jordan morell, aap, ncp

Presented by:

Jordan Morell, AAP, NCP

Associate Director of Education Services, UMACHA

Tim Thorson, AAP, CTP

SVP & Manager, ACH Operations, Regions Financial Corporation

Overview

Lessons Learned

Phase 2 – Introduction

Topics for Phase 2 ODFI

RDFI

2© Payments 2017; All rights reserved.

Same Day Debits: Are You at Risk for Being Non-compliant?

© Payments 2017; All rights reserved. 3


Functionality Phase 1

Sept. 23, 2016

Phase 2

Sept. 15, 2017

Phase 3

March 16, 2018

Transaction Eligibility ($25,000 limit; IAT not

eligible)

Credits only Credits and debits Credits and debits

New Same Day ACH

Processing

Deadlines

10:30 AM ET and

2:45 PM ET

10:30 AM ET and

2:45 PM ET

10:30 AM ET and

2:45 PM ET

New Settlement

Time(s)

1:00 PM ET and

5:00 PM ET

1:00 PM ET and

5:00 PM ET

1:00 PM ET and

5:00 PM ET

ACH Credit Funds

Availability

End of RDFI’s

processing day

End of RDFI’s

processing day

5:00 PM RDFI local

time


Individual Entries of $25,000 and under

All Standard Entry Class (SEC) codes Exception International ACH Transactions (IATs)

Automated Enrollment Entries (ENRs)

Non-Monetary Entries Prenotifications

NOCs

Returns All Returns can be processed same day

Eligible Transactions


Fee is set at 5.2 cents per Same Day transaction to

be paid by the ODFI to the RDFI of the Entry

Review period of

Five, eight and ten years after implementation of

Phase 3

Same Day Entry Fee


Handling of Effective Entry Dates (EED)

Today’s date: Oct. 25, 2017

Batch EED: 171025

Batch submitted

by 10:30 AM ET

Batch settled 10/25/17, 1:00 PM ET

Same-Day Entry Fee charged

Batch submitted

by 2:45 PM ET



Batch submitted

after 2:45 PM ET

Batch settled 10/26/17, 8:30 AM ET

No Same-Day Entry Fee charged


Handling of Stale/Invalid Effective Entry Dates

Today’s date:

Oct. 25, 2017

Batch EED:

171024 (stale)

Batch submitted

by 10:30 AM ET



Batch submitted

by 2:45 PM ET



Batch submitted

after 2:45 PM ET

Batch settled 10/26/17, 8:30 AM ET

No Same-Day Entry Fee chargedNote: stale date means a date that is in the past


RDFIs Identifying Same Day Entries

5225ABC COMPANY 1234567054PPDPAYROLL 1609232671091000310000001


ODFIs

Did well with identifying before the File was sent but

reporting was an issue after the fact

Processing date vs Effective Entry Date

Vendors

Still seem to be working on this issue

What have you heard?

ODFIs Identifying Same Day Entries


Still seems to be a challenge for some

How’s balancing going for you?

Internal accounts

Originators’/Receivers’ accounts

Fed Account

Balancing


How are you accounting for Exceptions?

ODFI

RDFI

Balancing questions


Will allow both debits and credits to be processed

as Same Day Entries

Balanced Files should be easier to reconcile

As long as the off-setting debit is under the $25,000

and not using an IAT SEC Code

Same Day ACH can reduce credit risk but not

having proper controls could lead to an increase

in risk (fraud)

September 15, 2017 debits go live!


Consumer debits are transactions that the whole

industry looks at, from NACHA to Regulators

Communicating with customers/members will be

important to ensure they know how Same Day

debits will be handled

Posting

Notice

Disputes

Fees

September 15, 2017 debits go live!


Be readily identifiable as an authorization

Have clear and readily understandable terms

Including amount, timing of debits

Provide that the Receiver may revoke the

authorization only by notifying the Originator in the

manner specified in the authorization

Authorization reminders


ODFI warrants to each RDFI and ACH Operator that Entry is properly authorized For an amount that will be due and owing to the

Originator from the Receiver on the Settlement Date

For a sum specified by the Receiver to be paid to the Originator

Unauthorized Debit Entry Debit Entry was initiated for settlement earlier than

authorized

Have clear and readily understandable terms


Currently

Rule states the notice used for recurring TEL and/or

single-entry needs to be made available prior to the

Settlement Date of the Entry

Updated

Rule states the notice used for recurring TEL and/or

single-entry needs to be made available prior to the

settlement of the Entry

TEL Authorization


Disclosure requirements (per Reg. E – 2007 Amendment) used to include language that stated that a check converted to an ACH debit may post as soon as the same day Language on same day was no longer required two years later

(2009) but it might be a good idea if using Same Day ACH

Issue? Consumer thinks it’s still a check and won’t clear for a day or two

Could this be a UDAAP issue? You will want to make sure your Originators are being very clear and transparent if processing same-day Check Conversion products

Check Conversion Authorization

12 Noon ET (1200 ET)

4 p.m. ET (1600 ET)

5 p.m. ET (1700 ET)

Issues Balancing

ACH Department

Operations Department

Fed Account

Charging back Originator’s account

Reporting

FI

Originator

Charging back Originator’s account

22

Same Day Return Distribution Windows

© Payments 2017; All rights reserved.


