries bearing Standard Entry Class 
Codes (SECs) that are classified as consumer entries, as well as those 
that can be both consumer and non-consumer entries (ARC, BOC, POP, and 
IAT debit entries).
    We are proposing to accept this amendment.
4. Clarification of RDFI Warranties for Notifications of Change
    This amendment modified the NACHA Operating Rules with respect to 
Notifications of Change (NOCs) to clarify aspects of: (1) The RDFI's 
warranties made with respect to its transmission of a Notification of 
Change or Corrected Notification of Change; and (2) the ODFI's 
warranties made with respect to usage of the corrected data within 
subsequent transactions. Specifically, the amendment clarified that the 
RDFI's warranty for information contained in a Notification of Change 
or Corrected Notification of Change is applicable only to the corrected 
information supplied by the RDFI.
    This modification removed from the RDFI's warranty on NOCs the 
specific statement that the Receiver has authorized the change 
identified in the NOC, if the Receiver's authorization is required. 
This subsection has been misinterpreted to mean that it supersedes the 
ODFI's warranty that a subsequent Entry is properly authorized by the 
Receiver. The RDFI does not warrant that the Entry itself has been 
properly authorized by the Receiver, but only that the data supplied in 
the Corrected Data field is accurate. The warranty that any Entry 
(including a subsequent Entry that uses corrected data from an NOC) is 
properly authorized still lies with the ODFI per Article Two, 
Subsection 2.4.1.1 (The Entry is Authorized by the Originator and 
Receiver).
    We are proposing to accept this amendment.
5. Minor Rules Topics
    These amendments changed four areas of the NACHA Operating Rules to 
address minor topics. Minor changes to the NACHA Operating Rules have 
little-to-no impact on ACH participants and no significant economic 
impact.
i. Clarification of ODFI Periodic Statement Requirements for CIE and 
WEB Credits
    This amendment made minor, editorial clarifications to the language 
within Article Two, Subsections 2.5.4.2 (ODFI to Satisfy Periodic 
Statement Requirement) and 2.5.17.6 (ODFI to Satisfy Periodic Statement 
Requirement for Credit WEB Entries) to clarify the intent of language 
governing an ODFI's periodic statement obligations with respect to the 
origination of CIE and credit WEB Entries by consumers.
    Periodic statement requirements typically are an obligation of the 
RDFI for the receipt of Entries to a consumer account. For CIE and WEB 
credits, however, the Originator of the ACH credit also is a consumer, 
thus putting periodic statement requirements on the ODFI as well for 
these entries. These clarifications do not affect the substance of the 
ODFI's obligation to identify on the consumer Originator's periodic 
statement the date, amount, and description of a transaction involving 
the consumer's account; rather, they simply recognize that the debiting 
of the consumer's account to provide funds for the CIE or WEB credit 
could be accomplished by something other than an ACH debit.
    We are proposing to accept this amendment.
ii. Clarifying the Commercially Reasonable Encryption Standard
    The NACHA Operating Rules require ACH participants to utilize a 
commercially reasonable standard of encryption technology when 
transmitting any banking information related to an Entry via an 
Unsecured Electronic Network. This amendment removed the reference to 
128-bit encryption technology as the minimum acceptable commercially 
reasonable standard, but retained the general reference to using a 
commercially reasonable level of encryption. The amendment also 
clarified that a commercially reasonable level of security must comply 
with current, applicable regulatory guidelines, which already impose 
more rigorous encryption obligations.
    Prior to the amendment the NACHA Operating Rules established a 
minimum for this commercially reasonable encryption standard at the 
128-bit RC4 encryption technology level. A task force of NACHA's former 
Internet Council, comprised of technology expert members, recommended 
that the specific reference to 128-bit RC4 encryption be removed, on 
the grounds that it is now out of date as a commercially reasonable 
standard.
    We are proposing to accept this amendment.
iii. Definition of Zero-Dollar Entry
    This amendment reintroduced the definition of a Zero-Dollar Entry 
within Article Eight (Definitions of Terms Used in These Rules) to 
correspond to unique technical references in the Appendices of the 
NACHA Operating Rules. Zero Dollar Entries are unique in that, although 
their dollar amount is zero, they bear remittance data that must be 
provided to the Receiver in an identical manner as ``live'' entries 
that transfer funds. The definition was removed in 2010 when the 
definition of a ``Non-

