Jordan Morell, AAP, NCP Tim Thorson, AAP, CTP

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1 April 11, 2017 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

4 Functionality Phase 1 Sept. 23, 2016 Transaction Eligibility ($25,000 limit; IAT not eligible) Phase 2 Sept. 15, 2017 Phase 3 March 16, 2018 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 Payments 2017; All rights reserved. 4

5 Eligible Transactions 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 Payments 2017; All rights reserved. 5

6 Same Day Entry Fee 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 Payments 2017; All rights reserved. 6

8 Handling of Effective Entry Dates (EED) Today s date: Oct. 25, 2017 Batch EED: Batch submitted by 10:30 AM ET Batch submitted by 2:45 PM ET Batch submitted after 2:45 PM ET Batch settled 10/25/17, 1:00 PM ET Same-Day Entry Fee charged Batch settled 10/25/17, 5:00 PM ET Same-Day Entry Fee charged Batch settled 10/26/17, 8:30 AM ET No Same-Day Entry Fee charged Payments 2017; All rights reserved. 8

9 Handling of Stale/Invalid Effective Entry Dates Today s date: Oct. 25, 2017 Batch EED: (stale) Note: stale date means a date that is in the past Batch submitted by 10:30 AM ET Batch submitted by 2:45 PM ET Batch submitted after 2:45 PM ET Batch settled 10/25/17, 1:00 PM ET Same-Day Entry Fee charged Batch settled 10/25/17, 5:00 PM ET Same-Day Entry Fee charged Batch settled 10/26/17, 8:30 AM ET No Same-Day Entry Fee charged Payments 2017; All rights reserved. 9

11 ODFIs Identifying Same Day Entries 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? Payments 2017; All rights reserved. 11

15 September 15, 2017 debits go live! 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) Payments 2017; All rights reserved. 15

16 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 Payments 2017; All rights reserved. 16

18 Authorization reminders 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 Payments 2017; All rights reserved. 18

19 Have clear and readily understandable terms 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 Payments 2017; All rights reserved. 19

20 TEL Authorization 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 Payments 2017; All rights reserved. 20

21 Check Conversion 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 Payments 2017; All rights reserved. 21

22 Same Day Return Distribution Windows 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 Payments 2017; All rights reserved. 22

23 Return/NOC reporting 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? Payments 2017; All rights reserved. 23

25 Reversals for ODFIs September 2017 Sunday Monday Tuesday Wednesday Thursday Friday Saturday Erroneous File sent (ODFI) Cannot process SD Reversal (ODFI) Could do Next- Day Reversal Could process Reversal Same day or next day (ODFI) Entries Settle (RDFI) Could process Reversal Same day or next day (ODFI) 10 Could process Reversal Same day or next day (ODFI) Could process Reversal Same day or next day (ODFI) Could process Reversal Same day or next day (ODFI) Could process Reversal Same day or next day (ODFI) Payments 2017; All rights reserved. 25

26 Reversals for ODFIs September 2017 Sunday Monday Tuesday Wednesday Thursday Friday Saturday Erroneous Same Day File sent (ODFI) Entries Settles (RDFI) Could process Reversal Same day or next day (ODFI) Could process Reversal Same day or next day (ODFI) Could process Reversal Same day or next day (ODFI) Could process Reversal Same day or next day (ODFI) Could process Reversal Same day or next day (ODFI) 8 9 Could process Reversal Same day or next day (ODFI) Payments 2017; All rights reserved. 26

27 Unauthorized Entry Fee 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 Payments 2017; All rights reserved. 27

28 Balancing 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? Payments 2017; All rights reserved. 28

30 Posting Early Always utilize the Settlement Date Settlement Date is formatted as an Julian Date ( ) 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 Payments 2017; All rights reserved. 30

31 Returns 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 Payments 2017; All rights reserved. 31

32 Fed 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 Payments 2017; All rights reserved. 32

33 Same Day Return Processing Windows 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 Payments 2017; All rights reserved. 33

34 Extended Returns/WSUD 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 Payments 2017; All rights reserved. 34

36 ODFI 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? Payments 2017; All rights reserved. 36

38 ODFI & 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 Payments 2017; All rights reserved. 38

Experience Essential Education. Explore Smart Solutions.

Faster Payments Experience, a consummate educational opportunity encompassing sessions and

40 Experience Essential Education. Explore Smart Solutions. ENJOY THE FASTER PAYMENTS EXPERIENCE At the heart of this year s event, NACHA introduces the Faster Payments Experience, a consummate educational opportunity encompassing sessions and solutions that focus on real-time, same-day and other faster payments initiatives. To register, visit payments.nacha.org HIGHLIGHTS Education sessions organized under 5 payments industry tracks Faster Payments Center Stage Faster Payments Zone Mutual of Omaha Bank Corporate Learning Center Dynamic Interactive Exhibit Hall

2018 ACH RULE CHANGES AND UPDATES. Jessica Lelii & Jill Lamb, AAP EFT Specialist, MY CU Services, LLC. Disclaimer

2018 ACH RULE CHANGES AND UPDATES Jessica Lelii & Jill Lamb, AAP EFT Specialist, MY CU Services, LLC www.mycuservices.com Disclaimer This material is not intended to provide any warranties or legal advice,