IBA Compliance Connection

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One of our customers’ checks was stolen. Later, someone forged the customer’s signature on a check at a store. The store converted the paper check into an electronic check and was processed as an ACH debit transaction. Do we have to follow the Electronic Fund Transfer Act (EFTA) guidelines? Do we need the customer to complete a forgery affidavit? Do you have sample language for the affidavit?

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Yes, the EFTA would apply to an electronic check that is processed as an ACH transaction. The EFTA, as implemented by Regulation E, applies to “electronic fund transfers,” which are defined to include ACH transfers and, specifically, electronic check conversions (where a paper check is used “as a source of information to initiate a one-time electronic fund transfer from a consumer’s account”).

The NACHA operating rules require your bank to obtain a written statement of unauthorized debit from your customer before returning the debit as unauthorized (using return reason code R10). The NACHA rules prescribe exactly what information is included on the statement (with a sample included in the rules as Appendix I), and those requirements are copied in the resources below. The NACHA rules do not require that this statement be made under oath.

For resources related to our guidance, please see:

  • Official Interpretations, Regulation E, 12 CFR 1005, Paragraph 3(b)(1), Comment 1(ii) (“The term ‘electronic fund transfer’ includes . . . . (ii) A transfer sent via ACH. For example, social security benefits under the U.S. Treasury’s direct-deposit program are covered, even if the listing of payees and payment amounts reaches the account-holding institution by means of a computer printout from a correspondent bank.”)

  • Regulation E, 12 CFR 1005.3(b)(1)(2) (“Electronic fund transfer using information from a check. This part applies where a check, draft, or similar paper instrument is used as a source of information to initiate a one-time electronic fund transfer from a consumer’s account. . . .”)

  • Official Interpretations, Regulation E, 12 CFR 1005, Paragraph 3(b)(1), Comment 1(v) (“The term ‘electronic fund transfer’ includes . . . (v) A transfer via ACH where a consumer has provided a check to enable the merchant or other payee to capture the routing, account, and serial numbers to initiate the transfer, whether the check is blank, partially completed, or fully completed and signed . . . .”)

  • NACHA Rules (2017), Section 3.11.1 (“An RDFI must promptly recredit the amount of a debit Entry to a Consumer Account of a Receiver, regardless of the SEC Code of the debit Entry, if it receives notification from the Receiver in accordance with Section 3.12 (Written Statement of Unauthorized Debit) . . . .”)

  • NACHA Rules (2017), Section 3.12.5 (“. . . . The Written Statement of Unauthorized Debit must be signed or similarly authenticated by the Receiver . . . The Written Statement of Unauthorized Debit must include the following minimum information for each Entry for which recredit is requested by the Receiver: (f) Receiver’s printed name and signature; (g) Receiver’s account number; (h) identity of the party (i.e., the payee) debiting the account, as provided to the Receiver, and, if different, the name of the intended third-party payee; (i) date the Entry was posted to the account; (j) dollar amount of Entry; (k) reason for return; (l) signature date; (m) Receiver assertion that the Written Statement of Unauthorized Debit is true and correct; (n) Receiver assertion that the Receiver is an authorized signer or has corporate authority to act on the account.”)

  • NACHA Rules (2017), Section 3.13.2 (“In addition to the other warranties contained in these Rules, an RDFI . . . warrants to each ODFI . . . that, prior to initiating the Extended Return Entry, the RDFI obtained from the Receiver a Written Statement of Unauthorized Debit complying with Section 3.12 . . . .”)

  • NACHA Operating Guidelines (2017), OG 104 (“In general, consumer debit entries returned by the RDFI as unauthorized will bear Return Reason Code R10 . . . . When using this Return Reason Code, the RDFI must receive a Written Statement of Unauthorized Debit from the Receiver prior to transmitting the extended return entry.”)

  • NACHA Operating Guidelines (2017), OG 107 (“RDFIs should be aware, when recrediting their consumers for unauthorized or improper debit entries, that the requirement to obtain a Written Statement of Unauthorized Debit is the minimum requirement under the NACHA Operating Rules. An RDFI may choose to obtain an affidavit from its account holder. . . .”)