Nothing in the Rules states the timeframe for an ODFI to

provide Return information to its Originators

What is the timeframe your FI provides Return

information?

Is that adequate for your Originators?

ODFI must provide Originator information within two

Banking Days of Settlement Date of NOC

In a same-day environment is that fast enough?

Return/NOC reporting


What software is being utilized for debit Return

tracking?

Is this the right time to update software?

Return tracking


Reversals for ODFIs

September 2017

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

1 2

Erroneous File

sent

(ODFI)

Cannot process

SD Reversal

(ODFI)

Could do Next-

Day Reversal

3

Entries Settle

(RDFI)

Could process

Reversal Same

day or next day

(ODFI)

4

Could process

Reversal Same

day or next day

(ODFI)

5

Could process

Reversal Same

day or next day

(ODFI)

6

Could process

Reversal Same

day or next day

(ODFI)

7

8 9

Could process

Reversal Same

day or next day

(ODFI)

10

Could process

Reversal Same

day or next day

(ODFI)

11 12 13 14


Reversals for ODFIs

September 2017

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

1 2

Erroneous Same

Day File sent

(ODFI)

Entries Settles

(RDFI)

Could process

Reversal Same

day or next day

(ODFI)

3

Could process

Reversal Same

day or next day

(ODFI)

4

Could process

Reversal Same

day or next day

(ODFI)

5

Could process

Reversal Same

day or next day

(ODFI)

6

Could process

Reversal Same

day or next day

(ODFI)

7

8 9

Could process

Reversal Same

day or next day

(ODFI)

10 11 12 13 14


Remember!

Improving ACH Network Quality Fee is set at $4.50

Accountholder could dispute an Entry according to

the Rules if an Entry posts prior to Settlement Date

With Same Day ACH that can lead to confusion and

misunderstanding

Ensure your Originators have a good understanding

of how Same Day ACH works and that they

informed their Receivers of when payments can

post

Unauthorized Entry Fee


Ensuring staff is aware of Same Day Return

processing on all transaction types

Communicate options you have to provide your

Originators with Return information

What options are available to you now?

How quickly can information from Return Files be

disseminated to proper departments, if need be?

Balancing


Always utilize the Settlement Date

Settlement Date is formatted as an Julian Date (001-

365)

If you post incorrectly the implications are

Overdrawing your Receivers’ accounts causing fees

Loss of accountholders frustrated with paying fees

UDAAP concerns (and having the CFPB checking

on you)

A violation of the NACHA Operating Rules with the

potential for a fine

Posting Early


Options as an RDFI for posting and returning Same

Day

After each settlement time (memo post)

If these create daylight overdrafts, will you charge for

those?

Disclosures

Explain your policies

Terms and Conditions

Update as needed

Returns


Deriving Returns and NOCs through the Fed Current functionality has limitations Entries available to derive Returns & NOCs are previous

day’s items and older (no current day items available)

Derived Returns, derived NOCs, and paper Returns are processed 2x/day Entries derived by 2:45 pm ET settle at 17:00 (dependent on

Effective Entry Date of current day or older) Entries derived between 2:45pm ET and 2:15 am ET settle at

8:30 am ET the next processing day

Customers cannot take advantage of 13:00 or 17:30 settlements using derived Returns function

Fed Returns

10:30 a.m.ET (1030 ET)

2:45 p.m. ET (1445 ET)

4:00 p.m. ET (1600 ET)

Issues Balancing ACH Department

Operations Department

Fed Account

Reporting FI

33

Same Day Return Processing Windows

© Payments 2017; All rights reserved.


Reminder!

Ensure WSUD is completed prior to processing an

Extended Return regardless if it’s same-day or not

Same Day Returns do not allow you more time to

process a Extended Return

Extended Return Entries must be made available to the

ODFI no later than opening of business on the banking

day following the 60th calendar day following

Settlement Date of original Entry

Extended Returns/WSUD


Authorization must have clear and readily

understandable terms

Specifically date

TEL Authorization updated

Unauthorized Fee

Distribution Windows

Balancing

Return Reporting

When are Originators receiving reporting for Same

Day Returns. Is it adequate?

ODFI


Posting Debits

Post by Settlement Date

Same Day Returns

Extended Returns

WSUD Procedures

Internal Same Day Education

Frontline staff

RDFI


We cannot stress enough about testing!

Federal Reserve

Dates have not been set

Vendors and software providers

Processors

Third-Party Service Providers including, Third-Party

Senders

Originators

ODFI & RDFI


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