IBA Compliance Connection

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We have a client with multiple entities — one LLC per parcel of real property — that have staff turnover from time to time, which necessitates updating the ACH origination addendum and related documentation for each entity. Have you seen any examples of a parent company document listing other related entities or do you have any other suggestions to limit the paperwork for both the client and the bank’s operations department?

Jan 5, 2023

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No, we are not aware of an example of a parent company document that can be updated in lieu of individual ACH origination documentation for related entities. We polled our Compliance Division Advisory Committee, and none of the committee members recalled using such a document at their bank. One committee member noted that their bank requires individual agreements for related entities since they are each separate from one another.

We have found several examples of ACH origination agreements providing flexibility for the bank customer to assign an administrator for each account with the authority to designate “users” who are authorized to issue ACH entries on the company’s behalf. It appears that updating the users assigned to an account would not require updating the ACH origination agreement itself. Adopting a similarly flexible approach may alleviate some of the operational burden associated with staff turnover at your customer’s related entities.

For resources related to our guidance, please see:

Continental Bank, ACH Origination Services Agreement (“4. Administrator and Persons of Authority. a. In order to originate Entries, Company shall designate at least one Company administrator (‘Administrator’). Administrator(s) shall be responsible for designating system users (individually and collectively ‘Users’) who Company authorizes to issue Entries on its behalf. . . .”)

Amarillo National Bank, Third-Party Ach Service Provider Agreement (“DESIGNATION OF ADMINISTRATOR. In order to originate ACH Entries, Originator must designate at least one Administrator. Administrator(s) shall be responsible for designating ‘Users’ who Originator authorizes to issue Entries on its behalf. . . .”)

Glenwood State Bank, Online Banking Service Agreement and Electronic Disclosure (“D. Designation of Administrator. In order to originate ACH Entries, Company must designate at least one Administrator. Administrator(s) shall be responsible for designating ‘Users’ who Company authorizes to issue Entries on its behalf. . . .”)

this question indicates that if a customer waits two years before reporting recurring fraudulent charges on their account, their bank likely would be required to credit the customer for any unauthorized transactions that occurred during the first sixty days following the periodic statement reflecting the initial fraudulent transaction. Are we correct that such a customer also would be eligible for a refund of all fees and interest we charged for that sixty-day period, but not for any fees and interest we charged after the sixty-day period?