[[Page 86310]]

Monetary Entry'' was introduced into the NACHA Operating Rules.
    We are proposing to accept this amendment.
iv. Expansion of Permissible Criteria for ODFI Requests for Return
    In addition to being able to request the return of an Erroneous 
Entry, as permitted by the NACHA Operating Rules, this amendment 
revised the NACHA Operating Rules to permit an ODFI to request that an 
RDFI return any Entry that the ODFI claims was originated without the 
authorization of the Originator. This amendment also expanded the 
description of Return Reason Code R06 (Returned per ODFI's Request) to 
include Entries returned by the RDFI for this reason. This newly 
permissible circumstance reflects actual current industry practice with 
regard to the recovery of funds related to unauthorized credit 
origination.
    Use of the ODFI Request for Return process is always optional on 
the part of both ODFIs and RDFIs. An RDFI will continue to be able to 
make its own business decision about whether to agree to return an 
Entry that the ODFI claims was originated without the authorization of 
the Originator. An RDFI responding to a request for the return of such 
an Entry will be indemnified under the NACHA Operating Rules against 
loss or liability by the ODFI.
    We are proposing to accept this amendment.

D. Notification of Reversals

    NACHA Operating Rule 2.9.1 requires that the Originator of a 
Reversing Entry make a reasonable attempt to notify the Receiver of the 
Reversing Entry and the reason for the Reversing Entry no later than 
the settlement date of the Entry. In attempting to contact Receivers 
regarding the reversal of a duplicate or erroneous Entry on behalf of 
federal agencies, Fiscal Service has found that efforts to reach 
Receivers, typically through the RDFI, are often unsuccessful. Adhering 
to the notification requirement also impedes the timeliness and 
efficiency of originating reversals, which is disadvantageous both for 
Fiscal Service and for Receivers. Accordingly, we are proposing to 
exclude this requirement from incorporation in Part 210.
    We request comment on whether this exclusion raises any concerns 
for Receivers or RDFIs.

E. Prepaid Cards

    In 2010, Fiscal Service amended Part 210 to establish requirements 
that prepaid cards receiving Federal payments must meet. 75 FR 80335. 
To be eligible to receive Federal payments, a prepaid card must meet 
four conditions: (1) The card account must be held at an insured 
financial institution; (2) the account be set up to meet the 
requirements for pass through deposit or share insurance under 12 CFR 
part 330 or 12 CFR part 745; (3) the account may not be attached to a 
line of credit or loan agreement under which repayment from the card 
account is triggered by delivery of the Federal payment; and (4) the 
issuer of the card must comply with all of the requirements, and 
provide the Federal payment recipient with the same consumer 
protections, that apply to a payroll card under regulations 
implementing the Electronic Fund Transfer Act, 15 U.S.C. 1693a(1). See 
31 CFR 210.5(b)(5)(i).
    We required that prepaid cards provide Regulation E payroll card 
protections because when our prepaid rule was issued in 2010, 
Regulation E did not cover any prepaid cards other than payroll cards. 
However, on October 5, 2016, the Consumer Financial Protection Bureau 
(CFPB) released its final rule to amend Regulation E to cover prepaid 
accounts. We are therefore proposing to amend our prepaid rule to 
replace the reference in 210.5(b)(5)(i)(D) to ``payroll card'' with a 
reference to ``prepaid account,'' so that the requirement would read: 
``The issuer of the card complies with all of the requirements, and 
provides the holder of the card with all of the consumer protections, 
that apply to a prepaid account under the rules implementing the 
Electronic Fund Transfer Act, as amended.'' We would also delete the 
definition of ``payroll card account'' from the rule because it would 
be unnecessary. These changes would be effective on the effective date 
of the CFPB's final rule. We request comment on this proposed 
amendment.

