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Stop
Payments and
Reg E
In
June of 2009, NACHA – the Electronic Payments Authority, notified
the industry of some new regulations. One of those was the change
for Stop Payments and Regulation E (Electronic
Fund Transfers) (Reg E).
The
Stop Payments Rule (Rule) re-aligns the NACHA Operating Rules
(Rules) with the requirements of the Federal
Reserve Board’s (FRB’s) Reg E. As the FRB’s Staff
Interpretation of Reg E has changed over time, there has been a
divergence between the Rules and Reg E with respect to the intent
of, and processing requirements for, stop payment orders on ACH
debits. These differences have become significant enough to result
in the potential for the Returning Depository Financial Institutions
(RDFIs) to have difficulty reconciling their obligations under both
the Rules and Reg E.
Reg
E
Reg E deals with whether
or not a specific transaction is an electronic transfer within the
meaning of the Electronic
Funds Transfer Act. It pertains mainly to the rights of
consumers. “Regulation E stop payment orders apply to all forms of
EFT debits to consumer accounts, including reauthorized (recurring)
debits via a debit card. If a stopped EFT is resubmitted, the bank
must continue to block it, even if to do so it must block all debits
from the same Originator.”
This
article pertains to the part of Reg E that specifies there is no
expiration date for Stop Payments.
ACH
ACH
was using the UCC treatments of stop orders: “A consumer's oral
stop payment order on such a payment is valid for 14 days unless it
is confirmed in writing (a bank can accept the oral order as final
if it wishes). A stop must be accepted and acted on if it is
received at least three business days prior to the date the subject
transaction is due (banks may decide to accept and act on stop
orders received later, if received in time for the bank to act).”
An
ACH Stop Payment is only good for the next transaction. Also, it
will expire in either two weeks or six months. The two weeks applies
when the Stop Payment was taken over the phone. If the Receiver came
in and signed a form stating that the item was to be stopped, the
request was good for six months.
New
Rule
As
a result of the differences, NACHA will change the ACH rule on March
19 as follows:
The
new rule has eliminated the six month and the two week time periods
after which the Stop Payment for the user lapses. This means that
the Stop Payment does not expire. Lapsed Stop Payments
are
normally deleted from a system. Once this rule is effective, they
will no longer be allowed to automatically delete after a certain
period of time. Also,
the Receiver can request that all future payments from the same
source be stopped. Proof can be requested from the clients showing
that they have requested the transaction from the Originator be
stopped.
The
new rule provides that the Stop Payment will be in effect until all
such entries are stopped. Since it is not known when any such
entries will arrive, the Stop Payment cannot be removed until the
Receiver advises that it can be removed.
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