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 2013 
NACHA Rules & Guidelines book with references to the 2016 NACHA 
Operating Rules & Guidelines book. Several of the NACHA Operating Rule 
amendments that we are not proposing to incorporate are modifications 
to provisions of the NACHA Operating Rules that are already excluded 
under Part 210. Other than replacing the references to the 2013 NACHA 
Operating Rules & Guidelines book, no change to Part 210 is necessary 
to exclude those amendments.
Sec.  210.2
    We are proposing to amend the definition of ``applicable ACH 
Rules'' at Sec.  210.2(d) to reference the rules published in NACHA's 
2016 Rules & Guidelines book rather than the rules published in NACHA's 
2013 Rules & Guidelines book. The definition has been updated to 
reflect the reorganization and renumbering of the NACHA Operating 
Rules. A reference to Section 1.11 of the NACHA Operating Rules is 
added to Sec.  210.2(d)(1) in order to exclude from Part 210 the 
imposition of fees for ACH debits that are returned as unauthorized. 
The reference in Sec.  210.2(d)(6) to the NACHA Operating Rule 
governing International ACH Transactions section has been updated by 
replacing an obsolete reference to ACH Rule 2.11 with the correct 
reference to Section 2.5.8. A new paragraph (7) is added to Sec.  
210.2(d) to exclude from Part 210 the requirement to make a reasonable 
attempt to notify the Receiver of a Reversing Entry under Subsection 
2.9.1 of the NACHA Operating Rules. A new paragraph (8) is added to 
exclude from Part 210, until July 1, 2017, the provisions of Subsection 
3.3.1.1, Section 8.99 and Appendix Three (definition of Effective Entry 
Date) that require an RDFI to make the amount of a credit Same-Day 
Entry available no later than the completion for that Settlement Date.
Sec.  210.3(b)
    We are proposing to amend Sec.  210.3(b) by replacing the 
references to the ACH Rules as published in the 2013 Rules & Guidelines 
book with references to the ACH Rules as published in the 2016 NACHA 
Operating Rules & Guidelines book.
Sec.  210.6
    In Sec.  210.6 we are proposing to replace the reference to ACH 
Rule 2.4.4 with a reference to ACH Rule 2.4.5 to reflect the re-
numbering of ACH Rule 2.4.4. This change is not substantive.
Sec.  210.8
    In Sec.  210.8(b) we are proposing to replace the reference to ACH 
Rule 2.4.4 with a reference to ACH Rule 2.4.5 to reflect the re-
numbering of ACH Rule 2.4.4. This change is not substantive.

IV. Incorporation by Reference

    In this rule, Fiscal Service is proposing to incorporate by 
reference the 2016 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

[[Page 86311]]

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 2016 
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--The Electronic Payments Association, 2550 Wasser Terrace, Suite 
400, Herndon, Virginia 20171, tel. 703-561-1100, info@nacha.org.

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--The Electronic Payments Association, 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.

Words of Issuance

    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 paragraph (d) to read as follows:


Sec.  210.2  Definitions.

* * * * *
    (d) Applicable ACH Rules means the ACH Rules with an effective date 
on or before March 16, 2018, as published in ``2016 NACHA Operating 
Rules & Guidelines: A Complete Guide to Rules Governing the ACH 
Network'' and supplements thereto, except:
    (1) Section 1.11; Subsections 1.2.2, 1.2.3, 1.2.4, 1.2.5 and 1.2.6; 
Appendix Seven; Appendix Eight; Appendix Nine and Appendix Ten 
(governing the enforcement of the ACH Rules, including self-audit 
requirements, 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 (requiring reporting and reduction of high rates 
of entries returned as unauthorized);
    (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;
    (7) The requirement to make a reasonable attempt to notify the 
Receiver of a Reversing Entry under Subsection 2.9.1; and
    (8) Until August 30, 2017, the provisions of Subsection 3.3.1.1, 
Section 8.99 and Appendix Three (definition of Effective Entry Date) 
that require an RDFI to make the amount of a credit Same-Day Entry 
available no later than the completion for that Settlement Date.
* * * * *
0
3. In Sec.  210.3, revise paragraph (b) to read as follows:


Sec.  210.3  Governing law.

* * * * *
    (b) Incorporation by reference--applicable ACH Rules.
    (1) This part incorporates by reference the applicable ACH Rules, 
including rule changes with an effective date on or before March 16, 
2018, as published in the ``2016 NACHA Operating Rules & Guidelines: A 
Complete Guide to Rules Governing the ACH Network,'' and supplements 
thereto. The Director of the Federal Register approves this 
incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR 
part 51. Copies of the ``2016 NACHA Operating Rules & Guidelines'' are 
available from NACHA--The Electronic Payments Association, 2550 Wasser 
Terrace, Suite 400, Herndon, Virginia 20171, tel. 703-561-1100, 
info@nacha.org. Copies also are available for public inspection at the 
Office of the Federal Register, 800 North Capitol Street NW., Suite 
700, Washington, DC 20002; and the Bureau of the Fiscal Service, 401 
14th Street SW., Room 400A, Washington, DC 20227.
    (2) Any amendment to the applicable ACH Rules approved by NACHA--
The Electronic Payments Association after publication of the 2016 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

[[Page 86312]]

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. Revise Sec.  210.6 to read as follows:


Sec.  210.6  Agencies.

    Notwithstanding any provision of the ACH Rules, including 
Subsections 2.4.5, 2.8.4, 4.3.5, 2.9.2, 3.2.2, and 3.13.3, agencies 
shall be subject to the obligations and liabilities set forth in this 
section in connection with Government entries.
    (a) Receiving entries. An agency may receive ACH debit or credit 
entries only with the prior written authorization of the Service.
    (b) Liability to a recipient. An agency will be liable to the 
recipient for any loss sustained by the recipient as a result of the 
agency's failure to originate a credit or debit entry in accordance 
with this part. The agency's liability shall be limited to the amount 
of the entry(ies).
    (c) Liability to an originator. An agency will be liable to an 
Originator or an ODFI for any loss sustained by the originator or ODFI 
as a result of the agency's failure to credit an ACH entry to the 
agency's account in accordance with this part. The agency's liability 
shall be limited to the amount of the entry(ies).
    (d) Liability to an RDFI or ACH association. Except as otherwise 
provided in this part, an agency will be liable to an RDFI for losses 
sustained in processing duplicate or erroneous credit and debit entries 
originated by the agency. An agency's liability shall be limited to the 
amount of the entry(ies), and shall be reduced by the amount of the 
loss resulting from the failure of the RDFI to exercise due diligence 
and follow standard commercial practices in processing the entry(ies). 
This section does not apply to credits received by an RDFI after the 
death or legal incapacity of a recipient of benefit payments or the 
death of a beneficiary as governed by subpart B of this part. An agency 
shall not be liable to any ACH association.
    (e) Acquittance of the agency. The final crediting of the amount of 
an entry to a recipient's account shall constitute full acquittance of 
the Federal Government.
    (f) Reversals. An agency may reverse any duplicate or erroneous 
entry, and the Federal Government may reverse any duplicate or 
erroneous file. In initiating a reversal, an agency shall certify to 
the Service that the reversal complies with applicable law related to 
the recovery of the underlying payment. An agency that reverses an 
entry shall indemnify the RDFI as provided in the applicable ACH Rules, 
but the agency's liability shall be limited to the amount of the entry. 
If the Federal Government reverses a file, the Federal Government shall 
indemnify the RDFI as provided in the applicable ACH Rules, but the 
extent of such liability shall be limited to the amount of the entries 
comprising the duplicate or erroneous file. Reversals under this 
section shall comply with the time limitations set forth in the 
applicable ACH Rules.
    (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 ACH Rules Subsections 2.3.2.2 and 2.5.10.1 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.
    (h) Return Fee Entry. An agency that has authority to collect 
returned item service fees may do so by originating a Return Fee Entry 
if the agency provides notice to the Receiver in accordance with the 
ACH Rules.''
0
5. In Sec.  210.8, revise paragraphs (a) and (b) to read as follows:


Sec.  210.8  Financial institutions.

    (a) Status as a Treasury depositary. The origination or receipt of 
an entry subject to this part does not render a financial institution a 
Treasury depositary. A financial institution shall not advertise itself 
as a Treasury depositary on such basis.
    (b) Liability. Notwithstanding ACH Rules Subsections 2.4.5, 2.8.4, 
4.3.5, 2.9.2, 3.2.2, and 3.13.3, if the Federal Government sustains a 
loss as a result of a financial institution's failure to handle an 
entry in accordance with this part, the financial institution shall be 
liable to the Federal Government for the loss, up to the amount of the 
entry, except as otherwise provided in this section. A financial 
institution shall not be liable to any third party for any loss or 
damage resulting directly or indirectly from an agency's error or 
omission in originating an entry. Nothing in this section shall affect 
any obligation or liability of a financial institution under Regulation 
E, 12 CFR part 1005, or the Electronic Funds Transfer Act, 12 U.S.C. 
1693 et seq.
* * * * *

    Dated: November 23, 2016.
David A. Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2016-28671 Filed 11-29-16; 8:45 am]
BILLING CODE 4810-AS-P